Company Quick10K Filing
Vale
20-F 2020-12-31 Filed 2021-03-24
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 2020-12-31

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TABLE OF CONTENTS
TABLE OF CONTENTS

Table of Contents

As filed with the Securities and Exchange Commission on March 23, 2021

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, 2020
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

3.750% Guaranteed Notes due 2030, issued by Vale Overseas

VALE/30 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, 2020 was:
5,129,910,942 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
†The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ
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

27

Forward-looking statements

29

Risk factors

30

II.      Information on the company


46

Lines of Business

46

Reserves

77

Capital Expenditures

87

Regulatory Matters

90

III.     Operating and financial review and prospects


96

Overview

96

Results of operations

103

Liquidity and capital resources

114

Contractual obligations

117

Off-balance sheet arrangements

118

Critical accounting policies and estimates

119

Risk management

124

IV.     Share ownership and trading


129

Major shareholders

129

Related party transactions

131

Distributions

133

Trading markets

134

Depositary shares

135

Purchases of equity securities by the issuer and affiliated purchasers

137

V.      Management and employees


138

Management

138

Management compensation

153

Employees

157

VI.    Additional information


159

Legal proceedings

159

Bylaws

174

Participating debentures

181
Exchange controls and other limitations affecting security holders 182
Taxation 184
Evaluation of disclosure controls and procedures 192

Management's report on internal control over financial reporting

192

Corporate governance

193

Code of conduct

198

Principal accountant fees and services

199

Information filed with securities regulators

200

Exhibits

201

Glossary

202

Signatures

206

Index to consolidated financial statements

F-1

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

27

3B Capitalization and indebtedness

Not applicable

3C Reasons for the offer and use of proceeds

Not applicable

3D Risk factors

Risk factors

30

4

Information on the Company

   

4A History and development of the company

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

2, 87, 200

4B Business overview

Business overview, Lines of business, Reserves, Regulatory matters

2, 46, 77, 90

4C Organizational structure

Exhibit 8

4D Property, plant and equipment

Lines of business, Capital expenditures, Regulatory matters

46, 87, 90

4A

Unresolved staff comments

None

5

Operating and financial review and prospects

   

5A Operating results

Results of operations

103

5B Liquidity and capital resources

Liquidity and capital resources

114

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

Capital expenditures

87

5D Trend information

Results of operations

103

5E Off-balance sheet arrangements

Off-balance sheet arrangements

118

 

Critical accounting policies and estimates

119

5F Tabular disclosure of contractual obligations

Contractual obligations

117

5G Safe harbor

Forward-looking statements

29

6

Directors, senior management and employees

 

6A Directors and senior management

Management

138

6B Compensation

Management compensation

153

6C Board practices

Management—Board of directors

138

6D Employees

Employees

157

6E Share ownership

Major shareholders, Employees—Performance-based compensation

129, 158

7

Major shareholders and related party transactions

   

7A Major shareholders

Major shareholders

129

7B Related party transactions

Related party transactions

131

7C Interests of experts and counsel

Not applicable

8

Financial information

   

8A Consolidated statements and other financial information

Financial statements

F-1

 

Distributions

133

 

Legal proceedings

159

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

134

9D Selling shareholders

Not applicable

9E Dilution

Not applicable

9F Expenses of the issue

Not applicable

10

Additional information

   

10A Share capital

Bylaws—Common shares and golden shares

174

10B Memorandum and articles of association

Bylaws

174

10C Material contracts

Lines of business, Results of operations Related party transactions

46, 103, 131

10D Exchange controls

Exchange controls and other limitations affecting security holders

182

10E Taxation

Taxation

184

10F Dividends and paying agents

Not applicable

10G Statement by experts

Reserves

77

10H Documents on display

Information filed with securities regulators

200

10I Subsidiary information

Not applicable

11

Quantitative and qualitative disclosures about market risk

Risk management

124

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

135

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

192

 

Management's report on internal control over financial reporting

192

16A

Audit Committee financial expert

Management—Audit Committee

151

16B

Code of ethics

Code of conduct

198

16C

Principal accountant fees and services

Principal accountant fees and services

199

16D

Exemptions from the listing standards for Audit Committees

Management—Audit Committee; Corporate governance

151, 193

16E

Purchase of equity securities by the issuer and affiliated purchasers

Purchases of equity securities by the issuer and affiliated purchasers

137

16F

Change in registrant's certifying accountant

Not applicable

16G

Corporate governance

Corporate governance

193

16H

Mine safety disclosure

Not applicable

17

Financial statements

Not applicable

18

Financial statements

Financial statements

F-1

19

Exhibits

Exhibits

201

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 six 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 associates 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

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,

2020 2019 2018

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

Ferrous minerals:

           

Iron ore

27,285 68.2 % 23,343 62.1 % 20,354 55.7 %

Iron ore pellets

4,242 10.6 5,948 15.8 6,651 18.2

Ferroalloys and manganese

225 0.6 282 0.8 454 1.2

Other ferrous products and services

326 0.8 432 1.1 474 1.3

Subtotal

32,078 80.2 30,005 79.9 27,933 76.4

Base metals:

           

Nickel and other products(1)

4,995 12.5 4,257 11.3 4,610 12.6

Copper(2)

2,175 5.4 1,904 5.1 2,093 5.7

Subtotal

7,170 17.9 6,161 16.4 6,703 18.3

Coal

473 1.2 1,021 2.7 1,643 4.5

Other

297 0.7 383 1.0 296 0.8

Total net operating revenues from continuing operations

40,018 100 % 37,570 100 % 36,575 100 %

(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 (three of these plants are currently suspended), and two in Oman. We also have a 50% stake in Samarco Mineração S.A. ("Samarco") and a 25% stake in one pellet company 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.

    Logistics.    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 Logistica 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 also charter dry bulk vessels to transport the products that we sell on a cost and freight ("CFR") basis to our customers.

    

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Base metals:

    Nickel.    Our principal nickel mines and processing operations are conducted through our wholly owned subsidiary Vale Canada Limited ("Vale Canada"), which has operations in Canada, Indonesia and New Caledonia. We are currently in the process of selling our operations in New Caledonia. See Overview—Business Overview—Significant Changes in Our Business—Divestments—Vale New Caledonia put option agreement. 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 and Japan, and have interests in a nickel refinery in South Korea. Our nickel refining facilities in China and Taiwan are currently under care and maintenance.

    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 Sudbury, Ontario, 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 Sudbury, Ontario, 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.

    

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Business Overview

BUSINESS STRATEGY

In 2020, we took important steps towards building a better Vale. Our goal is to be a company recognized by society for being: (i) a benchmark in safety, (ii) the best in class reliable operator, (iii) a talent-driven organization, (iv) a leader in low-carbon mining and (v) a reference in creating and sharing value. We are dedicated to repairing Brumadinho and to transforming natural resources into prosperity and sustainable development, based on the following main strategic pillars:

    Safety and operational excellence.

    New pact with society.

    Maximize flight-to-quality in iron ore.

    Base metals transformation.

    Discipline in capital allocation.

Below is a summary of the major developments in our strategy.

Safety and operational excellence

We have the ambition to become a benchmark in safety with clear targets by 2025: (i) no high potential recordable injuries, (ii) 50% reduction of employee exposure to main health risks, (iii) reduction or elimination of very high-risk scenarios. Our process safety program starts with the hazard identification and risk assessment ("HIRA"), hazard investigation and risk assessment, by identifying the most critical process risks, and their respective controls. We have identified about 790 critical risks and more than 8,500 critical controls. Monitoring the integrity of these controls has become a part of our daily maintenance routine. As of March 22, 2021, we implemented HIRA in 95% of our sites.

We are enhancing our tailings and dam management system for adoption of known best practices. This initiative is organized around three pillars: routine, performance and risk assessment (known as RPR Management System). We are committed to adopting the Global Industry Standard on Tailings Management (GISTM) and we expect to be well positioned to be adherent to these standards by the end of 2021. We are strengthening our tailings and dam management system, improving our dams' conditions and working closely with the engineers of record, we are also decharacterizing our upstream geotechnical structures (including dams, dikes and drained piles) in Brazil.

The implementation of our integrated management system, known as "VPS" (Vale Production System) is strategic for us to become a reliable operator and to support our cultural transformation. The VPS will integrate our processes and systems into one single framework, enabling our company to work with unified objectives and in a standardized way. The VPS fosters the creation of a safer work environment and a more effective problem resolution process within the company. It is composed by three dimensions: leadership, technical and method, which strengthen our organizational culture through people development, standardization of best practices, operational discipline and compliance with routine. With this, we will redefine the path to operational excellence as a more humane, safe and sustainable company. All of our employees are trained to support full engagement.

    

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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 regions where we operate and going beyond taxes, social projects and the reparation of Brumadinho. Our sustainability goals are in line with the Sustainable Development Goals (SDG) of the United Nations 2030 Agenda and include commitments relating to:

    Fighting climate change.

    Renewable electricity, energy efficiency and energy matrix transformation.

    Reducing GHG emissions of our supply chain and contributing to reduce clients' carbon footprint by offering high quality products.

    Forest protection.

    Water usage reduction.

    Socioeconomic contribution.

    Bridging our gaps of Environmental, Social and Governance ("ESG").

For further information about our ESG practices and commitments, see Overview—Business overview—Our environmental, social and governance (ESG) framework.

Maximize flight-to-quality in iron ore

In the iron ore business, we are committed to delivering the highest possible margins under the current market environment, by managing our extensive supply chain and flexible product portfolio to cope with production constraints in the short-term. We are focusing our product line to capture industry trends, improving quality and productivity, controlling costs, strengthening our logistics infrastructure of railroads, ports, and distribution centers, committed to a safe, green and efficient shipping portfolio and enhancing relationships with customers.

    We will continue to promote the Brazilian blend fines (BRBF), a standard product 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 ores and Southern and Southeastern ores, which are complementary ores for our blending strategy. BRBF 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. Our blending strategy also permits the use of iron ore with lower iron 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, reduce use of dams, and reduce water consumption by 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

    

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      Carajás fines (IOCJ), obtained through a grinding process, opening a new market for our high-quality portfolio. We are currently working on the development of low CO2 iron making technologies and services to support our customers as they make the transition to low CO2 steelmaking.

