Company Quick10K Filing
Vale
20-F 2019-12-31 Filed 2020-04-03
20-F 2018-12-31 Filed 2019-04-18
20-F 2017-12-31 Filed 2018-04-13
20-F 2016-12-31 Filed 2017-04-11
20-F 2015-12-31 Filed 2016-03-31
20-F 2014-12-31 Filed 2015-03-20
20-F 2013-12-31 Filed 2014-03-27
20-F 2012-12-31 Filed 2013-04-02
20-F 2011-12-31 Filed 2012-04-17
20-F 2010-12-31 Filed 2011-04-28
20-F 2009-12-31 Filed 2010-04-29

VALE 20F Annual Report

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Vale Earnings 2019-12-31

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20-F 1 a2240808z20-f.htm 20-F

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TABLE OF CONTENTS
TABLE OF CONTENTS

Table of Contents

As filed with the Securities and Exchange Commission on April 3, 2020

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2019
Commission file number: 001-15030

VALE S.A.
(Exact name of Registrant as specified in its charter)

Federative Republic of Brazil
(Jurisdiction of incorporation or organization)

Luciano Siani Pires, Chief Financial Officer
Phone: +55 21 3485 5000

Praia de Botafogo 186 – offices 701 – 1901 – Botafogo
22250-145 Rio de Janeiro, RJ, Brazil

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading
Symbol(s)
Name of Each Exchange on Which Registered

Common shares of Vale, no par value per share

  New York Stock Exchange*

American Depositary Shares (evidenced by American Depositary Receipts), each representing one common share of Vale

VALE New York Stock Exchange

6.250% Guaranteed Notes due 2026, issued by Vale Overseas

VALE/26 New York Stock Exchange

8.250% Guaranteed Notes due 2034, issued by Vale Overseas

VALE/34 New York Stock Exchange

6.875% Guaranteed Notes due 2036, issued by Vale Overseas

VALE/36 New York Stock Exchange

6.875% Guaranteed Notes due 2039, issued by Vale Overseas

VALE39 New York Stock Exchange

5.625% Notes due 2042, issued by Vale S.A.

VALE42 New York Stock Exchange

*
Shares are not listed for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the New York Stock Exchange.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
The number of outstanding shares of each class of stock of Vale as of December 31, 2019 was:
5,128,282,457 common shares, no par value per share
12 golden shares, no par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ    No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o    No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes þ    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ                                       Accelerated filer o                                       Non-accelerated filer o                                        Emerging growth company o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o      International Financial Reporting Standards as issued by the International Accounting Standards Board þ      Other o
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o    Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No þ

Table of Contents

TABLE OF CONTENTS

Page

Form 20-F cross-reference guide ii

I.       Overview


1

Business Overview

2

Selected Financial Data

25

Forward-looking statements

27

Risk factors

28

II.      Information on the company


46

Lines of Business

46

Reserves

77

Capital Expenditures

86

Regulatory Matters

88

III.     Operating and financial review and prospects


93

Overview

93

Results of operations

102

Liquidity and capital resources

112

Contractual obligations

115

Off-balance sheet arrangements

116

Critical accounting policies and estimates

117

Risk management

122

IV.     Share ownership and trading


126

Major shareholders

126

Related party transactions

129

Distributions

131

Trading markets

132

Depositary shares

133

Purchases of equity securities by the issuer and affiliated purchasers

135

V.      Management and employees


136

Management

136

Management compensation

151

Employees

155

VI.    Additional information


157

Legal proceedings

157

Memorandum and articles of association

169

Shareholder debentures

176
Exchange controls and other limitations affecting security holders 177
Taxation 179
Evaluation of disclosure controls and procedures 187

Management's report on internal control over financial reporting

187

Corporate governance

188

Code of conduct

193

Principal account fees and services

194

Information filed with securities regulators

195

Exhibits

196

Glossary

197

Signatures

201

i


Table of Contents

FORM 20-F CROSS REFERENCE GUIDE

Item
Form 20-F caption
Location in this report
Page

1

Identity of directors, senior management and advisers

Not applicable

2

Offer statistics and expected timetable

Not applicable

3

Key information

   

3A Selected financial data

Selected financial data

25

3B Capitalization and indebtedness

Not applicable

3C Reasons for the offer and use of proceeds

Not applicable

3D Risk factors

Risk factors

28

4

Information on the Company

   

4A History and development of the company

Overview, Business overview, Capital expenditures; Information filed with securities regulators,

1, 2, 86,195

4B Business overview

Overview, Business overview, Lines of business, Reserves, Regulatory matters, Major factors affecting prices, Results of operations

1, 2, 46, 77, 88, 94, 102

4C Organizational structure

Exhibit 8

4D Property, plant and equipment

Lines of business, Capital expenditures,Regulatory matters

46, 86, 88

4A

Unresolved staff comments

None

5

Operating and financial review and prospects

   

5A Operating results

Business overview, Results of operations

2, 102

5B Liquidity and capital resources

Liquidity and capital resources

112

5C Research and development, patents and licenses, etc.

Capital expenditures

86

5D Trend information

Results of operations

102

5E Off-balance sheet arrangements

Off-balance sheet arrangements

116

 

Critical accounting policies and estimates

117

5F Tabular disclosure of contractual obligations

Contractual obligations

115

5G Safe harbor

Forward-looking statements

27

6

Directors, senior management and employees

 

6A Directors and senior management

Management

136

6B Compensation

Management compensation

151

6C Board practices

Management—Board of directors

136

6D Employees

Employees

155

6E Share ownership

Major shareholders, Management compensation, Employees—Performance-based compensation

126, 151, 156

7

Major shareholders and related party transactions

   

7A Major shareholders

Major shareholders

126

7B Related party transactions

Related party transactions

129

7C Interests of experts and counsel

Not applicable

8

Financial information

   

8A Consolidated statements and other financial information

Financial statements

F-1

 

Distributions

131

 

Legal proceedings

157

8B Significant changes

Not applicable

ii


Table of Contents

Form 20-F cross-reference guide

Item
Form 20-F caption
Location in this report
Page

9

The offer and listing

   

9A Offer and listing details

Not applicable

9B Plan of distribution

Not applicable

9C Markets

Trading markets

132

9D Selling shareholders

Not applicable

9E Dilution

Not applicable

9F Expenses of the issue

Not applicable

10

Additional information

   

10A Share capital

Memorandum and articles of association—Common shares and golden shares

169

10B Memorandum and articles of association

Memorandum and articles of association

169

10C Material contracts

Lines of business, Results of operations, Related party transactions

46, 102, 129

10D Exchange controls

Exchange controls and other limitations affecting security holders

177

10E Taxation

Taxation

179

10F Dividends and paying agents

Not applicable

10G Statement by experts

Reserves

77

10H Documents on display

Information filed with securities regulators

195

10I Subsidiary information

Not applicable

11

Quantitative and qualitative disclosures about market risk

Risk management

122

12

Description of securities other than equity securities

   

12A Debt securities

Not applicable

12B Warrants and rights

Not applicable

12C Other securities

Not applicable

12D American Depositary Shares

Depositary shares

133

13

Defaults, dividend arrearages and delinquencies

Not applicable

14

Material modifications to the rights of security holders and use of proceeds

Not applicable

15

Controls and procedures

Evaluation of disclosure controls and procedures

187

 

Management's report on internal control over financial reporting

187

16A

Audit Committee financial expert

Management—Audit Committee

148

16B

Code of ethics

Code of conduct

193

16C

Principal accountant fees and services

Principal accountant fees and services

194

16D

Exemptions from the listing standards for audit committees

Management—Audit Committee; Corporate governance

148, 188

16E

Purchase of equity securities by the issuer and affiliated purchasers

Purchases of equity securities by the issuer and affiliated purchasers

135

16F

Change in registrant's certifying accountant

Not applicable

16G

Corporate governance

Corporate governance

188

16H

Mine safety disclosure

Not applicable

17

Financial statements

Not applicable

18

Financial statements

Financial statements

F-1

19

Exhibits

Exhibits

196

iii


Table of Contents

I. OVERVIEW

We are one of the largest metals and mining companies in the world, based on market capitalization. We are one of the world's largest producer of iron ore and nickel. We also produce iron ore pellets, manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals (PGMs), gold, silver and cobalt. We are presently engaged in greenfield mineral exploration in five countries. We operate large logistics systems in Brazil and other regions of the world, including railroads, maritime terminals and ports, which are integrated with our mining operations. In addition, we have a distribution center to support the delivery of iron ore worldwide. Directly and through affiliates and joint ventures, we also have investments in energy and steel businesses.

In this report, references to "Vale" are to Vale S.A. References to "we," "us" or the "Company" are to Vale and, except where the context otherwise requires, its consolidated subsidiaries. References to our "ADSs" or "American Depositary Shares" are to our common American Depositary Shares (our "common ADSs"), each of which represents one common share of Vale. American Depositary Shares are represented by American Depositary Receipts ("ADRs") issued by the depositary.

Vale S.A. is a stock corporation, or sociedade por ações, that was organized on January 11, 1943 under the laws of the Federative Republic of Brazil for an unlimited period of time. Its head office is located at Praia de Botafogo 186 – offices 701-1901 – Botafogo, 22250-145 Rio de Janeiro, RJ, Brazil, and its telephone number is 55-21-3485-5000.

Unless otherwise specified, we use metric units. References to "real," "reais" or "R$" are to the official currency of Brazil, the real (singular) or reais (plural). References to "U.S. dollars" or "US$" are to United States dollars. References to "€" are to Euros.

    

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BUSINESS OVERVIEW

RUPTURE OF THE TAILINGS DAM AT THE CÓRREGO DO FEIJÃO MINE

On January 25, 2019, a tailings dam ("Dam I") failed at our Córrego do Feijão mine, in the city of Brumadinho, state of Minas Gerais. The rupture released a flow of tailings residue, which affected our administrative area at the Córrego do Feijão mine and parts of the communities of Córrego do Feijão and Parque da Cachoeira outside of Brumadinho, reaching the nearby Paraopeba River. The dam rupture resulted in 270 fatalities or presumed fatalities, and also caused extensive property and environmental damage in the region.

We reaffirm our respect for the victims and their families, and thank the authorities engaged with the search and rescue measures, and those who have dedicated time and effort to provide support and comfort amidst such tragedy. Since the first hours following the rupture of Dam I, we have provided assistance to the victims and impacted families, support to restore the livelihood of the people affected, and means to help them cope with the losses. We have also provided support to local governments and public entities, given the extent of the impacts of the dam rupture and of the suspension of our operations in the region.

Repairing the damage in a fair and agile way is fundamental to the families affected by the rupture of Dam I, and we have prioritized initiatives and resources to that end. Based on open dialogue with the authorities and the affected communities, we developed the Integral Reparation Program, based on social, environmental and infrastructure pillars, to ensure that actions and resources will effectively compensate individuals and communities, recover the environment and enable the sustainable development of Brumadinho and its surroundings.

As we move forward on our path to making our business better, valuing people, safety and reparation, we continue firm in our ambition to become one of the safest and most reliable companies in the world. We will never forget Brumadinho.

Dam I

The Córrego do Feijão mine is part of the Paraopeba complex, in the Southern System. Dam I was first built in 1976 by Ferteco Mineração, a company we acquired in 2001. Dam I received disposed tailings from the Córrego do Feijão and Jangada mines from 1976 until it became inactive in 2016. Dam I contained approximately 11.7 million cubic meters of iron ore tailings.

The dam was raised by building successive layers (lifts) above the tailings accumulated in the reservoir, a technique known as the "upstream" method. There are two other raising methods, the "downstream" method and the "centerline" method, in which the dam is raised by placing new layers away from the initial dam or on top of it, as opposed to over the accumulated tailings. Each of these methods presents a different risk profile.

Vale's response

Since the date of the dam rupture, we have focused on (i) providing full and effective assistance to the victims and reparation of the damages, (ii) determining the causes of the rupture of Dam I, and (iii) preventing further accidents through the adoption of improved technical standards and accelerating the decharacterization of our upstream dams in Brazil, in compliance with applicable Brazilian regulations.

    

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      (i) Immediate support to victims and families

We have provided humanitarian assistance to victims and families from the very first moments. Immediately following the rupture of Dam I, we contacted the local authorities and activated our Emergency Mining Dam Response Plan (Plano de Ação de Emergência para Barragens de Mineração (PAEBM)) to locate and rescue victims and provide immediate aid to affected parties, including employees and members of the community. Support to people affected has been offered on a broad basis, with large teams dedicated to listening to the people affected, recording their emergency requirements, ensuring the immediate assistance and delivering them updates in the fastest way possible. A variety of actions were taken to offer aid and relief to people affected by the rupture of Dam I.

We took measures to mobilize ten hospitals and health units, as well as seven assistance centers to provide emergency healthcare and psychological and social assistance to those in need. More than 14,000 medical and psychological consultations and 185,000 pharmacy items have been provided. We made donations to the families of deceased or missing individuals, to assist them with financial expenses in such a critical moment, regardless any future compensation. Donations were also made, starting a few days after the dam rupture, to those who lived or had business activities or real estates in the Self-Rescue Zone. Basic items, such as water, food and shelter, were made available to the communities in need.

Over 580 million liters of water have been supplied to the population, artesian wells have been drilled and a new water pipeline was built to serve the municipality of Pará de Minas. For people who had to be evacuated from neighborhoods close to the impacted areas, we have provided full support with relocation, temporary or permanent housing and the overall well-being.

We mobilized over 700 professionals, including veterinarians, biologists, technicians and field staff to support the rescue of fauna and mitigate environmental impacts, and provided a hospital and an animal shelter. Over 9,800 animals have been rescued so far, and more than 500 remain under our care.

We have also made financial contributions over R$400 million to the city of Brumadinho, ten municipalities impacted by suspended mining operations and the state of Minas Gerais. Donations were directed to public entities engaged with the search and rescue efforts, especially the State Fire Department, the State Civil Defense, and the State Military Police. State-of-the-art equipment was bought for the Institute of Forensics of Belo Horizonte.

We have also performed emergency infrastructure works to ensure the fast reestablishment of logistics, such as the installation of the Alberto Flores bridge, which grants safe access to the central area of Brumadinho.

      (ii) Reparation and remediation efforts

We have been working with authorities and affected communities to remediate the environmental and social impacts of the rupture of Dam I. In addition to the emergency actions discussed above, we have entered into 27 agreements with authorities, on a variety of matters. Below is a summary of the preliminary agreements we have entered into with public authorities to establish a framework of for indemnification and reparation measures:

    Preliminary settlement agreement with the Brazilian Federal Government, the state of Minas Gerais and public prosecutors.  In February 2019, we entered into a preliminary settlement agreement with the state of Minas Gerais, the Federal Government, public prosecutors of the state of Minas Gerais, federal prosecutors, public defenders of the state of

    

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      Minas Gerais and other public authorities. Under this agreement, we committed to make monthly emergency aid payments to residents of Brumadinho and the communities located downstream of Dam I, up to one kilometer from the Paraopeba riverbed, from Brumadinho to the city of Pompéu for one year, retroacting to January 2019. In October 2019, we entered into a new agreement to extend payments for 10 months, with a narrower scope. The total amount paid as emergency aid pursuant to these agreements will be deducted from an eventual collective damages payment to be agreed in the future.

    Preliminary settlement agreement with Minas Gerais state public defenders.  In April 2019, we entered into an agreement with the public defenders' office of the state of Minas Gerais to permit those affected by the dam rupture to join individual or family group out-of-court settlement agreements for the indemnification of property, and other economic and personal damages (danos morais) sustained by affected persons. This agreement establishes the basis for a wide range of indemnification payments. As of March 31, 2020, we entered into 2,267 indemnification agreements with individuals or groups, corresponding to 4,898 beneficiaries, providing for payments in the amount of approximately R$857 million.

