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TABLE OF CONTENTS
Vale S.A. Financial Statements

Table of Contents

As filed with the Securities and Exchange Commission on April 18, 2019

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, 2018
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:

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FORM 20-F CROSS-REFERENCE GUIDE

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Form 20-F cross-reference guide

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I.  OVERVIEW

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

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

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

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

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BUSINESS OVERVIEW

FAILURE OF THE TAILINGS DAM AT THE CÓRREGO DO FEIJÃO MINE

On January 25, 2019, a tailings dam ("Dam I") failed at our Córrego do Feijão mine, in the city of Brumadinho, state of Minas Gerais. The failure released a flow of tailings debris, which affected our administrative area at the Córrego do Feijão mine and parts of the communities of Córrego do Feijão and Parque da Cachoeira outside of Brumadinho, reaching the nearby Paraopeba River. The dam failure resulted in nearly 300 fatalities or presumed fatalities, and also caused extensive property and environmental damage in the region. Our priority now is to provide support to those affected by the dam failure.

The causes of the accident are still uncertain and are being investigated by us and by several governmental authorities. We are providing our full cooperation to the authorities and to the investigations into the dam failure.

Dam I

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

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

Dam VI, another dam located at the Córrego do Feijão mine, was impacted by the tailings debris flow from the failure of Dam I. Due to the ongoing investigation into potential damages from the impact of the tailings debris, it has not received the certification of stability (Stability Condition Statement, or "DCE") required by the rules of the national mining agency, the ANM (Agência Nacional de Mineração). Dam VI is being continuously monitored.

The Jangada mine, also located in the Paraopeba complex, was not affected by the tailings debris flow, but its operations were suspended because of the closure of Feijão processing plant, which processed the run-of-mine of the Jangada mine.

Vale's response

Our senior management has been focused on emergency and long-term initiatives, with three main purposes: (i) providing assistance to victims and remediation of the affected area, (ii) determining the causes of the failure of Dam I, and (iii) preventing further accidents through improved standards and accelerated decommissioning of upstream dams.

(i) Assistance and remediation efforts

Immediately following the failure of Dam I, we contacted the local authorities and activated our Emergency Mining Dam Response Plan (Plano de Ação de Emergência de Barragens de Mineração (PAEBM)) to rescue and provide immediate humanitarian assistance to affected parties, including employees and members of the community. We also mobilized our teams to monitor the Paraopeba River basin, rescue wildlife and domestic animals and support sanitation measures. We mobilized over 400

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doctors, nurses, psychologists, social workers and volunteers to set up assistance centers for those affected. These assistance centers provided humanitarian aid, including medical, psychological and social assistance, distributed basic emergency items, including pharmaceuticals, food, potable water and clothing, and provided duplicate records (such as identification cards, marriage certificates, and birth certificates) to those who lost their homes. We also provided 40 ambulances, a support helicopter, shopping vouchers for clothing, accommodation and transportation for over 800 people.

On January 31, 2019, we presented an emergency plan to the Minas Gerais Public Prosecutor's Office, and to the state and federal environmental agencies, including containment, retention, remediation and recovery actions. The plan contemplates removing debris, installing hydraulic barriers and small dams to assist in the tailings control process, establishing water treatment stations, restoring roads and installing membrane barriers downstream to contain ultrafine sediments and protect the water system on the Paraopeba River basin.

On February 6, 2019, we entered into an agreement with various governmental authorities undertaking to gradually replace our professionals who had been providing assistance to the populations affected since the dam failure, with a team to join the health and social service teams of the city of Brumadinho. We will bear for at least six months the costs of employing 142 professionals, including doctors, nurses, psychologists, physical therapists, occupational therapists, social workers and endemic disease control agents, in addition to administrative and operational professionals, as well as logistics costs incurred by these teams.

We have donated resources to the Municipality of Brumadinho, the fire department of Minas Gerais and other entities that provided assistance to the affected parties. For those affected by the dam failure, we established a three-tiered financial assistance program, under which, we have made donations to more than 440 people. We are also providing funeral assistance and contributing to funeral expenses for each affected family. These donations are without prejudice to any right that any person affected by the dam failure may have to claim damages against us.

(ii) Determination of the causes for the failure of the dam

We are investigating the causes of the failure of Dam I. We engaged a legal advisor and technical experts to conduct an investigation into the causes of the failure of the dam. In addition, our Board of Directors established the Independent Ad Hoc Consulting Committee for Investigation (CIAEA), an independent committee to investigate and advise the Board of Directors in connection with the determination of the causes of the dam failure.

(iii) Prevention of further accidents and accelerated decommissioning of upstream dams

On January 29, 2019, we decided to accelerate our existing plan to decommission our tailings dams built using the upstream method. "Decommissioning" or "decharacterization" means reintegrating the dam and its contents into the local environment, so that the structure is effectively no longer a dam. We will determine the appropriate actions to decommission each dam safely, in accordance with the geotechnical and geographic conditions of each dam. For certain of our upstream dams, we will first convert the dam into a downstream or centerline dam and conclude the decommissioning subsequently. Some of our existing downstream or centerline dams contain smaller dikes or structures that were built using the upstream technique, and we are also planning to remove these upstream dikes or structures. At this point, we cannot predict the costs and timing for decommissioning our upstream tailings dams.

We have been taking steps to decommission upstream dams since late 2015, in response to the failure of Samarco's Fundão dam. In February 2019, we announced our plan to accelerate this process and our

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decision to temporarily suspend our operations at mines and concentration plants located in areas where upstream dams are located. Also, based on our initial assessments, we determined that certain dams would not meet the requirements of new safety requirements imposed by ANM, and evacuated certain areas and relocated the population located within the Self-Rescue Zone of these dams. We expect to resume production at these mines and concentration plants in the future.

Independent Committees

Our Board of Directors has created three independent ad hoc advisory committees to support the Board in matters relating to the dam failure. All of these committees are composed of external and independent members appointed by our Board of Directors. These committees are described below.

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Independent Ad Hoc Consulting Committee for Investigation (CIAEA): established to conduct an independent investigation into the causes of the dam failure and to advise our Board of Directors in connection with these matters. The committee is chaired by Dr. Ellen Gracie, former Justice of the Brazilian Supreme Court, and also includes Manuel Martins and Jose Francisco Compagno.



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Independent Ad Hoc Consulting Committee for Support and Recovery (CIAEAR): established to monitor our measures to support the affected community and to remediate the impacted area, and our provision of resources for this purpose, and to recommend measures to our Board of Directors in connection with these matters. The committee is chaired by Leonardo Pereira, former chair of the Brazilian Securities Commission, and also includes Ana Cristina Barros and Márcio Gagliato.



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Independent Ad Hoc Consulting Committee for Dam Safety (CIAESB): established to monitor safety initiatives, risk management and risk mitigation efforts related to our tailings dams and recommending measures to strengthen safety at these dams. This committee is chaired by Flávio Miguez de Mello, and also includes Willy Lacerda and Pedro Repetto.

Impacts of the failure of Dam I on Vale

The impacts of the dam failure on our operations and results of operations will be very significant, but their full scale and scope remains uncertain. Some of major impacts are described below.

(i) Freeze orders

Various Brazilian courts have ordered freezes, attachments, deposits and similar measures affecting an aggregate of R$17.6 billion (US$4.5 billion) of our financial assets, including balances in our bank accounts and judicial deposits to secure the payment of damages resulting from the dam failure. This total amount also includes common shares that we hold in treasury and that have been attached. We are also subject to a number of other proceedings and investigations related to the dam failure, which may result in additional attachment of assets and seizure of balances in our bank accounts.