    Our goal is to achieve a run-rate capacity of 400 Mtpy by the end of 2022. In the Northern System, our plan is to have high-quality growth with new low-cost assets, ramping up and opening new mining fronts to reach our capacity goal of 230 Mtpy. In the Southeastern System, we are investing in increasing our pellet feed production, developing filtering and dry stacking capacity and recovering approximately 40 Mtpy to our capacity. Finally, in the Southern System we are committed to solving the interference of upstream dams in our operations, recovering approximately 14 Mtpy to our capacity.

    One of our key goals is to increase our flexibility by creating capacity buffers across iron ore operations. We currently expect to achieve over 50 Mtpy capacity buffer in the long-term, by expanding Northern System by opening new mining pits and obtaining new licenses, as Northern System 240 Mtpy and Serra Sul 120 projects and N3 mining front opening in Serra Norte, developing the 14 Mtpy capacity Capanema project in Southeastern System and unlocking capacity in our Vargem Grande complex.

    With the continuous investments in dry staking tailings disposal and the planned increase of the share of dry processing production from 40% in 2014 of our total production to a target of 70% by 2024, our reliance on new dams and dam raisings should decline. Due to tailings disposal restrictions and lower iron ore production in the Southern and Southeastern Systems since the Brumadinho dam rupture, we temporarily reached 73% of dry processing production in 2020. The additional volume to reach 400 Mtpy production level is expected to come from dry processing method or wet processing using the dry staking method. To treat the tailings from wet processing, we are investing in tailings filtration systems to allow us to operate certain of our mines and plants without using tailings dams. We have announced an estimated investment of US$2.4 billion between 2020 and 2024 in some of our sites, including Vargem Grande complex, Itabira complex and Brucutu, to be operated with tailings filtration systems and dry stacking tailings disposal, which consists of filtering and stacking of partially or totally dewatered tailings, reducing our reliance on tailings dams. In 2020, we invested US$195 million in tailings filtration system and dry stacking tailings disposal. In March, 2021 we gradually started the operation of the tailings filtration plant located at the Vargem Grande Complex, our first filtration plant to be operated in our sites in the state of Minas Gerais. In line with this goal, we acquired New Steel in January 2019, bringing in innovative technologies for the dry beneficiation of iron ore, and approved an investment of US$125 million in the world's first industrial-scale dry magnetic fines concentration plant to produce 1.5 Mtpy with the start-up expected for 2022 in the Vargem Grande complex.

Base metals transformation

Nickel.    A key aspect of the strategy for our nickel business is to be a leader in providing nickel for a renewable energy transition and go further by improving our sustainable way to operate. We will keep our focus on completing the business turnaround, continuing to review our asset utilization, optimizing our operations and concentrating 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

    

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produce nickel products from nickel sulfide and laterite sources using advanced technology. Our commercial footprint is global, with a focus on serving our customers directly.

Our nickel products meet the needs of customers in different industries, including those with high-purity nickel needs and electric vehicle battery manufacturers. Most of our production that will be used in these industries comes from our Canadian operations, which benefit from the use of renewable energy and are located in a stable jurisdiction with strong ESG standards. Our main product, Class 1 nickel, places us in a unique position with environment-friendly operations in the North Atlantic, in line with our low-carbon agenda. By the end of 2021, we will start operations in two replacement projects in Canada: the extensions of the Voisey's Bay Mine and Copper Cliff Mine 1. Both projects have high nickel content and also a significant amount of by-products. We also have opportunities to expand our operations at Onça Puma in Brazil, and the option to participate, through joint ventures, in the Pomalaa and Bahodopi projects in Indonesia.

Copper.    We have significant opportunities to grow our copper business organically. We have a strong portfolio of copper assets and plans to develop a multi-year copper expansion plan, with Salobo III, Alemão and Cristalino being competitive projects that will support our strategic goal of production capacity of around 500 thousand tons per year. In addition to these projects, we have other opportunities to grow in the future, benefiting from the knowledge and logistics that already exist in the Carajás region, while we also evaluate opportunities to increase copper production in Canada. We are also engaged in greenfield exploration for copper in some of the world's most prolific belts, looking for tier-one assets for future development. The copper business still has the potential to expand, through partnerships, the Hu'u project, a world-class deposit located in Indonesia.

Discipline in capital allocation

We reaffirm our strong commitment to a sound balance sheet and for value creation to our stakeholders.

In September 2020, we repaid in full the outstanding balance of US$5 billion under our revolving credit lines, which were drawn in March 2020 to secure capital funding in light of the increased risks presented by the COVID-19 pandemic. We continued our deleveraging process and achieved a net cash level of US$898 million as of December 31, 2020.

We also consider other liabilities in determining the appropriate capital structure for Vale, such as the mark-to-market on derivatives, lease obligations according to IFRS 16, our REFIS tax refinancing program and our provisions to meet our obligations towards Fundacao Renova and the reparation of Brumadinho. See Overview—Business Overview—Rupture of tailings dam in Brumadinho—Settlements agreements—Global Settlement for Full Reparation.

As part of our commitment to attain a leaner portfolio, we continued the optimization of our asset portfolio. Accordingly, in December 2020 we entered into a binding put option agreement for the sale of our ownership interest in Vale Nouvelle-Calédonie S.A.S. (VNC), and in January 2021 we entered into a heads of agreement with Mitsui to structure Mitsui's divestment of the Moatize mine and the Nacala Logistics Corridor, as a first step towards our divestment of the coal business. For more details on the intitiatives regarding the divestment of assets, please see Overview—Business Overview—Significant Changes in Our Business—Divestments.

In July 2020, our Board of Directors reestablished our Shareholder Remuneration Policy, suspended in January 2019. The continuation of our dividend payment policy aims at returning to our shareholders a relevant portion of our cash generation, in a predictable pattern and aligned with our strategic pillar "Discipline in Capital Allocation". Accordingly, we made distributions to shareholders in August 2020 (US$1.324 billion), September 2020 (US$2.329 billion) and March 2021 (US$3.972 billion). For more details on shareholder remuneration, please see Share Ownership and Trading—Distributions.

    

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Business Overview

SIGNIFICANT CHANGES IN OUR BUSINESS

We summarize below major events in our business since the beginning of 2020.

Global Settlement for Full Reparation

In February 2021, we entered into a settlement agreement with various public authorities for the reparation and remediation of socio-environmental and social-economic damages resulting from the Brumadinho dam rupture. For a discussion about this settlement agreement and other issues relating to the Brumadinho dam rupture, see Overview—Business overview—Rupture of tailings dam in Brumadinho.

Developments related to the pandemic of the coronavirus

In 2020, the outbreak of Coronavirus Disease 2019 (COVID-19) spread throughout the world. 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.

Operations.    In 2020, some of our operations were temporarily suspended as a result of developments of the COVID-19 pandemic as discussed below. Temporary suspensions had no relevant impact in our results of operation.

    Itabira Complex.  In May and June 2020, our operations at the Itabira complex were suspended for 12 days by the Labor Superintendence of the State of Minas Gerais (Superintendência Regional do Trabalho e Emprego—"SRTE") due to concerns related to COVID-19 transmission. The SRTE revoked the suspension order once it concluded that our safety measures and procedures were satisfactory. In June 2020, we also reached a judicial agreement with labor prosecutors (Ministério Público do Trabalho—"MPT") and the labor court of the state of Minas Gerais to establish a series of health and safety measures and procedures for our operations in Itabira in connection with the COVID-19 pandemic. In September and November, 2020, we entered into two additional agreements with the MPT, on a voluntary basis, to extend such health and safety measures to all of our mining complexes in Brazil until the end of the COVID-19 pandemic.

    Teluk Rubiah Maritime Terminal (TRMT).  Between March and May 2020, we temporarily halted our operations in the TRMT in Malaysia for 53 days, as we were temporarily unable to secure the minimum resources to safely operate the terminal. During suspension of the operations, vessels heading to TRMT were redirected and redistributed among our blending facilities in China with no impact on production and sales volume in 2020. In May we resumed the loading operations at TRMT following adequate health and safety protocols.

    Voisey's Bay.  In March 2020, we ramped down our Voisey's Bay mining operation and placed it on care and maintenance as a precaution to help protect the health and well-being of indigenous communities in Labrador in face of the COVID-19 pandemic. We took this preventive action because of the unique remoteness of the area, with fly-in and fly-out operations, and higher exposure to travel. In July 2020, production was resumed at the site,

    

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      reaching full capacity in August 2020. The impact on our nickel production of the care and maintenance at Voisey's Bay Mine was mitigated by Long Harbour refinery sustained operations, sourcing nickel concentrate stockpiles already at site.

    Azul Mine Operations.  In March 2020, we suspended our manganese operations at the Azul Mine in the state of Pará, mainly based on the contingent of employees considered an at-risk group, and to contribute to the levels of key personnel at iron ore production sites in the Northern System. Currently, we expect to maintain operations suspended in 2021.

    Mozambique Coal Processing Plants.  Due to travel and equipment transportation restrictions resulting from the COVID-19 outbreak, we revisited plans for the Mozambique coal processing plant stoppage for a maintenance revamp. The halting of the processing plants' operations was previously expected to start in the second quarter of 2020, but was rescheduled to November 2020 and started according to the plan. Following works completion, a production run rate of 15 Mtpy and improved business sustainability are expected.

Safety protocols.    Since March 2020, we have transitioned a significant number of our employees to a remote work regime as part of the efforts to mitigate the spread of COVID-19. We have also implemented other social distancing measures, including shifts in operational areas, restriction of in-person meetings, test-trace protocol, among others.

At our operational sites, we have implemented different levels of defense to mitigate the risk of transmission of COVID-19. Any person accessing our sites must fill in a digital self-assessment for symptoms and potential exposure to COVID-19. Employees requiring health support and information have access to designated COVID-19 hotlines. Additional point-of-entry screening was implemented at the units globally, and an app to track proximity in case of contact tracing was deployed in several of them.

In Brazil, Indonesia and Mozambique, this screening process included periodic testing of the workforce with the use of thousands of serologic or antigen rapid tests. Local implementation of the plan also included swift deployment and efficient monitoring of physical distancing, use of face protection, access to hand washing or hand sanitizer stations, and cleaning routine within the sites and vehicles. Dining hall routines were adapted to provide individually packed meals. Finally, employees identified as having a higher risk to develop the severe form of the disease were removed from the operations and have remained home with full-benefits awaiting to be vaccinated prior to returning to the sites.

