Vale S A : Transcript of Vale’s 4Q22 Conference Call

4Q22 and 2022 Performance Webcast - Opening remarks

Vale's 4Q22 Conference Call

February 17, 2023

EDUARDO BARTOLOMEO

• Thank you very much. Good morning, everyone, I hope you're fine.
• In 2022, we substantially de-risked and reshaped Vale. We had strong deliveries in dam management and decommissioning, we advanced as expected with the Brumadinho Reparation, we created leverages for operational stability and flexibility and we simplified our business portfolio, enabling a greater focus on our core businesses.
• On top of that, we drew up the plan for a Vale of the future: a company that promotes sustainable mining, fosters low-carbon solutions, and remains disciplined. Next slide.
• Before going to our performance in Q4, let me just reinforce that we announced a new organizational design in Vale's Executive Committee, which will strengthen our core business, broaden technical excellence, and improve project execution. I will provide more details later.
• I am also very happy to announce the appointment of Jerome Guillen as our first independent director for our Energy Transition Materials business, in line with the new management model we had laid out during Vale Day. Jerome is a former President of Tesla Automotive and has played a key role in developing the EV market as we know today. He is a very innovative and purpose-driven individual that will certainly add tremendous value to our Energy Transition Materials' strategy. As well, we continue to make substantial progress on the minority sale and expect to share additional details still in the first half of the year.
• Moving on to our operations, in Iron Solutions we delivered strong results, with fines sales up 24%, combined with a strong price realization. Our All-in cost decreased, benefited by lower freight rates. The Gelado project is now being commissioned, and that makes us confident about our production guidance.
• In Energy Transition Materials, our Nickel performance was steady, with sales up 30% and production up by 6%, mainly due to the excellent performance of our Sudbury mines, which delivered the highest production rates since 2019. Also, Onça Puma had the best annual production in the last five years.
• In Copper, it was a quarter of important maintenance activities in Salobo and Sossego to ensure asset integrity, which is paving the way for higher production rates in 2023. We successfully completed the start-up of Salobo 3, adding 30 to 40 kilo tons per year of nickel at peak production capacity.
• On product strategy, I highlight Vale's long-term agreement General Motors to supply battery- grade nickel sulphate. This reinforces Vale's unique strategic position to be the supplier of choice to the EV industry.
• In our quest to become a leader in sustainable mining, we continued to deliver in many of our public commitments, such as in Human Rights, Amazon Forest protection and restoration, and the safety of our dams.
• Finally, we walked the talk on cash return to shareholders. We just announced a US$ 1.8 billion dividend, for payment in March, while remaining committed to our buyback program, about 43% completed. Next slide, please.
• The re-design of our executive team is key to ensure a fit-for-purpose organization, with greater focus on its core business and on delivering its strategic goals.

February 17, 2023

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4Q22 and 2022 Performance Webcast - Opening remarks

• We now have a dedicated structure, led by Spinelli, to accelerate the development of innovative products and solutions in iron ore and the improvement of the marketing strategy.
• Carlos Medeiros now has the challenge of accelerating the implementation of Vale's Management Model, promoting greater safety and reliability for Vale's operations.
• Rafael Bittar was promoted to the executive team. He implemented with excellence our Tailings and Dams Management Model and now will lead the Technical vice-presidency, which incorporates Safety and Operational Excellence, mineral exploration, and operational innovation.
• Alexandre Pereira will be entirely focused on implementing a state-of-art project planning and execution, to secure our long-term growth ambitions.
• As you can see, we designed an organizational structure for the efficient management of our operations and the development of innovative solutions for a carbon-neutral economy. Next slide, please.
• We are seeing unprecedented opportunities for segmentation and demand growth for high quality. Quality is key for the decarbonization of steelmaking, and a game-changing transformation in the steel market.
• There is no other company like Vale - which combines volume and quality, innovative products, and supply chain - to deliver the decarbonization solutions that the steel industry needs. Our Iron Solutions strategy is designed precisely for this purpose.
• With those differentiators, we are a partner of choice for our clients. We're establishing partnership with steel mills to find new solutions to decarbonize the industry. We have signed with clients representing almost 50% of our scope 3 emissions.
• As you can see on the chart, we are projecting a higher average iron content in our iron ore portfolio, starting in 2023. This would give us much higher quality premium on prices. It's a quality and price game.
• Just as a reference of how much value we can generate on quality, each 1 percentage point increase in average iron content corresponds to around US$ 550 million of incremental EBITDA, if we consider the value in use and our current annual volume.
• The commissioning of the plus-10 project in S11D and the Gelado project will help us achieve growth, higher quality and better prices. In the Southeastern and Southern Systems, we are increasing concentration processes to deliver high-quality feedstock, with 4 filtration plants in Itabira, Vargem Grande and Brucutu, that we delivered recently.
• And concentration is key to a high-qualitylow-carbon supply, reason why we signed up for the development of Mega Hubs in the Middle East.
• And finally, We are also about to start up our first green-briquette plant, in the first half of 2023, with a 6-million tons production capacity as originally planned. Next slide, please.
• In energy transition materials, we have the right assets in the right jurisdictions, making us the ideal partner for delivering high quality products to our customers.
• In 2022, we entered into strategic nickel supply agreements with Northvolt and with General Motors, in addition to a MoU for nickel processing between PTVI, Huayou and Ford Motor Co.
• We are developing a first-of-its-kind plant in Canada and North America to produce nickel sulfate from high-purity,low-carbon nickel from our Canadian refineries. This project is a natural extension to our business, offering diversified sales with a greater footprint in the North American EV market.

