Vale - Stock Report_04Jan14_S&P Capital

5/28/2018 Vale - Stock Report_04Jan14_S&P Capital

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GICS SectorMaterialsSub-Industry Steel

SummaryThis Brazilian company is the world's largest iron ore miner and the world'ssecond largest nickel producer.

Key Stock Statistics(Source S&P, Vickers, company reports)

52-Wk Range $20.97 12.39 S&P Oper. EPS 2013E 2.56 Market Capitalization(B) $45.650 Beta 1.

Trailing 12-Month EPS $0.87 S&P Oper. EPS 2014E 2.60 Yield (%) 5.01 S&P 3-Yr. Proj. EPS CAGR(%) Trailing 12-Month P/E 16.5 P/E on S&P Oper. EPS 2013E 5.6 Dividend Rate/Share $0.72$10K Invested 5 Yrs Ago $13,474 Common Shares Outstg. (M) 5,153.4 Institutional Ownership (%) 14

Price Performance

A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M

2010 2011 2012 2013 2014

4

30-Week Mov. Avg.

12-Mo. Target Price

10-Week Mov. Avg.

Relative Strength

GAAP Earnings vs. Previous Year

Up Down No Change

Volume Above Avg.

Below Avg.

STARS

15

20

25

40

0

40

80

120

Vol.

Mil.

5

1

Options: ASE, CBOE, P, Ph

Analysis prepared by Equity AnalystJohnson Imodeon Nov 15, 2013, when the stock traded at $15.73.

Highlights

We look for a 6% sales rise in 2013, followed bya 2% advance in 2014. We expect a 6% in-crease in the 2013 average iron ore price($135/tonne) but a 19% fall in the 2014 averageiron ore price ($110/tonne). However, we antici-pate a combination of rising iron ore shipmentsin 2014 (+6%) and higher Base Metals volumes(especially copper) to mitigate iron ore pricepressure. We see lower iron ore prices in 2014due to rising global supply, at more than 10%relative to an estimated 3% rise in Chinese steeldemand (according to the World Steel Associa-

tion).

We look for a significant rebound in 2013 earn-ings before interest and taxes, thanks to higher

iron ore prices and cost savings. After interestexpense and taxes, we estimate earnings perADS of $2.56 for 2013, rising 2% in 2014 to $2.60.

Longer term, we see earnings benefiting fromChina's ongoing development, which should in-crease demand for Vale's more consumer-orient-ed commodities, especially nickel.

Investment Rationale/Risk

We view the ADSs as attractively valued, re-cently trading at about 6X our 2013 earnings perADS estimate. After a projected strong rise in2013 earnings per ADS, we expect rising vol-umes and cost savings to help offset our expec-

tation of weaker iron ore prices in 2014. Fur-thermore, the group's strategic review of itsbase metals activities should also support earn-ings and valuation, in our view. Longer term, wehave a positive outlook for nickel as Chinesegrowth turns to being consumption rather thaninvestment driven.

Risks to our recommendation and target priceinclude a sharper decline in the price of ironore in 2014 than we project. Additional risk

comes from a US$15 billion tax claim in Brazilthat Vale is contesting and has not made provi-sions for.

Applying a multiple of 8.6X to our 2013 earningsper ADS estimate, which is at the low end of

the historical range of the past 10 years to re-flect the risk to earnings from rising iron oresupply and potentially higher taxes in Brazil, wederive our 12-month target price of $22.

Qualitative Risk Assessment

LOW MEDIUM HIGH

Our risk assessment reflects Vale's exposure tothe global steel industry, especially in China,which accounts for about 50% of global steelproduction, and volatile iron ore prices.

Quantitative Evaluations

S&P Quality Ranking

D C B- B B+ A- A A+

Relative Strength Rank WE13

LOWEST = 1 HIGHEST =

Revenue/Earnings Data

Revenue (Million $)

1Q 2Q 3Q 4Q Ye2013 10,918 11,032 12,327 -- 2012 11,054 11,960 10,727 16,083 47,62011 13,784 15,715 17,162 16,241 61,72010 6,980 10,303 14,676 15,608 47,2

2009 5,578 5,147 7,073 6,712 2 4,32008 7,832 10,600 11 ,739 7,515 37,4

Earnings Per ADS ($)

2013 0.60 0.09 0.68 E0.58 E2.2012 0.74 0.53 0.32 -0.33 0.2011 1.28 1.22 0.92 0.96 4.2010 0.32 0.70 1.13 1.11 3.2009 0.26 0.15 0.31 0.29 0.2008 0.41 1.01 0.94 0.26 2.Fiscal year ended Dec. 31. Next earnings report expected: EarlyFebruary. EPS Estimates based on S&P Operating Earnings;historical GAAP earnings are as reported.

Dividend Data(Dates:mm/ddPayment Date:mm/dd/yy)

Amount

($)

Date

Decl.

Ex-Div.

Date

Stk. of

Record

Payme

Da0.286 -- 04/17 04/19 05/07/0.077 -- 04/17 04/19 05/07/0.355 -- 10/18 10/22 11/07/Dividends have been paid since 2002. Source: Company reports.

Stock Report | January 4, 2014 | NYS Symbol:VALE

Vale SA

S&P Recommendation BUY Price$14.33 (as of Jan 3, 2014)

12-Mo. Target Price$22.00

Please read the Required Disclosures and Analyst Certification on the last page of this report.


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Business SummaryNovember 15, 2013

CORPORATE OVERVIEW. Incorporated in 1942 and privatized by the Brazilian government in 1997, Vale SA(formerly Companhia Vale do Rio Doce) is the world's largest producer of iron ore fines and pellets for usein steelmaking, and the world's second largest producer of manganese and ferroalloys. Vale is also thesecond biggest nickel producer and also produces copper, coal, fertilizers, cobalt and platinum group met-als. In addition, Vale operates in the steel and energy areas.

