United States
Securities and Exchange Commission

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the
Securities Exchange Act of 1934

Vale S.A.

Avenida Graça Aranha, No. 26
20030-900 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

(Check One) Form 20-F þ Form 40-F o

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1))

(Check One) Yes o No þ

(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7))

(Check One) Yes o No þ

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

(Check One) Yes o No þ

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82-______.)

 

 

2Q10

Table 1 — SELECTED FINANCIAL INDICATORS

		2Q09				1Q10				2Q10				%				%
US$ million		(A)				(B)				(C)				(C/A)				(C/B)
Operating revenues			5,084				6,848				9,930				95.3				45.0
Adjusted EBIT			976				2,062				4,630				374.4				124.5
Adjusted EBIT margin (%)			19.7				31.2				47.9				—				—
Adjusted EBITDA			1,725				2,855				5,577				223.3				95.3
Net earnings			790				1,604				3,705				369.0				131.0
Earnings per share fully diluted basis(US$ / share)			0.15				0.30				0.70				—				—
Total debt/ adjusted LTM EBITDA (x)			1.49				2.42				1.76				—				—
Capex (excluding acquisitions)			2,080				2,158				2,375				14.2				10.1

		1H09				1H10				%
US$ million		(A)				(B)				(B/A)
Operating revenues			10,505				16,778				59.7
Adjusted EBIT			2,661				6,692				151.5
Adjusted EBIT margin (%)			25.9				41.2
Adjusted EBITDA			4,006				8,432				110.5
Net earnings			2,153				5,309				146.6
Capex (excluding acquisitions)			3,794				4,533				19.5
Acquisitions			1,444				5,334				269.4

Except where otherwise indicated the operational and financial information in this release is based on the consolidated figures in accordance with US GAAP and, with the exception of information on investments and behavior of markets, quarterly financial statements are reviewed by the company’s independent auditors. The main subsidiaries that are consolidated are the following: Vale Inco, MBR, Alunorte, Albras, Vale Manganês S.A., Vale Manganèse France, Vale Manganese Norway AS., Urucum Mineração S.A., Ferrovia Centro-Atlântica (FCA), Vale Australia, Vale International, Vale Overseas, Fertilizantes Fosfatados S.A. — Fosfertil and Vale Fosfatados.

US GAAP		2Q10

INDEX

GAINING MOMENTUM			1
Table 1 — SELECTED FINANCIAL INDICATORS			2
BUSINESS OUTLOOK			4
REVENUES			7
Table 2 — GROSS REVENUE BY PRODUCT			7
Table 3 — GROSS REVENUE BY DESTINATION			8
COSTS			8
Table 4 — COST OF GOODS SOLD			10
OPERATING INCOME			10
NET EARNINGS			10
CASH GENERATION			11
Table 5 — ADJUSTED EBITDA BY BUSINESS AREA			12
Table 6 — QUARTERLY ADJUSTED EBITDA			12
DEBT INDICATORS			12
Table 7 — DEBT INDICATORS			13
INVESTMENTS			13
Table 8 — TOTAL INVESTMENT BY CATEGORY			14
Table 9 — TOTAL INVESTMENT BY BUSINESS AREA			15
PERFORMANCE OF THE BUSINESS SEGMENTS			17
Table 10 — BULK MATERIALS: FERROUS MINERALS BUSINESS PERFORMANCE			18
Table 11 — BULK MATERIALS: COAL BUSINESS PERFORMANCE			19
Table 12 — BULK MATERIALS: SELECTED FINANCIAL INDICATORS			19
Table 13 — BASE METALS BUSINESS PERFORMANCE			21
Table 14 — FERTILIZERS BUSINESS PERFORMANCE			22
Table 15 — LOGISTCS SERVICES BUSINESS PERFORMANCE			23
FINANCIAL INDICATORS OF NON-CONSOLIDATED COMPANIES			24
CONFERENCE CALL AND WEBCAST			24
BOX — IFRS RECONCILIATION WITH USGAAP			25
ANNEX 1 — FINANCIAL STATEMENTS			26
Table 16 — INCOME STATEMENTS			26
Table 17 — FINANCIAL RESULT			26
Table 18 — EQUITY INCOME BY BUSINESS SEGMENT			26
Table 19 — BALANCE SHEET			27
Table 20 — CASH FLOW			28
ANNEX 2 — VOLUMES SOLD, PRICES, MARGINS AND CASH FLOWS			29
Table 21 — VOLUMES SOLD: MINERALS AND METALS			29
Table 22 — AVERAGE SALE PRICE			29
Table 23 — ADJUSTED EBIT MARGIN BY BUSINESS SEGMENT			30
ANNEX 3 — RECONCILIATION OF US GAAP and “NON-GAAP” INFORMATION			31