Humanitarian and financial aid.    In 2020, we donated US$109 million to local governments in Brazil, the second largest amount donated by a corporation in Brazil to fight COVID-19. We have also provided resources to governments and institutions in Canada, Indonesia and other countries where we operate. For 2021, we have approved US$15 million (approximately R$80 million) to be used in humanitarian aid actions related to COVID-19, including to support to Butantan Institute in the works to expand the Multi-Purpose Center for Vaccine Production, which will have a production capacity of up to 100 million doses per year, and the donation of 50 million syringes and 280,000 PPEs to the Brazilian Ministry of Health. We have also provided temporary financial aid for our suppliers in Brazil. The initiatives included advancing payments to small and medium-sized suppliers in Brazil, reducing payment terms for services and materials. We also provided financial support to construction companies and workers allocated to projects which were halted by us, in order to reduce the flow of people in our sites and increase the safety of our workers.

    

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We continue to monitor the developments of the COVID-19 pandemic. The situation is evolving and could have a material impact on us if there is significant supply chain disruption or customer demand declines.

Divestments

    Vale New Caledonia put option agreement.  In December 2020, our subsidiary Vale Canada Limited ("VCL") entered into a put option agreement for the sale of its ownership interest in Vale Nouvelle-Calédonie S.A.S. ("VNC") with Prony Resources, a consortium of current VNC management and employees, supported by both the Caledonian and French authorities and having Trafigura as a minority shareholder. As a result of the proposed transaction, we recognized a loss of US$882 million in our financial statements for the period ending on December 31, 2020, which includes a provision of US$500 million related to the commitment to fund the continuity of VNC operations and investments in the conversion of the tailings deposition from wet to dry-stacking. The transaction has been approved by VNC workers council and is supported by the Caledonian and the French governments. Closing is expected for 2021.

    Sale of VLI Shares.  In December 2020, BNDES Participações S.A. ("BNDESPAR") exercised its option to purchase shares of VLI held by us, representing 8% of VLI's share capital. We had granted this option to BNDESPAR under a stock purchase option agreement signed in 2015, in connection with an amendment to the indenture of the debentures that were issued to finance the expansion project of the Ferrovia Norte Sul S.A. ("FNS"), currently operated by VLI. In consideration for the purchase of these shares, we received R$1.223 billion (US$241 million) on December 11, 2020. Following this transaction, we hold 29.6% of VLI's total shares.

    Total Divestment of Biopalma.  In November 2020, we sold 100% of the shares of Biopalma da Amazônia S.A—Reflorestamento, Indústria e Comércio to Brasil Bio Fuels Pará Ltda., a company from the Brasil Bio Fuels S.A. group, resulting in the total divestment of our palm oil business.

    Sale of interest in Longyu.  In August 2020, we concluded the sale of our 25% stake in Longyu Energy Resources Co., Ltd. (Longyu) to Yongmei Group Co., Ltd (Yongmei), for CNY1.065 billion (equivalent to US$156 million). Longyu produces metallurgical and thermal coal and other related products in the Henan province in China.

    Sale of interest in Zhuhai YPM.  In November 2020, we concluded the sale of our 25% stake in Zhuhai YPM Pellet Co., Ltd. (Zhuhai YPM) to Zhuhai Yueyufeng Iron and Steel Co., Ltd., (YYF), for US$13 million.

    Transfer of the shares of Potassio Rio Colorado.  In February 2021, we concluded the transfer of the shares of Potassio Rio Colorado to the Province of Mendoza, in Argentina.

    Heads of Agreement with Mitsui.  In January 2021, we signed a heads of agreement ("HOA") with Mitsui to structure Mitsui's exit from Vale Moçambique and the Nacala Logistics Corridor ("NLC"). Mitsui holds a 15% interest in Vale Moçambique and a 50% interest in the NLC. The HOA provides that we will acquire Mitsui's stake in the mine and the logistics assets for US$1.00 each, and will take full control of the Nacala Corridor project finance. In the event of closing of the transaction, we will also control the NLC and, therefore, consolidate its assets and liabilities. Following the acquisition of Mitsui's stakes, and therefore simplification of governance and asset management, we will begin the process of divesting

    

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      its participation in the coal business, which will be guided by the preservation of the operational continuity of the Moatize mine and the NLC, through the search of a third party interested in those assets.

    PT Vale Indonesia divestment agreement.  In October 2020, in compliance with the divestment obligation under the contract of work, Vale Canada sold to Inalum, a state-owned mining holding company which oversees the state mining investments, part of its interest in PTVI, for US$278 million. Following this transaction, we now own approximately 45% of PTVI's share capital.

New projects

    Capanema project.  In December 2020, our Board of Directors approved the implementation of the Capanema iron ore project in the Southeastern System, located in the municipalities of Santa Bárbara, Ouro Preto and Itabirito, in the state of Minas Gerais, Brazil. This project includes investments in the Capanema mine to resume facilities and acquire new equipment, implement a long-distance belt conveyor (TCLD) and adjustments in the Timbopeba stockyards, totaling expected multiyear investments of US$495 million, with capacity of 18Mtpy. Start-up is expected for the second half of 2023.

    New Steel Project (NS04).  In December 2020, our Board of Directors approved the implementation of the NS-04 Project, located at the Vargem Grande complex, in the city of Nova Lima, in the state of Minas Gerais. The project is expected to be the world's first industrial-scale dry magnetic fines concentration, with total expected multi-year investments of US$125 million, capacity of 1,5Mtpy. Start-up is expected for the second half of 2022.

    Solar Project—Sol do Cerrado.  In December 2020, we announced the Sol do Cerrado project for the generation of solar energy, in the municipality of Jaíba, in the state of Minas Gerais, Brazil. The project contemplates the construction of a photovoltaic plant, including 17 sub-parks that total an installed capacity of 766 megawatts peak (MWp). It also includes the implementation of an elevator substation, transmission line and connection bay at the 230 kV Jaíba substation, with contracts signed for connection to the Brazilian National Interconnected System. The implementation of the project will require investments of approximately US$500 million. The project will produce approximately 193 average megawatt (MWa) of energy per year for our operations, corresponding to 13% of our estimated demand in 2025, and its operational start-up is expected for the fourth quarter of 2022. Solar generation, located in the Southeastern region, also optimizes the generation profile of our portfolio, which is based on hydro generation. The project was approved by our Board of Directors and is subject to customary closing conditions, including approval by the National Electric Energy Agency (ANEEL).

    West III Project (Zhejiang Province, China).  In October 2020, our Board of Directors approved the creation of a joint venture company with Ningbo Zhoushan Port Company Limited ("Ningbo Zhoushan Port"), a subsidiary of Zhejiang Provincial Seaport Investment & Operation Group Co. Ltd. (Ningbo Zhoushan Port Group Co. Ltd.), to build, own and operate the West III Project in Shulanghu Port, Zhoushan City, Zhejiang Province, China. Each of Vale International and Ningbo Zhoushan Port will own a 50%-equity interest in the joint venture. The project consists in expanding the Shulanghu Port facilities, developing a stockyard and loading berths with additional 20 Mtpy capacity. Investments for the project are estimated between US$110 million and US$160 million. By participating in the project, we will secure a

    

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      total port capacity of 40Mtpy in Shulanghu, which will help us to optimize our overall supply chain costs.

    Inauguration of a grinding hub in China.  In August 2020, we inaugurated the Shulanghu Grinding Hub, located in the city of Zhoushan, Zhejiang Province, China. We own 100% of the grinding equipment, and the Ningbo Zhoushan Port's subsidiary maintains and operates such grinding equipment in Shulanghu Port for us through a services agreement. This is our first grinding hub in China, having three production lines and totaling a nominal capacity of 3 million tons per year. The first product to be produced at the Grinding Hub is the GF88, a high-grade ground iron ore fine using our Carajás fines (IOCJ) as raw material, which provides an excellent environmental-friendly solution for pellet production and supports steelmaking clients with the challenge of reducing their carbon footprint, part of our scope 3 emissions.

    Serra Sul 120 Project (Carajás).  In August 2020, our Board of Directors approved the implementation of the Serra Sul 120 Project, located in the municipality of Canaã dos Carajás, in the state of Pará, Brazil. The project consists of increasing the S11D mine-plant capacity by 20 Mtpy, to a total of 120 Mtpy at site. The project has total multiyear investments of US$1.5 billion and its start-up is expected for the first half of 2024. The project will create an important buffer of productive capacity, ensuring greater operational flexibility to face eventual production or licensing restrictions in the Northern System.

    JV with Kobe Steel and Mitsui.  In July 2020, we entered into a non-binding heads of agreement to establish the preliminary terms and conditions for the creation of a new venture ("NewVen") to supply low GHG (greenhouse gases) metallic minerals and steel making solutions to the steel industry with Kobe Steel, Ltd and Mitsui & Co., Ltd. The potential creation of the NewVen has the main purpose of delivering low CO2 metallic minerals to the global market, providing new technological solutions to our clients and will use existing and new low-CO2 iron making technology such as the Tecnored® technology and the Midrex® process.

Resumption of Samarco's operations

In December 2020, Samarco commenced the gradual resumption of its operations, with the integrated restart of iron ore extraction and beneficiation in the Germano complex, located in Mariana, state of Minas Gerais, and pelletizing at the Ubú complex, located in Anchieta, state of Espírito Santo. Samarco's operations are resuming with approximately 7 to 8 Mtpy production capacity, with the use of one of three concentrators to beneficiate iron ore in the Germano complex and one of four pellet plants in the Ubu complex, representing 26% of Samarco's productive capacity. The integrated restart of operations occurs after extensive commissioning tests after the five-year halt. Samarco will use new processes for tailings disposal, reflecting its commitment to a sustainable restart and operational safety.

Through the implementation of the filtration process, Samarco expects to be able to substantially dewater sand tailings, which represent 80% of total tailings by volume, and stack these filtered sand tailings in piles safely. The remaining 20% of tailings are planned to be deposited in Alegria Sul pit, a bedrock self-contained structure, which is safer than a tailings dam. Additionally, Samarco is progressing in the decommissioning of Germano dam, following the safety standards required. Samarco operates a Monitoring and Inspection Center in real time to monitor the stability and safety of its geotechnical structures.