Through its ownership and operation of railroads and ports, Vale is the largest provider of transportationand logistics in Brazil. As of December 31, 2012, Valepar S.A. held 52.7% of Vale's common stock and 33.7%of Vale's total capital (including preferred shares). The largest shareholder in Valepar is Litel Participa-coes SA (49%), which in turn is owned by an entity that is controlled by state majority-owned Banco doBrasil.

Each ADS represents one ordinary share.

CORPORATE STRATEGY. The company's main goal is to strengthen its position as one of the world's lead-ing diversified metals and mining companies by building on its strengths in iron ore and nickel, increasinggeographic and product diversification and expanding logistics capabilities. Although the company maycontinue to make strategic acquisitions, its main focus is to grow organically through the development of awide range of projects founded on its world-class asset base.

Ferrous products (69.5% of revenues in 2012, $19.3 billion of EBITDA) comprise iron ore mining and pelletproduction, as well as the Northern and Southern transportation systems, including railroads, ports and

terminals, as they pertain to mining operations. Manganese mining and ferroalloys are also included in the

segment.

Base metals (15.4%, $1.1 billion of EBITDA) include copper, cobalt, gold, silver nickel, and platinum groupmetals.

Fertilizer nutrients (8.1%, $741 million of EBITDA) include production of potash, phosphates and nitrogen.

Logistics services, which includes the operation of rails, shipping and ports, accounted for 3.5% of salesand had EBITDA of $53 million.

Other accounted for 1.1% of sales and had a $1.8 billion loss.

Coal accounted for 2.4% of sales and had a $274 million loss.

Gross revenues by region in 2012 were: Brazil 19.6%; South American excluding Brazil 1.5%; North Ameri-ca, 5.1%; Europe 17.5%; China 34%; Asia excluding China 19%; Middle East, 2.2%; and rest of world 1.1%.

MARKET PROFILE. Mining for base metals is a highly capital-intensive business requiring large sums ofmoney to explore for deposits and construct mines once deposits have been discovered. Since the begin-ning of the 21st century, the base metals mining industry has become more concentrated as a result ofmergers, and mining costs have risen substantially.

The company's main competitors in iron ore are BHP Billiton and Rio Tinto. These three companies ac-count for some 75% of the seaborne trade in iron ore. Demand for iron ore increased dramatically in thefirst decade of the 21st century, largely as a result of rising steel production in China. Global iron ore ship-ments reached 1.1 billion metric tons in 2012. Vale's iron ore shipments were 258.1 million metric tons in2012, versus 257.3 million metric tons in 2011.

Vale competes with BHP Billiton, Norilsk Nickel of Russia, ERAMET, Jinchuan Nonferrous Metals andGlencoreXstrata in the nickel market. On average, stainless steel production accounts for two-thirds ofnickel demand. Global mine production of nickel totaled 2.1 million metric tons in 2012, versus 1.9 millionmetric tons in 2011. Nickel refined production and consumption were almost matched in 2012 at 1.8 millionand 1.7 million metric tons, respectively.

FINANCIAL TRENDS. From 2003 to 2012, revenues increased at a compound annual growth rate (CAGR) of26.2%, while earnings per ADS rose at a CAGR of 13.7%. For the same period, dividends rose at a CAGR of26.4%. From 2003 through 2012, capital spending averaged 369.6% of depreciation, depletion and amortiza-

tion. Over the same period, free cash flow, before acquisitions, dividends and asset sales, increased at aCAGR of 13%. Following a large decline in 2012, we expect free cash flow to rebound in 2013, mostly re-flecting higher net income.

On November 6, 2013, Vale reported third-quarter underlying EPS of $0.72 on an 11% sales rise, versus EPSof $0.45 a year ago. Group results mainly reflected higher iron ore prices (+12%) and volumes (+7%). Costof sales also fell by 3%. VALE stated that it expected iron ore prices to sustain current levels (about$130/tonne) for the remainder of 2013, supported by low Chinese inventories and robust demand.

Corporate Information

Investor ContactF. De Oliveira Barbosa

OfficeGraca Aranha Avenue, 26, Downtown, Rio deJaneiro, Brazil 20030-900.

Telephone55 21 3814 8888.

Fax55 21 3814 8820.

[email protected]

Websitehttp://www.vale.com

Officers

ChrmnD.A. Conrado

CEO & PresM. De Oliveira Ferreira

CFOL.S. Pires

Chief Acctg OfficerM.V. Severini

SecyC. Torres

Board MembersM. J. Barros

D. A. Conrado

L. Galvao Coutinho

R. Rocha

J. M. da Cunha

J. B. Cavaglieri

M. Da Silveira TeixeirJr.

F. Kawashima

R. da Cruz Gomes

O. A. de Camargo Filh

DomicileBrazil

Founded1942

Employees85,305

StockholdersNA


Vale SA


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Quantitative Evaluations

S&P Fair ValueRank

NR 1 2 3 4 5

LOWEST HIGHESTBased on S&P's proprietary quantitative model, stocks are rankedfrom most overvalued (1) to most undervalued (5).

Fair Value

Calculation

NA

InvestabilityQuotientPercentile

17

LOWEST = 1 HIGHEST = 100

VALE scored lower than 83% of all companies for which an S&PReport is available.

Volatility LOW AVERAGE HIGH

TechnicalEvaluation

NA

Insider Activity NA UN FAVORAB LE NEUTRA L FAVO RA BLE

Expanded Ratio Analysis

2012 2011 2010 20Price/Sales 2.24 1.82 3.88 NPrice/EBITDA 6.07 3.24 6.94 NPrice/Pretax Income 27.29 4.05 8.58 NP/E Ratio 20.92 5.03 10.55 NAvg. Diluted Shares Outstg (M) 5,105.7 5,246.8 5,311.5 N

Figures based on calendar year-end price

Key Growth Rates and Averages

Past Growth Rate (%) 1 Year 3 Years 5 Years 9 YeaSales -22.77 25.59 12.50 28.Net Income -77.14 2.31 -2.87 21.