(ii) Liabilities and legal proceedings

Our potential legal liabilities resulting from the dam failure are significant, and we cannot estimate the total amount at this time. We are already the subject of several investigations and legal proceedings relating to the failure of Dam I, and we expect to face other investigations and proceedings. For additional information regarding the legal proceedings relating to the failure of Dam I, see Additional Information—Legal proceedings. We will continue to cooperate fully with the authorities and to support the investigations into the dam failure. We will also contest any actions that we believe are unjustified.

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The proceedings are all in very early stages, and we cannot reasonably estimate the size of potential losses or settlements or the timing for decisions. We estimate that we will recognize provisions in our financial statements for the first quarter of 2019 in the amount of R$850 million (US$220 million) in connection with an ongoing public civil action brought by labor prosecutors and provisions ranging from R$1.0 billion to R$2.0 billion (US$260 million to US$520 million) in connection with our preliminary agreement with the State of Minas Gerais and other authorities. Our potential liabilities resulting from the dam failure are significant, and additional provisions are expected.

(iii) Suspension of operations

Following the dam failure, we have suspended various operations, either voluntarily or as a result of revocation of licenses or court orders. As of April 15, 2019, the estimated impact of the suspension of operations following the dam failure on our production is 92.8 million metric tons per year (including the estimated annual impact of the suspension of the Brucutu mine). Additional operations may be suspended as a result of new laws and regulations relating to the use of dams, or our inability to obtain the required licenses or the stability reports required by applicable regulations, as discussed below.

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

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Southern System:  Immediately after the dam failure, we suspended our operations at the Córrego do Feijão site, including the Jangada mine, pursuant to an order of the environmental authority of the State of Minas Gerais (SEMAD). Also, to permit the acceleration of our decommissioning plan for upstream dams, and following a determination of the ANM, we temporarily suspended operations at the entire Vargem Grande and Fábrica complexes and at the Vargem Grande and Fábrica pelletizing plants on February 20, 2019. The estimated impact of the suspension of these operations is a reduction of approximately 40 million metric tons of iron ore production per year, including the pellet feed needed for the production of 11 million metric tons of pellets per year.



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Southeastern System:  Our operations at the Timbopeba mine and Alegria mine are currently suspended. Our operations at the Brucutu mine have been suspended since February 4, 2019, but on April 15, 2019, the court of appeals of the State of Minas Gerais partially reversed the last injunction that prevented us from operating the Brucutu mine. We expect to resume operations at Brucutu soon, but the proceedings challenging our right to use the dams supporting our operations at Brucutu are still ongoing. The estimated impact of the suspension of these operations is a reduction of approximately 30 million metric tons of iron ore production per year for the Brucutu mine, 12.8 million metric tons of iron ore production per year for the Timbopeba mine and 10 million metric tons of iron ore production per year for the Alegria mine.

(iv) New regulations

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

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Minas Gerais state law on licensing of dams.  A new statute approved by the state of Minas Gerais in February 2019 prohibits the increase, modification or construction of any upstream dam, and provides for the full decommissioning of any upstream tailings dam by February

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

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ANM rules.  In February 2019, the ANM, Brazil's national mining agency, issued a resolution on dam safety requiring companies that own upstream tailings dams to submit a technical decommissioning project by August 2019 and to fully decommission any inactive upstream tailings dam by August 2021, and any active upstream tailings dam by August 2023. In addition, the resolution requires the decommissioning of our facilities located within the Self-Rescue Zone of a tailings dam. This new resolution, which imposes more stringent safety requirements, is already in effect, but is under public consultation for potential adjustments until May 1, 2019. We are reviewing the impact of this resolution on our operations.

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

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

(v) Impact on reserves

As a result of the dam failure and our decision to accelerate the decommissioning of our upstream tailings dams, we are not in a position to report reserves for the Feijão, Jangada and Capim Branco mines (in the Paraopeba complex).

We are reviewing the impact on our reported reserves of the ongoing investigations and legal proceedings involving the use of dams in our mining operations and of the new rules relating to licensing, use and operations of dams, which were adopted in response to the Dam I failure. These proceedings and regulations may impact our iron ore reserves and reserves for other products for which the production process involves dams. Because alternative methods are available, particularly the dry stockpiling and dry processing technologies, we currently believe that our iron ore reserves will not be materially impacted by these new rules, but we have not concluded our analysis.

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

Brazilian state and federal authorities are strengthening regulations on dam safety. Many regulations applicable to our mines require us to obtain independent reports and certificates from external experts on the safety and stability of our dams. External experts may be unwilling to provide these reports and certificates as a result of the uncertainties regarding the causes of the Dam I failure, the increasing risk of liability and uncertainties about interpretation of new regulations. If any of our dams is unable to comply

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with safety requirements, we may need to evacuate the area surrounding this dam, relocate communities and take other emergency actions.

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On February 8, 2019, we started emergency actions after an external consultant revoked a stability report relating to the Sul Superior dam at our Gongo Soco mine (in the Minas Centrais complex in the Southeastern System), in Barão de Cocais, Minas Gerais. As a result, we relocated about 500 residents of the Socorro, Tabuleiro and Piteiras neighborhoods of Barão de Cocais in the downstream area of the Sul Superior tailings dam. The Sul Superior dam has been inactive since April 2016, when we suspended iron ore production at the Gongo Soco mine. As an additional safety measure, we intensified inspections of the Sul Superior dam, installed new monitoring equipment and engaged additional consultants to perform a new safety assessment.



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On February 16, 2019, the Emergency Action Plan for Mining Dams (PAEBM) for the B3/B4 dam at the Mar Azul mine, in the city of Nova Lima, Minas Gerais, triggered a preventive measure after data from analysis reports from specialized advisory firms indicated increased risk. As a result, we relocated about 200 people from the Macacos neighborhood in the downstream area of the B3/B4 tailings dam, which has been inactive.



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On March 20, 2019, we temporarily suspended our operations at the Alegria mine, in the Mariana complex, because the results from a preliminary analysis of the stability of its structures under stress conditions were inconclusive.



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On March 31, 2019, following an auditing process, external auditors renewed the certification of stability (Stability Condition Statements, or DCE) for 80 of our operational structures. We were not able to renew the DCE for 18 other operational structures, and, as a result, we suspended our activities in these structures.

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

We expect the failure of Dam I, and the consequences summarized above, to have extensive impact on our financial performance and results of operations. We have not yet determined the nature and amount of all the consequences. See Operating and financial review and prospects—Impact of the failure of Dam I at the Córrego do Feijão Mine. These will include:

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Reduced revenues, and increased costs and expenses, due to the suspension of operations.



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Increased expenditures for assistance and remediation.



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Impairments of fixed assets, which may result in the write-down and write-off of assets.



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Provisions for costs of decommissioning and further remediation.



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Provisions for legal proceedings.

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We may also need to incur additional debt to pay for assistance and remediation actions.

Temporary leave of executive officers

On March 1, 2019, our Board of Directors received a formal recommendation from the federal and state (Minas Gerais) public prosecution offices, the federal police and the civil police of Minas Gerais that we suspend certain of our employees and executive officers. In response to this recommendation, our CEO, Fabio Schvartsman, and our executive officer for Ferrous Minerals and Coal, Gerd Peter Poppinga, requested temporary leave from their positions. Our Board of Directors approved these requests on March 2, 2019, and appointed Eduardo de Salles Bartolomeo as interim chief executive officer and Claudio de Oliveira Alves as interim executive officer for Ferrous Minerals and Coal. Mark James Travers has been appointed executive officer for Base Metals, subject to obtaining the requisite visa and relocating to Brazil, as required under Brazilian law.