    Settlement agreement with public labor prosecutors.  In July 2019, we entered into a final settlement agreement with the public labor prosecutors to indemnify workers who were based at Córrego do Feijão mine or were otherwise victims of the dam rupture. The settlement agreement established standards to indemnify the families of the workers and also provides for employment stability to our employees and outsourced workers, whose workplace was the Córrego do Feijão mine on the day of the dam failure, and to the survivors who were working at the Córrego do Feijão mine at the moment of the dam failure, for the period of three years from the date of the dam rupture, with the possibility of conversion of this stability right into the proportional amount of money that these employees and outsourced workers would have received until the date of completion of such three-year period (i.e. January 25, 2022). Spouses or companions and parents of deceased workers will be granted lifetime health insurance and children of deceased workers will be granted health insurance, until the age of 25. As of March 31, 2020, we entered into 615 indemnification agreements with individuals or groups pursuant to this settlement agreement, corresponding to 1,578 beneficiaries and 244 families of deceased workers, providing for payments in the total amount of approximately R$1,007 million. The settlement agreement also provided for the payment of R$400 million as collective moral damages (danos morais coletivos), which we fully paid in 2019. Finally, the settlement agreement determined the release of R$1.6 billion initially blocked from us.

    Environmental remediation and compensation.  Between February 2019 and February 2020, we entered into 12 agreements with public authorities, relating to environmental matters and providing for specific remediation and compensation measures, including, among other actions, emergency measures relating to domestic and wild fauna affected by the rupture of Dam I, and actions to restore water collection at the Paraopeba River, improve water collection points around the area affected by the dam rupture, and monitor the water quality in the Paraopeba River and São Francisco River Basin. We also launched the "Ground Zero Project", a pilot project for environmental recovery.

    Other agreements.  We entered into 12 other agreements with authorities to cover specific topics, such as: (i) support to the municipalities in providing public services and infrastructure; (ii) emergency payments to families relocated in Barão de Cocais and for the Pataxós indigenous community; and (iii) external audits and asset integrity studies, providing

    

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      technical support for the authorities, with measures to review and reinforce structures and suspension of operations.

    Other negotiations.  In addition, we are negotiating with the Government of the State of Minas Gerais and public authorities that are part of the task force group constituted to investigate the failure of Dam I an additional agreement regarding collective damages indemnification and further compensation for the society and environment, with the goal of creating a stable legal framework for the execution of reparation and compensation measures. Based on the current terms under early-stage discussions and preliminary estimates, this agreement could result in an additional provision ranging from US$ 1.0 billion to US$ 2.0 billion. Accounting impacts, if any, will be recorded when an agreement is reached.

Based on the dialogue with impacted communities and with authorities, we have developed a comprehensive program to repair the damage caused, encompassing economic measures already included in legal agreements as well as non-economic compensation measures.

On the environmental front, a plan was developed to remove and treat tailings, recover fauna and flora and ensure the water catchment and supply to the Belo Horizonte metropolitan region. Two water treatment stations (ETAF) are already operating to clean and return treated water to the Ferro-Carvão stream and the Paraopeba river. The "Ground Zero Project" is a pilot project to fully recover the original conditions of the Ferro-Carvão stream by 2023.

On the socio-economic front, non-economic compensation measures aim to ensure respect for human rights and are being negotiated, focused on the perspectives and demands of the affected communities and public authorities. Our initiatives are being designed to provide structured assistance for long-term results in education, healthcare and well-being, employment and income generation, ultimately enabling sustainable development in the region. Some initiatives in place welcome residents of Brumadinho to share their experiences and feelings, with a view to rebuilding self-esteem and strengthening the sense of belonging to that community and location. Activities are also developed to enhance local vocations, such as cultural tourism, productive backyards, community gardens and handicrafts.

We know that there is still a lot to be done to fully restore Brumadinho and reaffirm our commitment to doing so. For further information on the updated balance of our actions taken so far, see the following website: vale.com/repairoverview. Information on our website is not incorporated by reference in this annual report on Form 20-F.

      (iii) Determination of the causes for the rupture of the dam

Immediately after the dam rupture, our external legal advisors engaged an expert panel to conduct an investigation into the causes of the dam rupture. On December 12, 2019, the expert panel released its report on the technical causes of the rupture of Dam I.

    The panel found that the rupture and resulting flow slide was the result of flow (static) liquefaction within the tailings in the dam.

    According to the panel's report, the following factors contributed to instability in Dam I: (i) a design that resulted in a steep upstream constructed slope; (ii) water management within the tailings impoundment that at times allowed ponded water to get close to the crest of the dam, resulting in the deposition of weak tailings near the crest; (iii) a setback in the design that pushed the upper portions of the slope over weaker fine tailings; (iv) a lack of significant

    

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      internal drainage that resulted in a persistently high water level in the dam, particularly in the toe region; (v) high iron content of tailings, resulting in heavy tailings with bonding between particles, which created stiff tailings that were potentially very brittle if triggered to become undrained; and (vi) high and intense regional wet season rainfall that can result in significant loss of suction, producing a slight loss of strength in the unsaturated materials above the water level.

    We are evaluating the potential effect of the factors identified by the expert panel on our determinations about safety and stability at our other structures, particularly upstream tailing dams.

Our Board of Directors also established, immediately after the dam rupture, three independent ad hoc advisory committees to support the Board in matters relating to the dam rupture: the Independent Ad Hoc Consulting Committee for Investigation (CIAEA), the Independent Ad Hoc Consulting Committee for Support and Recovery (CIAEA-R) and the Independent Ad Hoc Consulting Committee for Dam Safety (CIAESB).

    The Independent Ad Hoc Consulting Committee for Investigation (CIAEA) was established to conduct an independent investigation into the causes of the dam rupture and to advise our Board of Directors in connection with these matters. The committee was chaired by Dr. Ellen Gracie, former Justice of the Federal Supreme Court (STF). On February 20, 2020, the CIAEA provided its investigation report to our Board of Directors. An executive summary of the report was published the same day. The committee reported on its investigation, provided its observations and, based on its observations, made recommendations concerning our controls and governance, changes in our internal organization, our culture, and our ability to identify risks and take action to address them. Because the committee investigated the circumstances that existed prior to the rupture of Dam I, some of the actions we have taken since then may address aspects of the committee's recommendations, but we are in the process of evaluating the committee's report. On March 20, 2020, we announced a detailed plan with deadlines for the implementation of measures to address the committee's recommendations. There can be no assurance that the measures we have taken or will take, including in response to the committee's recommendations, will be effective to prevent future accidents.

    The Independent Ad Hoc Consulting Committee for Support and Recovery (CIAEA-R) was established to monitor our measures to support the affected community and to remediate the impacted area, and our provision of resources for this purpose, and to recommend measures to our Board of Directors in connection with these matters. On February 20, 2020, the committee provided its investigation report to our Board of Directors. The report recognizes that we have made significant efforts for the reparation since the rupture of Dam I, but also indicates that there are challenges for the evolution of the reparation process. The report provides recommendations to the Board of Directors with respect to the improvement and monitoring of our action plans, and technical and operational suggestions to our management to contribute to the effective fulfillment of the action plans.

    The Independent Ad Hoc Consulting Committee for Dam Safety (CIAESB) was established to monitor safety initiatives, risk management and risk mitigation efforts related to our dams and recommending measures to strengthen safety at these dams. In March 2020, our Board of Directors decided to extend the term of the committee for one year.

    

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      (iv) Prevention of further accidents and decharacterization of upstream dams

In April 2019, we created a special department in charge of reparation and development (Diretoria Especial de Reparação e Desenvolvimento). This department is responsible for all social, humanitarian, environmental, and structural recovery actions to be carried out in Brumadinho and in the 22 municipalities along Paraopeba river up to Retiro Baixo dam in the state of Minas Gerais, and the coordination of actions with communities in the Self-Rescue Zone and Secondary Safety Zone of the dams. The head of the department reports to our CEO and participates in weekly meetings of our management to report and discuss the progress of the initiatives.

In January 2019, we decided to accelerate our plan to "decharacterize" all of our dams located in Brazil built using the upstream raising method. Following the announcement of our decision, the Brazilian National Mining Agency ("ANM") approved new safety standards for dams and required the decharacterization of structures built under the upstream method. Our plan aims to decharacterize dam structures in accordance with new federal and state regulations (ANM Regulation no. 13/2019 and the Minas Gerais State Law no. 23.291/2019). The term "decharacterization" means reintegrating the dam and its contents into the local environment.

We have been working to develop a detailed engineering plan to decharacterize each of those upstream dams. The updated plan for each structure takes into consideration whether downstream containment structures should be built, depending on the level of safety of the structure. As of December 31, 2019, we recognized provisions in connection with the decharacterization of dams in the aggregate amount of US$2.625 billion.

In December 2019, we concluded the decharacterization of the 8B dam in the city of Nova Lima and the construction of a containment structure for the Sul Superior dam in the city of Barão de Cocais. We expect to conclude the downstream containment structures for B3/B4 and Forquilha I, Forquilha II and Forquilha III dams in the first half of 2020.

In 2019, due to the ANM's technical reevaluation of the construction methods of our dams and other structures, we included additional dams in our decharacterization plan. Additionally, smaller dikes that were raised through the upstream method and drained stacking, that are now required to comply with the requirements imposed by the ANM, will also be decharacterized.

We are currently working on the improvement of engineering solutions to decharacterize all of these structures. These projects are subject to further review and eventual approval by the relevant authorities. The costs and provisions associated with the decharacterization of our upstream dams and structures are based on several assumptions and estimates that depend, in part, on factors that are beyond our control.

We also operate tailings dams outside of Brazil (Canada and New Caledonia), including compacted outer shell upstream dams in Canada. We are not planning to decharacterize these upstream dams, as decharacterization is not required or contemplated under local regulations.

Impacts of the rupture of Dam I on Vale

The impacts of the dam rupture on our operations and results of operations were very significant, but their full scale and scope remain uncertain. Some of the major impacts are described below.

    

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      (i) Impacts on our financial performance and results of operations

The rupture of Dam I had an extensive impact on our financial performance and results of operations as of and for the year ended December 31, 2019. The main impacts in our income statement for the year ended December 31, 2019 was (i) US$7.402 billion, including expenses and provisions to meet our obligations in connection with the decharacterization of our upstream dams and the obligations we assumed in preliminary settlement agreements, and (ii) a loss of US$235 million in the "impairment and disposal of non-current assets" attributable to the write-off of the Córrego do Feijão mine and other upstream dams. See Operating and Financial Review and Prospects—Overview—Rupture of Dam I.

      (ii) Liabilities and legal proceedings

Our potential liabilities resulting from the dam rupture are significant. We are continuously evaluating these contingencies and may recognize additional provisions in the future. We are already subject to several legal proceedings and governmental investigations relating to the rupture of Dam I, and we expect to face other such proceedings and investigations. For additional information regarding the legal proceedings relating to the rupture of Dam I, see Additional Information—Legal proceedings. We will continue to cooperate fully with the authorities and support the investigations into the dam rupture, and will also contest any proceedings that we believe are unjustified.

As of December 31, 2019, we recognized provisions in the total amount of US$3.925 billion related to preliminary settlement agreements with authorities for compensation to affected persons and communities, donations and projects to restore the environment, including (i) US$2.735 billion in connection with social and economic compensation and (ii) US$1.190 billion in connection with environmental restoration and compensation. Our potential liabilities resulting from the dam rupture are significant, and additional provisions might be expected.

      (iii) Suspension of operations

Following the dam rupture, we have suspended various operations, either voluntarily or as a result of revocation of licenses or court orders. The suspension of operations in its most critical level totaled 92.8 million metric tons per year of production capacity, but part of these operations resumed during 2019. Additional operations may be suspended as a result of new laws and regulations relating to the use of dams, or our inability to obtain the required licenses or the stability reports required by applicable regulations, as discussed below.

Below is a summary of operations suspended since the date of the dam rupture.

    Southern System:  In addition to Córrego do Feijão and Jangada mines, which were directly affected by the rupture of Dam I, we temporarily suspended operations at the entire Vargem Grande and Fábrica complexes in February 2019. In July 2019, the ANM authorized the partial resumption of dry processing operations at the Vargem Grande complex, which enabled 5.0 million metric tons of additional production in 2019, which represents 12.0 million metric tons per year of production capacity.

    Vargem Grande—We expect operations at the Vargem Grande pellet plant to resume in the third quarter of 2020. The pellet feed for pellet production is expected to be sourced from the site's beneficiation plant, which will require tailings disposal at the Maravilhas I dam and Cianita waste dump until the start-up of the Maravilhas III dam, which is expected to occur in the last quarter of 2020. In

    

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        order to resume operations at the pellet plant, we will need to run trigger tests, which require approval by an external audit of the state prosecutors of the state of Minas Gerais (MPMG). In order to restart the Vargem Grande beneficiation plant and its economic mining plan, we will need to obtain approval from the ANM.

      Fábrica—We expect operations at the Fábrica complex to resume in the second quarter of 2020. In order to resume operations, we will need to run vibration trigger tests to certify the absence of impacts to the site's structures, which require the approval from the ANM and by the external audit to be conducted by the MPMG We expect to operate using wet processing with tailings disposal at the Forquilha V Dam starting in the third quarter of 2020.

    Southeastern System:  Our operations at the Timbopeba mine are suspended, while the Alegria and Brucutu mines are partially operating.

    Brucutu—Our operations at the Brucutu mine were suspended in February 2019, resumed in June 2019, and subsequently partially suspended in December 2019 while we assess the geotechnical characteristics of the Norte Laranjeiras dam. We have extended the suspension of tailings disposal while a geotechnical assessment of the structure's conditions is being conducted. The findings of the assessment will determine the corrective actions, if any, to resume tailings disposal at the Norte Laranjeiras Dam. As a result, the Brucutu plant will continue to operate with approximately 40% of its capacity, while utilizing wet processing with tailings filtration, with the impact of the partial suspension being estimated at approximately 1.5 million metric tons per month. As of the March 31, 2019 deadline under applicable regulations, we did not obtain a certification of stability ("DCE") for the Norte Laranjeiras dam. Our geotechnical and operational teams are testing short-term alternatives for tailings disposal, such as the optimized use of the Sul dam, which may restore the Brucutu plant's processing capacity to 80%.

    Alegria—Our operations at the Alegria mine were suspended by the ANM in March 2019 but, in November 2019, the ANM reversed its decision, authorizing us to resume production of approximately 8 million metric tons of iron ore per year of production capacity.

    Timbopeba—We expect to receive the necessary authorization from the MPMG to restart operations at the Timbopeba site using dry processing in the first half of 2020, after the evaluation of the external audit by the MPMG. We expect wet processing activities at the Timbopeba mine to resume in the last quarter of 2020, following the completion of a pipeline to dispose tailings at the Timbopeba pit. We are evaluating alternatives to resume wet processing sooner.

      (iv) New regulations

Various governmental authorities have approved or proposed new regulations relating to licensing, use and operations of dams in response to the Dam I rupture. Additional rules imposing restrictions on mining operations and ancillary activities are expected. Also, new taxes, contributions or other obligations may be imposed on us as a result of the rupture of Dam I or its direct or indirect impacts. These rules may affect not only our iron ore operations, but also our base metals operations in Brazil and other operations that rely on dams.

    

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    Minas Gerais state law on licensing of dams.  A statute approved by the state of Minas Gerais in February 2019 prohibits the increase, modification or construction of any upstream dam, and provides for the full decharacterization of any upstream dam by February 2022. The statute also prohibits the increase, modification or construction of any dam if communities are established within its Self-Rescue Zone (Zona de Autossalvamento or "ZAS"), an area which encompasses the portion of the valley downstream of the dam where timely evacuation and intervention by the competent authorities in emergency situations is not possible. Although this statute permits the construction of new dams and the use of existing dams built using other techniques, it imposes significant restrictions on them as well. As a result, we may not be able to rely on tailings dams for new projects and expansion of existing operations.

    ANM rules.  In 2019, the ANM, Brazil's national mining agency, issued resolutions on dam safety requiring companies that own upstream dams to submit a technical decharacterization project by August 2019 and to fully decharacterize these upstream dams following certain timetables based on the volume and the characteristics of the dam. In addition, the resolution requires the decharacterization of our facilities located within the Self-Rescue Zone of a tailings dam.

    As a result of new regulations, the licensing process for our operations may become longer and more uncertain, and our costs of monitoring and compliance are expected to increase. These additional laws and regulations may impose restrictions on our operations, require additional investments or eventually require us to suspend additional operations.