Ratio Analysis(Annual Avg.)Net Margin (%) 10.73 27.93 27.22 30.% LT Debt to Capitalization 26.28 24.41 25.20 27.Return on Equity (%) 7.95 22.46 24.26 37.

Company Financials Fiscal Year Ended Dec. 31

Per ADS Data ($) 2012 2011 2010 2009 2008 2007 2006 2005 2004 20Tangible Book Value 12.65 13.02 10.83 9.42 7.04 8.00 5.16 6.31 1.50 0.Cash Flow 1.73 5.06 3.89 1.51 2.78 4.76 2.56 3.71 0.99 0.Earnings 0.99 4.31 3.24 0.99 2.58 2.42 1.35 1.05 0.56 0.Dividends 0.99 1.59 0.45 0.44 0.47 0.32 0.23 0.25 0.15 0.Payout Ratio 100% 37% 14% 45% 18% 13% 17% 24% 26% 35Prices:High 26.87 37.25 35.00 29.93 44.15 38.32 15.23 11.49 7.31 4.Prices:Low 15.77 20.46 23.58 11.50 8.80 13.53 9.58 6.26 3.44 2.P/E Ratio:High 27 9 11 30 17 16 11 11 13 P/E Ratio:Low 16 5 7 12 3 6 7 6 6

Income Statement Analysis(Million $)Revenue 47,694 61,759 47,281 24,395 37,426 32,242 19,651 12,792 8,066 5,3Operating Income 17,636 34,746 26,475 9,370 18,505 15,380 8,634 6,051 3,462 1,8Depreciation 4,288 4,149 3,262 2,740 2,807 2,186 997 619 339 2

Interest Expense NA NA NA NA 1,765 1,592 1,338 560 671 3Pretax Income 3,922 27,808 21,406 7,718 12,267 15,828 8,539 6,180 3,545 1,9Effective Tax Rate NM 19.5% 18.7% 32.1% 2.97% 20.2% 16.8% 14.2% 21.1% 15.2Net Income 5,116 22,383 17,409 5,156 11,666 11,825 6,528 4,841 2,573 1,5

Balance Sheet & Other Financial Data(Million $)Cash 6,078 4,499 9,920 7,580 10,639 1,046 4,448 1,041 1,249 5Current Assets NA NA NA NA 23,238 11,380 12,940 4,775 3,890 2,4Total Assets 130,620 129,740 129,235 100,764 79,651 76,717 60,954 22,644 15,715 11,4Current Liabilities NA NA NA NA 7,237 10,083 7,312 3,325 2,455 2,2Long Term Debt 29,307 25,025 24,033 20,714 18,304 17,608 21,122 3,715 3,232 2,7Common Equity 51,664 76,989 67,498 54,893 41,277 28,323 14,971 9,827 6,215 3,8Total Capital 111,499 108,201 100,956 81,978 66,587 59,164 48,133 16,910 11,411 7,9Capital Expenditures 15,777 15,181 14,176 9,236 8,972 6,651 4,431 3,977 2,022 1,5Cash Flow 9,404 26,531 20,671 7,895 16,025 14,011 7,525 5,460 2,912 1,7Current Ratio 1.8 1.9 1.7 2.2 3.2 1.1 1.8 1.4 1.6

% Long Term Debt of Capitalization 26.3 23.1 23.8 25.3 26.3 29.8 43.9 22.0 28.3 34% Net Income of Revenue 10.7 36.2 36.8 21.1 31.2 36.7 33.2 37.8 31.9 28% Return on Assets 3.9 17.3 15.1 5.7 16.9 17.2 15.6 25.2 19.0 16% Return on Equity 8.0 31.0 28.5 10.7 43.2 54.6 52.6 60.4 51.2 49


Vale SA

Data as orig reptd.; bef. results of disc opers/spec. items. Per share data adj. for stk. divs.; EPS diluted. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. UR-Under Review.


4/11

Sub-Industry Outlook Stock Performance

We have a neutral fundamental outlook for the steelindustry for the next 12 months. Following a declinein aggregate profits in 2012 for the four companies

that comprise our industry index, we anticipate thatgreater demand due to a combination of rising GDP,another increase in auto sales, and inventory

accumulation by distributors will lead to an increasein the volume of steel shipped in 2013 and in 2014.However, as a result of lingering excess steelcapacity, we think average price per ton in 2013 and2014 will be modestly lower than 2012's levels. That,along with high levels of imports and modestnonresidential construction, will likely result in asmall decline in earnings for our proxy group in 2013.Stable pricing and increased demand will likelyresult in an increase in earnings in 2014.

For 2013, we see a 3% increase in steel consumptionand for 2014 we see a 4% increase, following an 8%rise in 2012. Our forecast rests on severalassumptions. First, Standard & Poor's Economicsprojects increases in U.S. real GDP of 1.7% in 2013and 2.6% in 2014, following estimated GDP growth of2.2% in 2012. As a result, we believe durable goodsdemand will increase. Second, Standard & Poor'sEconomics anticipates an increase in auto sales in2013 to 15.5 million units and a further increase in2014 to 16.0 million, from 14.4 million in 2012. S&PEconomics also forecasts moderate growth innonresidential construction of 1.7% in 2013 and 2.9%in 2014, vs. 12.7% growth in 2012.