US GAAP		2Q10

• BUSINESS OUTLOOK

Over the twelve-month period ended at June 2010 global GDP ran at an above-trend growth rate and industrial production recorded the largest gains since at least the early seventies. The rebound in global manufacturing activity, which has retraced a significant part of the peak to recession trough decline, has contributed to fuel a substantial demand expansion for minerals and metals and the strongest price rise seen in recoveries out of the last five global downturns.

A recovery from a recession usually starts with an initial acceleration phase which is followed by a desirable moderation towards a more sustainable pace of expansion. During the last four quarters global manufacturing output grew at a rate above 10%, characterizing a boom which is clearly not sustainable over time. Thus, the emergence of a transition period characterized by growth deceleration is an expected phenomenon.

As a matter of fact, there are signals that global manufacturing production has begun to slow. While still remaining at a high level — even higher than the average level during 2003-2007 when the global economy expanded at a fast pace — the J.P. Morgan global manufacturing PMI fell in June, suggesting the end of an inventory cycle which has contributed to a phase of production acceleration in order to align with a rising final demand. If on the one hand, there is no inventory overhang, on the other hand, with the fading of inventory building the expansion of industrial output will depend much more on the behavior of final demand. Up until now, conditions in the labor market improved as companies resumed hiring thus adding strength to retail sales, and capital expenditures have been recovering from depressed levels.

Latest data show that the deceleration is being led by the high-growth emerging Asian economies reflecting the exiting from monetary policy stimulus of various central banks and in particular the credit tightening and measures intended to cool the property market in China.

Concerns about the ability of some Euro zone countries to manage sizable budget deficits and high levels of public debt spurred a change in risk appetite which heightened financial asset price volatility and created funding strains. As a consequence, financial conditions became less supportive of economic growth in recent months, raising the fears of a more pronounced weakening of global expansion growth than would be expected solely from the cyclical convergence to a more sustainable pace.

The growth outlook is also being influenced by the expectations of negative effects provoked by the shift of the fiscal policy stance in developed countries from stimulative to restrictive and the concerns about the risk of a sharp deceleration of the Chinese economy. The combination of these factors has been a key determinant in the correction of mineral and metal prices since April.

So far the European sovereign debt problems have been essentially a regional and not a global problem as they have remained limited to European peripheral economies and did not spread to the EU core countries nor to other regions of the world. At the same time, the creation of the European Financial Stability Facility, the package of initiatives launched by the European Central Bank to address the bond and money market tensions and the measures taken by several governments to cut their budget deficits led to the mitigation of default risks and are expected to improve risk perception. As a consequence, market tensions have partially receded, as shown by the simultaneous decline in interbank spreads and equity price volatility and the appreciation of the euro since early June.

Despite the view that the decision to tighten fiscal policy is in the wrong stage of the cycle, just as the world economy is recovering from a recession, past experience from developed economies suggests that economic growth improved during large fiscal corrections that relied more on cutting current government spending. The change in expectations regarding future tax increases, the contribution to reduce real wages — badly needed to restore the competitiveness of some EU countries — and the fall in real interest rates arising from the improvement in risk perception tend to boost economic activity, whereas expansionary fiscal policies in the presence of severe budget deficits and high public debt ratios risk an abrupt shift in financial market sentiment resulting in a sudden stop of financing flows.