    

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Renewal of railway concessions

We have entered into amendments to the Vitória a Minas railroad ("EFVM") and the Carajás railroad ("EFC") concession agreements in order to formalize the renewals of the concessions that would expire in 2027 for an additional period of 30 years. As a result, EFVM and EFC concessions will now expire in 2057. See Information on the Company—Lines of business—Infrastructure—Logistics.

    

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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 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 63 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 the tailings dam in Brumadinho, we decided to strengthen our interactions with ESG stakeholders to discuss a range of strategy, risk and governance-related matters and accelerate our ESG aid initiatives. We are committed to eliminating our ESG gaps by 2030 (our "2030 Commitments").

Our ESG Portal provides greater transparency about our initiatives.

Below are the highlights of our main ESG accomplishments in 2020 and ongoing initiatives:

Environmental

    Climate Change.  We are committed to leading the transition towards a net-zero mining industry. We are committed to contributing with solutions that will help limit the increase in the average global temperature to well below 2°C, as set forth in the Paris Agreement. We endorsed and follow the Task Force on Climate related financial disclosures (TCFD) framework for risks and opportunities related to climate change. We have ambitious goals related to climate change risk management, including targets to reduce scopes 1 and 2 absolute emissions by 33% until 2030, with 2017 as baseline, and to become carbon neutral by 2050. We recognize that we can only lead the mining industry towards a low carbon economy if we induce our value chain on the same direction. Our scope 3 emissions, annually calculated and verified by independent third parties, represents 98% of our total emissions and are not under our direct control. In 2020, we committed to a target to reduce scope 3 net emissions by 15% until 2035, with 2018 as baseline, which are based on development of new products, nature-based solutions, partnership and engagement with clients and suppliers. The scope 3 target will be revised every five year, given the uncertainties regarding low carbon technologies and climate policies. Both targets are aligned with the Paris Agreement ambition.

    Scopes 1 and 2 decarbonization plan:    We have built a bold roadmap, with clear milestones, to meet the reduction targets in Scopes 1 and 2. We will invest US$2 billion over the next 10 years to develop low carbon solutions, such as electrification, biofuels use and renewable electricity generation and use. Our current portfolio of initiatives consolidates more than 35 projects, prioritizing the most cost-competitive initiatives to achieve the 2030 target, based on a Marginal Abatement Cost curve (MAC Curve). All investment decisions are submitted to an internal price of US$50 per ton of CO2 to encourage investments in greenhouse gas (GHG) reduction, in part by incorporating a scenario of more restrictive regulations, and as a tool to help implement our emission reduction targets. We intend to reduce GHG in our operations by increasing the processes' energy efficiency, and by

    

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            developing solutions based on replacing usual energy sources by greener alternatives. These initiatives include, among others, the use of biofuels replacing fossil fuels, electrification of equipment and processes, use of alternative fuels such as electrofuels, carbon capture technologies, and development of alternative processes.

      Scope 3 decarbonization plan:    More than 90% of our scope 3 emissions occur due to the processing of the iron ore in the steel industry. We have identified two pillars of the scope 3 roadmap: (i) portfolio differentiation, with high quality products and low CO2 iron making technologies and services for the steel industry; and (ii) partnerships in shipping and in the steel sector. We can offset up to 20% of the target with nature-based solutions.

        In 2020, we employed a number of efforts to reduce greenhouse gases emissions and mitigate the climate change, and we spent US$80.2 million with these initiatives.

    Energy.  The three pillars of our energy initiatives are: (a) renewable electricity, (b) energy efficiency and (c) energy matrix transformation. Approximately 68% of the electricity consumed by our operations in Brazil is self-generated energy that comes from renewable sources. Our target is to achieve electricity self-sufficiency from renewable sources in Brazil by 2025, and to match 100% of our consumption globally through renewable electricity by 2030.

    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 80% of total production demand in 2020. 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. In 2018, we set a target to reduce new water collection by 10% until 2030. This commitment aims to provide a lower freshwater withdrawal per ton produced compared to 2017. Until 2020, we have already reduced its water collection by 8.7%, of the 10% reduction expected by 2030.

    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 400,000 hectares and reforesting additional 100,000 hectares by 2030, bolstering our 2018 target. In this sense, in 2020 we added 54,000 hectares of protected forests in conservation units.

    Waste.  In 2020, we approved our Waste Policy to encourage the transition from our waste management to a circular economy perspective. Such transition is possible due to innovation. In our policy, we also prioritize dry processing, in line with our goal of achieving 70% dry processing by 2024.

Social

    Human Rights.  We are committed to the United Nations Guiding Principles on Business and Human Rights. We have a Human Rights Policy since 2009. In 2019, our policy was revised

    

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      following a public consultation process. Most of the contributions received through the process were taken into account. In 2020, Human Rights became part of Vale's Integrated Global Risk Map. Since then, our operations included their human rights risk assessment, mitigation controls and action plans in our global management system. In 2020, we also reviewed our human rights due diligence strategy and methodology and developed a roadmap for its implementation in the next five years.

    Gender Balance.  We have announced the goal to double our female workforce by 2030, from 13% to 26% and to increase the female presence in leadership roles from 12% to 20%. We have also disclosed the median salary by gender and seniority level. In 2020, we achieved 16.3% of women representation, a 26% increase in the total number of women in Vale compared to 2019, and we achieved 15.9% of women in senior leadership (executive manager positions and above), a 28% increase in the representation of women in senior leadership positions compared to 2019.

    Health and Safety.  We are committed to improving the health and safety of our workers. Our long-term goals are: (i) no recordable injuries with potential for fatality or life-altering injuries, (ii) 50% reduction in the exposure of employees to the top 10 health risks by 2025 and (iii) reduction or elimination of the most significant risk scenarios by 2025.

    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 and income generation in the regions where we operate. We spent approximately US$390 million on social initiatives in 2020, of which 56% was spent on voluntary programs, 13% on Brazilian-tax-exempted initiatives, and 31% on mandatory programs.

    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. We defined as one of our strategic planning pillars the expansion of our engagement with indigenous people. This pillar consists of three main fronts: preservation of cultural memory, support for indigenous people protagonism and implementation of sustainability programs.

    Community involvement.  In order to engage communities and other local players in the regions where we operate, we have established structured dialogue spaces for creating "Relationship Plans" with the communities in regions we operate. These plans have as their main principles: (i) the social engagement in the definition and prioritization of initiatives to be implemented in the communities; and (ii) the use participatory meetings to monitor the performance, assessing adherence, and effectiveness of the results together with the communities. In 2020, we developed Relationship Plans with more than 450 communities, and carried out more than 430 projects.

        We have also structured channels to strengthen our relationship with our stakeholders. Through these channels, we promote dialogue and improve our relationship management processes, anticipating and treating risks, impacts and possible conflicts and rights violations.

    

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        In 2020, we received 15,559 community contacts through these channels, where 99.01% were responded and 72.6% were resolved.

Governance

Since 2018, we have been listed on the Novo Mercado segment, the highest level of governance of B3. We have been investing in the improvement of our corporate governance, with benchmarks in national and international best practices, and developing our understanding of investors' perspective on these matters.

    Board of Directors.  At a shareholders' meeting held on March 12, 2021, our shareholders approved several changes to our bylaws to improve our governance. The main changes are described below.

    Majority of independent directors.    Our Board of Directors must be composed of 11 to 13 members and one alternate member, and at least seven of these members must be independent. So, following our next annual shareholders' meeting, scheduled for April 2021, we expect to have a Board of Directors composed of a majority of independent members. We also adopted more stringent requirements for a candidate to be considered independent. Previously, our Board of Directors was composed of 13 members and 13 alternates, and our bylaws required that the higher of three members or 20% of the members of our Board of Directors be independent. For more information on our full standard of independency, see Management and Employees—Management—Board of Directors.

    Lead Independent Director.    Our Board of Directors must now have a Lead Independent Director (LID), in case the chairperson is not an independent director. The LID will be elected among and by the independent directors. The LID will act together with our Investor Relations department as an alternate point of contact for investors and will be a mediator between the chairperson of our Board of Directors and the remaining directors.

    Individual election for directors.    Our shareholders will now vote to elect the members of our Board of Directors on an individual basis (as opposed to voting for a slate of candidates).

    Election of the chairperson and vice-chairperson.    Our shareholders will now elect the chairperson and vice-chairperson of our Board of Directors directly. Previously, the chairman and vice-chairman were elected by the directors.

    No alternate members.    We will no longer elect alternates members for our Board of Directors (with the exception of the alternate for the director elected by our employees, as required by law).

    Board Committees.  In 2020, we adopted additional measures to enhance our governance structure, establishing our Audit Committee and our Nomination Committee. The creation of these committees is an important step in the evolution of our corporate governance model. With the Audit Committee, we now have a specialized committee to directly assist the Board of Directors in supervising the internal audit activities, the area of internal controls and the area responsible for preparing Vale's financial statements, among other duties. The Nomination Committee is a permanent committee to directly assist the Board of Directors,

    

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      proposing improvements related to the structure, size and composition of the Board, in addition to recommending the skills, profiles and potential nominees for the Board, so that we can continue to benefit from the plurality of arguments and from a decision-making process with quality and care, complying with the law, ethics and corporate governance best practices. In 2021, we have also established our Innovation Committee, which will responsible for analyzing new technologies and other initiatives to improve our business. Finally, our Personnel, Compensation and Governance Committee is responsible for evaluating the compensation model for members of our executives as well as the proposed annual, global budget for the compensation of executives, among other matters. See Management and Employees—Management—Advisory Committees to the Board of Directors.

    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 and a clawback policy under which, upon the occurrence of events of exceptional severity, the Board of Directors may reduce variable compensation of executives or require that executives return amounts received, and the implementation of new share ownership guidelines for executive officers. For 2020, we approved new standards for Executive Officers compensation: 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.

    Risk Management.  In 2020, with a focus on continuous improvement of risk management and governance, we created a new risk executive committee to better monitor and discuss sustainability and reputational risks. We now have five 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, (iv) compliance risks and (v) sustainability, institutional relations and reputational risks. We have also revised our Integrated Risk Map to include two new categories: Sustainability & Reputation and People.

    In July 2020, our Board of Directors established a Compliance Office headed by a Chief Compliance Officer ("CCO"), who reports directly to the Board of Directors and is supervised by the Audit Committee. This structure ensures that the CCO has autonomy and is insulated from our other executive structures. The CCO is responsible for supervising the Corporate Integrity, the Internal Audit and also the Whistleblower Channel, of which these two last mentioned areas act as our third line of defense.

