Vale S A : Performance in 2Q23

Vale's performance in 2Q23

Rio de Janeiro, July 27th, 2023. "We continue to make substantial progress on operational excellence across all businesses. In Iron Solutions we set a new production record for a second quarter at S11D, alongside solid performances from Itabira and Vargem Grande. The Torto dam license is a significant milestone, enhancing our portfolio's overall quality. Our Energy Transition Metals (ETM) business has also performed very well with the successful ramp-up of Salobo III and improved performance at Sossego. Today´s annoucement to form a strategic partnership with Manara Minerals and Engine No.1 is another major milestone in ETM´s journey to accelerate accretive growth and unlock significant long-term value for all our stakeholders. Furthermore, we delivered on our commitment and implemented GISTM for our prioritized tailings facilities. This is an important milestone in the evolution of our dam management and the safety of our operations and surrounding communities. We will continue advancing with the incorporation of the best international practices so that Vale becomes an increasingly safe and sustainable company", commented Eduardo Bartolomeo, Chief Executive Officer.

Selected financial indicators

	US$ million		2Q23		2Q22		1Q23
	Net operating revenues	9,673	11,157	8,434
	Total costs and expenses (ex-Brumadinho and de-characterization of dams)1		(6,412)		(6,504)		(5,403)
	Expenses related to Brumadinho and de-characterization of dams		(271)		(280)		(111)
	Adjusted EBIT from continuing operations		3,095		4,444		2,920
	Adjusted EBIT margin (%)		32%		40%		35%
	Adjusted EBITDA from continuing operations		3,874		5,254		3,576
	Adjusted EBITDA margin (%)	40%	47%	42%
	Proforma adjusted EBITDA from continuing operations2		4,145		5,534		3,687
	Net income from continuing operations attributable to Vale's shareholders	892	4,093	1,837
	Net debt 3		8,908		5,375		8,226
	Capital expenditures	1,208	1,293	1,130

1. Includes adjustment of US$ 52 million in 2Q23 and US$ 35 million in 1Q23, to reflect the performance of the streaming transactions at market price.
2. Excluding expenses related to Brumadinho.
3. Including leases (IFRS 16).

Highlights

Business Results

• Proforma adjusted EBITDA from continued operations of US$ 4.1 billion in Q2, down US$ 1.4 billion y/y, mainly reflecting lower realized prices of iron ore fines and nickel.
• Free Cash Flow from Operations of US$ 0.8 billion in Q2, representing an EBITDA-to-cash conversion of 19%.

Disciplined capital allocation

• Capital expenditures of US$ 1.2 billion in Q2, including growth and sustaining investments, in line y/y.
• Gross debt and leases of US$ 13.9 billion as of June 30, 2023, US$ 1.0 billion higher q/q, resulting from a US$ 1.5 billion bond issuance and US$ 0.5 million tender offer in the quarter, as part of Vale's liability management.

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• Expanded Net Debt of US$ 14.7 billion as of June 30, 2023, US$ 0.3 billion higher q/q mainly driven by the US$ 1.4 billion share buyback program in the quarter and the US$ 0.8 billion in Free Cash Flow from Operations. Vale's target leverage is US$ 10- 20 billion.

Value creation and distribution

• Disbursement in Q2 as part of the 3rd buyback program was US$ 1.4 billion. At the end of Q2, the 3rd buyback program was 64% complete, with a disbursement of US$ 4.9 billion to repurchase approximately 320 million shares1.
• Today, the Board of Directors approved the distribution of US$ 1.7 billion in interest on capital, scheduled to be paid in September. The amount is based on the financial results from the first half of the year, in accordance with the Shareholder Remuneration Policy.

Focusing and strengthening the core

• Delivering iron solutions:
• • The Torto dam, at the Brucutu site, has obtained its operating license and commissioning is underway. The dam, together with the tailings filtering plant, will substantially improve overall ore quality, resulting in increased availability of pellet feed to Vale's pellets plants and an improved product mix, which will command higher price premiums.
  • In May, several Memorandums of Understanding ("MoUs") and land reservation agreements were signed with authorities and partners in the United Arab Emirates, Saudi Arabia, and Oman. These agreements aim to advance studies to develop industrial complexes, Mega Hubs, to produce low-carbon emission products for steelmaking.
  • Also in May, an MoU was signed with GravitHy, a French Direct Reduction Iron ("DRI") producer, to jointly evaluate the construction of a co-located briquetting plant in GravitHy's DRI plant project in Fos-sur-Mer, France. The plant is expected to start-up production in 2027 with a 2 Mtpy DRI production capacity.
• Building a unique Energy Transition Metals vehicle:
• • Signed a binding agreement with Manara Minerals, a joint venture between Ma'aden and the Public Investment Fund, under which Manara Minerals will invest in Vale Base Metals ("VBM"), the holding entity of Vale's Energy Transition Metals business, at an implied enterprise value of US$ 26.0 billion. Concurrently, entered into a binding agreement with the investment firm Engine No. 1 pursuant to which Engine No. 1 will make an equity investment in VBM under the same economic terms. The total consideration to be paid to VBM under both agreements is US$ 3.4 billion, for a 13% equity interest. These strategic partnerships will accelerate value generation from the unique set of assets and projects, being a key enabler of the global energy transition.
  • Reorganization of the Energy Transition Metals operations in Brazil was successfully concluded on July 1st. This involved transferring the copper assets in Brazil to Salobo Metais S.A. and the nickel assets to a newly established entity called Mineração Onça Puma S.A., both of which remain under the consolidation and control of Vale. The reorganization will enable a more efficient management of copper and nickel assets in Brazil.
• Advancing the project pipeline:
• • Salobo III plant ramp-up is progressing well, with strong production rates achieved in Q2. Once the plant reaches full capacity, it is expected to yield a 10% to 15% reduction in overall unit costs.
• Samarco:
• • Vale, BHP, Samarco, and certain creditors have entered into a binding agreement for Samarco's debt restructuring. The plan aims to implement a consensual restructuring, with Samarco emerging with a lean capital structure.