US GAAP		2Q10

As mentioned, expectations about the performance of the Chinese economy have been a source of downward price volatility over the last few months, initially due to unfounded concerns about asset price bubbles lately being replaced by fears about a sharp deceleration of economic activity.

Chinese GDP increased 8% per annum in 2Q10 on a seasonally adjusted quarter-on-quarter basis (10.3% year-on-year), the slowest sequential expansion since 1Q09 but still a robust performance. The slowdown was led by fixed asset investment in real terms, influenced by the effect of credit tightening in infrastructure investment, which was partially offset by the rising investment in real estate, as land purchases and housing starts continued to increase.

Tightening measures in China were needed to avoid overheating and in our view the ongoing deceleration of economic activity is consistent with the convergence to a sustainable growth path. While we do not anticipate a relaxation in the short-term of the measures to cool the property market — as policy makers are likely to wait for a deeper assessment of the impact of current restrictions before making new decisions and there is a matter of policy credibility involved — we do not foresee any further tightening in credit controls and/or interest rate hikes. In this respect, it is important to note that the bank lending expansion target for this year is 18%, which still means significant credit growth, even though this is a much slower pace than the dramatic expansion recorded last year.

We expect China’s demand for steel and iron ore to bounce back in the fourth quarter of 2010 as the inventory correction — which produced a mini-cycle of decreasing steel prices within an expansionary cycle — comes to an end and the outlook for the property market becomes clearer. In this regard, we expect the building of public housing for low-income families to provide a backstop for construction, thus mitigating the negative impact on the demand for steel.

After peaking in April, at 121 Mt on a seasonally adjusted basis, global carbon steel output reached 117 Mt in June, returning to the pre-crisis peak level of July 2008. The demand for Vale’s iron ore remained strong with shipments to clients facing limitations set by our own capacity rather than by client orders. After its launch in March this year, the quarterly price formula for iron ore and pellets is being consolidated with all clients around the world.

During the summer season in the Northern Hemisphere activity in the steel market tends to remain relatively weak. For 4Q10, in addition to the expected Chinese recovery, demand for steel in the rest of the world is likely to rebound as inventories are replenished.

There is an increasing concern on the part of Chinese government authorities about the rise of carbon emissions and the high level of energy consumption per US$ of GDP, which, pursuant to estimates of the International Energy Agency, is the double that of the US and triple that of the EU. In this context, steel is one of the six industries² that still showed increases in energy consumption this year and were singled out as targets for government efforts for performance improvement.

Simultaneously, the Ministry of Industry and Information Technology presented new plans to reduce the number of steel companies and speed up industry consolidation, through the closure of outdated mills and the encouragement of mergers.

These moves have the potential to cause a structural change towards a more intensive consumption of higher value-in-use iron ores produced by Vale as they contribute to lower both energy consumption and carbon dioxide emissions in addition to the fact that modern blast furnaces require the consumption of high-quality raw materials.

China has resumed the adoption of the more flexible exchange rate policy launched in July 2005, after an interlude that lasted from June 2008 to June 2010. It is only a very promising initiative if it means the initial step towards a floating regime, as the lack of exchange rate flexibility not only reduces monetary policy independence, but also contributes to the existence of a dysfunctional financial system. The inability of the Chinese central bank to employ interest rates as a primary tool of monetary policy implies that credit growth has to be controlled by quantitative controls, such as targets/ceilings and administrative measures, rather than letting it be guided by market signals.

The use of non-market instruments leads to misallocation of credit and very low real interest rates to remunerate depositors’ savings. Misallocation of capital always presents a threat to long-term growth sustainability and the underdevelopment of financial instruments has been stimulating booms and busts in the Chinese equity and real estate markets, which amongst other consequences contribute to macroeconomic volatility and to instability in the demand for steel.