We will need to rely on alternative methods to continue operating certain of our mines and plants, particularly those that rely on tailings dams. We have approved projects and further studies are in progress, to apply a residue disposal technology that consists of filtering and stacking of partially or totally dewatered tailings, which will reduce our reliance on tailings dams in the medium and long term. These alternative technologies will cause an increase in our production costs and require additional investments in our mines and plants.

      (v) Impact on reserves

Our reported reserves have been affected by the ongoing investigations and legal proceedings involving the use of dams in our mining operations and by the new rules relating to licensing, use and operations of dams, which were adopted in response to the Dam I rupture. See Information on the Company—Reserves These proceedings and regulations may impact our iron ore reserves and reserves for other products for which the production process involves dams.

      (vi) Uncertainties arising from increased safety requirements and external expert certification

We are required to obtain a certification of stability (Stability Condition Statement, or "DCE"), which is provided by external experts following an audit, for most of our dams in Brazil in six-month intervals by March 31 and September 30 of each year, and for some, on an annual basis. Brazilian state and federal authorities are strengthening regulations on dam safety. External experts may be unwilling to provide these reports and certificates as a result of the uncertainties regarding the causes of the Dam I rupture, the increasing risk of liability, and uncertainties concerning the interpretation of new regulations. If any of our dams is unable to comply with safety requirements, we may need to suspend related operations, evacuate the area surrounding the dam, relocate communities and take other emergency actions.

    

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In January 2020, we implemented the role of Engineer of Record ("EoR") as an additional step in the assessment of our structures in Brazil. Among its duties, the EoR is responsible for carrying out regular dam safety inspections, as well as the issuance of monthly technical reports. The EoR is integrated with our lines of defense and senior management level, and not part of our operations, so as to have the requisite authority for this type of role. In this model of continuous supervision, if a change in the stability of any of our structures is identified, a new audit process may be initiated to obtain a DCE at any point in the year.

    In September 2019, we obtained DCEs for 82 of our operational structures in Brazil and did not obtain DCEs for 18 structures, including upstream dams that are being decharacterized, and other structures that are undergoing additional studies and works. The operations of these 18 structures have been suspended, and we have followed the emergency plans for each of them.

    In 2019, we started emergency actions after an external consultant revoked a stability report relating to the Sul Superior dam at our Gongo Soco mine (in the Minas Centrais complex in the Southeastern System), in Barão de Cocais, Minas Gerais. As a result, we relocated about 500 residents of the Socorro, Tabuleiro and Piteiras neighborhoods of Barão de Cocais in the downstream area of the Sul Superior tailings dam. The Sul Superior dam has been inactive since April 2016, when we suspended iron ore production at the Gongo Soco mine. As an additional safety measure, we intensified inspections of the Sul Superior dam, installed new monitoring equipment and engaged additional consultants to perform a new safety assessment. In addition, based on the Emergency Action Plan for Mining Dams (PAEBM) for the B3/B4 dam at the Mar Azul mine, in the city of Nova Lima, Minas Gerais, we relocated about 200 people from the Macacos neighborhood in the downstream area of the B3/B4 tailings dam, which has been inactive.

    On September 30, 2019, following an auditing process, external auditors renewed the certification of stability (Stability Condition Statement, or DCE) for 82 of our operational structures. We were not able to renew the DCE for the following structures: Pontal System, Campo Grande, Doutor, Marés II, VI, Sul Inferior, Maravilhas II, Dique B, Capitão do Mato, Vargem Grande, Capim Branco, Captação de Água do Igarapé Bahia, Forquilha II, Grupo, Sul Superior, B3/B4, Forquilha I and Forquilha III.

    After September 30, 2019, the Itabiruçu, Santana and Norte/Laranjeiras dams also had the emergency level triggered due to operational conditions and further investigations, but these structures did not lose theirs DCEs.

    In October 2019, we identified some anomalies during a routine inspection in Forquilha IV dam. As a result the DCE for this dam has been withdrawn. The Forquilha IV dam has not received tailings since February 2019.

    In February 2020, we activated level 2 of the Mining Dams Emergency Action Plan (PAEBM) of the Capitão do Mato Dam, at the Capitão do Mato mine, in Nova Lima (MG). As a result, we evacuated all people in the Self-Rescue Zone of this dam, as a preventive measure due to the volume of rainfall recorded in the region, higher than the historical average.

    On March 31, 2020, after the EoR's assessment, we obtained DCEs for 78 of our operational structures in Brazil. Nine dams at emergency levels 2 and 3 of the Mining Dams Emergency Action Plan (PAEBM) were not granted a DCE. We had already evacuated people in the Self-Rescue Zone of these dams, with the exception of the Doutor dam, for which the Self-Rescue Zone evacuation plan was initiated in February 2020 and will be concluded by

    

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      the end of April 2020. Seventeen other structures, all currently inactive, did not obtain DCEs. We are not required to evacuate people in the Self-Rescue Zone of these 17 structures, as they are classified as emergency level 1 of the PAEBM.

OPERATIONAL SUMMARY

The following table presents the breakdown of total net operating revenues attributable to each of our lines of business with continuing operations.

Year ended December 31,

2019 2018 2017

(US$ million) (% of total) (US$ million) (% of total) (US$ million) (% of total)

Ferrous minerals:

           

Iron ore

23,343 62.1 % 20,354 55.7 % 18,524 54.5 %

Pellets

5,948 15.8 6,651 18.2 5,653 16.7

Ferroalloys and manganese

282 0.8 454 1.2 469 1.4

Other ferrous products and services

432 1.1 474 1.3 483 1.4

Subtotal

30,005 79.9 27,933 76.4 25,129 74.0

Base metals:

           

Nickel and other products(1)

4,257 11.3 4,610 12.6 4,667 13.7

Copper(2)

1,904 5.1 2,093 5.7 2,204 6.5

Subtotal

6,161 16.4 6,703 18.3 6,871 20.2

Coal

1,021 2.7 1,643 4.5 1,567 4.6

Other

383 1.0 296 0.8 400 1.2

Total net operating revenues from continuing operations

37,570 100 % 36,575 100 % 33,967 100 %

(1)
Includes nickel coproducts (copper) and byproducts (precious metals, cobalt and others).
(2)
Does not include copper produced in our nickel operations.

Ferrous minerals:

    Iron ore and iron ore pellets.    We operate four systems in Brazil for producing and distributing iron ore, which we refer to as the Northern, Southeastern, Southern and Midwestern Systems. Each of the Northern and the Southeastern Systems is fully integrated, consisting of mines, railroads, maritime terminals and a port. The Southern System consists of two mining complexes and two maritime terminals. We also have iron ore pellet operations in several locations, some of which are conducted through joint ventures. We currently operate eleven pellet plants in Brazil (four of these plants are currently suspended), and two in Oman. We also have a 50% stake in Samarco Mineração S.A. ("Samarco") and 25% stakes in two pellet companies in China.

    Ferroalloys and manganese.    We conduct our manganese mining operations through Vale S.A. and subsidiaries in Brazil, and we produce several types of manganese ferroalloys through a wholly owned subsidiary in Brazil.

Base metals:

    Nickel.    Our principal nickel mines and processing operations are conducted by our wholly owned subsidiary Vale Canada Limited ("Vale Canada"), which has operations in Canada,

    

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      Indonesia and New Caledonia. We also have nickel operations in Onça Puma, in the Brazilian state of Pará. We also control and operate nickel refining facilities in the United Kingdom, Japan and China, and have interests in a nickel refinery in South Korea.

    Copper.    In Brazil, we produce copper concentrates at Sossego and Salobo, in Carajás, in the state of Pará. In Canada, we produce copper concentrates, copper matte and copper cathodes in conjunction with our nickel mining operations at Sudbury and Voisey's Bay.

    Cobalt, PGMs and other precious metals.    We produce cobalt as a byproduct of our nickel mining and processing operations and refine it at our Port Colborne facilities, in the Province of Ontario, Canada. We produce refined cobalt in our Long Harbour facilities in Newfoundland and Labrador. We also produce cobalt as a byproduct of our nickel operations in New Caledonia. We produce PGMs as byproducts of our nickel mining and processing operations in Canada. The PGMs are concentrated at our Port Colborne facilities. We produce gold and silver as byproducts of our nickel mining and processing operations in Canada, and gold as a byproduct of our copper mining at Sossego and Salobo in Brazil.

Coal:

    We conduct our coal operations in Mozambique, through our subsidiary Vale Moçambique S.A. ("Vale Moçambique"), where we are ramping up our metallurgical and thermal coal operations.

Logistics infrastructure:

    We are a leading operator of logistics services in Brazil and other regions of the world, with railroads, maritime terminals, distribution centers and ports. Two of our four iron ore systems include an integrated railroad network linked to port and terminal facilities. We also have an interest in MRS Logística S.A. ("MRS"), which transports our iron ore products from the Southern System mines to our maritime terminals, and VLI S.A. ("VLI"), which provides integrated logistics solutions to general cargo through railroads, inland and maritime terminals in Brazil. We operate the logistics infrastructure to support our coal operations in Southeastern Africa. We charter dry bulk vessels to transport the products that we sell on a cost and freight ("CFR") basis to our customers.

BUSINESS STRATEGY

2019 was a very challenging year for us. We know that there is much to be done to address the effects of the rupture of Dam I at the Córrego do Feijão mine. We will manage the liabilities arising from this deeply regretted event, and we are committed to learning and sharing the lessons from the dam rupture. With this purpose, we are dedicated to going beyond our commitment to restore Brumadinho and to build a better Vale, based on the following main pillars:

    Safety and operational excellence.

    New pact with society.

    Maximize flight-to-quality in iron ore.

    Base metals transformation.

    Discipline in capital allocation.

    

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Below are the highlights of our major business strategies.

Safety and operational excellence

We are fully committed to addressing the effects of the rupture of Dam I, with three key initiatives: (i) assistance to victims and recovery of the affected areas, (ii) determination of the causes of the dam rupture, and (iii) prevention of further accidents through adoption of the highest technical standards and accelerated decharacterization of all upstream dams.

In 2019, we created a new position on our Board of Executive Officers, for an executive officer for Safety and Operational Excellence, who leads a department in charge of: (i) enhancing risk governance and information flow, (ii) acting as second line of defense and defining technical standards and risk acceptance criteria applicable to personnel whose activities are related to strategic assets, performance monitoring and definition of technical competences, and (iii) monitoring risk management. This new Executive Office is composed of four technical teams: Tailings, Asset Integrity, Operational Excellence and Health, Safety and Operational Risks. One of the main responsibilities of the Health, Safety and Operational Risks team is a new structured process for hazard identification and risk assessment (HIRA) in all of our operations, developing a tailings management system in line with the best international practices and consolidating our management system (Vale Production System), which was revised and relaunched with more than 60,000 people trained in 2019 as a means to support the ongoing safety cultural transformation within Vale. We continue to make every effort to provide relief and support to those affected by the dam rupture and to restore the trust of our stakeholders on us. We are committed to rebuilding our reputation in Brazil and in the global mining industry.

New pact with society

We are committed to a comprehensive approach towards sustainability and safety, establishing a positive social, economic and environmental legacy in the places where we operate and going beyond taxes, social projects and reparation in Brumadinho. See Overview—Business overview—Our environmental, social and governance (ESG) framework. In 2019, we revised the sustainability goals that we had established in 2018 in line with the Sustainable Development Goals (SDG) of the United Nations 2030 Agenda, to adopt more ambitious goals. Below is a list of our new "2030 Commitments":

    Energy—The three pillars of our energy initiatives are: (a) self-sufficiency, (b) energy efficiency and (c) energy matrix transformation. Approximately 60% of the electricity consumed by our operations in Brazil is self-generated energy that comes from renewable sources. By 2025, we intend to reach 100% of self-generation from renewable sources in Brazil, and by 2030 we intend to reach this goal globally.

    Forest Protection—One of our main initiatives related to biodiversity involve the rehabilitation of areas with the purpose of restoring previously existing native habitats and recovering important ecosystems. We are committed to recovering and protecting 500,000 hectares of degraded land beyond our boundaries by 2030.

    Climate Change—Fighting the causes of climate change is one of our main goals. In 2012, Vale set a goal to reduce direct emissions by 5% by 2020. This goal was reached in 2017. In 2019, we established more ambitious goals relating to climate change risk management, which include a commitment to reduce greenhouse gas emissions in line with the Paris Agreement by 2030, and become carbon neutral by 2050.

    

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    Environmental, Social and Governance (ESG) Gaps—Since 2018, we have been increasing our engagement with key ESG stakeholders and mapping our main ESG gaps against best practices. We are committed to eliminating our ESG gaps by 2030. Our main initiatives are detailed in an action plan available on our website, and include, among other initiatives: (a) achieving a new target relating to gender balance; (b) obtaining ISO 14001 certification for all operations, (c) establishing an audit committee, (d) establishing a human rights due diligence process, (e) structuring social key performance indicators (KPIs) with short, medium and long term goals, and (f) establishing long-term compensation with correlation to ESG metrics.

Maximize flight-to-quality in iron ore

In the iron ore business, we are committed to delivering the highest possible margins under the current circumstances, by managing our extensive supply chain and flexible product portfolio to cope with production constraints in the short-term. We will constantly seek better price realization, based on adjustments to our product portfolio according to market demand and supply chain optimization. We are focusing our product line to capture industry trends, improving quality and productivity, controlling costs, strengthening our logistics infrastructure of railroads, ports, shipping and distribution centers, and strengthening relationships with customers. Our diversified portfolio of high-quality products, strong technical marketing strategy, efficient logistics and long-standing relationships with major customers will help us overcome the immediate challenges and achieve this goal.

With the continuous increase of the share of dry processing production to 60% in 2018 from 40% in 2014, and aimed at 70% by 2023, our reliance on new dams and dam raisings is declining. To treat the tailings from wet processing, we are investing in studies and new technologies with a view to allowing us to operate certain of our mines and plants without having to rely on the use of tailings dams. We have announced an estimated investment of US$1.8 billion between 2020 and 2024 in some of our sites, including Cauê, Conceição and Brucutu Mines, to be operated with dry stacking waste disposal technology, which consists of filtering and stacking of partially or totally dewatered tailings, reducing our reliance on tailings dams in the medium and long term. In line with this goal, we acquired New Steel in January 2019, bringing in innovative technologies for the dry beneficiation of iron ore. We also announced an investment of US$100 million in the world's first industrial-scale dry magnetic fines concentration to produce 1.5Mt starting in 2022.

We will continue to promote the Brazilian blend fines (BRBF), a product standard with silica (SiO2) content limited to 5% and lower alumina (1.5%), offering strong performance in any kind of sintering operation. We produce BRBF by blending fines from Carajás, which contain a higher concentration of iron and a lower concentration of silica in the ore, with fines from the Southern and Southeastern Systems, which contain a lower concentration of iron in the ore, but also low concentration of alumina. It is produced in our Teluk Rubiah Maritime Terminal in Malaysia and in seventeen ports in China. This process reduces the time needed to reach Asian markets and increases our distribution capillarity by allowing the use of smaller vessels. The blending strategy also permits the use of iron ore with lower concentration from the Southern and Southeastern Systems, allowing more efficient mining plans and increasing the use of dry processing methods, which in turn reduce capital expenditures, extend the life of our mines and reduce the use of water in our operations: a key flexibility to cope with the short-term challenges.

We continue to improve our portfolio in order to provide solutions to our customers and to adapt to potential market demands. In 2019, we announced the launch of the GF88, a new product to supply the growing market of pellet production in China. This product consists of Carajás fines (IOCJ), obtained through a grinding process, opening a new market for our high quality portfolio. We are currently evaluating the development and production of metallics products (e.g. "green" pig iron and hot

    

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briquetted iron) along with customers as an addition to our portfolio. Metallics are steel raw material products containing a high percentage of metallic iron, which can support the steel industry in its challenge to reduce carbon emission, fulfilling its quality requirements with less capex, while using more advanced technologies.

Base metals transformation

In view of a potential trifurcation in nickel markets, into stainless steel (Class II), electric vehicle battery (nickel sulphate) and high value applications (Class I) markets, we are adopting a new commercial strategy for our nickel business, which includes (a) preserving and restoring our market share in the high value segments, through a recovery of our market share in the Upper Class 1 nickel market (nickel alloys) and an increase of our presence in the Lower Class 1 nickel markets, and (b) maintaining our product portfolio optionality for a potential surge in electric vehicle battery demand, through our continuous presence in the Class 2 ferronickel market globally, and a reduction in our exposure to intermediate products.