In 2012, steel shipment volume rose 4.4%, accordingto statistics compiled by the American Iron andSteel Institute, while consumption was up 8%.However, due to new production entering themarket, along with a rise in imports, steel pricesdeclined through early July 2012 after rising steadilyfrom about mid-October 2011 through February 2012.Due to production cutbacks and an easing of

imports, prices stabilized and headed higher in thefourth quarter of 2012. Prices weakened again

through much of the first half of 2013 as domesticsteel capacity utilization weakened from 2012 levels.However, as of early November, pricing hadincreased from first half levels due primarily to a

tightening in supply availability caused by steel millsbeing temporarily offline in the U.S. and elsewhere.

Year to date to December 13, the S&P Steel Indexrose 13.0%, compared to a 25.0% gain for the S&P1500 Composite Index and a 17.2% increase in theS&P Materials Index. In 2012, the S&P Steel Indexfell 7%, versus a 13.7% gain for the 1500 and a 14%increase in the Materials Index.

--Philip Kaukonen

GICS Sector:MaterialsSub-Industry:Steel

Based on S&P 1500 IndexesMonth-end Price Performance as of 12/31/13

2009 2010 2011 2012 2013

160

140

120

100

80

60

40

20

0

Sub-Industry Sector S&P 1500

NOTE:All Sector & Sub-Industry information is based Global Industry Classification Standard (GICS)


Vale SA

Sub-Industry : Steel Peer Group*: Based on market capitalizations within GICS Sub-Industry

Peer GroupStock

Symbol

Stk.Mkt.Cap.

(Mil. $)

RecentStock

Price($)

52Week

High/Low($) B etaYield

(%)P/E

Ratio

FairValue

Calc.($)QualityRanking

S&PIQ

%ile

Return onRevenue

(%)

L

Vale SA ADS VALE 45,650 14.33 20.97/12.39 1.37 5.0 16 NA NR 17 10.7

Alderon Iron Ore AXX 202 1.55 2.26/0.83 NA Nil NM NA NR 52 NM Central Steel & Wire CSTW 196 740.13 780.00/665.00 0.34 0.3 11 NA B 84 2.4 China Gerui Adv Materials Gp CHOP 78 1.31 3.04/1.12 1.17 Nil NM NA NR 1 9.8 Gerdau S.A. ADR GGB 12,944 7.61 9.68/5.27 1.82 0.9 21 9.40 NR 56 3.9 Grupo Simec SAB ADS SIM 655 11.92 15.37/10.15 1.13 Nil 23 NA NR 45 8.1 Handy & Harman HNH 312 23.68 25.24/13.71 0.95 Nil 9 NA NR 15 3.7 Haynes Intl HAYN 663 53.77 56.51/43.36 2.25 1.6 31 60.90 NR 75 4.5 Mechel OAO ADR MTL 1,012 2.43 7.47/1.65 2.76 Nil NM NA NR 2 NA New Millennium Iron NML.C 110 0.61 1.63/0.57 NA Nil NM NA NR NA NM Sims Metal Management ADR SMSMY 2,008 9.83 11.60/7.25 1.98 Nil NM NA NR 38 NA SunCoke Energy SXC 1,568 22.38 23.42/13.58 1.88 Nil 38 NA NR 22 5.2 SunCoke Energy Prtnrs LP SXCP 844 26.85 28.20/18.00 NA 6.4 15 NA NR 75 7.7 Sutor Tech Grp SUTR 74 1.83 2.53/0.95 2.32 Nil 4 NA NR 3 2.8 Ternium S.A. ADR TX 606 30.89 31.64/18.86 2.19 2.1 53 NA NR 40 2.2

NA-Not Available NM-Not Meaningful NR-Not Rated. *For Peer Groups with more than 15 companies or stocks, selection of issues is based on market capitalization.

Source: S&P.


5/11

S&P Analyst Research Notes and other Company News

November 8, 201312:16 pm ET ... S&P CAPITAL IQ MAINTAINS BUY RECOMMENDATION ON ADSSOF VALE (VALE 15.96****): We maintain our target price of $22 despite raising our'13 EPS est. by $0.57 to $2.56 to exclude one-off items. Vale's Q3 adjusted EPS($0.72) was 9% and 31% ahead of our and consensus ests. Adjusted EBIT of $4.8Bwas up 48% y-y driven by iron ore volumes (+7%) and prices (+12%). Cost of sales

fell 3%. Looking ahead, while we expect lower average iron ore prices in '14(-19%) due to rising global supply, we believe Vale can mitigate this throughhigher volumes (+6%) and savings. We also see support from ongoing initiatives

to rationalize its portfolio. /Johnson Imode

August 8, 201311:02 am ET ... S&P MAINTAINS BUY RECOMMENDATION ON ADSS OF VALE(VALE 14.2201****): We maintain our target price of $22 after minor changes toour adjusted 13 EPS forecast of $2.57 as Vale's Q2 adjusted EPS of $0.64 was inline. Reported EPS of $0.08 was impacted by derivative/currency losses due to

the weaker Real and drives a $0.56 cut to our reported 13 EPS forecast of $1.99.Underlying EBIT of $3.6B was down 17% from a year ago due to lower commodityprices, but cost savings of $700M helped mitigate this. We see a stronger H2 withiron ore prices $15/tonne higher than a year ago due to low inventories androbust demand, while cost savings should help. /Johnson Imode/

August 5, 2013Vale S.A. announced that one of its Board Members, Mr. Nelson HenriqueBarbosa Filho, has resigned as of August 1, 2013.

May 28, 2013The Board of Directors of Vale S.A. approved the nomination of Mr. HIDEHIROTAKAHASHI as alternate of Mr. Fuminobu Kawashima at the Vale Board ofDirectors, in replacement of Hajime Tonoki.