US GAAP		2Q10

According to our estimates, global stainless steel output remained strong for the second consecutive quarter, reaching 7.7 Mt in 2Q10, on a seasonally adjusted basis, and the austenitic ratio stayed constant, at 73%. Nickel inventories at the London Metal Exchange (LME) warehouses have been decreasing continuously since early February 2010. As a result, 30% of stocks were shed, during this five-month period.

However, after rallying from February to April, nickel prices fell until the first week of June and have stayed range bound fluctuating around a level of US$19,500 per metric ton. We see the recent nickel price behavior as a consequence of the pricing of risks of a global growth slowdown and the partial anticipation of the effects on global supply from the end of the strike in our Sudbury and Voisey’s Bay operations.

On July 9 Vale ratified new five-year collective agreements with the labor union representing production and maintenance employees in Sudbury and Port Colborne, Ontario, Canada. Within four to six weeks from the end of the strike all the employees are expected to return to work.

In addition to the normalization of our nickel operations, the agreements were very positive to the extent that they allow the introduction of a defined contribution pension plan for new employees and the adoption of a more meritocratic variable compensation system, thus enhancing the foundations of growth sustainability.

The demand for nickel for non-stainless steel applications has been strong around the world, and we expect it to remain steady in 2H10. Simultaneously, the demand for stainless steel will soften due to the seasonal weakness in 3Q10 before improving by year-end.

Despite the short-term risks to the global economic recovery, we do not foresee a reversal, even though a slower pace of expansion is expected for the next few quarters. In the light of a positive view about the long-term fundamentals of the markets for minerals and metals, we are continuing to develop our pipeline of projects, adjusting the asset portfolio to optimize capital allocation and to pursue opportunistic value creating acquisitions.

In the first seven months of the year, Vale delivered three of the seven projects scheduled to come on stream in 2010: (a) Additional 20 Mtpy, a low-cost high-quality iron ore brownfield project at Carajás; (b) Bayóvar, a phosphate rock mine in Peru, one of the lowest cost phosphate rock mines in the world, our first greenfield project in the fertilizer business and also our first greenfield mining project to be concluded outside Brazil; (c) TK CSA, a steel slab plant in the state of Rio de Janeiro, Brazil, with a capacity of 5 Mt per year, in which Vale has a 26.87% stake and is the exclusive supplier of iron ore and pellets. In 2H10, Onça Puma (ferronickel), Tres Valles (copper), Oman (pellet plant and distribution center) and Estreito (power plant) will come on stream.

The delivery of a pipeline of projects boosts production growth, cash generation and value creation for shareholders, following a transitory phase characterized by the large financing needs to develop growth initiatives and pressures on the returns on capital invested. Some of the projects already concluded, such as Bayóvar, and others to be concluded in the near future, such as Moatize and Salobo, also open the door for low-capex brownfield expansions, magnifying their impact on cash flow and return to shareholders.

We recently concluded important steps in the acquisition of fertilizer assets in Brazil. Alongside the expected contribution to long-term shareholder value creation, the development of a fertilizer asset base is a move that leads to a further and more interesting diversification of our asset portfolio, as the fertilizer business is exposed to cyclical changes that have different drivers than those determining minerals and metals cycles.

At the same time, the decision to invest in operations in Brazil and to focus on its market entails a geographical diversification in the sources of revenue increase thus easing the reliance on Asian demand growth. Brazilian agriculture has a high growth potential, implying very good prospects for the demand for fertilizer nutrients. Highlighting its potential, the forecasts of a recent joint study prepared by OECD-FAO indicates Brazil as the country with the fastest growing agricultural production in the world, with an expected increase of 40% until 2019, when compared to the 2007-2009 base period.

US GAAP		2Q10

• REVENUES

Gross operating revenues totaled US$9.930 billion in 2Q10, with an increase of 45.0% over the US$6.848 billion in 1Q10.