February 17, 2023

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4Q22 and 2022 Performance Webcast - Opening remarks

• Nickel production increased 6% in 2022, mainly due to the stabilization of Sudbury operations and the consistent and strong performance at Onça Puma.
• Copper production declined by 15%, to 253kt in 2022, due to extended maintenance at the Sossego mill during the first half of the year and additional maintenance required at Sossego and Salobo. With the maintenance completion and the start-up of Salobo 3, our copper production should grow materially in 2023.
• In short, we have the assets, we have the innovative technology, and we are building the client engagement and the supply chain. We have the will and the conditions to take Vale to the leadership of a sustainable mining on the critical mineral's world. Next slide, please.
• Safety is the basis of our work and culture, and we are proud to have achieved historic results in 2022.
• We reduced more than 80% the number of high-potential recordable injuries since 2019 in key critical activities.
• Vale now has the lowest TRIFR in 15 years.
• We are also 40%-completed in our goal to eliminate all our upstream dams.
• The B3/B4 dam had its emergency level reduced from high to medium, after successful safety improvements, an important milestone in the journey to eliminate critical safety conditions in dams by 2025.
• Vale is around 90%-adherent to the requirements of the Global Industry Standard for Tailings management, which gives us confidence that we will 100% compliant by 2025.
• And we will continue to pursue the highest safety standards and operational excellence, making sure safety is incorporated into the company's culture. Next slide, please.
• At Vale, we are making sure that sustainable mining is at the core of all our actions.
• On our journey to reduce Scopes 1 & 2 emissions, we established a natural gas supply agreement for a pilot pelletizing plant in São Luís. We are also testing biochar in our metallurgical and pelletizing processes, while progressing with the conversion of two pelletizing plants to green briquette in Tubarão as mentioned before.
• We have a voluntary commitment to protect and restore additional 500 thousand hectares of forests by 2030. We protected and recovered 51 thousand hectares in 2022, bringing the total to 172,000 hectares since 2019, or about 34.4% of the long-term goal.
• On Human Rights, 100% of Vale's operations in Brazil are covered by human rights due diligence.
• We have a goal of taking 500,000 people out of extreme poverty by 2030. In 2022 we detailed our action plan. In 2023, we will start a pilot project to benefit 30,000 people from areas neighboring Vale's operations and in other locations.
• In Brumadinho, we delivered 58% of the commitments set by the Reparation Agreement, within established deadlines. In Mariana, the Renova Foundation provided 315 housing solutions in 2022. This means Renova provided a total of 441 housing solutions for far, or about 60% of the resettlement requirement.
• In conclusion, we have materially de-risked Vale. We are delivering on our commitments to a safer and more reliable company. We are building a better Vale.

February 17, 2023

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4Q22 and 2022 Performance Webcast - Opening remarks

• Now, I pass the floor to Gustavo, who will detail our financial results and I'll get back to Q&A at the end.