A key aspect of the strategy for our nickel business is to complete its turnaround, continuing to review our asset utilization, optimizing our operations and focusing our efforts to increase productivity and improve returns, while preserving capacity for growth. We are one of the world's largest nickel producers, with large-scale, long-life and low-cost operations, a substantial resource base and diversified mining operations that produce nickel from nickel sulfide and laterite sources using advanced technology. Our commercial footprint is global, with a focus on serving our customers directly.

A key aspect of our strategy for our copper business is to improve efficiency and asset utilization in the Carajás region in Brazil while we also evaluate opportunities to increase copper production in Canada. We have plans to develop a multi-year copper expansion plan, with Salobo III in the Carajás region being the first approved project in the pipeline. Commercially, we plan on redirecting our copper concentrate sales to the Pacific region in order to align with global copper demand.

Below is a list of actions we are taking, which are consistent with our turnaround strategy for our base metals business:

    Investments in replacement projects in the short term at Sudbury and Voisey's Bay nickel mines;

    Nickel-hedging strategies to guarantee cash flow stability in periods of heavier investments;

    New projects in Indonesia through partnerships and joint-ventures in Sorowako, Bahodopi and Pomalaa;

    Completion of divestments in PT Vale Indonesia Tbk ("PTVI"), in order to meet certain obligations under our amended contract of work and safeguard its extension and our investments in Indonesia;

    Focus on nickel-production reliability in the short term, through improvements in our North Atlantic Canadian operations, our ability to expand our operations in Onça Puma with a second furnace, as well as the above-mentioned projects in Indonesia.

    

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Discipline in capital allocation

We reiterate our strong commitment to a sound balance sheet. In 2019, we continued our deleveraging process and achieved a net debt level of US$4.880 billion as of December 31, 2019. We will allocate capital in a disciplined way, which will be key to enable us to address the effects of the Dam I rupture. In January 2019, our Board of Directors approved the suspension of our shareholder remuneration policy, so that no payment of dividends or interest on shareholders' equity will be made pursuant to this policy in excess of mandatory payments required by law, and we will not approve any share buyback for the time being. In March 2020, taking into account our strong balance sheet and the need to secure capital funding in light of the increased risks presented by the COVID-19 pandemic, we drew US$5 billion under our revolving credit lines.

As part of our commitment to discipline in capital allocation and a leaner portfolio, some of our non-performing assets are under scrutiny as we move towards de-risking outside of our core business. As a result, we are implementing the following strategies: (a) a new mining plan and a new plant strategy to achieve a sustainable ramp-up of Moatize, which includes shortening the life of mine and completing a plant overhaul, (b) studying exit alternatives for our operations in New Caledonia, while also considering operational and commercial alternatives to improve the short-term cash flows of Vale New Caledonia ("VNC"), and (c) studying coordinated exit alternatives for steel joint-ventures and other investments outside our core business.

SIGNIFICANT CHANGES IN OUR BUSINESS

We summarize below major events in our business since the beginning of 2019.

Developments relating to the outbreak of the coronavirus

In December 2019, an outbreak of a contagious disease, the Coronavirus Disease 2019 (COVID-19), began in mainland China and has since spread through various countries, including Brazil and Canada, where most of our operations are concentrated. We are complying with the health and safety protocols established by the authorities and agencies of each country in which we operate and are monitoring the developments of the situation closely. In January 2020, we created a crisis management structure and governance to manage and deploy our actions in response to the COVID-19 pandemic. We have taken steps and implemented policies to safeguard our employees, businesses and communities surrounding our operations from the threats posed by the COVID-19 pandemic.

    Revolving credit lines.  On March 24, 2020, we drew down US$5 billion under our revolving credit lines maturing June 2022 (US$ 2 billion) and December 2024 (US$ 3 billion). In making the decision, we assessed the increased risks presented to our business by the COVID-19 pandemic and concluded that it would be prudent to take advantage of our strong balance sheet to navigate through the next few months with increased cash reserves.

    Voisey's Bay.  We have ramped down our Voisey's Bay mining operation and placed it on care and maintenance for a period of four weeks, as a precaution to help protect the health and well-being of Nunatsiavut and Innu indigenous communities in Labrador in face of the COVID-19 pandemic. We have taken this preventive action because of the unique remoteness of the area, with fly-in and fly-out operations, and higher exposure to travel. We are working together with the communities and authorities to ensure our operations do not act as a catalyst to inadvertently introduce the virus in these communities.

    

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        The Long Harbour Processing Plant (LHPP) continues to operate nickel and cobalt production and, in principle, should not be affected, given the availability of stockpiled concentrates to feed the LHPP well past the four-week care and maintenance period, while copper concentrate production at the site will be reduced proportionally to the period of mine stoppage (Voisey's Bay produced 25kt of copper in concentrate in 2019). The decision also impacts the Voisey's Bay Mine Expansion project currently underway to transition to underground operations.

    Mozambique Coal Processing Plants.  Due to travel and equipment transportation restrictions resulting from the COVID-19 outbreak, we are revisiting plans for the Mozambique coal processing plant stoppage. The halting of the processing plants' operations was previously expected to start in the second quarter of 2020 and a new date is under evaluation.

    Home-Office Regime.  On March 16, 2020, the great majority of our employees and third-party employees based in our corporate offices began to work according to a home-office regime. The measure aims to safeguard our employees, reducing the number of people in the same workspace and exposure to public spaces, such as buses, subways and elevators.

    Test kits and protective equipment in humanitarian aid.  On March 22, 2020, we purchased five million COVID-19 rapid test kits to help the Brazilian government fight the spread of the disease in the country. The amount of test kits purchased by us represents half of the need estimated by the Brazilian Ministry of Health at the moment. We also purchased from our Chinese suppliers personal protective equipment, such as goggles, gloves and medical masks, for doctors and nurses which will also be donated to the Brazilian federal government.

    Teluk Rubiah Maritime Terminal (TRMT). On March 24, 2020, we temporarily halted our operations in the TRMT in Malaysia, as we are temporarily unable to secure the minimum resources to safely operate the terminal. During suspension of the operations, vessels heading to TRMT will be redirected and redistributed among our blending facilities in China with no expected impact on production and sales volume in 2020, but with an impact on sales of approximately 500kt in the first quarter of 2020. We also expect some marginal cost increase due to additional logistics.

    Temporary Aid Package for Suppliers.  On March 24, 2020, we announced a series of aid initiatives for our suppliers during the crisis caused by the coronavirus pandemic. The initiatives include advancing payments to more than a thousand small and medium-sized suppliers in Brazil, reducing payment timeframes for services and materials that are still to be invoiced by approximately 3,000 small and medium-sized suppliers, and providing financial support to construction companies and workers allocated to projects which are being halted by us, in order to reduce the flow of people in our sites and increase the safety of our employees and outsourced workers, and to concentrate resources on essential activities for the country at this moment. There will be no impact on our works related to dam safety. We estimate that through these measures we will inject about R$ 160 million into the Brazilian economy in the coming weeks following this initiative.

We are closely evaluating the impact of COVID-19 on our business. The situation is evolving and could have a material impact on us if there is significant supply chain disruption or customer demand declines.

    

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Acquisitions

    Minerações Brasileiras Reunidas S.A. (MBR).  On December 20, 2019, Vale redeemed and cancelled all preferred shares class A of MBR, which were held by Banco Bradesco BBI S.A., for the total value of R$3.309 billion. Upon completion of such corporate transaction, Vale consolidated a 98.3% equity position in MBR. MBR is a subsidiary of Vale that owns assets for production, transportation and port shipment of iron ore integrated into our Southern System and accounted for the production of approximately 59 Mt of iron ore in 2018.

    Ferrous Resources.  In August 2019, we concluded the acquisition of Ferrous Resources Limited, a company that owns and operates iron ore mines near our operations in Minas Gerais, for a cash consideration of US$525 million. The transaction immediately increased our production of high-quality pellet feed.

    New Steel.  In January 2019, we concluded the acquisition of New Steel Global NV (New Steel), a company that develops innovative iron ore beneficiation technologies, for US$496 million. New Steel currently owns patents in 56 countries for Fines Dry Magnetic Separation (FDMS), a dry processing concentration technique.

Full production capacity of 90 Mtpy of S11D enabled

In December 2019, we completed the physical works and the start-up of the CLN S11D project, which enables the full production capacity of 90 million metric tons per year at the S11D mine in 2020. The CLN S11D project increased logistics capacity of the Northern System, through the expansion of approximately 570 km of railway, the construction of a railway spur of 101 km, the acquisition of wagons and locomotives and port expansion (onshore and offshore expansions at Ponta da Madeira maritime terminal). Until 2022, the project will be in a monitored ramp-up phase.

Sale of interest in Longyu

In December 2019 we entered into an agreement to sell our 25% stake in Longyu Energy Resources Co., Ltd. (Longyu) to Yongmei Group Co., Ltd (Yongmei), for CNY1.065 billion (equivalent to approximately US$152 million). Longyu produces metallurgical and thermal coal and other related products in the Henan province in China. Closing of the transaction is expected to occur in 2020, subject to certain conditions precedent.

Obtaining of licenses for resumption of Samarco's operations

In October 2019, Samarco obtained the Corrective Operation License (LOC) relating to its operations in the Germano Complex, located in the Brazilian state of Minas Gerais. With the license, Samarco has now obtained all environmental licenses required to resume its operations. As Samarco is planning on restarting its operations using new technologies for dry tailings stacking, the operations of iron ore extraction and beneficiation plants in Germano and the pelletization plant at the Ubu Complex, located in Anchieta, state of Espírito Santo, will resume only after the implementation of a filtration system, which is expected to take approximately 12 months. During this period, Samarco will continue to prepare to restart its operations, which is currently expected to occur by the end of 2020. Samarco's expected ramp-up has been materially affected by new regulation and changes in existing regulation related to mining activities and dams. Although we expect that Samarco be able to restart operations through one concentrator following the implementation of the filtration technology, increase in production will

    

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depend on the other two concentrators, which activities are expected to resume in six and ten years, respectively.

Resumption of operations in Onça Puma

We resumed our operations at Onça Puma in September 2019, following a decision of the Brazilian Federal Supreme Court (STF). The operations at this mine had been suspended since September 2017 and the nickel processing plant had been halted since June 2019, as a result of court decisions issued in connection with a legal proceeding brought by federal prosecutors against us. See Additional Information—Legal proceedings—Onça Puma litigation.

RUPTURE OF SAMARCO'S TAILINGS DAM IN MINAS GERAIS

In November 2015, the Fundão tailings dam owned by Samarco Mineração S.A. (Samarco) failed, releasing tailings downstream, flooding certain communities and causing impacts on communities and the environment along the Doce river. The rupture resulted in 19 fatalities and caused property and environmental damage to the affected areas. Samarco is a joint venture equally owned by Vale S.A. and BHP Billiton Brasil Ltda. ("BHPB").

In June 2016, Samarco, Vale and BHPB created the Fundação Renova, a not-for-profit private foundation, to develop and implement (i) social and economic remediation and compensation programs and (ii) environmental remediation and compensation programs in the region affected by the dam rupture.

The creation of Fundação Renova was provided for under the agreement for settlement and conduct adjustment (the "Framework Agreement") signed in March 2016 by Vale, BHPB, Samarco, the Brazilian federal government, the two Brazilian states affected by the rupture (Minas Gerais and Espírito Santo) and other governmental authorities. The Framework Agreement has a 15-year term, renewable for successive one-year periods until all the obligations under the Framework Agreement have been performed. The Framework Agreement does not provide for admission of civil, criminal or administrative liability for the Fundão dam rupture. The Framework Agreement provides that, within three years of the date of the agreement, the parties would review its terms to assessing the effectiveness of the ongoing remediation and compensation activities.

On June 25, 2018, Samarco, Vale and BHPB entered into a comprehensive agreement with the offices of the federal and state (Minas Gerais and Espírito Santo) prosecutors, public defenders and attorney general, among other parties, improving the governance mechanism of Fundação Renova and establishing, among other things, a process for potential revisions to the remediation programs provided under the Framework Agreement based on the findings of experts hired by Samarco to advise the MPF (Federal Prosecutor's Office) over a two-year period (the "June 2018 Agreement"). See Additional Information—Legal proceedings. The process of revision of the remediation programs will start in the second half of 2020.

Under the Framework Agreement, the June 2018 Agreement and Renova's by-laws, Fundação Renova must be funded by Samarco, but to the extent that Samarco is unable to fund, Vale and BHPB must ratably bear the funding requirements under the Framework Agreement. As Samarco is currently unable to resume its activities, we and BHPB have been funding the Fundação Renova and also providing funds directly to Samarco, to preserve its operations and to support Samarco's funding obligations.

In October 2019, Samarco obtained the Corrective Operation License (LOC) relating to its operations in the Germano Complex, located in the Brazilian state of Minas Gerais. With the license, Samarco has now

    

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obtained all environmental licenses required to resume its operations. As Samarco is planning on restarting its operations using new technologies for dry tailings stacking, the operations of iron ore extraction and beneficiation plants in Germano and the pelletization plant at the Ubu Complex, located in Anchieta, state of Espírito Santo, will resume only after the implementation of a filtration system, which is expected to take approximately 12 months.

Pursuant to the Framework Agreement, Fundação Renova and Samarco allocated R$2.6 billion to social and economic remediation and compensation programs in 2019 and have allocated R$7.8 billion to these programs since the dam rupture. From 2020 to 2021, Samarco, or Vale and BHP, will provide to Fundação Renova funding based on the amounts needed to implement the projects approved for each year, subject to an annual minimum of R$800 million. Starting in 2022, we expect Samarco to provide the necessary funding in order to complete remaining programs approved for each year.

Additionally, Fundação Renova must allocate a minimum annual amount of R$240 million over 15 years (from 2016) to the implementation of compensation programs. Under the terms of the Framework Agreement, Fundação Renova must spend an additional amount of at least R$500 million on sewage collection and treatment and solid waste disposal.

For a discussion of the legal proceedings resulting from the rupture of Samarco's tailings dam, see Additional Information—Legal proceedings.

OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) FRAMEWORK

We are committed to fully integrating sustainability into our business through a comprehensive approach based on systematic planning and execution, prioritizing risk and impact management, and establishing a positive social, economic and environmental legacy in the places where we operate. Our practices related to ESG are evolving.

We are members of the International Council on Mining and Metals (ICMM), one of the most important associations in the mining industry, reaffirming our commitment to sustainable development of the mining industry, and we have joined the Task Force on Climate-related Financial Disclosures (TCFD), an association with the purpose of creating a set of recommendations to improve the quality of voluntary disclosure of climate-related information, and the Council of Institutional Investors (CII), an association for effective corporate governance standards and strong shareowner rights.

We have been increasing our engagement with socially responsible investors and key ESG stakeholders through webinars, roadshows and the development of a dedicated website, the ESG Portal. We have also reviewed studies from leading ESG advisors and index providers (such as ISS, Glass Lewis, MSCI, Sustainalytics, Responsible Mining Index, Dow Jones Sustainability Index), and identified approximately 50 gaps with respect to ESG best practices. Based on this assessment, we mapped out an ESG action plan to address these gaps.

After the rupture of Dam I, we decided to strengthen our interactions with ESG stakeholders to discuss a range of strategy, risk and governance-related matters and accelerate our ESG initiatives. We are committed to eliminating our ESG gaps by 2030 (our "2030 Commitments").

In 2019, we launched our ESG Portal, providing greater transparency about our initiatives. These include, among other actions: (a) doubling the percentage of women in the workforce by 2030; (b) obtaining ISO 14001 certification for all operations, (c) establishing an audit committee, (d) establishing a human rights due diligence process, (e) structuring social key performance indicators (KPIs) with short, medium and long-term goals, and (f) establishing long-term compensation with correlation to ESG metrics.