Higher sales prices produced a positive effect of US$2.259 billion on 2Q10 operating revenues, while sales volume growth added US$823 million. The implementation of the quarterly pricing system for iron ore and pellets started to be reflected in the revenues for 2Q10. Rising iron ore and pellet prices contributed with an increase of US$2.179 billion, while price changes of other products accounted for US$80 million.

The share of bulk materials — comprised of iron ore, pellets, manganese ore, ferroalloys, metallurgical and thermal coal — in total revenues rose to 75.6% in 2Q10 from 70.8% in 1Q10, while the contribution of base metals declined to 17.5% from 22.3%. Logistics services represented 4.1% of total operating revenues, fertilizers 2.1%, and other products 0.7%. As the acquisition of the Brazilian fertilizer assets was partially concluded at the end of May 2010, their financial performance in June was captured in Vale’s 2Q10 results.

Sales to Asia represented 48.2% of total revenues, while sales to the Americas accounted for 23.2%, to Europe 24.0% and the rest of the world 4.6%. China’s share in our sales revenues fell to 28.1% in 2Q10 from 39.7% one year ago, reflecting a more balanced growth in the global demand for minerals and metals.

Table 2 — OPERATING REVENUE BREAKDOWN

US$ million		2Q09				%				1Q10				%				2Q10				%
Bulk materials			2,812				55.3				4,849				70.8				7,506				75.6
Ferrous minerals			2,716				53.4				4,722				69.0				7,321				73.7
Iron ore			2,423				47.7				3,748				54.7				5,435				54.7
Pellets			176				3.5				769				11.2				1,610				16.2
Manganese ore			43				0.8				58				0.8				89				0.9
Ferroalloys			69				1.4				131				1.9				160				1.6
Pellet plant operation services			3				0.1				5				0.1				8				0.1
Others			2				—				11				0.2				19				0.2
Coal			96				1.9				127				1.8				185				1.9
Thermal Coal			50				1.0				62				0.9				72				0.7
Metallurgical Coal			46				0.9				65				0.9				113				1.1
Base metals			1,788				34.3				1,526				22.3				1,736				17.5
Nickel			916				18.0				687				10.0				820				8.3
Copper			271				5.3				227				3.3				233				2.3
PGMs			54				1.1				1				—				14				0.1
Precious metals			26				0.5				8				0.1				9				0.1
Cobalt			12				0.2				5				0.1				5				0.1
Aluminum			180				3.5				258				3.8				244				2.5
Alumina			275				5.4				331				4.8				404				4.1
Bauxite			—				—				6				0.1				6				0.1
Others			55				0.3				4				0.1				1				—
Fertilizers nutrients			121				2.4				65				0.9				210				2.1
Potash			121				2.4				65				0.9				55				0.5
Phosphates			—				—				—				—				107				1.1
Nitrogen			—				—				—				—				35				0.4
Others			—				—				—				—				13				0.1
Logistics services			280				5.5				311				4.5				407				4.1
Railroads			223				4.4				236				3.4				301				3.0
Ports			57				1.1				75				1.1				106				1.1
Others			83				2.5				97				1.4				71				0.7
Total			5,084				100.0				6,848				100.0				9,930				100.0