    Expiration of Shareholder Agreement.  In November 2020, the Shareholders' Agreement among Litela Participações S.A., Litel Participações S.A., Bradespar S.A. Mitsui & Co., Ltd. and BNDES Participações S.A. expired. As a result, these shareholders are no longer required to vote jointly on matters that were previously covered by the agreement.

    

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RUPTURE OF TAILINGS DAM IN BRUMADINHO

On January 25, 2019, a tailings dam ruptured at our Córrego do Feijão mine, in the city of Brumadinho, state of Minas Gerais. The rupture of the dam released a flow of tailings residue, which submerged our administrative area at the Córrego do Feijão mine and reached parts of the communities of Córrego do Feijão and Parque da Cachoeira outside of Brumadinho, and the nearby Paraopeba River. The dam rupture resulted in 270 fatalities, including 11 victims still missing, and caused extensive property and environmental damage in the region.

We will never forget Brumadinho. We reaffirm our respect for the victims and their families, prioritizing the fair and agile reparation of Brumadinho. As we move forward on our path to making our business better, valuing people, safety and reparation, we continue firm in our commitment to become one of the safest and most reliable mining companies in the world.

Reparation and remediation efforts

We have provided humanitarian assistance to victims and their families since the very first moments. Our emergency actions to support impacted people and region included psychological and health care, financial aid, sheltering, food and other essential items, transportation and logistics, emergency safety measures and infrastructure works, animal rescue and care, infrastructure for water supply to the metropolitan region of Belo Horizonte, support to authorities, and donations to municipalities, among other things.

Through February 2021, we had allocated over R$13 billion to pay for compensation to impacted people, infrastructure works and environmental and socioeconomic reparation actions. The environmental reparation activities extend over 22 municipalities located along the Paraopeba River, and involve sediment containment and removal, monitoring of water quality, and preservation and restoration of fauna and flora.

In 2020, we concluded the works on two pipelines for water withdraw on the Para River, in the city of Para de Minas, as part of the construction of new water supply systems to serve the population of Para de Minas and the metropolitan area of Belo Horizonte. We expect to deliver a third one, on the Paraopeba River, in the first half of 2021. We also completed essential social infrastructure works, with the delivery of a daycare facility and a health care unit to communities in Parque da Cachoeira, and a school for 400 students to the community of Macacos, both in the state of Minas Gerais. In Brumadinho, we are renovating a multi-sport gymnasium complex and all 16 public schools.

In September 2020, we announced the Full Reparation Program, a program for comprehensive reparation of damages caused by the Brumadinho dam rupture. The program results from an open dialogue with authorities and the affected communities, and includes 166 initiatives and projects, including, among others:

    Actions to improve quality of life and create jobs for Brumadinho residents through social projects to transform local realities and bring more dynamism to the local economy. As an example, we provided the installation of 700 km of fiber optic cabling, with wireless access points, increasing the availability of internet network in the region.

    Social service programs for the affected parties.

    

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    Forest recovery, protection of wildlife, fish and plant species, as well as constant water quality monitoring and studies to assess risks to human health.

    Urban and social infrastructure construction projects.

    Other actions designed to bring normality back to evacuated communities.

The Full Reparation Program follows the recommendations contained in the February 2020 report of the Independent Ad Hoc Consulting Committee for Support and Reparation (CIAE-AR), an ad-hoc committee created by our Board of Directors to monitor our measures to support the affected community and to remediate the impacted area. In January 2021, a consulting firm conducted an external assessment and reviewed the actions taken by us and concluded that approximately 82% of the recommendations were addressed and the other 18% are in line with our service and commitment schedule. Additional information is available on our ESG Portal, at www.vale.com/esg. Information in our website is not incorporated by reference in this annual report on Form 20-F.

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

Dam safety measures

We have implemented a number of initiatives to enhance our tailings and dam management process and improve dam safety.

Decharacterization of upstream dams.    Our key initiative is the decharacterization of all of our 30 upstream structures in Brazil, including dams, dikes and drained piles. An upstream structure is a structure raised using the upstream raising method, in which the body of the structure is built using the thick tailings deposited in the reservoir, by successively layering them up and in the direction opposite to the water flow (upstream). This is the same construction method as the Brumadinho dam. The term "decharacterization" means functionally reintegrating the structure and its contents into the environment, so that the structure no longer serves its primary purpose of acting as a tailings containment. Recently approved laws and regulations require us to decharacterize all of our upstream structures on a specified timetable, based on projects agreed with authorities.

    The decharacterization of an upstream structures is a complex process and may take a long time to be concluded with the necessary safety precautions. The works related to the decharacterization process may influence the geotechnical stability conditions and increasing the risk of such structures. See Overview—Risk factors—Risks relating to dam rupture. We are conducting detailed engineering studies for each structure to be decharacterized, and may need to improve the construction or build additional containment structures (back-up dams) to safely proceed with the decharacterization. For instance, for certain dams, we have to build downstream back-up dams to ensure the retention of tailings in case of a dam rupture. All these projects are subject to further review and eventual approval by the relevant authorities.

    Our decharacterization plan was updated in 2020 and currently comprises 25 geotechnical structures (including 13 dams, 10 dikes and 2 drained piles) built by the upstream raising method. Our plan also includes the construction of seven containment structures (back-up

    

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      dams) for certain dams, to retain tailings in case of dam rupture, protecting the area downstream from these dams during the decharacterization works.

    We concluded the decharacterization of five of the original 30 upstream structures between 2019 and early 2021. In 2019, we concluded the decharacterization of the 8B dam in the city of Nova Lima. In 2020, we concluded the decharacterization of Rio do Peixe, II Kalunga and III Kalunga dikes. In 2021, we concluded the decharacterization of Pondes de Rejeitos dam, and we expect to conclude the decharacterization of Fernandinho dam and 4 Pontal and 5 Pontal dikes. In 2020, we have also concluded the construction of two downstream back-up dams, one for the Sul Superior dam and the other for B3/B4 dam, and the first phase of the downstream back-up dams related to Forquilha I, Forquilha II, Forquilha III, Forquilha IV and Grupo dams.

    We also operate tailings dams in Canada and New Caledonia, including compacted outer shell upstream dams in Canada. We are not planning to decharacterize these upstream dams for the time being, since there are no safety, technical or regulatory reasons for doing so. In Mozambique, our single tailings dam is no longer active, and a closure plan is currently at a conceptual stage.

    Our joint venture Samarco owns two upstream tailings dams, both inactive and in compliance with the currently approved design. After the rupture of Samarco's dam in 2015, emergency works were performed in order to ensure the stability required and to comply with the applicable regulation. Samarco is currently implementing a closure plan and long-term monitoring will be defined as part of the decharacterization of both structures. Our investee Mineração Rio do Norte ("MRN") owns 24 tailings dams, 13 of which are active, while the other 11 are inactive. The two upstream dams in such portfolio are inactive and have ongoing decharacterization plans.

    The decharacterization process is important for the long-term risk reduction of the upstream tailings facilities, but the works required for the decharacterization process may impact the geotechnical stability of certain upstream tailings facilities, increasing the of risk of rupture of these structures specially during the first phases of this process. To mitigate this risk, we have evacuated the downstream zones of the critical dams and we are building big physical barriers (back-up dams) to contain the tailings in case of failure. To mitigate the risk of life losses, we are considering alternatives to perform the works in these critical dams with remotely-operated equipment and the design is being reviewed with proper redundancy levels.

    In 2020, we spent a total of US$293 million in connection with the decharacterization of dams. As of December 31, 2020, we had a US$2.289 billion provision recognized in our balance sheet for the decharacterization of upstream structures.

Monitoring and precautionary measures.    We have been closely monitoring our active and inactive dams. Among other measures to improve our tailings and dam management system, we have dedicated teams with enhanced governance and revised processes and standards. We have created three geotechnical monitoring centers since 2019, to continuously monitor the dams and to collect information for better decision making. We have implemented 24-hour video monitoring, emergency sirens, water level monitoring in different areas of dam and satellite and drone image and radar monitoring.

Under applicable Brazilian regulations, we must submit to the authorities a certification of stability (Stability Condition Statement, or "DCE") from an independent expert for each of our dams. For 104 of

    

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our geotechnical structures, the DCE must be submitted semi-annually, on March 31 and September 30 of each year. If we are unable to comply with safety requirements for issuance of the DCE of a certain dam, we need to take certain emergency actions based on the Emergency Action Plan for Mining Dam ("PAEBM") for this dam, which may include the suspension of related operations, evacuation of the area surrounding the dam and removal of communities.

    In January 2020, we implemented the function of "Engineer of Record" ("EoR") for our iron ore business, responsible for carrying out regular dam safety inspections for each dam, as well as the issuance of monthly technical reports, in a model of continuous supervision. This is another line of defense for dam safety, under which if a change in the stability of any of our structures is identified, a new audit process may be initiated to issue or revoke a DCE at any moment. We have implemented continuous monitoring through an EoR in all 104 structures.

    As of December 31, 2020, an EoR issued DCEs for 72 structures (61 structures in our ferrous minerals operations and 11 in our base metals operations). We did not obtain DCEs for 32 structures (all of them in our ferrous minerals operations).

    In 2019 and 2020, we relocated 1,415 people residing in the self-rescue zones of the Sul Superior dam (in Barão de Cocais, Minas Gerais), the Vargem Grande dam and the B3/B4 dam at the Mar Azul mine (in the city of Nova Lima, Minas Gerais), the Doutor dam (in Ouro Preto, Minas Gerais) and the Forquilhas I and 2 dams (in Itabirito, Minas Gerais).

Additional information on the status of DCEs and emergency levels of our structures is available on our ESG Portal, at www.vale.com/esg. Information in our website is not incorporated by reference in this annual report on Form 20-F.

Review of our active and inactive mining sites.    We are reviewing our active and inactive mining sites to improve geotechnical management and ensure compliance with applicable rules. As part of our ongoing review of our mining sites, we may identify other structures that should be classified as dams under applicable regulations, which may trigger additional obligations or precautionary measures. These measures could impact our production, cause the suspension of operations and generate additional costs, which could materially and adversely affect our business.

Stabilization of production.    In 2020, we partially resumed our iron ore fines operations that had been suspended in 2019.