    

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Below are the highlights of our main ESG accomplishments in 2019 and ongoing initiatives:

Environmental

      (i) Climate Change

We are committed to supporting actions towards a sustainable low carbon economy and we have established targets for scope 1 and 2 emissions in line with the Paris Agreement goal of limiting global warming to below 2°C pre-industrial levels. We are also targeting carbon neutrality with respect to scopes 1 and 2 emissions by 2050, and in that process, we expect to help customers reach their goals in terms of emissions reductions with our high-grade iron-ore pellets and products.

      (ii) Energy

The electricity consumed in our operations comes mostly from clean sources—around 80% of our worldwide electricity consumption comes from renewable sources, but only part of this energy is self-produced (close to 60%). Our target is to achieve energy self-sufficiency from clean sources in Brazil by 2025, and globally by 2030.

      (iii) Water

We are committed to reducing fresh water use in our activities by investing in new technologies, in the expansion of our monitoring network and in other initiatives to control total water collection, especially by promoting water reuse. We are currently developing programs and implementing actions that go beyond compliance with the legal requirements to optimize water use and consumption. Our water reuse represents 83% of total production demand. We want to reduce by 10% the new water captured and used in processes per ton produced, which means a smaller volume of fresh water captured for the same volume of production.

      (iv) Forest conservation

Our ambition is to act as a global catalyst for forest conservation and reforestation. Currently, we help to protect 1,018,405 hectares of forest as a result of compensation measures, voluntary initiatives and partnerships. We are committed to protecting and reforesting additional 500,000 hectares by 2030, bolstering our 2018 target.

Social

      (i) Human Rights

We are committed to the Guiding Principles on Business and Human Rights of the United Nations Human Rights Council. In 2019, we made a Human Rights risk self-assessment in 51 ventures, including operations. An external due diligence assessment is planned for 2020 and subsequent years, in addition to our self-assessment of Human Rights risks. Also in 2019, we held a public consultation on our website to revise our Human Rights Policy.

    

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      (ii) Gender Balance

We have announced the goal to double our female workforce by 2030, from 13% to 26% and to double the female presence in leadership roles from 12% to 20%. We have also disclosed the median salary by gender and seniority level.

      (iii) Health and Safety

We are committed to improving the health and safety of our workers. Our long-term goals are: (i) reduction to zero recordable injuries with potential for fatality or changed lives, (ii) 50% reduction in the exposure of employees to the top 10 health risks by 2025 and (iii) elimination of the most significant risk scenarios by 2025.

      (iv) Socioeconomic Contribution

We are committed to positively impacting society, by investing in socioeconomic actions and projects focused on community development. In particular, we are investing in actions that contribute to the development and improvement of urban infrastructure and mobility, traditional communities, education, culture, health, and work generation and income in the places where we operate. We spent over US$ 112 million on social initiatives in 2019, of which 62% was on voluntary programs.

      (v) Indigenous People and Traditional Communities

Our guidelines with respect to indigenous people and traditional communities are built upon the ICMM's position statement on Mining and Indigenous People, the International Labour Organization (ILO) Indigenous and Tribal Peoples Convention (C169), and the United Nations Declaration on the Rights of Indigenous Peoples. We are committed to respecting the principle of Free, Prior and Informed Consent (FPIC), which entails a process of informing, negotiating in good faith and allowing the Indigenous or traditional communities to freely make decisions.

Governance

      (i) Board of Directors

In the 2019 election of members of the Board of Directors, our shareholders elected a third independent member. In addition, our Board of Directors created three Independent Ad Hoc Consulting Committees to conduct an independent investigation into the causes of the rupture of Dam I, monitor our measures to support the affected communities and remediate the affected areas, and to monitor our safety initiatives, risk management and risk mitigation efforts related to dams and recommend measures. In 2019, we also engaged external advisors to conduct an investigation into the causes of the dam rupture.

In March 2020, we adopted additional measures to enhance our governance structure, establishing our Audit Committee and assigning to our Personnel and Governance Committee the role of Nomination Committee until 2021, when a specific Committee will be set up for this purpose.

      (ii) Compensation

We are committed to aligning our compensation programs to our business strategy and the goal of making Vale a safer company. We implemented a number of changes, such as the adoption of a malus clause under which the Board of Directors may reduce variable compensation of executives upon the

    

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occurrence of events of exceptional severity, and the implementation of new share ownership guidelines for Executive Officers.

In 2019, 60% of Executive Directors performance goals were based on Health and Safety, Sustainability metrics and actions to repair the damage caused by the Dam I rupture. For 2020, we approved new standards: for short-term compensation, at least 30% of performance goals will be ESG-driven and directly related to safety, risk management and sustainability targets, and with respect to long-term compensation, at least 20% of performance goals will be based on ESG metrics. Overall, 12% of total remuneration will be linked to ESG metrics.

      (iii) Risk Management

In 2019, we enhanced our defense line model, creating a new Safety and Operational Excellence Office, with compensation structures that are not correlated to the results of our operations. We established four executive committees created to advise our management with respect to each of these risks: (i) operational risks, (ii) geotechnical risks, (iii) strategy, finance and cyber risks, and (iv) compliance risks. In February 2019, we also launched two Geotechnical Monitoring Centers (CMG), one located in Nova Lima, and the other in Itabira, both in the state of Minas Gerais, which operate 24-hours a day, covering our critical geotechnical structures in Brazil. To oversee the third line of defense, our Board of Directors decided to establish a Compliance Office headed by a Chief Compliance Officer, who will report directly to our Board of Directors and interact with the Audit Committee. The Chief Compliance Officer will be responsible for the integrity department, the internal audit and the Whistleblower Channel. The proposal to amend our bylaws in order to implement this decision will be submitted to our shareholders in our next shareholders' meeting.

      (iv) Integrity

We have a Code of Conduct that applies to our employees and to the members of our Board of Directors and our Board of Executive Officers. Any breaches of our Code of Conduct, policies and standards can be reported by anyone, including employees, contractors, suppliers, members of affected communities and other stakeholders, via our Whistleblower Channel. In 2019, our Whistleblower Channel received 3,507 complaints and closed 3,382 cases, of which (i) 2,937 lead to investigations, that confirmed violations of our Code of Conduct in 38% of these cases, (ii) 291 referred to complaints that were not investigated due to lack of information or pertinence to the scope of the Ethics and Conduct Office, (iii) 154 were consultations, which were answered by the Ethics and Conduct Office, but did not lead to an investigation. All confirmed violations triggered correction plans. These investigations resulted in 1,833 corrective actions, including the termination of 227 employees. See Additional Information—Code of conduct.

    

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SELECTED FINANCIAL DATA

The tables below present selected consolidated financial information as of and for the years indicated. You should read this information together with our consolidated financial statements in this annual report.

Consolidated statement of income data

 
For the year ended December 31,
 
2019 2018 2017 2016 2015
 
(US$ million)
Net operating revenues 37,570 36,575 33,967 27,488 23,384
Cost of goods sold and services rendered (21,187 ) (22,109 ) (21,039 ) (17,650 ) (18,751 )
Selling, general, administrative and other operating expenses, net (992 ) (968 ) (951 ) (774 ) (819 )
Research and evaluation expenses (443 ) (373 ) (340 ) (319 ) (395 )
Pre-operating and operational stoppage (1,153 ) (271 ) (413 ) (453 ) (942 )
Brumadinho event (7,402 ) –   –   –   –  
Impairment and disposal of non-current assets (5,074 ) (899 ) (294 ) (1,240 ) (8,708 )
Operating income (loss) 1,319 11,955 10,930 7,052 (6,231 )
Non-operating income (expenses):          
Financial income (expenses), net (3,413 ) (4,957 ) (3,019 ) 1,843 (10,654 )
Equity results and other results in associates and joint ventures (681 ) (182 ) (82 ) (911 ) (794 )
Income (loss) before income taxes (2,775 ) 6,816 7,829 7,984 (17,679 )
Current and deferred taxes 595 172 (1,495 ) (2,781 ) 5,249
Net income (loss) from continuing operations (2,180 ) 6,988 6,334 5,203 (12,430 )
Net income (loss) attributable to non-controlling interests (497 ) 36 21 (8 ) (501 )
Net income (loss) from continuing operations attributable to Vale's stockholders (1,683 ) 6,952 6,313 5,211 (11,929 )
Net income (loss) from discontinued operations attributable to Vale's stockholders –   (92 ) (806 ) (1,229 ) (200 )
Net income (loss) attributable to Vale's stockholders (1,683 ) 6,860 5,507 3,982 (12,129 )
Net income (loss) attributable to non-controlling interests (497 ) 36 14 (6 ) (491 )
Net income (loss) (2,180 ) 6,896 5,521 3,976 (12,620 )
Total cash paid to stockholders(1) –   3,313 1,456 250 1,500

(1)
Consists of total cash paid to stockholders during the year, whether classified as dividends or interest on stockholders' equity.

Earnings (loss) per share

The table below shows our earnings (loss) per share. The earnings (loss) per share for 2015 to 2016 have been retrospectively adjusted to reflect the conversion of our Class A preferred shares into common shares, which was concluded in November 2017, as if the conversion had occurred at the beginning of the earliest year presented.

 
For the year ended December 31,
 
2019 2018 2017 2016 2015
 
(US$, except as noted)
Earnings (loss) per common share from continuing operations (0.33 ) 1.34 1.21 1.00 (2.30 )
Earnings (loss) per common share from discontinued operations –   (0.02 ) (0.16 ) (0.23 ) (0.03 )
Earnings (loss) per common share (0.33 ) 1.32 1.05 0.77 (2.33 )
Weighted average number of shares outstanding (in thousands)(1)(2) 5,127,950 5,178,024 (3) 5,197,432 5,197,432 5,197,432
Distributions to stockholders per share(2)(4)          

Expressed in US$

–   0.64 0.28 0.05 0.29

Expressed in R$

–   2.39 0.90 0.17 0.98

(1)
Each common ADS represents one common share.
(2)
Restated as if the conversion had occurred at the beginning of the earliest year presented.

    

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(3)
The number of weighted average shares outstanding as of December 31, 2018 has been revised, with no impact on the basic and diluted earnings (loss) per share from continuing operations as of December 31, 2018.
(4)
Our distributions to shareholders may be classified as either dividends or interest on shareholders' equity. In many years, part of each distribution has been classified as interest on shareholders' equity and part has been classified as dividends. For information about distributions paid to shareholders, see Share Ownership and TradingDistributions.

Balance sheet data

 
                  As of December 31,                   
 
2019 2018 2017 2016 2015
 
(US$ million)
Current assets 17,042 15,292 15,367 13,978 11,429
Non-current assets held for sale –   –   3,587 8,589 4,044
Property, plant and equipment, net and intangible assets 55,075 56,347 63,371 62,290 59,426
Investments in associated companies and joint ventures 2,798 3,225 3,568 3,696 2,940
Non-current assets 16,798 13,326 13,291 10,461 10,653
Total assets 91,713 88,190 99,184 99,014 88,492
Current liabilities 13,845 9,111 11,935 10,142 10,438
Liabilities associated with non-current assets held for sale –   –   1,179 1,090 107
Long-term liabilities(1) 27,033 19,784 20,512 19,096 15,896
Long-term debt(2) 11,842 14,463 20,786 27,662 26,347
Total liabilities 52,720 43,358 54,412 57,990 52,788
Stockholders' equity:          

Capital stock

61,614 61,614 61,614 61,614 61,614
Additional paid-in capital (2,110 ) (1,122 ) (1,106 ) (851 ) (854 )
Retained earnings and revenue reserves (19,437 ) (16,507 ) (17,050 ) (21,721 ) (27,171 )

Total Vale shareholders' equity

40,067 43,985 43,458 39,042 33,589
Non-controlling interests (1,074 ) 847 1,314 1,982 2,115
Total stockholders' equity 38,993 44,832 44,772 41,024 35,704
Total liabilities and stockholders' equity 91,713 88,190 99,184 99,014 88,492

(1)
Excludes long-term debt.
(2)
Excludes current portion of long-term debt.

    

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FORWARD-LOOKING STATEMENTS

This annual report contains statements that may constitute forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Many of those forward-looking statements can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "plan," "intend," "estimate" and "potential," among others. Those statements appear in a number of places and include statements regarding our intent, belief or current expectations with respect to:

    the impact of the tailings dam rupture at the Córrego do Feijão mine and related remediation measures on our operations, cash flows and financial position;

    the outcome of the various investigations, regulatory, governmental and legal proceedings in which we are involved;

    our direction and future operation;

    the implementation of our financing strategy and capital expenditure plans;

    the exploration of mineral reserves and development of mining facilities;

    the depletion and exhaustion of mines and mineral reserves;

    trends in commodity prices, supply and demand for commodities;

    the future impact of competition and regulation;

    the payment of dividends or interest on shareholders' equity;

    compliance with financial covenants;

    industry trends, including the direction of prices and expected levels of supply and demand;

    the implementation of our principal operating strategies, including our potential participation in acquisition, divestiture or joint venture transactions or other investment opportunities;

    the duration and severity of the recent coronavirus (COVID-19) outbreak and its impacts on our business;

    other factors or trends affecting our financial condition or results of operations; and

    the factors discussed under Overview—Risk factors.

We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in forward-looking statements as a result of various factors. These risks and uncertainties include factors relating to (i) economic, political and social issues in the countries in which we operate, including factors relating to the coronavirus pandemic outbreak, (ii) the global economy, (iii) commodity prices, (iv) financial and capital markets, (v) the mining and metals businesses, which are cyclical in nature, and their dependence upon global industrial production, which is also cyclical, (vi) regulation and taxation, (vii) operational incidents or accidents, and (viii) the high degree of global competition in the markets in which we operate. For additional information on factors that could cause our actual results to differ from expectations reflected in forward-looking statements, see Overview—Risk factors. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments. All forward-looking statements attributed to us or a person acting on our behalf are expressly qualified in their entirety by this cautionary statement, and you should not place undue reliance on any forward-looking statement.

    

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RISK FACTORS

Developments relating to the outbreak of the coronavirus may have a material adverse impact on our financial conditions or results of operations.

In December 2019, an outbreak of a contagious disease, the Coronavirus Disease 2019 (COVID-19), began in mainland China and has since spread through various countries. There have been reports of multiple fatalities from the virus in various countries, including Brazil and Canada, where we have our main operations. On March 11, 2020, the World Health Organization (WHO) declared COVID-19 outbreak pandemic. During the month of March 2020, governmental authorities in various jurisdictions imposed lockdowns or other restrictions to contain the virus, and various businesses suspended or reduced operations. The final impact on the global economy and financial markets is still uncertain, but is expected to be significant.

The outbreak has begun to advance over the regions where our operations are concentrated. We have ramped down some operations and revisited plans for others. See Overview—Business overview—Significant changes in our business. We may face restrictions imposed by regulators and authorities, difficulties related to employee absences resulting in insufficient personnel at some sites, disruption of our supply chain, deterioration of our customers' financial health, higher costs and expenses associated with the suspension of contractors' work on non-essential projects, operational difficulties such as the postponement of the resumption of our production capacity due to delayed inspections, assessments or authorizations, among other operational difficulties. We may need to adopt further contingency measures or eventually suspend additional operations, which may have a material adverse impact on our financial conditions or results of operations.

As a result of this coronavirus pandemic outbreak, business activities all over the world, including construction and manufacturing activities that drive demand for iron ore and other metals, have started to decline and are expected to be significantly impacted. If the coronavirus outbreak continues and efforts to contain the pandemic, whether governmental or otherwise, further limit business activity, or limit our ability to transport our products to customers generally, for an extended period of time, the demand for our products could be adversely impacted. These factors could also have a material adverse impact on our financial conditions or results of operations.

RISKS RELATING TO DAM RUPTURE

The rupture of Dam I in Minas Gerais has adversely affected our business, financial condition and reputation, and the overall impact of the dam rupture on us is still uncertain.

On January 25, 2019, Dam I failed, resulting in 270 fatalities or presumed fatalities, in addition to personal, property and environmental damages. See Overview—Business overview—Rupture of the tailings dam at the Córrego do Feijão mine. This event has adversely affected and will continue to adversely affect our operations.