OPERATIONAL SUMMARY

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

Ferrous minerals:

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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. The Northern and the Southeastern Systems are fully integrated, consisting of mines, railroads, maritime terminals and a port. The Southern System consists of three 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 (the operations of two of these plants are currently

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suspended), and two in Oman. We also have a 50% stake in Samarco Mineração S.A. ("Samarco") and 25% stakes in two pellet companies in China.

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

Base metals:

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Nickel.    Our principal nickel mines and processing operations are conducted by our wholly owned subsidiary Vale Canada Limited ("Vale Canada"), which has operations in Canada, Indonesia and New Caledonia. We also have nickel operations in Onça Puma, in the Brazilian state of Pará. We also control and operate nickel refining facilities in the United Kingdom, Japan and China, and have interests in a nickel refinery in South Korea.



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Copper.    In Brazil, we produce copper concentrates at Sossego and Salobo, in Carajás, in the Brazilian 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.



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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 began producing refined cobalt in our Long Harbour facilities in Newfoundland and Labrador in 2017. We also produce cobalt as a byproduct of our nickel operations in New Caledonia. We produce PGMs as byproducts of our nickel mining and processing operations in Canada. The PGMs are concentrated at our Port Colborne facilities. We produce gold and silver as byproducts of our nickel mining and processing operations in Canada, and gold as a byproduct of our copper mining at Sossego and Salobo in Brazil.

Coal:

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We conduct our coal operations primarily in Mozambique, through Vale Moçambique S.A. ("Vale Moçambique"), where we are ramping up our metallurgical and thermal coal operations. We also have a minority interest in a Chinese coal producer.

Logistics infrastructure:

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

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BUSINESS STRATEGY

The year of 2019 has been a very challenging year for us. We know that there is much to be done to address the effects of the failure of the tailings dam at the Córrego do Feijão mine. We are committed to remediating the damages caused to the city of Brumadinho and the surrounding communities. We will manage the liabilities arising from this deeply regretted event, and we are committed to learning and sharing the lessons from the dam failure. With this purpose, we are dedicated to:

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Keeping our people and communities safe and restoring trust from our stakeholders;



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Capital discipline;



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Maintaining our value over volume approach for the iron ore business;



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Transforming our base metals business into a significant cash generator;



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Concluding the ramp-up of our coal business; and



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Enhancing corporate governance.

Below are the highlights of our major business strategies.

Keeping our people and communities safe and restoring trust from our stakeholders

We are fully committed in addressing the effects of the failure of Dam I at the Feijão mine, with three key initiatives: (i) assistance to victims and recovery of the area affected by the rupture of the dam, (ii) determination of the causes of the dam failure, and (iii) prevention of further accidents through adoption of the highest standards and accelerated decommissioning of all upstream dams. See Business overview—Failure of the tailings dam at the Córrego do Feijão mine. We continue making every effort to provide relief and support to those affected by the dam failure and to restore the trust of our stakeholders on us. We are committed to rebuilding our reputation in Brazil and in the global mining industry.

Capital discipline

We reiterate our strong commitment to a sound balance sheet. In 2018, we completed our deleveraging process and achieved our net debt target of US$10 billion. We will allocate capital in a disciplined way, which will be key to enable us to address the effects of Dam I failure. In January 2019, our Board of Directors approved the suspension of our shareholder remuneration policy, so that no payment of dividends or interest on shareholders' equity will be made pursuant to this policy in excess of mandatory payments required by law, and we will not approve any share buyback for the time being.

Maintaining our value over volume approach for the iron ore business

In the iron ore business, we are committed to delivering the highest possible margins under the current circumstances, by managing our extensive supply chain and flexible product portfolio to cope with production constraints in the short-term. We will constantly seek better price realization, based on adjustments to our product portfolio according to market demand and supply chain optimization. We are focusing our product line to capture industry trends, improving quality and productivity, controlling costs, strengthening our logistics infrastructure of railroads, ports, shipping and distribution centers, and

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strengthening relationships with customers. Our diversified portfolio of high-quality products, strong technical marketing strategy, efficient logistics and long-standing relationships with major customers will help us overcome the immediate challenges and achieve this goal.

With the continuous increase of the share of dry processing production, from 45% in 2014 to 60% in 2018, and aimed at 70% by 2023, our reliance on new dams and dam raisings tend to reduce. To treat the tailings from wet processing, we are investing in studies and new technologies with a view to allowing us to operate certain of our mines and plants without having to rely on the use of tailings dams. In particular, we have studies in progress, and we have developed a pilot project, to apply a waste disposal technology that consists of filtering and stacking of partially or totally dewatered tailings, which will reduce our reliance on tailings dams in the medium and long term. These alternative technologies will cause an increase in our production costs and require additional investments in our mines and plants. In line with this goal, we acquired New Steel in January 2019, bringing innovative technologies for the dry beneficiation of iron ore.

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

Transforming our base metals business into a significant cash generator

Our strategy for our nickel business is to complete its turnaround, continuing to review our asset utilization and optimize our operations and aiming to increase productivity and improve returns, while preserving capacity for growth based on the prospects for an electric vehicle revolution. We are the world's largest nickel producer, with large-scale, long-life and low-cost operations, a substantial resource base and diversified mining operations that produce nickel from nickel sulfide and laterite sources using advanced technology.

We have transitioned to a smaller footprint in our nickel business by calibrating investments and production to reflect current market conditions, and our nickel turnaround plan is now based on three pillars: supply chain integration, operational excellence and digital transformation. In Canada, we are optimizing the flowsheet, running a cost reduction program and improving underground mine performance at Sudbury and finalizing the ramp-up of operations at Long Harbour. In Indonesia, we are renewing truck and mine equipment, increasing efficiency of the furnaces and increasing fuel efficiency through coal conversion. In New Caledonia, we are developing a mine plan revision and a study to increase efficiency of the VNC plant. In the long term, the battery segment shows important upside potential as electric vehicle production continues to attract significant investments, which could positively affect nickel price and our nickel premiums.

A key aspect of our strategy for our copper assets in the Carajás region is to improve efficiency and asset utilization while we evaluate opportunities to increase copper production. We have plans to develop a multi-year copper expansion plan, with Salobo III being the first approved project in the pipeline.

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Concluding the ramp-up of our coal business

We have been working to increase our coal production, mainly through the ramp-up of the Moatize operations and the ramp-up of the Nacala Logistics Corridor (NLC) in Mozambique and Malawi, where we have entered into a strategic partnership with Mitsui. As we complete the ramp-up in Moatize and the NLC, we expect our costs to diminish, enhancing the competitiveness of our coal operations. Key initiatives, such as knowledge transfer from our iron ore operations, opening of new mine sections and preparation of selected mining pits for future disposals are expected to lead to higher capacity utilization, mine productivity and yields.

Enhancing corporate governance

We are committed to continuing to improve our corporate governance. Following the conversion of our class A preferred shares into common shares, in December 2017, we completed our listing on the Novo Mercado segment of the B3 exchange (formerly BM&FBovespa), the special listing segment of B3 for companies committed to the highest standards of corporate governance. In 2018, our Board of Directors revised some of our policies, including our Corporate Integrity Policy, Code of Ethical Conduct, Socio-Environmental Investment Policy, Risk Management Policy, Remuneration to Shareholders Policy and Securities Trading Policy.

In 2018, as required under Brazilian rules, we started reporting our compliance with the Code of Best Practices for Corporate Governance of the Brazilian Corporate Governance Institute (IBGC). The code is based on the "comply or explain" principle, and we currently fully comply with 80% of the practices recommended by the IBGC and partially comply with 17% of practices recommended by the code.