April 25, 201302:19 pm ET ... S&P MAINTAINS BUY RECOMMENDATION ON THE ADSS OFVALE (VALE 17.165****): We maintain our target price of $22 having made minorcuts to our 13 EPS ($2.56) post Q1 results. Today's results of $0.62 EPS beatCapital IQ's consensus by 17%, gaining from Vale's cost saving drive whichlowered costs by $880M from a year ago. Looking ahead, we expect this positive

to be added to by higher iron ore production (post the normal Q1 weather impact),

and our expectation for a 6% rise in 2013 average iron ore prices. Importantly,Vale is changing its iron ore contract structures from a lag to closer to spot torealize price changes more quickly. /Johnson Imode

February 28, 201305:15 pm ET ... S&P MAINTAINS BUY RECOMMENDATION ON ADSS OF VALE(VALE 18.99****): We lower our target price by $1, to $22, based on a reduction toour 2013 EPS estimate. To reflect a more conservative assumption for iron oreprices, we cut our '13 EPS estimate to $2.57 from $2.88. On our revised estimateand target price, the projected P/E is at the low end of the historical range of thelast 10 years. We think the ADSs will carry a low valuation on '13's estimate given

the risk to earnings from a sluggish steel market. Q4 operating EPS were $0.38, vs.$0.91, on a 19% sales drop, below our $0.56 estimate and the Capital IQconsensus forecast of $0.43. /L. Larkin

January 17, 2013Vale S.A.'s global steel director Aristides Corbellini has resigned from his dutiesas part of a downsizing process in the miner's steel production division.

November 27, 201205:32 am ET ... S&P MAINTAINS BUY RECOMMENDATION ON THE ADSS OFVALE (VALE 17.66****): We lower our 12-month target price to $23 from $24 on areduction to '13's EPS estimate. Based on a more conservative assumption foriron ore volume, we cut '13's EPS estimate to $2.88 from $3.39. On our new targetprice and '13's revised estimate, the projected P/E would be just above the lowend of the 10-year range. Given concerns over global economic growth in generaland steel production growth in particular, we believe the ADSs will carry a lowP/E. We see long-term earnings rising on a secular increase in iron ore resultingfrom increased durable goods demand in Asia. /L. Larkin

October 26, 2012

04:25 pm ET ... S&P MAINTAINS BUY RECOMMENDATION ON THE ADSS OFVALE (VALE 18.28****): We cut our '12 EPS estimate to $2.26 from $2.65 on low

than expected Q3 results. But assuming a rebound in iron ore and nickel pricwe keep '13's at $3.39 and retain our 12-month target price of $24. We think Vis attractive at current levels. The company tells analysts that '12 is likely a peyear for capital spending and that it plans to sell low-return assets. In our vie

this bodes well for free cash flow. Q3 operating earnings per ADS were $0.42

EPS of $0.95, on 34% lower sales, below our $0.71 estimate and the Capital IQconsensus forecast of $0.51. /L. Larkin

October 11, 2012Vale S.A. reported that Mr. Ricardo Jose Sasseron announced his resignationDirector of Board of Directors. His appointed replacement will be submitted tBoard approval at its October 2012 meeting and subsequently announced to tmarket.

October 4, 2012Vale S.A. announced that Ricardo Flores, Chairman of its Board of Directors, announced he will pass on the chairmanship to Dan Conrado. At the Boardmeeting, Ricardo Flores announced his resignation, expressing gratitude for unconditional support he received from Vale's shareholders, other Boardmembers and Executive Officers. Ricardo Flores, who had served as Chairmaits Board of Directors since November 2010, made important contributions toVale, working in harmony with all the shareholders and senior management areinforcing the culture of meritocracy in the company. Dan Conrado'sappointment will be submitted to Board approval at its October 2012 meeting.Conrado is currently president of Previ, the large pension fund in Latin AmeriHe holds a law degree and previously held various positions within Banco doBrasil, including Vice President of Retail, Distribution and Operations, DirectoSao Paulo Distribution and Director of Marketing and Communications.

September 28, 2012Rio de Janeiro announced his new duties as CEO of Brasilprev Seguros e Prencia S.A. Ricardo Flores, Chairman of Board of Directors, has announced he pass on the chairmanship to Dan Conrado, during the Board meeting held onSeptember 27, 2012, Ricardo Flores announced his resignation. Ricardo Florewho had served as Chairman of Board of Directors since November 2010. DaConrado's appointment will be submitted to Board approval at its October 20meeting. Dan Conrado is currently president of Previ.

August 1, 201204:55 pm ET ... S&P MAINTAINS BUY RECOMMENDATION ON ADSS OF VALE(VALE 18.05****): We lower our 12-month target price by $3, to $24, to reflect reduction to our 2013 earnings per ADS estimate. Based on a less optimisticoutlook for iron ore prices stemming from s luggish Chinese steel industryconditions, we cut our '12 estimate to $2.64 from $3.34, and reduce '13's to $3from $3.72. On our target price and '13 estimate, the projected P/E would be alow end of the 10-year range. VALE posted Q2 operating earnings per ADS of$0.60, vs. $1.22, on a 21% sales decline, below our $0.81 estimate, and toppingCapital IQ consensus forecast of $0.57. /L. Larkin


Vale SA

Source: S&P.


6/11

Analysts' Recommendations

Wall Street Average

S

WH

H

BH

B

Number of Analysts Following Stock

Monthly Average Trend Buy

B

Buy/Hold

BH

Hold

H

Weak Hold

WH

Sell

S

No Opinion VALE Trend

F M A M J J A S O N D J F M A M J J A S O N D J

2012 2013

Stock Price ($)

10

20

30

40

10

20

30

Of the total 34 companies following VALE, 20 analysts currently publish recommendations.

No. of Ratings % of Total 1 Mo. Prior 3 Mos. Prior

Buy 11 55 11 10Buy/Hold 0 0 0 0Hold 7 35 7 0Weak Hold 1 5 1 2Sell 1 5 1 0No Opinion 0 0 0 0Total 20 100 20 12

Wall Steet Consensus Opinion

BUY/HOLD

Companies Offering Coverage

Over 30 firms follow this stock; not all firms aredisplayed.