    Liabilities and legal proceedings.  We are a defendant in a number of other legal proceedings in which plaintiffs claim significant amounts in damages and other measures against us resulting from the event, and additional proceedings and investigations may be initiated in the future. These liabilities or actions taken by creditors may have a material adverse effect on our business and financial condition. See Overview—Business overview—Impacts of the rupture of Dam I on Vale—Liabilities and legal proceedings and Additional Information—Legal proceedings.

    Liquidity.  Some of our assets remain restricted as a result of court order, and additional assets may be attached in the future. See Operating and Financial Review and Prospects—

    

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      Overview—Rupture of Dam I. These attachments and asset freezes may adversely impact our business and liquidity.

    Suspension of operations.  Following the dam rupture, we have suspended various operations, which have adversely impacted and may continue to adversely impact our production and cash flows. See Overview—Business overview—Impacts of the rupture of Dam I on Vale—Suspension of operations. As a result of the suspended operations, we may need to purchase iron ore and iron ore pellets in the market to honor our obligations under existing commercial contracts, which may increase our overall costs and adversely impact our business and financial condition. It is possible that certain of these operations may not be resumed.

    Increase in production costs and capital investments.  We may need to make investments or adjustments in the operations not impacted by the dam rupture to increase production, mitigate the impact of suspended operations or comply with additional safety requirements. We may also have to use alternative disposal methods to continue operating certain of our mines and plants, particularly those that rely on tailings dams. These alternative methods may be more expensive or require significant capital investments in our mines and plants. As a result, we expect our costs to increase, which may have a material adverse effect on our business and financial condition.

    Increased taxation and other obligations.  We may be subject to new or increased taxes or other obligations to fund remediation measures and compensate direct and indirect impacts of the rupture of Dam I. Also, we have entered into settlement agreements with the state of Minas Gerais and certain municipalities to minimize the socio-economic effects of the shutdown of some of our operations.

    Additional regulation and restrictions on mining operations.  Various governmental authorities have proposed and approved new rules relating to licensing, use and operations of dams in response to the Dam I rupture. See Overview—Business overview—Impacts of the rupture of Dam I on Vale—New regulations. New rules imposing restrictions on mining operations and ancillary activities may be approved. The licensing process for our operations may become longer and subject to more uncertainties. These additional laws and regulations may impose restrictions on our operations, require additional investments or even require us to suspend additional operations, which may adversely affect our business.

    Reserves.  Developments resulting from the rupture of Dam I, particularly new regulations applicable to dam licensing and use and the ongoing proceedings and investigations, may result in decreases in our reported reserves or reclassification of proven reserves as probable reserves. We continuously review the impact of new regulations, proceedings and investigations on our reported reserves. See Overview—Business overview—Impacts of the rupture of Dam I on Vale—Impact on reserves.

    Inability to comply with additional safety requirements or to obtain required certifications.  Rules on dam safety are getting stricter following the dam rupture. Also, external experts may be reluctant to attest to the stability and safety of our dams, as a result of the uncertainties regarding the causes of the Dam I rupture and the increasing risks of liability. See Overview—Business overview—Impacts of the rupture of Dam I on Vale—Uncertainties arising from increased safety requirements and external expert certification. If any of our dams is unable to comply with the safety requirements or if we are unable to obtain the required certification for any of our dams, we may need to suspend operations, evacuate the area surrounding this dam, relocate communities and take other emergency actions. These

    

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      measures are costly, may adversely impact our business and financial condition and cause further damage to our reputation.

    Inability to pay dividends.  Reduced cash flows and increased liabilities may adversely affect our ability to pay dividends or make other distributions to our shareholders. Immediately after the dam rupture, our Board of Directors determined the suspension of our shareholder remuneration policy.

    Increased funding requirements.  We may need to raise funds in the financial markets to meet our existing commitments and the potential liabilities and capital expenditures associated with the remediation of environmental damages. We may not be able to obtain funds at acceptable costs.

    Increased cost of insurance.  Our cost of insurance is expected to rise, and we may not be able to obtain insurance for certain risks.

    Management attention.  Since the date of the dam rupture, attention of our senior management and our Board of Directors is focused on the emergency actions and other measures in response to the crisis and diverted from our core business.

    Impact on our financial performance.  We expect the rupture of Dam I to continue to have a significant impact on our financial performance, which include reduced revenues due to the suspension of operations, increased expenditures for assistance and remediation, impairments of fixed assets, provisions for costs of decharacterization, restoration and recovery, and provisions for legal proceedings. See Operating and Financial Review and Prospects—Overview—Rupture of Dam I.

    Additional environmental impacts.  Additional environmental consequences of the rupture of the dam remain uncertain. The impact of the rupture of Dam I on the water quality of the Paraopeba River affected its use up to the city of Pompéu, including public supply in the cities of Pará de Minas and Paraopeba. Heavy rains in the Paraopeba River basin during January 2020 intensified the impacts on the water quality of the Paraopeba River and there is no guarantee that interstate rivers will not be impacted as well, which could lead to additional proceedings and investigations by the federal authorities. Failure to implement our decharacterization plan and measures to prevent further accidents could also lead to additional environmental damages, additional impacts on our operations, and additional claims, investigations and proceedings against us.

The rupture of a dam or similar structure may cause severe damages, and the decharacterization of our upstream dams may be long and costly.

We own a number of dams and similar structures. In addition, we own stakes in companies that own a number of dams or similar structures, including Samarco and Mineração Rio do Norte S.A. (MRN). The rupture of any of these structures could cause loss of life and severe personal, property and environmental damages, and could have adverse effects on our business and reputation, as evidenced by the consequences of the rupture of Dam I at Córrego do Feijão. See Overview—Business overview—Rupture of the tailings dam at the Córrego do Feijão mine. Some of our dams, and some of the dams owned by our investees, such as Samarco and MRN, were built using the "upstream" raising method, which presents specific stability risks.

Recently approved laws and regulations require us to decharacterize all of our upstream dams on a specified timetable. We are still determining the appropriate measures for the decharacterization of each

    

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upstream dam. This process will require significant expenditures, and the decharacterization process may take a long time. According to our decharacterization plan, we estimate the costs for conclusion of the decharacterization process to be US$2.6 billion, and although we expect to conclude the decharacterization process for all of our upstream dams within five years, we may not be able to do so within such time-frame.

Our obligations and potential liabilities arising from the rupture of a tailings dam owned by Samarco in Minas Gerais could negatively impact our business, our financial conditions and our reputation.

In November 2015, the Fundão tailings dam owned by Samarco failed, causing fatalities and environmental damage in the surrounding area. The rupture of Samarco's tailings dam has adversely affected and will continue to affect our business, and the full impact is still uncertain and cannot be estimated. Below is a discussion of the main effects of the dam rupture on our business.

    Legal proceedings.  We are involved in multiple legal proceedings and investigations relating to the rupture of the Fundão tailings dam, and other proceedings and investigations may arise in the future. These proceedings include putative securities class actions in the United States against us and some of our current and former officers, a criminal proceeding in Brazil, public civil actions brought by Brazilian authorities and multiple proceedings involving claims for significant amounts of damages and remediation measures. Adverse results in these proceedings may impact our liquidity and our financial condition. Tax authorities or other creditors of Samarco may attempt to recover from us amounts due by Samarco. See Additional Information—Legal proceedings.

    Reparation obligations and other undertakings.  As Samarco is currently unable to resume its activities, we and BHPB have been funding Fundação Renova to support certain remediation measures undertaken by Samarco and also providing funds directly to Samarco, to preserve its operations. If Samarco is unable to resume operations or to generate sufficient cash flows to fund the remediation measures required under these agreements, we will be required to continue funding these remediation measures, which in turn may adversely affect our liquidity and financial conditions. See Overview—Business overview—Rupture of Samarco's tailings dam in Minas Gerais.

    Risk of additional environmental damages.  Failure to contain the remaining tailings in Samarco's dams could cause additional environmental damages, additional impacts on our operations, and additional claims, fines and proceedings against Samarco and against us. Failure to contain the remaining tailings could also impact the feasibility and timing for the restart of Samarco's operations.

    Other impacts.  We may encounter delays in the receipt of environmental and other licenses for our tailings dams and other facilities, and Brazilian authorities may impose more stringent conditions in connection with the licensing process of our projects and operations. Also, as one of Samarco's shareholders, our reputation has been adversely affected by the rupture of Samarco's tailings dam.

    

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EXTERNAL RISKS

Our business is exposed to the cyclicality of global economic activity and requires significant investments of capital.

As a mining company, we are a supplier of industrial raw materials. Industrial production tends to be the most cyclical and volatile component of global economic activity, which affects demand for minerals and metals. At the same time, investment in mining requires a substantial amount of funds in order to replenish reserves, expand and maintain production capacity, build infrastructure, preserve the environment, prevent fatalities and occupational hazards and minimize social impacts. Sensitivity to industrial production, together with the need for significant long-term capital investments, are important sources of risk for our financial performance and growth prospects.

Also, we may not be able to adjust production volume in a timely or cost-efficient manner in response to changes in demand. Lower utilization of capacity during periods of weak demand may expose us to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the capital intensity of mining operations. In addition, efforts to reduce costs during periods of weak demand could be limited by labor regulations or previous labor or government agreements. Conversely, during periods of high demand, our ability to rapidly increase production capacity is limited, which could prevent us from meeting demand for our products. Moreover, we may be unable to complete expansions and greenfield projects in time to take advantage of rising demand for iron ore, nickel or other products. When demand exceeds our production capacity, we may meet excess customer demand by purchasing iron ore fines, iron ore pellets or nickel from joint ventures or unrelated parties processing and reselling it, which would increase our costs and narrow our operating margins. If we are unable to satisfy excess customer demand in this way, we may lose customers. In addition, operating close to full capacity may expose us to higher costs, including demurrage fees due to capacity restraints in our logistics systems.

The prices for our products are subject to volatility, which may adversely affect our business.

Global prices for metals are subject to significant fluctuations and are affected by many factors, including actual and expected global macroeconomic and political conditions, regional and sectorial factors, levels of supply and demand, the availability and cost of substitutes, inventory levels, technological developments, regulatory and international trade matters, investments by commodity funds and others and actions of participants in the commodity markets. Sustained low market prices for the products we sell may result in the suspension of certain of our projects and operations, decrease in our mineral reserves, impairment of assets, and may adversely affect our cash flows, financial position and results of operations. We expect that the price of our products will be subject to additional volatility in 2020 due to the impact of the COVID-19 pandemic.

Demand for our iron ore, coal and nickel products depends on global demand for steel. Iron ore and iron ore pellets, which together accounted for 78% of our 2019 net operating revenues, are used to produce carbon steel. Nickel, which accounted for 7.7% of our 2019 net operating revenues, is used mainly to produce stainless and alloy steels. The prices of different steels and the performance of the global steel industry are highly cyclical and volatile, and these business cycles in the steel industry affect demand and prices for our products. In addition, vertical backward integration of the steel and stainless steel industries and the use of scrap could reduce the global seaborne trade of iron ore and primary nickel. The demand for copper is affected by the demand for copper wire, and a sustained decline in the construction industry could have a negative impact on our copper business.

We are mostly affected by movements in iron ore prices. For example, a price reduction of US$1 per dry metric ton unit ("dmt") in the average iron ore price would have reduced our operating income for the year ended December 31, 2019 by approximately US$290 million. Average iron ore prices significantly

    

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changed in the last five years, from US$55.5 per dmt in 2015, US$58.5 per dmt in 2016, US$71.3 per dmt in 2017, US$69.5 per dmt in 2018 and US$93.4 per dmt in 2019, according to the average Platts IODEX (62% Fe CFR China). On March 18, 2020, the year-to-date average Platts IODEX iron ore price was US$90.75 per dmt. See Operating and Financial Review and Prospects—Overview—Major factors affecting prices.

Adverse economic developments in China could have a negative impact on our revenues, cash flow and profitability.

China has been the main driver of global demand for minerals and metals over recent decades. In 2019, Chinese demand represented 73% of global demand for seaborne iron ore, 56% of global demand for nickel and 51% of global demand for copper. The percentage of our net operating revenues attributable to sales to customers in China was 48.6% in 2019. Therefore, any contraction of China's economic growth could result in lower demand for our products, leading to lower revenues, cash flow and profitability. Poor performance in the Chinese real estate sector, the largest consumer of carbon steel in China, would also negatively impact our results. These risks may be intensified in 2020 due to the impact of the COVID-19 pandemic.

Changes in exchange rates for the currencies in which we conduct operations could adversely affect our financial condition and results of operations.

A substantial portion of our revenues, trade receivables and our debt is denominated in U.S. dollars, and given that our functional currency is the Brazilian real, changes in exchange rates may result in (i) losses or gains on our net U.S. dollar-denominated indebtedness and accounts receivable and (ii) fair value losses or gains on currency derivatives we use to stabilize our cash flow in U.S. dollars. In 2019, we had net foreign exchange gains of US$39 million, while we had net foreign exchange losses of US$2.247 million in 2018 and net foreign exchange losses of US$467 million in 2017. In addition, changing values of the Brazilian real, the Canadian dollar, the Euro, the Indonesian rupiah, the Chinese yuan and other currencies against the U.S. dollar affects our results since most of our costs of goods sold is denominated in currencies other than the U.S. dollar, principally the real (44% in 2019) and the Canadian dollar (6% in 2019), while our revenues are mostly U.S. dollar-denominated. We expect currency fluctuations to continue to affect our financial income, expense and cash flow generation.

Significant volatility in currency prices may also result in disruption of foreign exchange markets, which could limit our ability to transfer or to convert certain currencies into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our indebtedness. The central banks and governments of the countries in which we operate may institute restrictive exchange rate policies in the future and impose taxes on foreign exchange transactions.

FINANCIAL RISKS

Lower cash flows, resulting from suspension of operations or decreased prices of our products, may adversely affect our credit ratings and the cost and availability of financing.

The suspension of operations or a decline in the prices of our products may adversely affect our future cash flows, credit ratings and our ability to secure financing at attractive rates. It may also negatively affect our ability to fund our capital investments, including disbursements required to remediate and compensate damages resulting from the rupture of Dam I, provide the financial assurances required to obtain licenses in certain jurisdictions, pay dividends and comply with the financial covenants in some of our long-term debt instruments. See Operating and Financial Review and Prospects—Liquidity and capital resources.

    

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LEGAL, POLITICAL, ECONOMIC, SOCIAL AND REGULATORY RISKS

Legal proceedings and investigations could have a material adverse effect on our business in the event of unfavorable outcomes

We are involved in legal proceedings in which adverse parties have sought injunctions to suspend certain of our operations or claimed substantial amounts against us. Also, under Brazilian law, a broad range of conduct that could be considered to be in violation of Brazilian environmental, labor or tax laws can be considered criminal offenses. Accordingly, our executive officers and employees could be subject to criminal investigations and criminal proceedings in connection with allegations of violation of environmental, labor or tax laws, and we or our subsidiaries could be subject to criminal investigations and criminal proceedings in connection with allegations of violation of environmental laws.

Defending ourselves in these legal proceedings may be costly and time consuming, Possible consequences of adverse results in some legal proceedings include suspension of operations, payment of significant amounts, triggering of creditor remedies and damage to our reputation, which could have a material adverse effect on our results of operations or financial condition. See Additional Information—Legal proceedings.

Political, economic and social conditions in the countries in which we have operations or projects could adversely impact our business.

Our financial performance may be negatively affected by regulatory, political, economic and social conditions in countries in which we have significant operations or projects. In many of these jurisdictions, we are exposed to various risks such as political instability, bribery, cyber-attacks, extortion, corruption, robbery, sabotage, kidnapping, civil strife, acts of war, guerilla activities, piracy in international shipping routes and terrorism. These issues may adversely affect the economic and other conditions under which we operate in ways that could have a materially negative effect on our business.

Political, social and economic instability in Brazil could adversely impact our business and the market price of our securities.

The Brazilian federal government's economic policies may have important effects on Brazilian companies, including us, and on market conditions and prices of securities of Brazilian companies. Our financial condition and results of operations may be adversely affected by the following factors and the Brazilian federal government's response to these factors:

    exchange rate movements and volatility;

    inflation and high interest rates;

    financing of the current account deficit;

    liquidity of domestic capital and lending markets;

    tax policy;

    pension, tax and other reforms;

    political instability resulting from allegations of corruption involving political parties, elected officials or other public officials; and

    

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    other political, diplomatic, social and economic developments in or affecting Brazil.