1 Related to the April 2022 3rd buyback program for a total of 500 million shares.

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Payments to creditors will be linked to operational ramp-up and cash flow. Samarco's contribution to reparation is capped at US$ 1 billion from 2024 to 2030, with the remaining balance equally shared between Vale and BHP.

Promoting sustainable mining

• Successfully achieved conformance with the Global Industry Standard on Tailings Management (GISTM) for all prioritized tailings facilities2, within the industry's timeframe. As of now, the company implemented the GISTM for 48 tailings facilities, 37 of them located in Brazil and 11 in Canada, with actions plans in place. By August 2025, all 50 tailings facilities will be in conformance.
• De-characterizationworks have started at the Campo Grande dam at the Alegria mine, as well as the Grupo and Área IX dams at the Fábrica mine. With that, a total of 8 out of the remaining 18 upstream dams to be eliminated have started de- characterization works. Since 2019, significant progress has been made, with 12 out of the 30 upstream dams already eliminated, representing 40% of the overall program.
• The Sol do Cerrado solar energy complex, one of the largest solar parks in Latin America has reached its full capacity of 766 Megawatts. The complex, located in Minas Gerais state, will supply 16% of all energy requirements from operations in Brazil, in line with the company´s strategy to zero CO2 emissions by 2050.

2 Including those with the highest damage potential associated.

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Adjusted EBITDA

Adjusted EBITDA

	US$ million		2Q23		2Q22			1Q23
	Net operating revenues	9,673	11,157	8,434
	COGS		(5,940)		(5,950)			(4,949)
	SG&A	(139)	(127)	(118)
	Research and development		(165)		(151)			(139)
	Pre-operating and stoppage expenses		(103)		(111)			(124)
	Expenses related to Brumadinho & de-characterization of dams		(271)		(280)			(111)
	Other operational expenses¹		(65)		(165)			(73)
	Dividends and interests in affiliated companies and JVs		105		71			-
	Adjusted EBIT from continuing operations		3,095		4,444			2,920
	Depreciation, amortization & depletion		779		810			656
	Adjusted EBITDA from continuing operations		3,874		5,254			3,576
	Proforma Adjusted EBITDA from continuing operations²		4,145		5,534			3,687
	Adjusted EBITDA total		3,874		5,254			3,576
	Proforma Adjusted EBITDA total²		4,145		5,534			3,687

• Includes adjustments of US$ 52 million in 2Q23 and US$ 35 million in 1Q23, to reflect the performance of the streaming transactions at market price. ² Excluding expenses related to Brumadinho.

Proforma EBITDA - 2Q23 vs. 2Q22

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Sales & price realization

Volume sold - Minerals and metals

	'000 metric tons		2Q23		2Q22		1Q23
	Iron ore fines		63,329			62,769			45,861
	ROM	2,236	1,550	1,665
	Pellets		8,809			8,843			8,133
	Nickel	40	39	40
	Copper¹		74			51			63
	Gold as by-product ('000 oz)¹		88			62			72
	Silver as by-product ('000 oz)¹		518			391			406
	PGMs ('000 oz)		89			46			74
	Cobalt (metric ton)		660			450			621

¹ Including sales originated from both nickel and copper operations.

Average realized prices

	US$/ton	2Q23	2Q22		1Q23
	Iron ore - 62% Fe reference price	111.0	137.9	125.5
	Iron ore fines Vale CFR/FOB realized price	98.5		113.3			108.6
	Pellets CFR/FOB (wmt)	160.4	201.3	162.5
	Nickel	23,070		26,221			25,260
	Copper2	6,986	6,411	9,298
	Gold (US$/oz)12	2,082		1,884			1,845
	Silver (US$/oz)2	23.96	20.56	22.07
	Cobalt (US$/t)1	34,694		81,915			32,830

• Prices presented above were adjusted to reflect the market prices of products delivered related to the streaming transactions.
  2 Including sales originated from both nickel and copper operations.

Costs

COGS by business segment

	US$ million		2Q23		2Q22			1Q23
	Iron Solutions	4,282		4,248		3,290
	Energy Transition Metals		1,617			1,424				1,620
	Others	41	278		39
	Total COGS of continuing operations¹		5,940			5,950				4,949
	Depreciation	737		777		613
	COGS of continuing operations, ex-depreciation		5,203			5,173				4,336

¹ COGS currency exposure in 2Q23 was as follows: 47.38% BRL, 46.55% USD, 5.85% CAD and 0.22% Other currencies.

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