SIGNIFICANT CHANGES IN OUR BUSINESS

We summarize below major events related to our acquisitions, divestitures and other significant developments in our business since the beginning of 2018.

Acquisitions

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Ferrous Resources.  On December 6, 2018, we entered into an agreement with IEP Ferrous Brazil LLC to buy Ferrous Resources Limited, a company that owns and operates iron ore mines near our operations in Minas Gerais, for US$550 million. The transaction is expected to be concluded in 2019, subject to certain conditions precedent, including approval by antitrust authorities in Brazil.



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New Steel.  On December 10, 2018 we entered into an agreement with Hankoe FIP to buy New Steel Global NV (New Steel), a company that develops innovative iron ore beneficiation technologies, for US$500 million. All conditions have been fulfilled, including approval by antitrust authorities in Brazil, and we concluded the transaction on January 24, 2019. New Steel currently owns patents in 56 countries for Fines Dry Magnetic Separation (FDMS), a dry processing concentration technique.

Dispositions and asset sales

We are always seeking to optimize the structure of our portfolio of businesses in order to achieve the most efficient allocation of capital. We summarize below our most significant dispositions since the beginning of 2018.

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Sale of Fertilizer Business—In January 2018, we completed the sale to The Mosaic Company ("Mosaic") of a substantial part of our fertilizer business, which includes (i) our phosphate assets in Brazil; (ii) our stake in the joint venture that operates the phosphate rock mine in Bayóvar, Peru; (iii) our potash assets located in Brazil; and (iv) our potash project based in Canada (Kronau). We received US$1.080 billion in cash and approximately 34.2 million shares of Mosaic's common stock, which corresponds to approximately 8.9% (on a post-issuance basis) of Mosaic's outstanding common stock. Subject to limited exceptions, the Mosaic shares issued to us cannot be transferred for two years following closing. We have the right to appoint two members of Mosaic's board of directors, one of whom must be independent, for so long as we hold at least 90% of the Mosaic shares received at closing, or one member of Mosaic's board for so long as we hold at least 50% of the Mosaic shares received at closing. We appointed Mr. Luciano Siani and Mr. Oscar P. Bernardes to Mosaic's board of directors.



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Sale of Cubatão assets—In May 2018, we completed the sale to Yara International ASA of our wholly owned subsidiary, Vale Cubatão Fertilizantes Ltda., which owned and operated nitrogen and phosphate assets in Cubatão, Brazil. We received the purchase price of US$255 million in cash upon the closing of the transaction.



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Sale of interest in coking coal project in Australia.  In September 2018, we concluded the sale of our 50% interest in the Eagle Downs hard coking coal project (including all associated rights and obligations) in Central Queensland, Australia, to BS Coal Pty Ltd for a total consideration of: (i) US$90 million in cash upon completion, (ii) US$27 million in cash upon the third anniversary of closing and (iii) royalties to be paid over 50% of all coal produced and sold from the Eagle Downs Project tenements.

Project Financing for the Nacala Logistics Corridor

We have a partnership with Mitsui in coal assets in Mozambique. In February 2018, we concluded the agreements for a project financing for the Nacala Logistics Corridor, which connects the Moatize coal mine to the Nacala-à-Velha maritime terminal, located in Nacala, Mozambique, in the total amount of US$2.730 billion, as follows:

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US$1.030 billion provided by Japan Bank for International Cooperation (JBIC);



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US$1.000 billion loan insured by Nippon Export and Investment Insurance (NEXI), provided by Sumitomo Mitsui Banking Corporation, The Bank of Tokyo Mitsubishi UFJ Ltd; Mizuho Bank Limited, Sumitomo Mitsui Trust Bank Limited, Nippon Life Insurance Company and Standard Chartered Bank;



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US$400 million loan insured by Export Credit Insurance of South Africa Limited (ECIC), provided by ABSA Bank Limited, Investec Bank Limited; Rand Merchant Bank and The Standard Bank of South Africa Limited;



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US$300 million provided by the African Development Bank (AfDB).

Vale received US$2.6 billion in proceeds, in repayment of certain shareholders loans provided for construction of NLC, net of certain commissions paid by NLC. The project financing will be repaid in 14 years with the proceeds obtained from the tariff charged by NLC in connection with its provision of coal transportation services.

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Business Overview

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Optimizing our base metals operations in Canada

We have optimized our nickel operations across Canada, as part of an overall strategy to prioritize value over volume, reduce our atmospheric emissions and comply with local regulations. In 2018, we phased out our smelting and refining activities in Thompson, focusing our operations on nickel concentrate production. The concentrate is then shipped to our Sudbury operation to be further processed. In Sudbury, we produce copper concentrate, copper matte, copper cathodes and refined nickel. In Long Harbour, we produce nickel rounds, copper cathodes and cobalt rounds. We successfully blended nickel intermediates from Sudbury and Asia in our refinery in Wales to make higher premium products.

We will now turn our focus to the optimization of the mining assets to ensure a sustainable and value-accretive ore supply to our three concentrators in Canada:

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Sudbury, Ontario—In the second half of 2017, we converted our two-furnace operation in Sudbury into a single furnace operation. As a result of this change, we increased the proportion of production of copper concentrate to total copper production from a rate of 66% in 2017 to 72% in 2018, maximizing the smelter capacity for nickel. In addition, we ceased production of copper anode and increased production of copper matte. At the end of 2018, 11% of our copper production was sold in the form of copper matte.



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Thompson, Manitoba—We changed our operations in Thompson, Manitoba, from an integrated operation to a mine-mill operation. We permanently shut down one of the two smelter furnaces at the site in 2017, and decommissioned the other furnace in 2018, therefore closing the remaining smelting and refining activities to focus the operation solely on nickel concentrate production. We currently send all nickel concentrate from Thompson to be refined in Sudbury.



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Voisey's Bay and Long Harbour, Newfoundland and Labrador—Starting in 2018, all Voisey's Bay nickel concentrate is being shipped to our Long Harbour refinery. Our Long Harbour processing facilities produce nickel rounds, copper cathode and cobalt rounds from the Voisey's Bay concentrate.

Cobalt streaming transaction

In June 2018, we sold to Wheaton Precious Metals Corp. (Wheaton) and Cobalt 27 Capital Corp. (Cobalt 27) a combined 75% of the cobalt produced as a byproduct at our Voisey's Bay mine from January 1, 2021, which includes the ramp-down of production from the existing mine and the life-of-mine production from our underground mine expansion project. In consideration, we received US$690 million in cash from Wheaton and Cobalt 27 upon closing of the transaction on June 28, 2018, and will receive additional payments of 20%, on average, of cobalt prices upon delivery. We remain exposed to approximately 40% of future cobalt production from Voisey's Bay, through our retained interest in 25% of cobalt production and the additional payments upon delivery. These transactions enabled the development of the Voisey's Bay underground mine extension project, which will extend the mine life of Voisey's Bay.

Resumption of operations of São Luis and Tubarão I and II pellet plants

In 2018, we resumed the operations of our Tubarão I, Tubarão II and São Luis pellet plants. The operations of these plants had been suspended since 2012 due to market conditions.

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FAILURE OF SAMARCO'S TAILINGS DAM IN MINAS GERAIS

In November 2015, the Fundão tailings dams owned by Samarco S.A. failed, releasing tailings downstream, flooding certain communities and causing impacts on communities and the environment along the Doce river. The failure 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 and its shareholders (Vale and BHPB) created the Fundação Renova, a not-for-profit private foundation, to develop and implement (i) social and economic remediation and compensation programs and (ii) environmental remediation and compensation programs in the region affected by the dam failure.