BB&T Capital MarketsBMO Capital Markets, Canadian EquityResearchBTG PactualBarclaysBofA Merrill LynchBradesco S.A. Corretora de Titulos e ValoresMobiliariosCLSACanaccord GenuityCitigroup IncCowen Securities LLC, Research DivisionCowen and Company, LLCCredit SuisseDaiwa Securities Co. Ltd.Deutsche Bank

Espirito Santo Investment BankEspirito Santo ResearchExane BNP ParibasGoldman SachsHSBCHamburger Sparkasse AGItau BBAJP MorganMacquarie ResearchMorgan StanleyMorningstar Inc.Nomura Securities Co. Ltd.RBC Capital MarketsRaymond James & AssociatesRenaissance CapitalS&P Capital IQ Equity Research

Wall Street Consensus Estimates

2012 Actual $1.98

2012 2013

S O N D J F M A M J J A S O N D J1.75

2

2.25

2.5

Estimates 2012 2013 2014

Fiscal Years Avg Est. High Est. Low Est. # of Est. Est. P/E2014 2.04 2.60 1.30 19 7.02013 2.27 2.69 1.63 19 6.32014 vs. 2013 -10% -3% -20% 0% 11%

Q4'14 0.55 0.63 0.45 4 26.1Q4'13 0.63 0.72 0.55 12 22.7Q4'14 vs. Q4'13 -13% -12% -18% -67% 15%

A company's earnings outlook plays a major part in any investment decision. Standard & Poor's organizes the earnings estimates of over 2,300Wall Street analysts, and provides their consensus of earnings over the next two years. This graph shows the trend in analyst estimates over

the past 15 months.

Wall Street Consensus vs. Performance

For fiscal year 2013, analysts estimate that VALEwill earn $2.27. For the 3rd quarter of fiscal year2013, VALE announced earnings per share of$0.68, representing 30% of the total annualestimate. For fiscal year 2014, analysts estimate

that VALE's earnings per share will decline by10% to $2.04.


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Source: S&P, Capital IQ Estimates, Inc.


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Glossary

S&P STARSSince January 1, 1987, S&P Capital IQ Equity Research has ranked a universe of U.S.common stocks, ADRs (American Depositary Receipts), and ADSs (AmericanDepositary Shares) based on a given equity's potential for future performance.Similarly, S&P Capital IQ Equity Research has used STARS methodology to rankAsian and European equities since June 30, 2002. Under proprietary STARS (STockAppreciation Ranking System), S&P equity analysts rank equities according to their

individual forecast of an equity's future total return potential versus the expected totalreturn of a relevant benchmark (e.g., a regional index (S&P Asia 50 Index, S&PEurope 350 Index or S&P 500 Index)), based on a 12-month time horizon. STARSwas designed to meet the needs of investors looking to put their investment decisionsin perspective. Data used to assist in determining the STARS ranking may be theresult of the analyst's own models as well as internal proprietary models resulting fromdynamic data inputs.

S&P 12 Month Target PriceThe S&P Capital IQ equity analyst's projection of the market price a given security willcommand 12 months hence, based on a combination of intrinsic, relative, and privatemarket valuation metrics, including S&P Fair Value.

Investment Style ClassificationCharacterizes the stock as Growth or Value, and indicates its capitalization level.Growth is evaluated along three dimensions (earnings, sales and internal growth),while Value is evaluated along four dimensions (book-to-price, cash flow-to-price,dividend yield and sale-to-price). Growth stocks score higher than the market averageon growth dimensions and lower on value dimensions. The reverse is true for Valuestocks. Certain stocks are classified as Blend, indicating a mixture of growth and valuecharacteristics and cannot be classified as purely growth or value.

S&P Capital IQ EPS EstimatesS&P Capital IQ earnings per share (EPS) estimates reflect analyst projections of futureEPS from continuing operations, and generally exclude various items that are viewedas special, non-recurring, or extraordinary. Also, S&P Capital IQ EPS estimates reflecteither forecasts of S&P Capital IQ equity analysts; or, the consensus (average) EPSestimate, which are independently compiled by Capital IQ, a data provider to S&PCapital IQ Equity Research. Among the items typically excluded from EPS estimatesare asset sale gains; impairment, restructuring or merger-related charges; legal andinsurance settlements; in process research and development expenses; gains orlosses on the extinguishment of debt; the cumulative effect of accounting changes;and earnings related to operations that have been classified by the company asdiscontinued. The inclusion of some items, such as stock option expense andrecurring types of other charges, may vary, and depend on such factors as industrypractice, analyst judgment, and the extent to which some types of data is disclosed bycompanies.

S&P Core EarningsS&P Capital IQ Core Earnings is a uniform methodology for adjusting operatingearnings by focusing on a company's after-tax earnings generated from its principalbusinesses. Included in the S&P Capital IQ definition are employee stock option grantexpenses, pension costs, restructuring charges from ongoing operations, write-downsof depreciable or amortizable operating assets, purchased research and development,M&A related expenses and unrealized gains/losses from hedging activities. Excludedfrom the definition are pension gains, impairment of goodwill charges, gains or lossesfrom asset sales, reversal of prior-year charges and provision from litigation orinsurance settlements.

Qualitative Risk AssessmentThe S&P Capital IQ equity analyst's view of a given company's operational risk, or therisk of a firm's ability to continue as an ongoing concern. The Qualitative RiskAssessment is a relative ranking to the S&P Capital IQ U.S. STARS universe, and

should be reflective of risk factors related to a company's operations, as opposed torisk and volatility measures associated with share prices.