Historically, the country's political situation has influenced the performance of the Brazilian economy, and political crises have affected the confidence of investors and the general public, which resulted in economic deceleration, downgrading of credit ratings of the Brazilian government and Brazilian issuers, and heightened volatility in the securities issued abroad by Brazilian companies. Political instability may aggravate economic uncertainties in Brazil and increase volatility of securities of Brazilian issuers.

In the last years, Brazil faced an economic recession, adverse fiscal developments and political instability. Brazilian GDP grew by 1.1% in 2019, 1.3% in 2018 and 1.3% in 2017. Unemployment rate was 11.9% in 2019, 12.3% in 2018 and 12.7% in 2017. Inflation, as reported by the consumer price index (IPCA), was 4.31% in 2019, 3.75% in 2018 and 2.95% in 2017. The Brazilian Central Bank's base interest rate (SELIC) was 4.5% on December 31, 2019, 6.50% on December 31, 2018 and 7.00% on December 31, 2017. Future economic, social and political developments in Brazil may impair our business, financial condition or results of operations, or cause the market value of our securities to decline.

Disagreements with local communities could adversely impact our business and reputation.

Disputes with communities where we operate may arise from time to time. Accidents or incidents involving mines, industrial facilities and related infrastructure, such as the rupture of Dam I, may significantly impact the communities where we operate. In some instances, our operations and mineral reserves are located on or near lands owned or used by indigenous peoples or other groups of stakeholders. Some of our mining and other operations are located in territories where title may be subject to disputes or uncertainties, or in areas claimed for agriculture or land reform purposes, which may lead to disagreements with landowners, organized social movements, local communities and the government. In some jurisdictions, we may be required to consult and negotiate with these groups as part of the process to obtain licenses required to operate, to mitigate impact on our operations or to obtain access to their lands. Disagreements or disputes with local communities and groups, including indigenous peoples, organized social movements and local communities, could cause delays in obtaining licenses, increases in planned budget, delays or interruptions to our operations. These issues may adversely affect our reputation or otherwise hamper our ability to develop our reserves and conduct our operations. See Information on the CompanyRegulatory matters and Additional Information—Legal proceedings.

We could be adversely affected by changes in government policies or by trends such as resource nationalism, including the imposition of new taxes or royalties on mining activities.

Mining is subject to government regulation, including taxes and royalties, which can have a significant financial impact on our operations. In the countries where we are present, we are subject to potential renegotiation, nullification or forced modification of existing contracts and licenses, expropriation or nationalization of property, foreign exchange controls, changes in local laws, regulations and policies and audits and reassessments. We are also subject to new taxes or raising of existing taxes and royalty rates, reduction of tax exemptions and benefits, renegotiation of tax stabilization agreements or changes on the basis on which taxes are calculated in a manner that is unfavorable to us. Governments that have committed to provide a stable taxation or regulatory environment may alter those commitments or shorten their duration. We also face the risk of having to submit to the jurisdiction of a foreign court or arbitration panel or having to enforce a judgment against a sovereign nation within its own territory. See Information on the Company—Regulatory matters—Royalties and other taxes on mining activities.

We are also required to meet domestic beneficiation requirements in certain countries, such as local processing rules, export taxes or restrictions or charges on unprocessed ores. The imposition of or increase in such requirements, taxes or charges can significantly increase the risk profile and costs of operations in those jurisdictions. We and the mining industry are subject to rising trends of resource nationalism in

    

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certain countries in which we operate that can result in constraints on our operations, increased taxation or even expropriations and nationalizations.

As a supplier of iron ore, nickel and other raw materials to the global integrated steel industry, we are subject to additional risk from the imposition of duties, tariffs, import and export controls and other trade barriers impacting our products and the products our customers produce. Global trade is subject to a growing trend of increased trade barriers, which could exacerbate commodities' price volatility and in turn result in instability in the prices of our products.

Concessions, authorizations, licenses and permits are subject to expiration, limitation on renewal and various other risks and uncertainties.

Our operations depend on authorizations and concessions from governmental regulatory agencies in the countries in which we operate. We are subject to laws and regulations in many jurisdictions that can change at any time, and changes in laws and regulations may require modifications to our technologies and operations and result in unanticipated capital expenditures.

Some of our mining concessions are subject to fixed expiration dates and might only be renewed a limited number of times for a limited period of time. Apart from mining concessions, we may need to obtain various authorizations, licenses and permits from governmental or other regulatory bodies in connection with the planning, maintenance, operation and closure of our mines and related logistics infrastructure, which may be subject to fixed expiration dates or periodic review or renewal. There is no assurance that renewals will be granted as and when sought, and there is no assurance that new conditions will not be imposed in connection with renewal. Fees for mining concessions might increase substantially due to the passage of time from the original issuance of each individual exploration license. If so, the costs of holding or renewing our mining concessions may render our business objectives not viable. Accordingly, we need to continually assess the mineral potential of each mining concession, particularly at the time of renewal, to determine if the costs of maintaining the concession are justified by the results of operations to date, and we might elect to let some of our concessions lapse. There can be no assurance that concessions will be obtained on terms favorable to us, or at all, for our future intended mining or exploration targets.

In a number of jurisdictions where we have exploration projects, we may be required to retrocede to the state a certain portion of the area covered by the exploration license as a condition to renewing the license or obtaining a mining concession. This requirement can lead to a substantial loss of part of the mineral deposit originally identified in our feasibility studies. For more information on mining concessions and other similar rights, see Information on the CompanyRegulatory matters.

OPERATIONAL RISKS

Our projects are subject to risks that may result in increased costs or delay in their implementation.

We are investing to maintain and further increase our production capacity and logistics capabilities. We regularly review the economic viability of our projects. As a result of this review, we may decide to postpone, suspend or interrupt the implementation of certain projects. Our projects are also subject to a number of risks that may adversely affect our growth prospects and profitability, including the following:

    We may not be able to obtain financing at attractive rates.

    We may encounter delays or higher than expected costs in obtaining the necessary equipment or services and in implementing new technologies to build and operate a project.

    

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    Our efforts to develop projects on schedule may be hampered by a lack of infrastructure, including reliable telecommunications services and power supply.

    Suppliers and contractors may fail to meet their contractual obligations to us.

    We may face unexpected weather conditions or other force majeure events.

    We may fail to obtain or renew the required permits and licenses to build a project, or we may experience delays or higher than expected costs in obtaining or renewing them.

    Changes in market conditions or regulations may make a project less profitable than expected at the time we initiated work on it.

    There may be accidents or incidents during project implementation.

    We may face shortages of skilled personnel.

Operational problems could materially and adversely affect our business and financial performance.

Ineffective project management and operational breakdowns might require us to suspend or curtail operations, which could generally reduce our productivity. Operational breakdowns could entail failure of critical plant and machinery. There can be no assurance that ineffective project management or other operational problems will not occur. Any damages to our projects or delays in our operations caused by ineffective project management or operational breakdowns could materially and adversely affect our business and results of operations. Our business is subject to a number of operational risks that may adversely affect our results of operations, such as:

    Unexpected weather conditions or other force majeure events.

    Adverse mining conditions delaying or hampering our ability to produce the expected quantity of minerals and to meet specifications required by customers, which can trigger price adjustments.

    Accidents or incidents involving our mines, industrial facilities and related infrastructure, such as dams, plants, railway and railway bridges, ports and ships.

    Delays or interruptions in the transportation of our products, including with railroads, ports and ships.

    Tropical diseases, HIV/AIDS, viral outbreaks such as the coronavirus, and other contagious diseases in regions where some of our operations or projects are located, which pose health and safety risks to our employees.

    Labor disputes that may disrupt our operations from time to time.

    Changes in market conditions or regulations may affect the economic prospects of an operation and make it inconsistent with our business strategy.

    

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    Failure to obtain the renewal of required permits and licenses, or delays or higher than expected costs in obtaining them.

    Disruptions to or unavailability of critical information technology systems or services resulting from accidents or malicious acts.

Our business could be adversely affected by the failure or unavailability of certain critical assets or infrastructure.

We rely on certain critical assets and infrastructure to produce and to transport our products to our customers. These critical assets include mines, industrial facilities, ports, railways, roads and bridges. The failure or unavailability of any critical asset, whether resulting from natural events or operational issues, could have a material adverse effect on our business.

Substantially all of our iron ore production from the Northern system is transported from Carajás, in the Brazilian state of Pará, to the port of Ponta da Madeira, in the Brazilian state of Maranhão, through the Carajás railroad (EFC). Any interruption of the Carajás railroad or of the port of Ponta da Madeira could significantly impact our ability to sell our production from the Northern system. With respect to the Carajás railroad, there is particular risk of interruption at the bridge over the Tocantins river, in which the trains run on a single line railway. In the port of Ponta da Madeira, there is particular risk of interruption at the São Marcos access channel, a deep-water channel that provides access to the port. Also, any failure or interruption of our long distance conveyor belt (TCLD) used to transport our iron ore production from the S11D mine to the beneficiation plant, could adversely impact our operations at the S11D mine.

Our business could be adversely affected by the failure of our counterparties, joint venture partners or joint ventures we do not control to perform their obligations.

Customers, suppliers, contractors, financial institutions, joint venture partners and other counterparties may fail to perform existing contracts and obligations, which may unfavorably impact our operations and financial results. The ability of suppliers and customers to perform their obligations may be adversely affected in times of financial stress and economic downturn.

Important parts of our iron ore, pelletizing, nickel, coal, copper, energy and other businesses are held through joint ventures. This may reduce our degree of control, as well as our ability to identify and manage risks. Our forecasts and plans for these joint ventures and consortia assume that our partners will observe their obligations to make capital contributions, purchase products and, in some cases, provide skilled and competent managerial personnel. If any of our partners fails to observe its commitments, the affected joint venture or consortium may not be able to operate in accordance with its business plans, or we may have to increase the level of our investment to implement these plans.

Some of our investments are controlled by partners or have separate and independent management. These investments may not fully comply with our standards, controls and procedures, including our health, safety, environment and community standards. Failure by any of our partners or joint ventures to adopt adequate standards, controls and procedures could lead to higher costs, reduced production or environmental, health and safety incidents or accidents, which could adversely affect our results and reputation.

    

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We may not have adequate insurance coverage for some business risks.

Our businesses are generally subject to a number of risks and hazards, which could have impact on people, assets and the environment. The insurance we maintain against risks that are typical in our business may not provide adequate coverage. Insurance against some risks (including liabilities for environmental damages, damages resulting from dams breaches, spills or leakage of hazardous substances and interruption of certain business activities) may not be available at a reasonable cost, or at all. Even when it is available, we may self-insure where we determine that is more cost-effective to do so. As a result, accidents or other negative developments involving our mining, production or transportation facilities may not be covered by insurance, and could have a material adverse effect on our operations.

Labor disputes may disrupt our operations from time to time.

A substantial number of our employees, and some of the employees of our subcontractors, are represented by labor unions and are covered by collective bargaining or other labor agreements, which are subject to periodic negotiation. Strikes and other labor disruptions at any of our operations could adversely affect the operation of facilities and the timing of completion and cost of our capital projects. For more information about labor relations, see Management and EmployeesEmployees. Moreover, we could be adversely affected by labor disruptions involving unrelated parties that may provide us with goods or services.

Higher energy costs or energy shortages would adversely affect our business.

Costs of fuel oil, gas and electricity are a significant component of our cost of production, representing 10.6% of our total cost of goods sold in 2019. To fulfill our energy needs, we rely on the following sources: oil byproducts, which represented 31% of total energy needs in 2019, electricity (29%), natural gas (15%), coal (16%) and other energy sources (5%).

Electricity costs represented 4.0% of our total cost of goods sold in 2019. If we are unable to secure reliable access to electricity at acceptable prices, we may be forced to curtail production or may experience higher production costs, either of which would adversely affect our results of operations. We face the risk of energy shortages in the countries where we have operations and projects, especially Brazil, due to lack of infrastructure or weather conditions, such as floods or droughts. Future shortages, and government efforts to respond to or prevent shortages, may adversely impact the cost or supply of electricity for our operations.

Failures in our information technology, operational technology, cybersecurity and telecommunications systems may adversely affect our business and reputation.

We rely heavily on information technology, operational technology and telecommunications systems for the operation of many of our business processes. Failures in those systems, whether caused by obsolescence, technical failures, negligence, accident or malicious acts, may result in the disclosure or theft of sensitive information, misappropriation of funds and disruptions to or interruption in our business operations. We may be the target of attempts to gain unauthorized access to information technology and operational technology systems through the internet, including sophisticated and coordinated attempts often referred to as advanced persistent threats. Disruption of critical information technology, operational technology, cybersecurity or telecommunications systems, or breaches of information security, may harm our reputation and have a material adverse effect on our operational performance, earnings and financial condition.

    

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HEALTH, SAFETY, ENVIRONMENTAL AND SOCIAL RISKS

Our business is subject to environmental, health and safety incidents.

Our operations involve the use, handling, storage, discharge and disposal of hazardous substances into the environment and the use of natural resources, resulting in significant risks and hazards, including fire, explosion, toxic gas leaks, spilling of polluting substances or other hazardous materials, rockfalls, incidents involving dams, failure of other operational structures, as well as activities involving mobile equipment, vehicles or machinery and other potentially fatal incidents and accidents. Incidents may occur due to deficiencies in identifying and assessing risks or in implementing sound risk management, and once these risks materialize, they could result in significant environmental and social impacts, damage to or destruction of mines or production facilities, personal injury, illness and fatalities, involving employees, contractors or community members near our operations, as well as delays in production, monetary losses and possible legal liability. Additionally, our employees may be exposed to tropical and contagious diseases that may affect their health and safety. Notwithstanding our standards, policies, controls and monitoring procedures, our operations remain subject to incidents or accidents that could adversely impact our business, stakeholders or reputation.

In February 2020, a vessel owned and operated by the South Korean company Polaris Shipping suffered damage and run aground after leaving the Ponta da Madeira Maritime Terminal, in the state of Maranhão, loaded with approximately 295 Mt of iron ore produced by us. We are supporting the ship owner with technical-operational and preventive measures to safely remove the fuel and iron ore cargo from this vessel. We successfully concluded de-bunkering operations (removal of bunker oil from the vessel) on March 27, 2020, and the salvage work is ongoing. A minor quantity of bunker oil still remains on board to keep the generators working and support the salvage operation. The authorities are investigating the causes of the incident. A leakage of fuel from this vessel into the sea may cause significant environmental damages, which could adversely impact our business, stakeholders or reputation.

Our business may be adversely affected by social, environmental and health and safety regulation, including regulations pertaining to climate change.

Nearly all aspects of our activities, products and services associated with capital projects and operations around the world are subject to social, environmental and health and safety regulations, which may expose us to increased liability or increased costs. These regulations require us to have environmental licenses, permits and authorizations for our operations and projects, and to conduct environmental and social impact assessments, including a hazard identification and risk analysis, in order to get approval for our projects and permission for initiating construction and continuing operating. Significant changes to existing operations are also subject to these requirements. Difficulties in obtaining or renewing permits may lead to construction delays, cost increases, and may adversely impact our production volumes. Social, environmental and health and safety regulations also impose standards, procedures, monitoring and operational controls on activities relating to mineral research, mining, beneficiation, pelletizing activities, railway and marine services, ports, decharacterization, decommissioning, distribution and marketing of our products. Such regulation may give rise to significant costs and liabilities. Litigation relating to these or other related matters may adversely affect our financial condition or cause harm to our reputation.

Social, environmental and health and safety regulations in many countries in which we operate have become stricter in recent years, and it is possible that more regulation or more stringent enforcement of existing regulations will adversely affect us by imposing restrictions on our activities, products, and assets, creating new requirements for the issuance or renewal of environmental licenses and labor

    

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authorizations, resulting in licensing and operation delays, raising our costs or requiring us to engage in expensive reclamation efforts.

In response to the rupture of Dam I, additional environmental and health and safety laws and regulations have been approved, and other may be forthcoming, and authorities may impose more stringent conditions in connection with the licensing process of our projects and operations. We will encounter more stringent requirements for and delays in the receipt of environmental operating license for other dams.