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

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

Under the Framework Agreement and the June 2018 Agreement, Fundação Renova must be funded by Samarco, but to the extent that Samarco is unable to fund, Vale and BHPB must ratably bear the funding requirements under the Framework Agreement. As Samarco is currently unable to resume its activities, we and BHPB have been funding the Fundação Renova and also providing funds directly to Samarco, to preserve its operations and to support Samarco's funding obligations. At this point, we cannot predict when Samarco will resume its operations.

Pursuant to the Framework Agreement, Fundação Renova and Samarco allocated R$2.1 billion to social and economic remediation and compensation programs in 2018 and have allocated R$5.3 billion to these programs since the dam failure. From 2019 to 2021, Samarco, or Vale and BHP, will provide to Fundação Renova funding based on the amounts needed to implement the projects approved for each year, subject to an annual minimum of R$800 million and an annual maximum of R$1.6 billion. Starting in 2022, Samarco will provide the necessary funding in order to complete remaining programs approved for each year.

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

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

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SELECTED FINANCIAL DATA

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

Consolidated statement of income data

Earnings (loss) per share

The table below shows our earnings (loss) per share. The earnings (loss) per share for 2014 to 2016 have been retrospectively adjusted to reflect the conversion of our Class A preferred shares into common shares, which was concluded in November 2017, as if the conversion had occurred at the beginning of the earliest year presented.

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Selected Financial Data

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Balance sheet data

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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:

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



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



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our direction and future operation;



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the implementation of our financing strategy and capital expenditure plans;



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the exploration of mineral reserves and development of mining facilities;



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the depletion and exhaustion of mines and mineral reserves;



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trends in commodity prices, supply and demand for commodities;



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the future impact of competition and regulation;



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the payment of dividends or interest on shareholders' equity;



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compliance with financial covenants;



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



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



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



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the factors discussed under 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, (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 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

RISKS RELATING TO DAM FAILURE

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

On January 25, 2019, Dam I failed, resulting in nearly 300 fatalities or presumed fatalities, in addition to personal, property and environmental damages. See Business Overview—Failure of the tailings dam at the Córrego do Feijão mine. The causes of the dam failure are uncertain and are being investigated by us and by several governmental authorities. This event has adversely affected our operations, but the overall impact of the dam failure is still uncertain.

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Liabilities and legal proceedings.  Our potential liabilities resulting from the dam failure are significant, and the total amount cannot be estimated at this time. The dam failure resulted in fatalities and property and environmental damages. We are a defendant in a number of legal proceedings, in which plaintiffs claim significant amounts in damages resulting from the event. See Additional Information—Legal proceedings and Operating and financial review and prospects—Impact of the failure of Dam I at the Córrego do Feijão Mine. These liabilities may have a material adverse effect on our business and financial condition.



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Liquidity.  Brazilian courts have ordered the freezing of more than R$17.6 billion (US$4.5 billion) of our assets, including cash in our bank accounts, judicial deposits and common shares we held in treasury. Additional assets may be attached in the future. These pre-judgment attachments and asset freezes may adversely impact our business and liquidity.



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Suspension of operations.  Following the dam failure, we have suspended various operations, which will adversely impact our production and cash flows. We suspended our operations at the Córrego do Feijão and Jangada mines immediately following the event. We temporarily suspended various mining and pellet plant operations to be able to expedite the decommissioning of our upstream dams. We also suspended operations in response to judicial injunctions and new determinations by ANM, Brazil's national mining agency. Other developments resulting from the failure of Dam I or questioning the safety of our existing dams may result in the suspension of other operations. As of April 15, 2019, the estimated impact of the suspension of operations following the dam failure on our production is 92.8 million metric tons per year, (including the estimated annual impact of the suspension of the Brucutu mine), including the pellet feed needed for the production of 11 million metric tons of pellets per year. As a result of the suspended operations, we may need to purchase iron ore and iron ore pellets in the market to honor our obligations under existing commercial contracts, which may increase our overall costs and adversely impact our business and financial condition. It is possible that certain of these operations may not be resumed.



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Increase in production costs.  We may need to make investments or adjustments in the operations not impacted by the dam failure 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.

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Increased taxation.  We may be subject to new or increased taxes or other obligations to fund remediation measures and compensate direct and indirect impacts of the failure of Dam I. Also, we have entered into settlement agreements with the state of Minas Gerais and certain municipalities to minimize the impact of the shutdown of some of our operations in state and municipal tax revenues. Also, the state of Minas Gerais has proposed the adoption of a new fiscal framework, under which the state would be entitled to collect from us an additional R$107 million per year on ICMS (a state tax on the circulation of goods) starting in 2020. Retroactive amounts could also be applied over the last five years, with an estimated impact of R$550 million on us.



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Additional regulation and restrictions on mining operations.  Various governmental authorities have proposed and approved new rules relating to licensing, use and operations of dams in response to the Dam I failure. For instance, a new statute approved by the state of Minas Gerais in February 2019 precludes the use of upstream dams and imposes new obligations for design, construction and operation of any other type of tailings dams. This new statute also provides for the full decommissioning of any upstream tailings dam by February 2022, and a rule approved by ANM in February 2019 requires us to fully decommission any inactive upstream tailings dam by August 2021 and any active upstream tailings dam by August 2023. New rules imposing restrictions on mining operations and ancillary activities may be approved. The licensing process for our operations may become longer and subject to more uncertainties. These additional laws and regulations may impose restrictions on our operations, require additional investments or even require us to suspend additional operations, which may adversely affect our business.



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Reserves.  Developments resulting from the failure of Dam I, particularly new regulations applicable to dam licensing and use and the ongoing proceedings and investigations involving the use of dams in our mining operations, may result in decreases in our reported reserves or reclassification of proven reserves as probable reserves. We continuously review the impact of new regulations, proceedings and investigations on our reported reserves. These new regulations, proceedings and investigations may impact our iron ore reserves and the reserves for other products the production of which involve dams.



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Inability to comply with additional safety requirements or to obtain required certifications.  Rules on dam safety are getting stricter following the dam failure. Also, external experts may be reluctant to attest to the stability and safety of our dams, as a result of the uncertainties regarding the causes of the Dam I failure and the 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 cause further damage to our reputation.



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



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

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



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



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Management continuity.  Following the dam failure, our CEO and our executive officer for Ferrous Minerals and Coal requested temporary leave from their positions, following the recommendation of Brazilian prosecutors. Other changes in our senior management may occur, which may have an adverse effect on our business. A shareholders' meeting is scheduled for April 30, 2019, and shareholders may approve changes in the composition of our Board of Directors, which may result in further changes to the composition of our senior management.



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Impact on our financial performance.  We expect the failure of Dam I to have a significant impact on our financial performance. We have not yet determined the nature and amount of the consequences, but they will include reduced revenues due to the suspension of operations, increased expenditures for assistance and remediation, impairments of fixed assets, provisions for costs of decommissioning and remediation, and provisions for legal proceedings. See Operating and financial review and prospects—Impact of the failure of Dam I at the Córrego do Feijão Mine.



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Additional impacts.  The overall consequences of the dam failure remain uncertain. The contamination of the Paraopeba river and other water systems may affect the water supply of surrounding cities. If our preventive measures fail to contain the tailings and debris flow, other rivers may be contaminated, causing additional environmental damages. If the tailings and debris flow from the failure of Dam I reach interstate rivers, we may be subject to additional proceedings and investigations by federal authorities.

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

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

Recently approved laws and regulations require us to decommission all of our upstream dams on a specified timetable. We are still determining the appropriate measures for decommissioning each upstream dam. This process will require significant expenditures, and the decommissioning process may take a long time. At this point, we cannot estimate the costs and timing for conclusion of the decommissioning process. We may not be able to conclude the decommissioning process for all of our upstream dams within the time-frame imposed by the new laws and regulations.