Settlement agreements

We have been actively seeking non-judicial alternatives to promote a more expedited reparation and remediation to the impacted people and to settle the various legal proceedings relating to the Brumadinho dam rupture. Below is a summary of key settlement agreements we have entered so far.

Global Settlement for Full Reparation.    On February 4, 2021, we entered into a court-supervised settlement agreement with the Government of the State of Minas Gerais, the Public Defender Office of the State of Minas Gerais (Defensoria Pública de Minas Gerais), public prosecutors of the State of Minas Gerais (Ministério Público do Estado de Minas Gerais—"MPMG") and federal prosecutors (Ministério Público Federal—"MPF") for the reparation and remediation of socio-environmental and social-economic damages resulting from the Brumadinho dam rupture (the "Global Settlement"). This agreement was mediated by the Court of Appeals of the State of Minas Gerais.

    

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    Under the Global Settlement, we agreed on a number of socio-economic and socio-environmental reparation projects, with an estimated economic amount of R$37.7 billion. The agreement includes our obligations to (i) fund certain agreed socio-economic and socio-environmental projects that will be managed by the State of Minas or by the courts, subject to a fixed disbursement schedule of predefined amounts, and (ii) implement directly certain projects established in the Global Settlement. The estimated economic value of the Global Settlement includes: (i) disbursements made prior to the settlement date of scope similar to the agreement, in an amount of R$7.8 billion; (ii) disbursements required for implementation of projects to be managed by the authorities, for a total specified amount of R$19.2 billion; (iii) estimated costs of the socio-economic reparation projects to be directly implemented by us, subject to a cap of R$5.7 billion; and (iv) estimated costs of R$5 billion of environmental recovery projects to be implemented by us. The estimated costs of the projects to be implemented by us are not a cap to our commitments under the Global Settlement.

    Projects contemplated in the agreement are in line with our Full Reparation Program, and include (i) projects demanded by the affected communities, (ii) a program of income transfer to the impacted population, replacing the current payment of emergency aid, (iii) projects for the city of Brumadinho and for the other municipalities of the Paraopeba Basin, (iv) funding for the Government of the State of Minas Gerais to implement an urban mobility program and (v) a public service strengthening program.

    This agreement settles certain public civil actions in which public authorities sought damages and a wide range of injunctive measures against us as a result of the Brumadinho dam rupture. Part of our commitments under the agreement were settled with the release, for the benefit of the authorities, of judicial deposits we had made in the amount of R$5.4 billion (US$ 1.039 billion), to be used in the implementation of projects under the Settlement Agreement. Individual claims for severable damages are excluded from the Global Settlement. See—Other settlement agreements below and Additional Information—Legal proceedings.

    We will be discharged of the obligations established in the Global Settlement upon (a) the full payment of our financial commitments, in accordance with the amounts and payment schedule defined for the projects managed by the State of Minas Gerais and judicial authorities, and (b) the conclusion by Vale of the projects to be implemented directly by us, which mainly include socio-economic and environmental repair projects.

    The Global Settlement also establishes guidelines for the governance and implementation of the Full Reparation Program.

As a result of the Global Settlement and based on our cash outflow expectations, we recognized a provision in the amount of R$19.924 billion (US$ 3.872 billion) in our 2020 fiscal year. For a discussion of the impacts of the dam rupture on our business and operations, see Overview—Risk factors—Risks relating to dam rupture and see Operating and Financial Review and Prospects—Overview—Tailing dam rupture in Brumadinho.

Other settlement agreements.    We have entered into other settlement agreements with public authorities to establish the framework for individual indemnification of the victims, in addition to individual settlement agreements with the victims.

    

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    February 2019 preliminary settlement agreement.  In February 2019, we entered into a preliminary settlement agreement with the state of Minas Gerais and other public authorities pursuant to which we committed to make monthly emergency aid payments to residents of Brumadinho and certain communities located downstream of the dam from January 2019 through February 2021. As of March 18, 2021, the total amount paid as emergency aid was approximately R$2 billion, and these amounts were recognized within the R$37.7 billion Global Settlement. Also under the Global Settlement, we will provide R$4.4 billion to the income transfer program that will replace the monthly emergency aid payments. This program will be administered and operated by the judicial authorities.

    April 2019 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 establish the framework for out-of-court settlement agreements for damage claims for property and other economic and moral damages (danos morais). As of March 18, 2021, we had entered into more than 3,500 indemnification agreements with over 7,670 individuals affected by the dam rupture, providing for payments in the aggregate amount of approximately R$1,300 million. These standards were also used to determine indemnification payments in other municipalities where evacuations occurred as result of the elevation of the emergency level of certain dams. As of March 4, 2021, we had entered into more than 1,100 indemnification agreements with individuals or groups affected by the evacuation of certain areas, providing for payments in the aggregate amount of approximately R$500 million.

    Settlement agreement with public labor prosecutors and labor unions.  In July 2019, we entered into a settlement agreement with the public labor prosecutors to indemnify relatives of the victims of the dam rupture. As of March 18, 2021, we had entered into more than 675 indemnification agreements with individuals or groups pursuant to this settlement agreement, providing for payments to family members of 249 workers (of the 250 deceased workers), in the aggregate amount currently exceeding R$1,180 million. In March 2020, we entered into a settlement agreement with labor unions, setting forth the indemnification amount to be paid to survivor workers and workers based on the Córrego do Feijão and Jangada Mines. As of March 18, 2021, we had entered into more than 700 indemnification agreements with individuals or groups pursuant to this settlement agreement, providing for payments in the aggregate amount of approximately R$102 million.

    Other agreements.  We have entered into other agreements with authorities to cover specific topics, such as support to the municipalities in providing public services and infrastructure, emergency payments to the indigenous communities, specific remediation and compensation measures, external audits and asset integrity studies, provision of technical support for the authorities, with measures to review and reinforce structures and suspension of operations.

Other legal proceedings and investigations relating to the Brumadinho dam rupture continue, and new investigations and legal proceedings may be brought in the future. See Additional Information—Legal proceedings.

    

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Cultural transformation

We are promoting a cultural transformation, seeking to bring safety, people and reparation to the center of our decisions. As part of this effort, we believe that five key behaviors must be present throughout the organization:

    Obsession with safety and risk management.

    Open and transparent dialogue.

    Empowerment with responsibility.

    Ownership for the whole.

    Active listening and engaging with society.

In 2019, we began a large-scale implementation of Vale Management System (VPS) to leverage the cultural transformation process. Through the development of people, the standardization of processes and operational discipline, the VPS inserts and reinforces, in the operational routine, the key behaviors and protocols for our strategic matters. See Overview—Business Overview—Safety and operational excellence.

In 2020, we conducted a cultural assessment that indicated the need to build a culture of learning together, with humility, discipline, a sense of collectivity, and, mainly, unceasing vigilance about safety. Based on the results of this assessment, we have promoted a number of initiatives to strengthen controls and corporate governance, and to promote changes in our internal organization, our culture, and our ability to identify risks and take action to address them. These initiatives also reflect our responses to the recommendations we received in the report issued in February 2020 by the Independent Ad Hoc Consulting Committee for Investigation (CIAEA). We have established a timeline for actions to comply with the recommendations from the CIAEA, and by 2020 approximately 90% of these recommendations had already been fully addressed. We expect to address the remaining recommendations by December 2022. Additional information on the status of our actions in response to the recommendations from the CIAEA is available on our ESG Portal, at www.vale.com/esg. Information in our website is not incorporated by reference in this annual report on Form 20-F.

We have also developed a project named "purpose of Vale", which involved 60 leaders who recovered the history and essence of Vale. In 2021, we defined our purpose as: "We exist to improve life and transform the future. Together." The purpose is a clear orientation for our actions and objectives, and is supported by four pillars: (i) serving society, returning value to all, (ii) making together, (iii) using our mobilizing capacity to make something extraordinary, and (iv) transforming the future, taking care of the present.

    

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RUPTURE OF SAMARCO'S TAILINGS DAM IN MINAS GERAIS

In November 2015, the Fundão tailings dam owned by Samarco ruptured, 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, in agreement with public authorities, created 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. Fundação Renova has been implementing 42 remediation programs established under the settlement agreements entered into with public authorities, following the governance mechanisms established in these settlement agreements.

    In August 2020, we announced the "Agenda Integrada" program, a settlement agreement among Fundação Renova, the states of Minas Gerais and Espirito Santo and an association of mayors of cities along the Doce river, providing for the allocation of R$882 million to investments in education, infrastructure, and health in the region impacted by the rupture of the Samarco dam.

    In July 2020, the 12th Federal Court in Belo Horizonte issued a decision providing guidelines for compensation to be paid to residents of the city of Baixo Guandu, followed by other decisions setting simplified parameters for the compensation of workers (mainly informal workers), in at least 20 cities and villages in the states of Minas Gerais and Espirito Santo. These parameters may be reflected throughout other cities along the Doce river. As of March 10, 2021, more than 6,500 workers had received payments through this new simplified compensation mechanism.

    For a discussion of the funding of Fundação Renova and the impact on our financial statements, see Operating and Financial Review and Prospects—Overview—Fundação Renova and Samarco Funding.

    For a discussion of the legal proceedings resulting from the rupture of Samarco's tailings dam, the settlement agreements we entered into with public authorities and the creation of Fundação Renova, see Additional Information—Legal proceedings.

    For further information on the actions taken by Fundação Renova, see the following website: http://www.vale.com/esg/en/Pages/RenovaFoundation.aspx. Information on our website is not incorporated by reference in this annual report on Form 20-F.

Since the rupture of the Fundão dam, Samarco has been subject to extensive litigation and is in a situation of financial distress. Samarco has defaulted in a number of financing agreements and is engaged in discussions with creditors for a potential debt restructuring. See Overview—Risk factors—Legal, Political, Economic, Social and Regulatory Risks—Legal proceedings and investigations could have a material adverse effect on our business.