Quantitative EvaluationsIn contrast to our qualitative STARS recommendations, which are assigned by S&PCapital IQ analysts, the quantitative evaluations described below are derived fromproprietary arithmetic models. These computer-driven evaluations may at timescontradict an analyst's qualitative assessment of a stock. One primary reason for thisis that different measures are used to determine each. For instance, when designatingSTARS, S&P Capital IQ analysts assess many factors that cannot be reflected in amodel, such as risks and opportunities, management changes, recent competitiveshifts, patent expiration, litigation risk, etc.

S&P Quality Ranking (also known asS&P Earnings & DividendRankings)Growth and stability of earnings and dividends are deemed key elemestablishing S&P Capital IQs Earnings and Dividend Rankings for common which are designed to capsulize the nature of this record in a single symbol. It be noted, however, that the process also takes into consideration certain adjusand modifications deemed desirable in establishing such rankings. The final sceach stock is measured against a scoring matrix determined by analysis of theof a large and representative sample of stocks. The range of scores in the array

sample has been aligned with the following ladder of rankings:A+AA-B+B

HighestHighAbove AverageAverageBelow Average

B-CDNR

Below AverageLowerLowestIn Reorganization

S&P Fair Value RankUsing S&P Capital IQ's exclusive proprietary quantitative model, stocks are raone of five groups, ranging from Group 5, listing the most undervalued stoGroup 1, the most overvalued issues. Group 5 stocks are expected to geoutperform all others. A positive (+) or negative (-) Timing Index is placed nexFair Value ranking to further aid the selection process. A stock with a (+) addedFair Value Rank simply means that this stock has a somewhat better chaoutperform other stocks with the same Fair Value Rank. A stock with a (-)somewhat lesser chance to outperform other stocks with the same Fair ValueThe Fair Value rankings imply the following: 5-Stock is significantly under4-Stock is moderately undervalued; 3-Stock is fairly valued; 2-Stock is movervalued; 1-Stock is significantly overvalued.

S&P Fair Value CalculationThe price at which a stock should trade at, according to S&P Capital IQ's propquantitative model that incorporates both actual and estimated variables (as opto only actual variables in the case of S&P Quality Ranking). Relying heavicompany's actual return on equity, the S&P Fair Value model places a valusecurity based on placing a formula-derived price-to-book multiple on a comconsensus earnings per share estimate.

Insider ActivityGives an insight as to insider sentiment by showing whether directors, officers aemployees who have proprietary information not available to the general pubbuying or selling the company's stock during the most recent six months.

Funds From Operations FFOFFO is Funds from Operations and equal to a REIT's net income, excluding glosses from sales of property, plus real estate depreciation.

Investability Quotient (IQ)The IQ is a measure of investment desirability. It serves as an indicator of pomedium-to-long term return and as a caution against downside risk. The mtakes into account variables such as technical indicators, earnings estimates, lifinancial ratios and selected S&P Capital IQ proprietary measures.

S&P's IQ RationaleVale SA ADS

Proprietary S&P MeasuresTechnical IndicatorsLiquidity/Volatility MeasuresQuantitative Measures

Raw Score171612

5

Max Value115

402075

IQ Total 50 250

VolatilityRates the volatility of the stock's price over the past year.

Technical EvaluationIn researching the past market history of prices and trading volume for each comS&P Capital IQ's computer models apply special technical methods and formidentify and project price trends for the stock.

Relative Strength Rank


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Redistribution or reproduction is prohibited without written permission. Copyright 2014 Standard & Poor's Financial Services LLC.STANDARD & POOR'S, S&P, S&P 500, S&P CAPITAL IQ, S&P EUROPE 350 and STARS are registered trademarks of Standard & Poor's Financial Services LLC.


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Shows, on a scale of 1 to 99, how the stock has performed versus all other companiesin S&P Capital IQ's universe on a rolling 13-week basis.

Global Industry Classification Standard (GICS)An industry classification standard, developed by S&P Capital IQ in collaboration withMorgan Stanley Capital International (MSCI). GICS is currently comprised of 10Sectors, 24 Industry Groups, 68 Industries, and 154 Sub-Industries.

S&P Issuer Credit RatingA Standard & Poor's Issuer Credit Rating is a current opinion of an obligor's overallfinancial capacity (its creditworthiness) to pay its financial obligations. This opinionfocuses on the obligor's capacity and willingness to meet its financial commitments asthey come due. It does not apply to any specific financial obligation, as it does not takeinto account the nature of and provisions of the obligation, its standing in bankruptcy orliquidation, statutory preferences, or the legality and enforceability of the obligation. Inaddition, it does not take into account the creditworthiness of the guarantors, insurers,or other forms of credit enhancement on the obligation. The Issuer Credit Rating is nota recommendation to purchase, sell, or hold a financial obligation issued by an obligor,as it does not comment on market price or suitability for a particular investor. IssuerCredit Ratings are based on current information furnished by obligors or obtained byStandard & Poor's from other sources it considers reliable. Standard & Poor's does notperform an audit in connection with any Issuer Credit Rating and may, on occasion,rely on unaudited financial information. Issuer Credit Ratings may be changed,suspended, or withdrawn as a result of changes in, or unavailability of, suchinformation, or based on other circumstances.

Exchange TypeASE - American Stock Exchange; AU - Australia Stock Exchange; BB - Bulletin Board;NGM - Nasdaq Global Market; NNM - Nasdaq Global Select Market; NSC - NasdaqCapital Market; NYS - New York Stock Exchange; OTN - Other OTC (Over theCounter); OTC - Over the Counter; QB - OTCQB; QX - OTCQX; TS - Toronto StockExchange; TXV - TSX Venture Exchange; NEX - NEX Exchange.