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Risk Factors

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We are involved in legal proceedings that could have a material adverse effect on our business in the event of unfavorable outcomes.

We are involved in legal proceedings in which adverse parties have sought injunctions to suspend certain of our operations or claimed substantial amounts, including several legal proceedings and investigations relating to the failure of our Dam I and the failure of Samarco's Fundão tailings dam. The outcomes of these proceedings are uncertain and may materially and adversely affect our business, our liquidity and the value of the securities issued by us or our subsidiaries. See Additional information—Legal proceedings.

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

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

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Legal proceedings.  We are involved in multiple legal proceedings and investigations relating to the failure of the Fundão tailings dam, and other proceedings and investigations may arise in the future. These proceedings include securities class actions in the United States against us and some of our officers, a criminal proceeding in Brazil, public civil actions brought by Brazilian authorities and multiple proceedings involving claims for significant amounts of damages and remediation measures. Adverse results in these proceedings may impact our liquidity and our financial condition. Brazilian federal tax authorities have tried to assert that we may be liable for certain tax obligations of Samarco, and other tax authorities or other creditors of Samarco may try to recover from us amounts due by Samarco. See Additional information—Legal proceedings.



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Reparation obligations and other undertakings.  In March 2016, Samarco and its shareholders (Vale and BHPB) entered into the Framework Agreement with certain governmental authorities, pursuant to which Samarco, Vale and BHPB agreed to create a foundation (Fundação Renova) to develop and implement long-term remediation and compensation programs. Under the Framework Agreement, these programs shall be reviewed within 3 years. In June 2018, Samarco, Vale and BHPB entered into a comprehensive agreement with the offices of the federal and state (Minas Gerais and Espírito Santo) prosecutors, public defenders and attorneys general, among other parties, in line with these preliminary agreements and in order to improve the governance mechanism of Fundação Renova. The comprehensive agreement established, among other things, a process for potential revisions to the remediation programs provided under the Framework Agreement based on the findings of experts hired by Samarco to advise the MPF over a two-year period. As Samarco is currently unable to resume its activities, we and BHPB have been funding Fundação Renova to support certain remediation measures undertaken by Samarco and also providing funds directly to Samarco, to preserve its operations. At this point, we cannot predict when Samarco will resume its operations. If Samarco is unable to resume operations or to generate sufficient cash flows to fund the remediation measures required under these agreements, we will be required to continue funding these remediation measures, which in turn may adversely affect our liquidity and financial conditions. See Business overview—Failure of Samarco's tailings dam in Minas Gerais.

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Risk Factors

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



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

EXTERNAL RISKS

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

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

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

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

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

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Risk Factors

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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 73.8% of our 2018 net operating revenues, are used to produce carbon steel. Nickel, which accounted for 8.8% of our 2018 net operating revenues, is used mainly to produce stainless and alloy steels. The prices of different steels and the performance of the global steel industry are highly cyclical and volatile, and these business cycles in the steel industry affect demand and prices for our products. In addition, vertical backward integration of the steel and stainless steel industries and the use of scrap could reduce the global seaborne trade of iron ore and primary nickel. The demand for copper is affected by the demand for copper wire, and a sustained decline in the construction industry could have a negative impact on our copper business.

We are mostly affected by movements in iron ore prices. For example, a price reduction of US$1 per dry metric ton unit ("dmt") in the average iron ore price would have reduced our operating income for the year ended December 31, 2018 by approximately US$340 million. Average iron ore prices significantly changed in the last five years, from US$97.0 per dmt in 2014, US$55.5 per dmt in 2015, US$58.5 per dmt in 2016, US$71.3 per dmt in 2017 and US$69.5 per dmt in 2018, according to the average Platts IODEX (62% Fe CFR China). On March 29, 2019, the year-to-date average Platts IODEX iron ore price was US$87.05 per dmt. See Operating and financial review and prospects—Overview—Major factors affecting prices.

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

China has been the main driver of global demand for minerals and metals over the last few years. In 2018, Chinese demand represented 72% of global demand for seaborne iron ore, 51% of global demand for nickel and 49% of global demand for copper. The percentage of our net operating revenues attributable to sales to customers in China was 41.7% in 2018. 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.

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 2018, we had net foreign exchange losses of US$2.247 million, while we had net foreign exchange losses of US$463 million in 2017 and net foreign exchange gains of US$3.252 billion in 2016. 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 (50.9% in 2018) and the Canadian dollar (5.4% in 2018), while our revenues are mostly U.S. dollar-denominated. We expect currency fluctuations to continue to affect our financial income, expense and cash flow generation.

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

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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 failure of Dam I, provide the financial assurances required to obtain licenses in certain jurisdictions, pay dividends and comply with the financial covenants in some of our long-term debt instruments. See Operating and financial review and prospects—Liquidity and capital resources.

POLITICAL, ECONOMIC, SOCIAL AND REGULATORY RISKS

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

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

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

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

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exchange rate movements and volatility;



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inflation and high interest rates;



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financing of the current account deficit;



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liquidity of domestic capital and lending markets;



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tax policy;



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pension, tax and other reforms;



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



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

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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.

Brazil held presidential and federal and state legislative elections in October 2018. We cannot predict whether the new administration will result in changes in Brazilian governmental and economic policies or in the Brazilian mining industry.

In the last years, Brazil faced an economic recession, adverse fiscal developments and political instability. Brazilian GDP grew by 1.1% in 2018 and 1.1% in 2017 but declined by 3.6% in 2016. Unemployment rate was 12.3% in 2018, 12.7% in 2017 and 11.5% in 2016. Inflation, as reported by the consumer price index (IPCA), was 3.75% in 2018, 2.95% in 2017 and 6.29% in 2016. The Brazilian Central Bank's base interest rate (SELIC) was 3.5% on December 31, 2018, 7.00% on December 31, 2017 and 13.75% on December 31, 2016. Future economic, social and political developments in Brazil may impair our business, financial condition or results of operations, or cause the market value of our securities to decline.

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

Disputes with communities where we operate may arise from time to time. Accidents or incidents involving mines, industrial facilities and related infrastructure, such as the failure of Dam I, may significantly impact the communities where we operate. In some instances, our operations and mineral reserves are located on or near lands owned or used by indigenous people 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 groups, 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 Company—Regulatory matters and Additional information—Legal proceedings.

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

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

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

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

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

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

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

OPERATIONAL RISKS

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

We are investing to maintain and further increase our production capacity and logistics capabilities. We regularly review the economic viability of our projects. As a result of this review, we may decide to

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postpone, suspend or interrupt the implementation of certain projects. Our projects are also subject to a number of risks that may adversely affect our growth prospects and profitability, including the following:

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



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



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



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



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



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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.



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



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There may be accidents or incidents during project implementation.



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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:

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Unexpected weather conditions or other force majeure events.



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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.



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



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



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

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



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



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



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

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

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

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

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

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

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

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

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environmental, 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 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 employees—Employees. 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 11.1% of our total cost of goods sold in 2018. To fulfill our energy needs, we rely on the following sources: oil byproducts, which represented 31% of total energy needs in 2018, electricity (31%), natural gas (17%), coal (17%) and other energy sources (4%).

Electricity costs represented 4.1% of our total cost of goods sold in 2018. If we are unable to secure reliable access to electricity at acceptable prices, we may be forced to curtail production or may experience higher production costs, either of which would adversely affect our results of operations. We face the risk of energy shortages in the countries where we have operations and projects, especially Brazil, due to lack of infrastructure or weather conditions, such as floods or droughts. Future shortages, and government efforts to respond to or prevent shortages, may adversely impact the cost or supply of electricity for our operations.