    

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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,
 
2020 2019 2018 2017 2016
 
(US$ million)
Net operating revenue 40,018 37,570 36,575 33,967 27,488
Cost of goods sold and services rendered (19,039 ) (21,187 ) (22,109 ) (21,039 ) (17,650 )
Selling, general, administrative and other operating expenses, net (1,306 ) (992 ) (968 ) (951 ) (774 )
Research and evaluation expenses (443 ) (443 ) (373 ) (340 ) (319 )
Pre-operating and operational stoppage (887 ) (1,153 ) (271 ) (413 ) (453 )
Brumadinho event (5,257 ) (7,402 ) –   –   –  
Impairment and disposals of non-current assets (2,243 ) (5,074 ) (899 ) (294 ) (1,240 )
Operating income 10,843 1,319 11,955 10,930 7,052
Non-operating income (expenses):          
Financial income (expenses), net (4,811 ) (3,413 ) (4,957 ) (3,019 ) 1,843
Equity results and other results in associates and joint ventures (1,063 ) (681 ) (182 ) (82 ) (911 )
Income (loss) before income taxes 4,969 (2,775 ) 6,816 7,829 7,984
Income taxes (438 ) 595 172 (1,495 ) (2,781 )
Net income (loss) from continuing operations 4,531 (2,180 ) 6,988 6,334 5,203
Net income (loss) attributable to non-controlling interests (350 ) (497 ) 36 21 (8 )
Net income (loss) from continuing operations attributable to Vale's stockholders 4,881 (1,683 ) 6,952 6,313 5,211
Loss from discontinued operations attributable to Vale's stockholders –   –   (92 ) (806 ) (1,229 )
Net income (loss) attributable to Vale's stockholders 4,881 (1,683 ) 6,860 5,507 3,982
Net income (loss) attributable to non-controlling interests (350 ) (497 ) 36 14 (6 )
Net income (loss) 4,531 (2,180 ) 6,896 5,521 3,976
Total cash paid to stockholders(1) 3,350 –   3,313 1,456 250

(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 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,
 
2020 2019 2018 2017 2016
 
(US$, except as noted)
Earnings (loss) per common share from continuing operations 0.95 (0.33 ) 1.34 1.21 1.00
Loss per common share from discontinued operations –   –   (0.02 ) (0.16 ) (0.23 )
Earnings (loss) per common share 0.95 (0.33 ) 1.32 1.05 0.77
Weighted average number of shares outstanding (in thousands)(1)(2) 5,129,585 5,127,950 5,178,024 (3) 5,197,432 5,197,432
Distributions to stockholders per share(2)(4)          

Expressed in US$

0.65 –   0.64 0.28 0.05

Expressed in R$

3.63 –   2.39 0.90 0.17

(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,
 
2020 2019 2018 2017 2016
 
(US$ million)

Current assets

24,403 17,042 15,292 15,367 13,978

Non-current assets held for sale

–   –   –   3,587 8,589

Property, plant and equipment, net and intangible assets

50,444 55,075 56,347 63,371 62,290

Investments in associated companies and joint ventures

2,031 2,798 3,225 3,568 3,696

Non-current assets

15,129 16,798 13,326 13,291 10,461

Total assets

92,007 91,713 88,190 99,184 99,014

Current liabilities

14,594 13,845 9,111 11,935 10,142

Liabilities associated with non-current assets held for sale

–   –   –   1,179 1,090

Long-term liabilities(1)

28,701 25,467 19,784 20,512 19,096

Long-term debt and leases(2)

13,891 13,408 14,463 20,786 27,662

Total liabilities

57,186 52,720 43,358 54,412 57,990

Stockholders' equity:

         

Capital stock

61,614 61,614 61,614 61,614 61,614

Additional paid-in capital

(2,056 ) (2,110 ) (1,122 ) (1,106 ) (851 )

Retained earnings and revenue reserves

(23,814 ) (19,437 ) (16,507 ) (17,050 ) (21,721 )

Total Vale shareholders' equity

35,744 40,067 43,985 43,458 39,042

Non-controlling interests

(923 ) (1,074 ) 847 1,314 1,982

Total stockholders' equity

34,821 38,993 44,832 44,772 41,024

Total liabilities and stockholders' equity

92,007 91,713 88,190 99,184 99,014

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

    

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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 rupture of the tailings dam in Brumadinho in 2019, the rupture of Samarco's tailings dam in 2015, and related remediation measures on our operations, cash flows and financial position;

    the implementation of our dam decharacterization plan;

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

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

    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;

    our ability to comply with our ESG targets and commitments;

    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 pandemic of the coronavirus may have a material adverse impact on our financial conditions or results of operations.

In December 2019, the outbreak of a contagious disease, the Coronavirus Disease 2019 (COVID-19), spread throughout the world. In March 2020, the World Health Organization (WHO) declared COVID-19 outbreak pandemic. The disease has caused multiple fatalities worldwide, including in Brazil and Canada, where we have our main operations. The impact on the global economy and financial markets has been significant and the overall consequences are still uncertain. It is unclear how the COVID-19 pandemic will evolve throughout 2021 and the following years.

    In 2020 and continuing in 2021, governmental authorities in various jurisdictions imposed lockdowns or other restrictions to contain the virus, and several businesses suspended or reduced operations. We, our customers, suppliers and service providers may face restrictions imposed by regulators and authorities. These restrictions may result in difficulties related to employee absences, and—consequently- 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 production and sales, result in additional costs and expenses, and eventually adversely impact our financial conditions or results of operations.

    In 2020, we have ramped down some operations and revisited plans for others. See Overview—Business overview—Significant changes in our business. While these operations have resumed, we may face similar situations in the future.

    We have transitioned a significant number of our employees to a remote work regime in an effort to mitigate the spread of COVID-19. Remote working may amplify certain risks to our businesses due to increased demand for information technology resources combined with increased risk of phishing scams and other cybersecurity attacks, increased risk of unauthorized dissemination of sensitive personal or confidential information and increased risk of business interruptions. We may also be more exposed to lawsuits from our employees alleging unpaid overtime or other labor-related claims. These risks may result in additional costs and expenses, affect our ability to operate effective internal control over financial reporting and adversely affect our reputation.

    As a result of the current coronavirus pandemic outbreak, business activities worldwide, including construction and manufacturing activities that are two of the main drivers of demand for iron ore and other metals, have been significantly impacted and a general recovery of such industries may take long. 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. All these factors could also have a material adverse impact on our financial conditions or results of operations.

    

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RISKS RELATING TO DAM RUPTURE

The rupture of a dam or similar structure may cause severe damages.

We own a significant number of dams and other geotechnical structures. Some of these structures were built using the "upstream" raising method, which presents stability risks, especially related to liquefaction. 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 dam rupture in Brumadinho. Some of our joint ventures and investees, including Samarco and Mineração Rio do Norte S.A. (MRN), also own dam and similar structures, including structures built using the upstream raising method.

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 upstream dam, but some of those dams already have decharacterization projects with timelines until 2029, as agreed with authorities given the dams technical characteristics, such as volumes of tailings contained. The implementation of the decharacterization plan will require significant expenditures, and the decharacterization process may take a long time. As of December 31, 2020, our provision for the conclusion of the decharacterization plan of our structures is US$2.289 billion and of Samarco's structure is US$221 million, subject to revision depending on further adjustments to the decharacterization projects.

The works related to the decharacterization process may impact the geotechnical stability of certain upstream tailings facilities, increasing the risk of rupture of these structures specially during the first phases of this process. In extreme cases, this process, when associated with other conditions, may contribute to the rupture of structures. The evacuation of the downstream zones of the critical dams, the construction of physical barriers (back-up dams) to contain the tailings in case of failure and other safety measures we take may not be sufficient to prevent damages.

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

In January 2019, the dam rupture in Brumadinho resulted in 270 fatalities or presumed fatalities, in addition to personal, property and environmental damages. See Overview—Business overview—Rupture of tailings dam in Brumadinho. This event has adversely affected and will continue to adversely affect our operations.

    Liabilities and legal proceedings.  We continue to be a defendant in a number of legal proceedings and investigations related to the dam rupture, including criminal investigations in Brazil and securities litigation in the United States. Additional proceedings and investigations may be initiated in the future. Adverse results in these proceedings may have a material adverse effect on our business and financial condition. See Overview—Business overview—Rupture of tailings dam in Brumadinho and Additional Information—Legal proceedings.

    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. It is possible that certain of these operations may not be resumed. See Operating and Financial Review and Prospects—Tailing dam rupture in Brumadinho.

    

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    Impact on our financial performance.  The dam rupture continues 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—Tailing dam rupture in Brumadinho.

    Increase in production costs and capital investments.  We have made investments and adjustments in our operations and may need to make additional investments and adjustments 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.

    Additional regulation and restrictions on mining operations.  Rules on mining activities and ancillary activities, such as dam safety, have become stricter following the Brumadinho dam rupture. Additional rules may be approved. The licensing process for our operations has become longer and subject to more uncertainties. Also, external experts may be reluctant to attest to the stability and safety of our dams, as a result of increasing risks of liability. 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 measures are costly, may adversely impact our business and financial condition and may cause further damage to our reputation.

    Additional environmental impacts.  The entire environmental consequences of the Brumadinho dam rupture remain uncertain, and additional damages may be identified in the future. Also, 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.

    Reserves.  New regulations applicable to dam licensing and operations have caused, and may further cause, decreases in our reported reserves or reclassification of proven reserves as probable reserves.

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

    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 dam ruptures.

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 is cyclical and volatile, which affects demand for minerals and metals. At the same time, investment in mining requires a

    

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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.

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. 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 third 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 may be subject to additional volatility in 2021 due to the impact of the COVID-19 pandemic and relief measures.

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 79% of our 2020 net operating revenues, are used to produce carbon steel. Nickel, which accounted for 8% of our 2020 net operating revenues, is used mainly to produce stainless and alloy steels. The prices of different steels products 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, 2020 by approximately US$265 million. Average iron ore prices significantly changed in the last five years, from US$58.5 per dmt in 2016, US$71.3 per dmt in 2017, US$69.5 per dmt in 2018, US$93.4 per dmt in 2019 and US$108.9 per dmt in 2020, according to the average Platts IODEX (62% Fe CFR China). On January 5, 2021, the year-to-date average Platts IODEX iron ore price was US$164.5 per dmt. See Operating and Financial Review and Prospects—Overview—Major factors affecting prices.

    

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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 2020, Chinese demand represented 80% of global demand for seaborne iron ore, 60% of global demand for nickel and 54% of global demand for copper. The percentage of our net operating revenues attributable to sales to customers in China was 58% in 2020. 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 2021 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 2020, we had net foreign exchange losses of US$ 523 million, while we had net foreign exchange gains of US$39 million in 2019. 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 (39.5% in 2020) and the Canadian dollar (6.2% in 2020), 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, among other factors, 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 dam rupture in Brumadinho, 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.