US GAAP		2Q10

Table 3 — OPERATING REVENUE BY DESTINATION

US$ million		2Q09				%				1Q10				%				2Q10				%
North America			513				10.1				348				5.1				358				3.6
USA			198				3.9				135				2.0				163				1.6
Canada			315				6.2				207				3.0				183				1.8
Others			—				—				7				0.1				11				0.1
South America			839				16.5				1,378				20.1				1,950				19.6
Brazil			802				15.8				1,258				18.4				1,756				17.7
Others			37				0.7				120				1.8				194				2.0
Asia			2,952				58.1				3,536				51.6				4,783				48.2
China			2,018				39.7				2,160				31.5				2,795				28.1
Japan			378				7.4				832				12.2				1,072				10.8
South Korea			165				3.2				232				3.4				316				3.2
Taiwan			193				3.8				178				2.6				269				2.7
Others			198				3.9				133				1.9				331				3.3
Europe			665				13.1				1,357				19.8				2,381				24.0
Germany			130				2.6				424				6.2				745				7.5
Belgium			85				1.7				33				0.5				67				0.7
France			41				0.8				81				1.2				93				0.9
UK			149				2.9				140				2.0				358				3.6
Italy			43				0.8				138				2.0				298				3.0
Others			217				4.3				541				7.9				821				8.3
Rest of the World			115				2.3				229				3.3				458				4.6
Total			5,084				100.0				6,848				100.0				9,930				100.0

• COSTS

Operating costs remained under control as costs of goods sold (COGS) decreased by US$29 million in comparison to 1Q10 after adjusting for the expansion in sales volumes and the effect of the depreciation of the US dollar³. Higher shipments and currency price changes caused a total cost increase of US$595 million and US$17 million, respectively, whereas non-adjusted COGS rose by US$583 million.

Expenses with energy consumption accounted for 18.2% of COGS, being its largest component. These costs reached US$749 million, increasing by US$132 million compared to 1Q10.

Fuel and gases costs reached US$465 million, increasing 20.2% on a quarter-on-quarter basis. Out of the US$77 million cost increase, US$68 million was due to the increase of our activities. The cost of electricity was US$284 million against US$230 million in 1Q10, representing a 23.5% quarter-on-quarter increase, mainly due to the higher consumption (US$44 million).

In 2Q10, the cost of materials accounted for 16.4% of COGS, amounting to US$675 million, against US$629 million in 1Q10. The increase in input costs totaled US$44 million due to higher sales in this quarter, and was the item with the largest impact on the performance of materials expenses.

Costs for outsourced services, making up 15.5% of COGS, were US$637 million in 2Q10, compared to US$534 million in 1Q10. The main factor for the cost increase was higher sales volumes (US$98 million).

Expenses with railroad freight increased to US$151 million from US$114 million in 1Q10, adding US$37 million to the costs with outsourced services. The volume of iron ore transported from our Southern System mines to the maritime terminals of Guaíba Island and Itaguaí by MRS, a non-consolidated affiliated logistics company, grew by 20%.

US GAAP		2Q10

Personnel expenses reached US$449 million, representing 10.9% of COGS. The increase of US$25 million relatively to 1Q10 reflected higher sales volumes.

The cost of purchasing products from third parties amounted to US$337 million — 8.2% of COGS — against US$302 million in 1Q10.

The cost of purchasing iron ore and pellets was US$186 million, against US$121 million in 1Q10. The volume of iron ore bought from smaller miners came to 1.8 Mt in 2Q10 compared with 937,000 metric tons in 1Q10. The acquisition of pellets from our joint ventures amounted to 920,000 metric tons in this quarter — against 765,000 metric tons in 1Q10.

The amount spent with the purchase of nickel products dropped to US$69 million from US$91 million in 1Q10, as volumes were reduced and more than offset the effect of higher average prices.

Costs with shared services, which reflect the cost of our shared services organization reached US$66 million, in line with 1Q10 level of US$61 million.

Depreciation and amortization — 15.4% of COGS — amounted to US$635 million, at the same level of US$633 million in 1Q10.

Other operational costs reached US$574 million, compared to US$339 million in 1Q10. The increase of US$235 million against 1Q10 was generated by changes in various items: (a) mining royalties, US$37 million; (b) the allocation of the operating costs of Vale Fosfatados⁴, US$41 million; (c) the reassessment of inventories in the ferrous minerals business, US$48 million; (d) the non-cash impact of the fair value adjustment of inventories existing at the acquired fertilizer assets as required by accounting standards, US$24 million; (e) rise in demurrage charges, US$40 million.