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

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

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information security, may harm our reputation and have a material adverse effect on our operational performance, earnings and financial condition.

HEALTH, SAFETY AND ENVIRONMENTAL 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, in remote localities, 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.

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 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 and monitoring controls on activities relating to mineral research, mining, beneficiation, pelletizing activities, railway and marine services, ports, 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 and products, 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.

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

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

Regulatory initiatives at the national and international levels that affect our shipping practices could increase our costs or require us to make new capital expenditures. Regulations, mainly from the European Union and China, may impose additional requirements for our products related to the safety of downstream users.

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

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

RISKS RELATING TO OUR MINING RESERVES

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

Our reported reserves are estimated quantities of ore and minerals that we have determined can be economically and legally mined and processed under present and assumed future conditions. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including factors beyond our control. Reserve reporting involves estimating deposits of minerals that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation and judgment. As a result, no assurance can be given that the indicated amount of ore will be recovered or that it will be recovered at the rates we anticipate. Reserve estimates and estimates of mine life may require revisions based on actual production experience, projects, updated exploration drilling data and other factors. Lower market prices of minerals and metals, more stringent regulations, reduced recovery rates or increased operating and capital costs due to inflation, exchange rates, changes in regulatory requirements or other factors may render proven and probable reserves uneconomic to exploit and may ultimately result in a reduction of reserves. Also, our inability to obtain licenses for new operations, supporting structures or activities, or to renew our existing licenses, can cause a reduction of our reserves. Such a reduction could affect depreciation and amortization rates and have an adverse effect on our financial performance.

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

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

The feasibility of new mineral projects may change over time.

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

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establish mineral reserves through drilling;



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



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obtain environmental and other licenses;



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



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obtain the ore or extract the minerals from the ore.

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

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

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

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RISKS RELATING TO OUR CORPORATE STRUCTURE

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

On August 14, 2017, Litel Participações S.A. ("Litel"), Bradespar S.A. ("Bradespar"), Mitsui & Co., Ltd. ("Mitsui") and BNDES Participações S.A. ("BNDESPAR") entered into a shareholders' agreement pursuant to which they undertook to vote jointly on certain key matters (the "Shareholders' Agreement"). The Shareholders' Agreement is expected to expire on November 9, 2020. See Share ownership and trading—Major shareholders. On December 31, 2018, Litel, Bradespar, Mitsui and BNDESPAR together held 39.03% of our total capital stock. As long as no other shareholder or group of shareholders owns more shares than the parties to the Shareholders' Agreement, these major shareholders may elect a majority of the members of our Board of Directors and control the outcome of certain actions requiring shareholder approval.

The Brazilian Government has certain veto rights.

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

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

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

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

Our investors may be located in jurisdictions outside Brazil and could seek to bring actions against us or our directors or officers in the courts of their home jurisdictions. We are a Brazilian company, and the majority of our officers and directors are residents of Brazil. The vast majority of our assets and the assets of our officers and directors are likely to be located in jurisdictions other than the home jurisdictions of our foreign investors. It might not be possible for investors outside Brazil to effect service of process within their home jurisdictions on us or on our officers or directors who reside outside their home jurisdictions. In addition, a final conclusive foreign judgment will be enforceable in the courts of Brazil without a re-examination of the merits only if previously confirmed by the Brazilian Superior Court of Justice (STJ—Superior Tribunal de Justiça), and confirmation will only be granted if the foreign judgment: (i) fulfills all formalities required for its enforceability under the laws of the country where it was issued; (ii) was issued by a competent court after due service of process on the defendant, as required under

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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 qualifying institutional foreign investors to buy and sell securities on the B3 and entitling 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 information—Exchange controls and other limitations affecting security holders. If an ADR holder attempts to obtain its own registration, it may incur expenses or suffer delays in the application process, which could delay the receipt of dividends or other distributions relating to the underlying shares or the return of capital in a timely manner.

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

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

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

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

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

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

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

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II.    INFORMATION ON THE COMPANY

LINES OF BUSINESS

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

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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 and we have a 50% stake in Samarco. Samarco's operations have been suspended following the failure of one of its tailings dams located in Minas Gerais in November 2015 (see Business overview—Failure of Samarco's tailings dam in Minas Gerais). 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 the mines.

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1.1.2      Iron ore production

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

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1.1.3      Iron ore pellet operations

We produce iron ore pellets in Brazil and Oman, directly and through joint ventures, as set forth in the table below. We also have a 25% interest in two iron ore pelletizing plants in China, Zhuhai YPM Pellet Co., Ltd. ("Zhuhai YPM") and Anyang Yu Vale Yongtong Pellet Co., Ltd. ("Anyang"). Our total estimated nominal capacity is 64.7 Mtpy, including the full capacity of our pelletizing plants in Oman, but not including our joint ventures Samarco, Zhuhai YPM and Anyang. We supply all of the iron ore requirements of our wholly owned pellet plants and part of the iron ore requirements for Zhuhai YPM. In 2018, we sold 102 thousand metric tons of pellet feed to Zhuhai YPM.

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1.1.4      Iron ore pellets production

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

1.1.5      Customers, sales and marketing

We supply all of our iron ore and iron ore pellets to the steel industry. Prevailing and expected levels of demand for steel products affect demand for our iron ore and iron ore pellets. Demand for steel products is influenced by many factors, such as global manufacturing production, civil construction and infrastructure spending. For further information about demand and prices, see Operating and financial review and prospects—Major factors affecting prices.

In 2018, China accounted for 56% of our iron ore and iron ore pellet shipments, and Asia as a whole accounted for 70%. Europe accounted for 22%, followed by Brazil with 8%. Our ten largest customers collectively purchased 146 million metric tons of iron ore and iron ore pellets from us, representing 40% of our 2018 iron ore and iron ore pellet sales volumes and 39% of our total iron ore and iron ore pellet revenues. In 2018, no individual customer accounted for more than 7% of our iron ore and iron ore pellet shipments.

Of our 2018 pellet production, 54% was blast furnace pellets and 46% was direct reduction pellets. Blast furnace and direct reduction are different technologies employed by steel mills to produce steels, each using different types of pellets. In 2018, the Asian market (mainly Japan), the European market and the Brazilian market were the primary markets for our blast furnace pellets, while the Middle East and North America were the primary markets for our direct reduction pellets.

We invest in customer service in order to improve our competitiveness. We work with our customers to understand their objectives and to provide them with iron ore solutions to meet specific customer needs. Using our expertise in mining, agglomeration and iron-making processes, we search for technical solutions that will balance the best use of our world-class mining assets and the satisfaction of our customers. We believe that our ability to provide customers with a total iron ore solution and the quality of our products are both very important advantages helping us improve our competitiveness in relation to competitors that may be more conveniently located geographically. In addition to offering technical assistance to our customers, we have offices in St. Prex (Switzerland), Tokyo (Japan), Singapore, Dubai (UAE) and Shanghai (China), which support global sales by Vale International, and an office in Brazil, which supports sales to South America. These offices also allow us to stay in close contact with our customers, monitor their requirements and our contract performance, and ensure that our customers receive timely deliveries.

We sell iron ore and iron ore pellets under different arrangements, including long-term contracts with customers and on a spot basis through tenders and trading platforms. Our pricing is generally linked to market price indexes and uses a variety of mechanisms, including current spot prices and average prices over specified

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periods. In cases where the products are priced before the final price is determinable at delivery, we recognize the sale based on a provisional price with a subsequent adjustment reflecting the final price.

