Staying strong in a world of changes

Transcription

1 Staying strong in a world of changes New York May 20,

2 Disclaimer This presentation may contain statements that express management s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and Vale cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian and Canadian economies and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore and nickel businesses and their dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which Vale operates. For additional information on factors that could cause Vale s actual results to differ from expectations reflected in forward-looking statements, please see Vale s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission. 2

3 Agenda A solid performance The cycle has gained momentum 3

4 A solid performance 4

5 Increasing our exposure to the cycle: exceeding the 300 Mt mark for iron ore output LTM iron ore production Million metric tons (Mt) 303 Mt Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 5

6 Delivering new value creation platforms Fazendão 15.8 Mtpy of iron ore (ROM) Samarco III 7.6 Mtpy of pellets Dalian 35,000 tpy of finished nickel Capex 1Q08 US$ 1.7 billion Projects Stay-inbusiness US$ 1.1 billion US$ 391 million R&D US$ 173 million 6

7 There is more to come in 2008 Pellets Itabiritos Brazil 7.0 Mtpy Bauxite Paragominas II Brazil 4.5 Mtpy Alumina Alunorte 6 & 7 Brazil 1.9 Mtpy Copper UHC Brazil 10,000 tpy Nickel Goro New Caledonia 60,000 tpy Ni 4,600 tpy Co 7

8 while we continue to develop a large world-class worldwide pipeline of projects Totten Reference Greenfield Karebbe Bayovar Litoranea Setentrional Equatorial CSV US$ 1 billion Papomono Estreito Oman Moatize Vermelho Eastern Range Tubarão VIII Maquiné-Baú CSA Salobo I Onça Puma Barcarena NAR Serra Sul Carajás 130 Mtpy Southern Corridor Carborough Downs Brownfield Voisey s Bay Paragominas III Iron ore & pellets Nickel Coal Copper Bauxite & alumina Phosphates Logistics Power generation Steel 8

9 Execution of the organic growth pipeline will keep the high growth path Vale aggregate production growth CAGR 2008E-2012E: 10.9% 250 Equivalent iron ore production unit base index base 2003 = CAGR : 11.6% Greenfield Brownfield Existing Operations ¹ index encompassing the production of all products produced by Vale, base 2003 =

10 Our cost cutting efforts are paying off amidst an environment conducive to rising costs 8% 6% 4% Cost per output unit¹ QoQ variation 4.1% 2% 0% -2% -4% -0.3% -2.5% -0.9% -6% -8% -5.5% 1Q07 2Q07 3Q07 4Q07 1Q08 1 COGS discounting the effects of depreciation and currency volatility 10

11 Operational margins on the rise 4Q07 1Q08 Vale 32.9% 37.2% Ferrous minerals 42.6% 40.7% Non-ferrous minerals 26.2% 36.6% Logistics 16.2% 22.5% 11

12 Despite seasonally low sales volumes, adjusted EBITDA showed a 5.6% increase Adjusted EBITDA US$ million 3, SG&A 190 COGS reduction 126 Sales prices 72 R&D 69 FX 29 Volume costs 1 (64) Dividends (457) Sales volumes 3,729 4Q07 1 cost changes due to production 1Q08 12

13 Adjusted EBITDA decreased on a YoY basis due to the normalization of nickel prices Adjusted EBITDA US$ million 4, ,339 3,729 Nickel prices 1Q07¹ 1Q07² 1Q08 1 excluding extraordinary inventory adjustment. ² adjusted EBITDA at 1Q08 nickel average realized prices 13

14 Net earnings decreased under the weight of an increase of non-cash charges of US$ 952 million LTM net earnings US$ billion Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 14

15 Impact of non-cash charges 1Q08 x 1Q07 change US$ million Monetary variation 659 Swaps 175 Price hedging 228 Mark-to-market -145 Others 35 Total

16 De-risking our debt: costs in a downward trend % 9.0 Average cost of debt % per annum % % Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 16

17 The cycle has gained momentum 17

18 The cycle has gained momentum, with longer term fundamentals remaining strong Demand for minerals and metals continues to increase Supply growth faces multiple headwinds Large infrastructure spending in emerging markets is the key support to demand growth over the long term Homebuilding, industrialization and consumer durables are other important sources of demand growth 18

19 We believe global GDP growth to stay above-trend in Relative decoupling is expected to continue Difference in GDP growth rates 6% 4% 2% 0% -2% Sources: DIRI/DEFB and IMF Emerging market economies - Developed economies Emerging market economies - US E 2009E 2010E 2011E 2012E 19

20 Steel prices rising across the world and reaching all-time highs. Excess demand adding tightness to markets for steelmaking raw materials iron ore, met coal, Mn alloys 250 CRUspi April 1994= Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 Source: CRU 20

21 Premium for BFP over iron ore fines prices returning to normal levels in another signal of market tightness Tubarão Blast furnace pellets (BFP) Premium over fines USD cents / Fe unit 71% 82% 83% 80% 80% 72% 78% 73% 66% 68% 70% 85% 64% 55% 51% 45%

22 New projects to exploit the rising global demand for pellets Delivered Capacity (Mtpy) Start-up Zuhai¹ 1.2 January 2008 Samarco III² 7.6 April 2008 To be delivered Itabiritos 7.0 2H08 Tubarão VIII 7.3 2H10 Board approval Oman 9.0 2H10 Under analysis China and Malaysia ¹ Vale owns a 25% stake. Additional 2.0 Mtpy capacity under analysis. ² Third pellet plant of Samarco, in which Vale owns a 50% stake 22

23 Global crude steel production expected to reach 1.7 billion metric tons in 2012, more than twice the levels prevailing by end of the 20 th century Crude steel production (Mt) World 788 China CAGR = 6.8% E= 4.7% , , E 540 1, E 710 1,690 Source: IISI 23

24 Seaborne iron ore trade is expected to continue to grow faster than global steel output Seaborne iron ore trade (Mt) 411 World China CAGR = 9.6% E= 7.4% = 31.4% E= 10.8% E E 625 1,115 24

25 Even though the existence of high inventories, near term prospects for nickel are improving. Stainless steel de-stocking cycle ended and demand from other applications is steady 60 Inventories - LME Nickel - spot LME 60, , ' metric tons ,000 30,000 20,000 price - US$/metric ton 10 10, Source: LME 25

26 Austenitic production is recovering from the low levels of 3Q07. Substitution pressures subsided and stainless steel output is gradually increasing Kt 6,500 World austenitic stainless steel production 1Q04 1Q08E 6,000 5,500 5,000 4,500 4,000 3,500 YoY growth Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q E 8% -4% 21% -7% 2008E 26

27 Aluminum prices increased in response to power shortages. Conflict between highly capital intensive projects and high energy costs tends to be solved by higher prices 1,600 3,600 1,400 Inventories - LME Aluminum - Spot LME 3, ' metric tons 1,200 1, ,800 2,400 2,000 1,600 price - US$/metric ton 200 1, Source: LME 27

28 The combination of production disruptions, low inventories and supply growth constraints creates a high price environment for copper 300 Inventories - LME Copper - spot LME 10,000 9, ' metric tons ,000 7,000 6,000 5,000 4,000 3,000 price - US$/metric ton 2, ,000 Source: LME 28

29 Vale: a global leader 29