The inventory adjustments of fertilizer assets are related to the preliminary purchase price allocation based on the fair values of all the incorporated firm’s assets according to FAS 141 and 142. Such allocation resulted in a fair value adjustment of inventories of US$64 million for Fosfertil and US$33 million for Vale Fosfatados, totaling an impact of US$97 million on the accounting value of assets in our balance sheet. At the same time, these adjustments produced a non-cash charge against 2Q10 costs of US$24 million, US$19 million for Fosfertil and US$5 million for Vale Fosfatados. The remaining balance of the inventory adjustment will be expensed in the following quarters as sales take place.

In 2Q10, demurrage costs — fines paid for delays in loading ships at our maritime terminals - totaled US$59 million, equivalent to US$1.00 per metric ton of iron ore shipped, against US$19 million in the previous quarter, US$0.33 per metric ton, primarily due to operational problems at the Ponta da Madeira maritime terminal.

Sales, general and administrative expenses (SG&A) came to US$343 million, against US$293 million in 1Q10. The higher SG&A expenses are mainly explained by the increase in costs with consulting services (US$12 million) and lower adjustment — US$4 million against US$11 million in 1Q10 — of copper revenues under the MAMA (month-after-month of arrival) pricing system for the shipments of copper concentrates.

Research and development (R&D) expenses, which reflect our investment to create long-term growth opportunities, amounted to US$189 million⁵ in the quarter, compared to US$172 million invested in 1Q10.

Other operating expenses reached US$374 million, against US$538 million in 1Q10. Expenses related to idle capacity and stoppage of operations totaled US$149 million, US$61 million lower than the previous quarter. Those expenses have been coming down since they peaked in 3Q09 at US$262 million, given the resumption of operations.

US GAAP		2Q10

Table 4 — COGS BREAKDOWN

US$ million		2Q09				%				1Q10				%				2Q10				%
Outsourced services			519				16.6				534				15.1				637				15.5
Cargo freight			179				5.7				165				4.7				213				5.2
Maintenance of equipments and facilities			102				3.2				127				3.6				149				3.6
Operational Services			138				4.4				129				3.7				151				3.7
Others			100				3.2				112				3.2				124				3.0
Material			660				21.1				629				17.8				675				16.4
Spare parts and maintenance equipment			205				6.5				281				7.9				301				7.3
Inputs			274				8.7				188				5.3				232				5.6
Tires and conveyor belts			34				1.1				57				1.6				42				1.0
Others			147				4.7				102				2.9				100				2.4
Energy			461				14.7				617				17.4				749				18.2
Fuel and gases			279				8.9				387				10.9				465				11.3
Electric energy			182				5.8				230				6.5				284				6.9
Acquisition of products			153				4.9				302				8.5				337				8.2
Iron ore and pellets			5				0.2				121				3.4				186				4.5
Aluminum products			63				2.0				69				1.9				72				1.7
Nickel products			79				2.5				91				2.6				69				1.7
Other products			6				0.2				21				0.6				10				0.3
Personnel			449				14.3				424				12.0				449				10.9
Depreciation and exhaustion			571				18.2				633				17.9				635				15.4
Shared services			55				1.8				61				1.7				66				1.6
Others			267				8.5				339				9.6				574				13.9
Total			3,135				100.0				3,539				100.0				4,122				100.0

• OPERATING INCOME

Operating income, as measured by adjusted EBIT, amounted to US$4.630 billion in 2Q10, substantially higher than the US$2.062 billion achieved in the 1Q10, and almost five times the number recorded in 2Q09, US$976 million.

The increase of US$2.568 billion in our quarterly adjusted EBIT was due to the positive impact of operating revenues, driven by higher sales prices for iron ore and pellets (US$2.178 billion), higher shipment volumes in almost all of our products (US$823 million) and lower expenses (US$96 million), partially offset by the higher COGS (US$583 million), which, as previously commented, was mainly due to the larger sales volumes.