Uncertainties relating to the discontinuation and replacement of LIBOR may adversely affect us.

In July 2017, the U.K. Financial Conduct Authority (FCA), which regulates the London Interbank Offered Rate ("LIBOR"), announced the effective discontinuation of LIBOR. After December 31, 2021, the FCA will

    

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no longer require panel banks to submit quotes for LIBOR settings other than overnight and 12-month U.S. dollar LIBOR and, after June 30, 2023, the FCA will no longer require panel banks to submit quotes for any U.S. dollar LIBOR settings. We are currently evaluating the potential impact of the eventual replacement of the LIBOR interest. As of the date hereof, it is not possible to predict the effect of the discontinuation of LIBOR or its replacement by alternative reference rates or of any other reforms to the LIBOR that may be enacted in the United Kingdom or elsewhere. Uncertainty related to the discontinuation, as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may have a material adverse effect on our financial condition and results of operations.

LEGAL, POLITICAL, ECONOMIC, SOCIAL AND REGULATORY RISKS

Legal proceedings and investigations could have a material adverse effect on our business.

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.

In addition to the investigations and legal proceedings relating to the Brumadinho dam failure, as a shareholder of Samarco, we also face the consequences of the failure of the Fundão tailings dam in November 2015. We are involved in multiple legal proceedings and investigations relating to the rupture of the Fundão tailings dam. Tax authorities or other creditors of Samarco may attempt to recover from us amounts due by Samarco, if Samarco is unable to fulfill its obligations or is unable to restructure its debt. 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. We 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 generate sufficient cash flows to fund the remediation measures required under these agreements, we will be required to continue funding these remediation measures. See Overview—Business overview—Rupture of Samarco's tailings dam in Minas Gerais. See Additional Information—Legal proceedings.

Political, economic and social conditions in the countries in which we have operations or projects, particularly in Brazil, 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.

    

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In Brazil, where a significant part of our operations is concentrated, the 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, for instance, 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

    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. 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.

Our governance, internal controls and compliance processes may fail to prevent breaches of legal, regulatory accounting, ethical 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. We are required to comply with a wide range of laws and regulations in the countries where we operate or do business, including anti-corruption, international sanctions, anti-money laundering and related laws and regulations. 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, regulatory, accounting, governance or ethical standards. We may be subject to breaches of our code of conduct, anti-corruption policies or other internal policies, or breaches of business conduct protocols and to instances of fraudulent behavior, corrupt practices and dishonesty by our employees, contractors or other agents. This risk is heightened by the fact that we have a large number contracts with local and foreign suppliers, as well as by the geographic distribution of our operations and the wide variety of counterparties involved in our business. 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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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 the tailings dam in Brumadinho, 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, capital ownership requirements, 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 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 and to other metal-consuming sectors such as battery production and other specified, industrial end-uses 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.

    

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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.

Changes in Brazilian fiscal policies and tax laws could have an adverse effect on our financial condition and results and on investments in our securities.

The Brazilian government has frequently implemented and may continue to implement changes in its fiscal policies, including, but not limited to tax rates, fees, sectoral charges and occasionally the collection of temporary contributions. Changes in tax laws and in the interpretation of tax laws by Brazilian tax authorities and courts may occur and may result in tax increases and revocation of tax exemptions. Brazilian legislators are currently considering a comprehensive tax reform, which may include the elimination or unification of certain taxes, the creation of new taxes, the revocation of income tax exemptions on the distribution of profits and dividends and changes relating to interest on net equity. The approval of these legislative proposals or changes in fiscal policies, tax laws and interpretations may impact our tax obligations and may have a material adverse effect on our financial condition and results, and on investments in our securities.

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

    

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number of risks that may adversely affect our growth prospects and profitability, including the following: (i) we may not be able to obtain financing at attractive rates; (ii) 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; (iii) our efforts to develop projects on schedule may be hampered by a lack of infrastructure, including reliable telecommunications services and power supply; (iv) suppliers and contractors may fail to meet their contractual obligations to us; (v) we may face unexpected weather conditions or other force majeure events; (vi) 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; (vii) changes in market conditions or regulations may make a project less profitable than expected at the time we initiated work on it; (viii) there may be accidents or incidents during project implementation; and (ix) 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: (i) unexpected weather conditions or other force majeure events; (ii) 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; (iii) accidents or incidents involving our mines, industrial facilities and related infrastructure, such as dams, plants, railway and railway bridges, ports and ships; (iv) delays or interruptions in the transportation of our products, including with railroads, ports and ships; (v) 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; (vi) labor disputes that may disrupt our operations from time to time; (vii) changes in market conditions or regulations may affect the economic prospects of an operation and make it inconsistent with our business strategy; (viii) failure to obtain the renewal of required permits and licenses, or delays or higher than expected costs in obtaining them; and (ix) disruptions to or unavailability of critical information technology systems or services resulting from accidents or malicious acts.

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

We rely heavily on cybersecurity controls, information technology, operational technology and telecommunications systems for the operation of many of our business processes. Failures in those controls and systems, whether caused by obsolescence, technical failures, negligence, accident or cyber-attacks, may result in the disclosure or theft of sensitive information, loss of data integrity, misappropriation of funds and disruptions to or interruption in our business operations, and impact our ability to disclose financial results. 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 cybersecurity controls, information technology, operational technology, or telecommunications systems, as well as data breaches, may harm our reputation and have a material adverse effect on our operational performance, earnings and financial condition.

    

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We are subject to laws and regulations relating to data protection and data privacy, including the European Union's General Data Protection Regulation (GDPR) and Brazilian Law No. 13,709 (Lei Geral de Proteção de Dados or LGPD). Any noncompliance with those laws and regulations could result in proceedings or actions against us, the imposition of fines or penalties or damage to our reputation, which could have an adverse effect on us and our business, reputation and results of operations.

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 performance of our counterparties, contractors, joint venture partners or joint ventures we do not control

Customers, suppliers, contractors, financial institutions, joint venture partners and other third parties may fail to perform existing contracts and obligations, which may unfavorably impact our operations and financial results. The ability of these third parties 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 contractors, partners or joint ventures to adopt adequate standards, controls and procedures could lead to higher costs, reduced production or environmental, litigation, health and safety incidents or accidents, which could adversely affect our results and reputation.

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

    

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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 9.0% of our total cost of goods sold in 2020. To fulfill our energy needs, we rely on the following sources: oil byproducts, which represented 36% of total energy needs in 2020, electricity (31%), natural gas (13%), coal (16%) and other energy sources (4%).

Electricity costs represented 3.8% of our total cost of goods sold in 2020. 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.

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.

    

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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 authorizations, resulting in licensing and operation delays, raising our costs or requiring us to engage in expensive reclamation efforts. All these factors may affect our practices and result in costs or expense increase, require us to new capital expenditures, restrict or suspend operations, write down or write off assets or reserves.

For a discussion of more stringent rules relating to licensing and operations of dams following the tailings dam rupture in Brumadinho, see Information on the CompanyRegulatory mattersBrazilian regulation of mining dams. For a discussion of national policies and international regulations regarding climate change, which may affect a number of our businesses in various countries, see Information on the CompanyRegulatory mattersEnvironmental regulations. For a discussion of the 2020 regulatory initiatives of 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, see Information on the CompanyRegulatory mattersEnvironmental regulations.

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, floods, droughts, water shortages, sea level rising, increased incidence and intensity of atmospheric discharges (lightning) 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.

    

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RISKS RELATING TO OUR MINERAL 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, market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine; we may not be able to replenish our reserves.

There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including factors beyond our control. Reduction in our reserves may affect our future production and cash generation, impact depreciation and amortization rates, and result in asset write-downs or write-offs, which may have an adverse effect on our financial performance. Below are the key risks relating to our reserves:

    Reserve reporting and estimates of mine life 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, market prices of minerals and metals, more stringent regulations, costs estimates, investments, geotechnics analysis, geological interpretation and judgment. 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. We review our reserve estimates from time to time in light of updated information and changes in regulatory framework, which may result in a reduction of our reported reserves. See Information on the Company—Reserves and—Regulatory matters.

    Our inability to obtain licenses for new operations, supporting structures or activities (such as dams), or to renew our existing licenses, can cause a reduction of our reserves.

    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. 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.

    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.

    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.

    

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    Beginning with the fiscal year ending 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.

RISKS RELATING TO OUR CORPORATE STRUCTURE

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—Bylaws—Common shares and golden shares.

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 (Superior Tribunal de Justiça—"STJ"), 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

    

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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 and taxation of dividends could be imposed in the future.

ADR holders may not have all the rights of our shareholders, and may be unable to exercise voting rights or 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 agreement or by the securities intermediaries through which ADR holders hold their securities.

    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 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.

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 related to our business

    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 ("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 and Serra Leste produce only 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 a 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 tailings dam in Brumadinho. 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 (five mines and five major beneficiation plants) and Paraopeba (five mines and three major beneficiation plants). In 2019, we reorganized our Southern System to eliminate the Minas Itabirito complex, and to consider the mines that composed this complex as part of the Vargem Grande and Paraopeba complexes. Ore reserves with high ratios of itabirite ore type relative to hematite ore type. Itabirite ore 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 tailings dam in Brumadinho. Supplied through the national electricity grid. Produced directly by Vale or acquired through power purchase agreements. MRS transports our iron ore products from the mines to our Guaíba Island and Itaguaí maritime terminals in the Brazilian state of Rio de Janeiro. EFVM railroad connects certain mines to the Tubarão port in the state of Espírito Santo.

Midwestern System

State of Mato Grosso do Sul

Two mines and two plants located in the city of Corumbá.

Hematite ore type, which generates lump ore predominantly. Iron grade of 62% on average.

Open-pit mining operations. The beneficiation process for the run-of-mine consists of standard crushing and classification steps, producing lump ore and sinter feed.

Supplied through the national electricity grid. Acquired through power purchase agreements.

Transported by barges traveling along the Paraguay and Paraná rivers to transhippers at the Nueva Palmira port in Uruguay, or delivered to customers at Corumbá.

    

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1.1.2      Iron ore production

The following table sets forth information about our iron ore production.

 
 
Production for the year ended
December 31,
 
 
 
Process
recovery
2020(2)