S&P Capital IQ Equity ResearchS&P Capital IQ Equity Research U.S. includes Standard & Poor's Investment AdvisoryServices LLC; Standard & Poor's Equity Research Services Europe includesMcGraw-Hill Financial Research Europe Limited trading as Standard & Poor's;Standard & Poor's Equity Research Services Asia includes McGraw-Hill FinancialSingapore Pte. Limited's offices in Singapore, Standard & Poor's Investment AdvisoryServices (HK) Limited in Hong Kong, Standard & Poor's Malaysia Sdn Bhd, andStandard & Poor's Information Services (Australia) Pty Ltd.

Abbreviations Used in S&P Capital IQ Equity Research Reports

CAGR - Compound Annual Growth RateCAPEX - Capital ExpendituresCY - Calendar YearDCF - Discounted Cash FlowDDM - Dividend Discount ModelEBIT - Earnings Before Interest and TaxesEBITDA - Earnings Before Interest, Taxes, Depreciation and AmortizationEPS - Earnings Per ShareEV - Enterprise ValueFCF - Free Cash FlowFFO - Funds From OperationsFY - Fiscal YearP/E - Price/EarningsP/NAV - Price to Net Asset ValuePEG Ratio - P/E-to-Growth RatioPV - Present ValueR&D - Research & DevelopmentROCE - Return on Capital EmployedROE - Return on EquityROI - Return on Investment

ROIC - Return on Invested CapitalROA - Return on AssetsSG&A - Selling, General & Administrative ExpensesSOTP - Sum-of-The-PartsWACC - Weighted Average Cost of Capital

Dividends on American Depository Receipts (ADRs) and AmericanDepository Shares (ADSs) are net of taxes (paid in the country oforigin).


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Required DisclosuresIn contrast to the qualitative STARS recommendations covered in this report, whichare determined and assigned by S&P Capital IQ equity analysts, S&P Capital IQ ranksstocks in accordance with three other ranking methodologies: (a) S&P's Capital IQ'squantitative evaluations are derived from S&P Capital IQ's proprietary Fair Valuequantitative ranking model. The Fair Value Ranking methodology is a relative rankingmethodology. As a quantitative model, Fair Value relies on history and consensusestimates and does not introduce an element of subjectivity. (b) Global Markets

Intelligence uses two different quantitative methodologies to determinerecommendations for the Trade Detector research report. One methodology is basedon a target price model, while the other methodology is based on four separatequantitative strategies. The STARS, quantitative evaluations and Trade Detectormethodologies reflect different criteria, assumptions and analytical methods and mayhave differing recommendations.

S&P Capital IQ Global STARS Distribution as of September 30, 2013

Ranking North America Europe Asia GlobalBuy 36.5% 33.5% 32.3% 35.6%Hold 54.2% 43.5% 59.5% 53.1%Sell 9.3% 23.0% 8.2% 11.3%

Total 100% 100% 100% 100%

5-STARS (Strong Buy): Total return is expected to outperform the total return of arelevant benchmark, by a wide margin over the coming 12 months, with shares risingin price on an absolute basis.4-STARS (Buy): Total return is expected to outperform the total return of a relevant

benchmark over the coming 12 months, with shares rising in price on an absolutebasis.3-STARS (Hold): Total return is expected to closely approximate the total return of arelevant benchmark over the coming 12 months, with shares generally rising in priceon an absolute basis.2-STARS (Sell): Total return is expected to underperform the total return of a relevantbenchmark over the coming 12 months, and the share price is not anticipated to showa gain.1-STARS (Strong Sell): Total return is expected to underperform the total return of arelevant benchmark by a wide margin over the coming 12 months, with shares fallingin price on an absolute basis.

Relevant benchmarks: In North America, the relevant benchmark is the S&P 500Index, in Europe and in Asia, the relevant benchmarks are the S&P Europe 350 Indexand the S&P Asia 50 Index, respectively.

For All Regions:All of the views expressed in this research report accurately reflect the researchanalyst's personal views regarding any and all of the subject securities or

issuers. No part of analyst compensation was, is, or will be, directly orindirectly, related to the specific recommendations or views expressed in thisresearch report. Analysts generally update stock reports at least four times eachyear.

S&P Capital IQ Global Quantitative Model RecommendationsDistribution as of September 30, 2013

Ranking North America Europe Asia GlobalBuy 40.0% 34.9% 57.3% 46.8%Hold 20.1% 23.8% 17.7% 19.8%Sell 39.9% 41.3% 25.0% 33.4%

Total 100% 100% 100% 100%

Trade Detector Recommendations Distribution as of March 31, 2014The Trade Detector research report was published after March 31, 2014. Rankingdistributions will be provided as of June 30, 2014.

About S&P Capital IQ's DistributorsS&P Capital IQ's research reports (the "research reports") have been prepared andissued by S&P Capital IQ and/or one of its affiliates. In the United States, researchreports are prepared by Standard & Poor's Investment Advisory Services LLC("SPIAS") and issued by Standard & Poor's Financial Services LLC ("S&P"). SPIAS isauthorized and regulated by the U.S. Securities and Exchange Commission; in theUnited Kingdom, research reports are issued by McGraw-Hill Financial ResearchEurope Limited ("MHFRE"), which is authorized and regulated by the FinancialConduct Authority and trades as Standard & Poor's; in Hong Kong, research reportsare issued by Standard & Poor's Investment Advisory Services (HK) Limited, which isregulated by the Hong Kong Securities Futures Commission; in Singapore, researchreports are issued by McGraw-Hill Financial Singapore Pte. Limited ("MHFSPL"),which is regulated by the Monetary Authority of Singapore; in Malaysia, researchreports are issued by Standard & Poor's Malaysia Sdn Bhd ("S&PM"), which isregulated by the Securities Commission of Malaysia; in Australia, research reports are

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S&P Capital IQ keeps certain activities of its business units separate from eacin order to preserve the independence and objectivity of their respective activitie


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Vale - Stock Report_04Jan14_S&P Capital