GUSTAVO PIMENTA

• Thanks Eduardo, and good morning, everyone.
• Let me start with our EBITDA performance for the quarter. As you can see, we delivered a solid US$5 billion EBITDA in Q4, US$1 billion higher than Q3 2022.
• This $1bn increase is mainly explained by our strong sales performance in the quarter, with iron ore fines up by 15.8Mt and nickel up by 13.9kt. Price realization for iron ore fines also contributed to our better performance, and I will provide more details about that on the next slide.
• Bunker & Oil cost was positively affected by US$ 250 million due to lower freight costs mainly as a result of lower bunker prices.
• In "others", the main driver was the US$ 224 million one-off tax agreement in Pará that I will cover later in my presentation.
• So back to Iron Ore price realization.
• The average reference price for the quarter was US$ 99/ton. Our average premium was $1.6/ton, up 1 dollar versus Q3, as a result of better sales mix.
• The pricing mechanism effect had also a positive impact on our final realized price. This is largely explained by the higher forward prices at the end of December. Around 31% of sales were booked at an average price of US$ 116.3/t. You can see this effect on "provisional prices in current quarter", which contributed with US$ 5.3/ton in Q4. Before the adjustments for moisture and FOB sales, price realization was $107.4/ton, 8.5% above the benchmark price.
• So, in summary, we delivered a realized price of US$ 95.6/t, up US$ 3/t versus Q3, despite a decrease in the benchmark price of US$3.3/t.
• Now moving to iron ore all-in costs.
• As you can see at the bottom of the table, our Ebitda break-even cost came down by US$ 2.8/t, to US$ 48.5/ton. This is explained by 3 main factors:
• 1. the 18% decrease in sales from third-party purchases, which contributed to US$1.2/ton in our C1.
  2. our freight performance, which contributed with a cost reduction of US$ 3.6/t due to lower bunker costs and better freight rates and;
  3. the US$1/ton-higher fines premium due to better mix
• On royalties, Vale joined a program with the government of Pará in relation to the increase of TFRM, which is a fee to fund the government supervision of mineral production activities. This agreement, which covers the entire 2022 fiscal year, was fully recorded in Q4. Excluding this one-off, the royalties' line in Q4 would have been US$ 2.7/ton lower, with an all-in EBITDA break-even of US$ 45.8/ton, versus US$ 48.5/t recorded.
• For 2023, we forecast a decrease of US$ 2/ton in the EBITDA break-even due to higher average quality of our product portfolio and lower fuel costs.
• Now, turning to Energy Transition Materials. Our EBITDA more than doubled quarter on quarter, reaching US$ 775MM. This was mainly driven by better price realization for both

February 17, 2023

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4Q22 and 2022 Performance Webcast - Opening remarks

Nickel and Copper, as well as a 30% growth in nickel sales and a decrease in nickel unit costs by 16% in the quarter.

• Now looking at all-in costs.
• In nickel, all-in unit cost dropped by US$ 2,600/t, mainly driven by lower cost of goods sold. As you may recall, in Q3 we had the carryover of high-cost inventories, which was a one-off impact to our Q3 cost of sales.
• For 2023, we project nickel unit cost to be relatively flat, as we don't expect to change our purchased-feed strategy in the short term, despite higher expected productivity in Sudbury. In the mid-term, we expect a reduction in nickel costs as we ramp-up VBME. Now, moving on to copper.
• Copper all-in unit cost was up due to lower volumes from South Atlantic operations, after maintenance at Salobo and Sossego plants. We expect unit costs to go down on the back of higher volumes associated with better operational performance at Salobo and Sossego, and the ramp-up of Salobo 3.
• Now moving to cash generation. As you can see, free cash flow generation was largely impacted by working capital and capex, which are usually higher in Q4. The working capital variation is largely explained by the US$ 2.1 billion increase in accounts receivable, mainly due to higher accrual sales volume for iron ore, together with the positive effect of $21/ton on higher iron ore provisional prices. These invoices will be collected in Q1 this year, and we expect the effect on working capital to revert in the following quarters.
• We also repurchased around US$ 1 billion in Vale's shares in Q4, which is aligned with our capital allocation strategy.
• So let me talk about more about our capital allocation strategy. Since April 2021, we bought back 683 million shares, or 13% of the initial number of outstanding shares. This means a 15% increase in concentration of earnings and dividends on a per share basis.
• Also, yesterday, we announced $1.8 billion in dividends to be paid in March 2023.
• So, before opening up for questions, I'd like to reinforce the key takeaways from today's call.
• As Eduardo mentioned, Vale re-designed its Executive Committee to ensure a fit-for-purpose organization with greater focus on our operations and on delivering solutions for the global energy transition.
• In that sense, we are taking actions to serve a growing market demand for quality products, leveraging on our unique mineral endowment and innovation capabilities. For example, the high-grade pellets and briquettes, the mega hubs initiatives, and the low-carbon nickel products.
• We also remain focused on delivering new projects to meet our production guidance and to make sure we sustain the unique competitive advantage of our products.
• And finally, we remain highly committed to a disciplined capital allocation as evidenced by our highly accretive buyback program and dividend payout.
• Now I would like to open the call for questions. Thank you all.

------	Q&A session to be included -------
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