In 2018, we hedged part of our total exposure to bunker oil prices relating to our owned fleet and long-term contracts of affreightment connected to our FOB and CFR international and domestic sales. The 2018 hedge program was settled in 2018.

1.1.6      Competition

The global iron ore and iron ore pellet markets are highly competitive. The main factors affecting competition are price, quality and range of products offered, reliability, operating costs and shipping costs.

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Asia - Our main competitors in the Asian market are located in Australia and include subsidiaries and affiliates of BHP, Rio Tinto Ltd ("Rio Tinto") and Fortescue Metals Group Ltd. We are competitive in the Asian market for two main reasons. First, steel companies generally seek to obtain the types (or blends) of iron ore and iron ore pellets that can produce the intended final product in the most economic and efficient manner. Our iron ore has low impurity levels and other properties that generally lead to lower processing costs. For example, in addition to its high-grade, the alumina content of our iron ore is very low compared to Australian ores, reducing consumption of coke and increasing productivity in blast furnaces, which is particularly important during periods of high demand. When market demand is strong, our quality differential generally becomes more valuable to customers. Second, steel companies often develop sales relationships based on a reliable supply of a specific mix of iron ore and iron ore pellets. Our ownership and operation of logistics facilities in the Northern and Southeastern Systems help us ensure that our products are delivered on time and at a relatively low cost. We rely on long-term contracts of affreightment to secure transport capacity and enhance our ability to offer our products in the Asian market at competitive prices on a CFR basis, despite higher freight costs compared to Australian producers. To support our commercial strategy for our iron ore business, we operate two distribution centers, one in Malaysia and one in Oman and we have long-term agreements with sixteen ports in China, which also serve as distribution centers. In 2015, we launched the Brazilian blend fines (BRBF), a product resulting from blending fines from Carajás, which contain a higher concentration of iron and a lower concentration of silica in the ore, with fines from the Southern and Southeastern Systems, which contain a lower concentration of iron in the ore. In August 2018, Metal Bulletin launched a new index, the 62% Fe low-alumina index, which is based on our BRBF. During the remainder of 2018, the 62% Fe low-alumina index traded with a premium of US$4.50 per dmt over the 62% Fe index. The resulting blend offers strong performance in any kind of sintering operation. It is produced in our Teluk Rubiah Maritime Terminal in Malaysia and in sixteen distribution centers in China, which reduces the time to reach Asian markets and increases our distribution capillarity by using smaller vessels.



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Europe - Our main competitors in the European market are Luossavaara Kiirunavaara AB ("LKAB"), ArcelorMittal Mines Canada Inc., Iron Ore Company of Canada, a subsidiary of Rio Tinto., Kumba Iron Ore Limited and Société Nationale Industrielle et Miniére. We are competitive in the European market for the same reasons as in Asia, but also due to the proximity of our port facilities to European customers.



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Brazil - The Brazilian iron ore market is also competitive and includes several small iron ore producers. Some steel companies, including Gerdau S.A. ("Gerdau"), Companhia Siderúrgica Nacional ("CSN"), Vallourec Tubos do Brasil S.A., Usiminas and Arcelor Mittal, also have iron ore mining operations. Although pricing is relevant, quality and reliability are important competitive factors as well. We believe that our integrated transportation systems, high-quality ore and technical services make us a strong competitor in the Brazilian market.

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With respect to pellets, our major competitors are LKAB, Iron Ore Company of Canada, Ferrexpo Plc, Arcelor Mittal Mines Canada (former Quebec Cartier Mining Co.) and Bahrain Steel (former Gulf Industrial Investment Co.).

1.2         Manganese ore and ferroalloys

1.2.1      Manganese ore operations and production

We conduct our manganese mining operations in Brazil through Vale S.A. and our wholly owned subsidiaries Vale Manganês S.A. ("Vale Manganês") and MCR. Our mining operations are carried out under concessions from the federal government granted for an indefinite period. Our mines produce metallurgical ore, used primarily for the production of manganese ferroalloys, a raw material used to produce carbon and stainless steel.

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The following table sets forth information about our manganese ore production, obtained after beneficiation process, and mass recovery.

1.2.2      Manganese ferroalloys operations and production

We conduct our manganese ferroalloys business through our wholly owned subsidiary Vale Manganês. The production of manganese ferroalloys consumes significant amounts of electricity, which is provided through power purchase agreements.

We produce several types of manganese ferroalloys, such as high carbon and medium carbon ferro-manganese and ferro-silicon manganese.

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The following table sets forth information about our manganese ferroalloys production.

1.2.3      Manganese ore and ferroalloys: sales and competition

The markets for manganese ore and ferroalloys are highly competitive. Competition in the manganese ore market takes place in two segments. High- and medium-grade manganese ore competes on a global seaborne basis, while low-grade ore competes on a regional basis. For some manganese ferroalloys, especially ferromanganese, higher-grade manganese ores are required to achieve competitive quality and cost, while medium- to lower-grade ores may be used in silicomanganese production. The main suppliers of high-grade ores are located in South Africa, Gabon, Australia and Brazil. The main producers of low-grade ores are located in the Ukraine, China, South Africa, Ghana, Kazakhstan, India and Mexico.

We compete in the seaborne market with both high- and medium-grade ores from the Azul and Urucum mines, where we benefit from extensive synergies with our iron ore operations, from mine to rail to port to vessel operations. Our main competitors in this segment are South32 (Australia and South Africa) and Eramet (Gabon). Our lower-grade ores, especially those from Morro da Mina, are consumed internally in our ferroalloy smelters.

The manganese ferroalloy market is characterized by a large number of participants who compete primarily on the basis of price. Our competitors are located principally in countries that produce manganese ore or carbon steel. Potential entrants and substitutes come from silicon or chrome ferroalloys, which can occasionally shift their furnaces to manganese alloys, and from electrolytic manganese producers. Competitors may be either integrated smelters like us, who feed manganese ore from their own mines, or non-integrated smelters. The principal competitive factors in this market are the costs of manganese ore, electricity, logistics and reductants such as coke, coal and charcoal. We compete with both stand-alone and integrated producers.

Focusing mainly in the Brazilian, South and North American steelmaking customers, our ferroalloys operations also benefit from synergies with our iron ore sales, marketing, procurement and logistics activities. We buy our energy and coke supplies at reasonable market prices both though medium-and long-term contracts. Competitors in the Brazilian market are about a dozen smelters with capacities from five to 90 thousand metric tons per year, most of which are not integrated and some of which are customers of our manganese ores. We have a distinctive advantage in comparison to them in producing ferroalloys with higher manganese content.

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2.           BASE METALS

2.1         Nickel

2.1.1      Operations

We conduct our nickel operations primarily through our wholly owned subsidiary Vale Canada Limited, which operates two nickel production systems, one in the North Atlantic region and the other in the Asia Pacific region. We also produce copper as a coproduct in our nickel operations in Canada and, through Vale S.A., operate a third nickel production system, Onça Puma, in the South Atlantic region. Our nickel operations are set forth in the following table.

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2.1.2      Production

The following table sets forth our annual mine production by operating mine (or, on an aggregate basis in the case of the Sulawesi operating areas operated by PTVI in Indonesia, because it is organized by mining areas rather than individual mines) and the average percentage grades of nickel and copper. The mine production at Sulawesi represents the product from PTVI's screening station delivered to PTVI's processing plant and does not include nickel losses due to drying and smelting. For our Sudbury, Thompson and Voisey's Bay operations, the production and average grades represent the mine product delivered to those operations' respective processing plants and do not include adjustments due to beneficiation, smelting or refining. For our Onça Puma operation in Brazil and VNC operation in New Caledonia the production and average grade represents in-place ore production and does not include losses due to processing.