National policies and international regulations regarding climate change may affect a number of our businesses in various countries. The ratification of the Paris Agreement in 2016 increased international pressure for the establishment of a global carbon price, and on companies to adopt carbon pricing strategies. The pricing of greenhouse gas emissions may impact our operational costs, mainly through higher price for fossil fuels as mining is an energy intensive industry, and our cost of international freight. In particular, consumption of thermal coal, one of the products we sell, is facing pressure from international institutions due to its carbon intensity.

Regulatory initiatives at the national and international levels, as evidenced by the 2020 Standard of the International Maritime Organization (IMO) prohibiting high sulfur fuel oil, as well as IMO's goals on greenhouse gas reductions in the industry, could affect our shipping practices, potentially increasing our costs or requiring us to make new capital expenditures. Other regulations, mainly from the European Union and China, may impose additional requirements for our products related to the safety of downstream users.

Natural disasters may cause severe damage to our operations and projects in the countries where we operate and may have a negative impact on our sales to countries affected by such disasters.

Natural disasters, such as wind storms, droughts, floods, earthquakes and tsunamis may adversely affect our operations and projects in the countries where we operate and may cause a contraction in sales to countries adversely affected due to, among other factors, power outages and the destruction of industrial facilities and infrastructure. The physical impact of climate change on our business remains uncertain, but we are likely to experience changes in rainfall patterns, increased temperatures, water shortages, rising sea levels, increased storm frequency and intensity as a result of climate change, which may adversely affect our operations. On some occasions in recent years, we have determined that force majeure events have occurred because of the effect of severe weather on our mining and logistics activities.

RISKS RELATING TO OUR MINING RESERVES

Our reserve estimates may materially differ from mineral quantities that we are actually able to recover; our estimates of mine life may prove inaccurate; more stringent regulations and market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine.

Our reported reserves are estimated quantities of ore and minerals that we have determined can be economically and legally mined and processed under present and assumed future conditions. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including factors beyond our control. Reserve reporting involves estimating deposits of minerals that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data, engineering, costs, investments, geotechnics,

    

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geological interpretation and judgment. As a result, no assurance can be given that the indicated amount of ore will be recovered or that it will be recovered at the rates we anticipate. Reserve estimates and estimates of mine life may require revisions based on actual production experience, projects, updated exploration drilling data and other modifying factors. Lower market prices of minerals and metals, more stringent regulations, reduced recovery rates or increased operating and capital costs due to inflation, exchange rates, changes in regulatory requirements (See Information on the CompanyRegulatory matters) or other factors may render proven and probable reserves uneconomic to exploit and may ultimately result in a reduction of reserves. Also, our inability to obtain licenses for new operations, supporting structures or activities, or to renew our existing licenses, can cause a reduction of our reserves. Such a reduction could affect depreciation and amortization rates and have an adverse effect on our financial performance. Starting in the fiscal year ending on December 31, 2021, we will be required to comply with the new SEC reporting rules on mining activities. We are currently reviewing our reported mining reserves, and we may need to adjust our reported reserves to be able to report in compliance with the new rules.

We may not be able to replenish our reserves, which could adversely affect our mining prospects.

We engage in mineral exploration, which is highly uncertain in nature, involves many risks and frequently is non-productive. Our exploration programs, which involve significant expenditures, may fail to result in the expansion or replacement of reserves depleted by current production. If we do not develop new reserves, we will not be able to sustain our current level of production beyond the remaining lives of our existing mines.

The feasibility of new mineral projects may change over time.

Once mineral deposits are discovered, it can take several years from the initial phases of drilling until production is possible, during which the economic feasibility of production may change. Substantial time and expenditures are required to:

    establish mineral reserves through drilling;

    determine appropriate mining and metallurgical processes for optimizing the recovery of metal contained in ore;

    obtain environmental and other licenses;

    construct mining, processing facilities and infrastructure required for brownfield and greenfield properties; and

    obtain the ore or extract the minerals from the ore.

If a project proves not to be economically feasible by the time we are able to exploit it, we may incur substantial losses and be obliged to take write-downs. In addition, potential changes or complications involving metallurgical and other technological processes arising during the life of a project may result in delays and cost overruns that may render the project not economically feasible.

    

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We face rising extraction costs and investment requirements over time as reserves deplete.

Reserves are gradually depleted in the ordinary course of a given open pit or underground mining operation. As mining progresses, distances to the primary crusher and to waste deposits become longer, pits become steeper, mines may move from being open pit to underground, and underground operations become deeper. In addition, for some types of reserves, mineralization grade decreases and hardness increases at greater depths. As a result, over time, we usually experience rising unit extraction costs with respect to each mine, or we may need to make additional investments, including adaptation or construction of processing plants and expansion or construction of tailings dams. Several of our mines have been operating for long periods, and we will likely experience rising extraction costs per unit in the future at these operations in particular.

RISKS RELATING TO OUR CORPORATE STRUCTURE

The shareholders that are party to our shareholders' agreement have significant power over Vale.

Pursuant to a shareholder's agreement, our major shareholders Litel Participações S.A. ("Litel"), Litela Participações S.A. ("Litela"), Bradespar S.A. ("Bradespar"), Mitsui & Co., Ltd. ("Mitsui") and BNDES Participações S.A. ("BNDESPAR") undertook to vote jointly on certain key matters. This shareholders' agreement is expected to expire on November 9, 2020. On December 31, 2019, Litela, Litel, Bradespar, Mitsui and BNDESPAR together held 35.66% of our total capital stock. See Share Ownership and Trading—Major shareholders. As long as no other shareholder or group of shareholders owns more shares than the parties to the Shareholders' Agreement, these major shareholders may elect a majority of the members of our Board of Directors and control the outcome of certain actions requiring shareholder approval.

The Brazilian Government has certain veto rights.

The Brazilian government owns 12 golden shares of Vale, granting it limited veto power over certain company actions, such as changes to our name, the location of our headquarters and our corporate purpose as it relates to mining activities. For a detailed description of the Brazilian government's veto powers, see Additional information—Memorandum and articles of association—Common shares and golden shares.

Our governance and compliance processes may fail to prevent breaches of legal, accounting or governance standards.

We operate in a global environment, and our activities extend over multiple jurisdictions and complex regulatory frameworks, with increasing enforcement activities worldwide. Our governance and compliance processes, which include the review of internal control over financial reporting, may not timely identify or prevent future breaches of legal, accounting or governance standards. We may be subject to breaches of our code of conduct, anti-corruption policies and business conduct protocols and to instances of fraudulent behavior, corrupt practices and dishonesty by our employees, contractors or other agents. Our failure to comply with applicable laws and other standards could subject us to investigations by authorities, litigation, fines, loss of operating licenses, disgorgement of profits, involuntary dissolution and reputational harm.

    

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It could be difficult for investors to enforce any judgment obtained outside Brazil against us or any of our associates.

Our investors may be located in jurisdictions outside Brazil and could seek to bring actions against us or our directors or officers in the courts of their home jurisdictions. We are a Brazilian company, and the majority of our officers and directors are residents of Brazil. The vast majority of our assets and the assets of our officers and directors are likely to be located in jurisdictions other than the home jurisdictions of our foreign investors. It might not be possible for investors outside Brazil to effect service of process within their home jurisdictions on us or on our officers or directors who reside outside their home jurisdictions. In addition, a final conclusive foreign judgment will be enforceable in the courts of Brazil without a re-examination of the merits only if previously confirmed by the Brazilian Superior Court of Justice (STJ—Superior Tribunal de Justiça), and confirmation will only be granted if the foreign judgment: (i) fulfills all formalities required for its enforceability under the laws of the country where it was issued; (ii) was issued by a competent court after due service of process on the defendant, as required under applicable law; (iii) is not subject to appeal; (iv) does not conflict with a final and unappealable decision issued by a Brazilian court; (v) was authenticated by a Brazilian consulate in the country in which it was issued or is duly apostilled in accordance with the Convention for Abolishing the Requirement of Legalization for Foreign Public Documents and is accompanied by a sworn translation into Portuguese, unless this procedure was exempted by an international treaty entered into by Brazil; (vi) it does not cover matters subject to the exclusive jurisdiction of the Brazilian courts; and (vii) is not contrary to Brazilian national sovereignty, public policy or good morals. Therefore, investors might not be able to recover against us or our directors and officers on judgments of the courts of their home jurisdictions predicated upon the laws of such jurisdictions.

RISKS RELATING TO OUR DEPOSITARY SHARES

If ADR holders exchange ADSs for the underlying shares, they risk losing the ability to remit foreign currency abroad.

The custodian for the shares underlying our ADSs maintains a registration with the Central Bank of Brazil permitting the custodian to remit U.S. dollars outside Brazil for payments of dividends and other distributions relating to the shares underlying our ADSs or upon the disposition of the underlying shares. If an ADR holder exchanges its ADSs for the underlying shares, it will be entitled to rely on the custodian's registration for only five business days from the date of exchange. Thereafter, an ADR holder may not be able to obtain and remit foreign currency abroad upon the disposition of, or distributions relating to, the underlying shares unless it obtains its own registration under applicable regulation. See Additional InformationExchange controls and other limitations affecting security holders. If an ADR holder attempts to obtain its own registration, it may incur expenses or suffer delays in the application process, which could delay the receipt of dividends or other distributions relating to the underlying shares or the return of capital in a timely manner.

The custodian's registration or any registration obtained could be affected by future legislative changes, and additional restrictions applicable to ADR holders, the disposition of the underlying shares or the repatriation of the proceeds from disposition could be imposed in the future.

ADR holders may not have all the rights of our shareholders, and may be unable to exercise preemptive rights relating to the shares underlying their ADSs.

ADR holders may not have the same rights that are attributed to our shareholders by Brazilian law or our bylaws, and the rights of ADR holders may be subject to certain limitations provided in the deposit

    

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agreement or by the securities intermediaries through which ADR holders hold their securities. Also, the ability of ADR holders to exercise preemptive rights is not assured, particularly if the applicable law in the holder's jurisdiction (for example, the Securities Act in the United States) requires that either a registration statement be effective or an exemption from registration be available with respect to those rights, as is in the case in the United States. We are not obligated to extend the offer of preemptive rights to holders of ADRs, to file a registration statement in the United States, or to make any other similar filing in any other jurisdiction, relating to preemptive rights or to undertake steps that may be needed to make exemptions from registration available, and we cannot assure holders that we will file any registration statement or take such steps.

ADR holders may encounter difficulties in the exercise of voting rights.

ADR holders do not have the rights of shareholders. They have only the contractual rights set forth for their benefit under the deposit agreements. ADR holders are not permitted to attend shareholders' meetings, and they may only vote by providing instructions to the depositary. In practice, the ability of a holder of ADRs to instruct the depositary as to voting will depend on the timing and procedures for providing instructions to the depositary either directly or through the holder's custodian and clearing system. With respect to ADSs for which instructions are not received, the depositary may, subject to certain limitations, grant a proxy to a person designated by us.

The legal protections for holders of our securities differ from one jurisdiction to another and may be inconsistent, unfamiliar or less effective than investors anticipate.

We are a global company with securities traded in several different markets and investors located in many different countries. The legal regime for the protection of investors varies around the world, sometimes in important ways, and investors in our securities should recognize that the protections and remedies available to them may be different from those to which they are accustomed in their home markets. We are subject to securities legislation in several countries, which have different rules, supervision and enforcement practices. The only corporate law applicable to our parent company is the law of Brazil, with its specific substantive rules and judicial procedures. We are subject to corporate governance rules in several jurisdictions where our securities are listed, but as a foreign private issuer, we are not required to follow many of the corporate governance rules that apply to U.S. domestic issuers with securities listed on the New York Stock Exchange, and we are not subject to the U.S. proxy rules.

    

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II.    INFORMATION ON THE COMPANY

LINES OF BUSINESS

Our principal lines of business consist of mining and related logistics. This section presents information about operations, production, sales and competition and is organized as follows

1.   Ferrous minerals

    1.1   Iron ore and iron ore pellets
            1.1.1   Iron ore operations
            1.1.2   Iron ore production
            1.1.3   Iron ore pellets operations
            1.1.4   Iron ore pellets production
            1.1.5   Customers, sales and marketing
            1.1.6   Competition

    1.2   Manganese ore and ferroalloys
            1.2.1   Manganese ore operations and production
            1.2.2   Ferroalloys operations and production
            1.2.3   Manganese ore and ferroalloys: sales and competition

2.   Base metals

    2.1   Nickel
            2.1.1   Operations
            2.1.2   Production
            2.1.3   Customers and sales
            2.1.4   Competition

    2.2   Copper
            2.2.1   Operations
            2.2.2   Production
            2.2.3   Customers and sales
            2.2.4   Competition

    2.3   PGMs and other precious metals
    2.4   Cobalt
3.   Coal

    3.1   Operations
    3.2   Production
    3.3   Customers and sales
    3.4   Competition

4.   Infrastructure

    4.1   Logistics
            4.1.1   Railroads
            4.1.2   Ports and maritime
            terminals
            4.1.3   Shipping

    4.2   Energy

5.   Other investments

    

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1.           FERROUS MINERALS

Our ferrous minerals business includes iron ore mining, iron ore pellet production, manganese ore mining and ferroalloy production. Each of these activities is described below.

1.1         Iron ore and iron ore pellets

1.1.1      Iron ore operations

We conduct our iron ore business in Brazil primarily at the parent-company level, and through our subsidiaries Mineração Corumbaense Reunida S.A. ("MCR") and Minerações Brasileiras Reunidas S.A. ("MBR"). Our mines, all of which are open pit, and their related operations are mainly concentrated in three systems: the Southeastern, Southern and Northern Systems, each with its own transportation and shipping capabilities. We also conduct mining operations in the Midwestern System. We conduct each of our iron ore operations in Brazil under concessions from the federal government granted for an indefinite period, subject to the life of mines.

Company/Mining System
Location Description/History Mineralization Operations Power source Access/Transportation

Vale

           

Northern System

Carajás, state of Pará Divided into Serra Norte, Serra Sul and Serra Leste (Northern, Southern and Eastern ranges). Since 1984, we have been conducting mining activities in the northern range, which is divided into three main mining areas (N4W, N4E and N5) and two major beneficiation plants. In 2014, we started a mine and beneficiation plant in Serra Leste. Our operations in Serra Sul, where our S11D mine is located, started in 2016. High-grade hematite ore type (iron grade around 65%). Open-pit mining operations. In Serra Norte, one of the major plants applies the natural moisture beneficiation process, consisting of crushing and screening, and the other applies both the natural moisture and the wet beneficiation process in distinct lines. The wet beneficiation process consists simply of sizing operations, including screening, hydrocycloning, crushing and filtration. Output from this site consists of sinter feed, pellet feed and lump ore. Serra Leste and Serra Sul natural moisture beneficiation process consists of crushing and screening. Serra Sul produces only sinter feed and Serra Leste produces lump and sinter feed. Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements. Carajás railroad (EFC) transports the iron ore to the Ponta da Madeira maritime terminal in the Brazilian state of Maranhão. Serra Leste iron ore is transported by trucks from the mine site to EFC railroad. The Serra Sul ore is shipped via the new 101-kilometers long railroad spur to the EFC railroad.

Southeastern System

Iron Quadrangle, state of Minas Gerais Three mining complexes: Itabira (two mines, with three major beneficiation plants), Minas Centrais (two mines, with two major beneficiation plants and one secondary plant) and Mariana (three mines, with three major beneficiation plants). Ore reserves with high ratios of itabirite ore relative to hematite ore type. Itabirite ore type has iron grade of 35-60%. Part of the ore is concentrated to achieve shipping grade and part is shipped and blended in Asia with the high-grade ore from our Northern System. Open-pit mining operations. We generally process the run-of-mine by means of standard crushing, classification and concentration steps, producing sinter feed, lump ore and pellet feed in the beneficiation plants located at the mining complexes. For status of halted operations see Overview—Business overview—Rupture of the tailings dam at the Córrego do Feijão mine. Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements. EFVM railroad connects these mines to the Tubarão port.

Southern System

Iron Quadrangle, state of Minas Gerais Two major mining complexes: Vargem Grande (four mines and four major beneficiation plants) and Paraopeba (four mines and