The adjusted EBIT margin was 47.9% in 2Q10 and 1,672 basis points above the margin for 1Q10, at 31.2%. It was also much higher than the average operating margin for the last 20 quarters, 37.5%, and the third highest ever.

• NET EARNINGS

In 2Q10, net earnings amounted to US$3.705 billion, compared with US$1.604 billion in 1Q10, with a significant quarter-on-quarter increase of 131.0%. Earnings per share, on a fully diluted basis, reached US$0.70. The increase is even more significant when compared to net earnings in 2Q09, with a year-on-year variation of 369.0%.

Earnings quality in 2Q10 is also shown by the fact that it was driven by operating income which represented 125% of net earnings.

US GAAP		2Q10

Financial revenues totaled US$69 million, above the US$48 million figure for 1Q10. Financial expenses reached US$514 million, compared to US$465 million spent in 1Q10, impacted mainly by tax charges of US$56 million on the conversion into ADRs of the two series of mandatorily convertible notes due June 15, 2010, representing 1.5% and 1.3%, respectively, of the outstanding common and preferred shares on June 15, 2010.

The mark-to-market of shareholders’ debentures led to a US$30 million non-cash negative charge.

In 2Q10, the mark-to-market of the transactions with derivatives caused a negative charge against earnings of US$112 million, against US$230 million in 1Q10. However, these transactions produced a net positive cash flow impact of US$111 million.

The net result of the currency and interest rate swaps, structured mainly to convert the BRL-denominated debt into US dollar to protect our cash flow from exchange rate volatility, produced a negative non-cash effect of US$214 million in 2Q10, and a positive cash impact of US$143 million.

As nickel prices trended downwards, our positions with nickel derivatives produced a non-cash positive charge of US$104 million in 2Q10, contributing to reduce our cash flow by US$38 million.

The derivative transactions related to bunker oil and freight costs, structured to minimize the volatility of the cost of maritime freight from Brazil to Asia, had a negative non-cash impact of US$24 million, of which US$20 million generated a positive cash effect.

As a consequence of the slight depreciation of Vale’s functional currency, the Brazilian real, against the US dollar⁶, foreign exchange and monetary variations caused a positive impact on our net earnings of US$66 million, against a negative impact of US$30 million in 1Q10.

In 2Q10 there were non-cash losses of US$6 million stemming from the discontinuation of.kaolin assets.

Equity income reached US$283 million, well above the US$96 million in 1Q10. The non-consolidated affiliates in the bulk materials business contributed with US$263 million, logistics with US$24 million, steel with US$13 million and base metals decreased equity income by US$17 million.

Individually, the greatest contributors to equity income were Samarco (US$245 million), MRS (US$23 million) and Longyu (US$19 million).

• CASH GENERATION

Cash generation, as measured by the adjusted EBITDA, reached US$5.577 billion in 2Q10, being 95.4% higher than the US$2.855 billion for 1Q10 and the third highest in our history. The US$2.722 billion increase was chiefly due to better performance of operating income, which added US$2.568 million to the adjusted EBITDA. Dividends received from non-consolidated affiliates increased by US$149 million, reaching US$199 million.

In the last twelve-month period ended June, 30, 2010, adjusted EBITDA reached US$13.591 billion.

The bulk materials business decreased its share in Vale’s total adjusted EBITDA to 90.3% from 93.2% in 1Q10. The base metals business was responsible for 9.4% of the total, while logistics accounted for 2.0% and fertilizer nutrients contributed with 0.2%. Other businesses reduced adjusted EBITDA by 1.9% and R&D expenditures decreased it by 3.4%.

US GAAP		2Q10

Table 5 — QUARTERLY ADJUSTED EBITDA

US$ million		2Q09				1Q10				2Q10
Net operating revenues			4,948				6,604				9,658
COGS			(3,135	)			(3,539	)			(4,122	)
SG&A			(230	)			(293	)			(343	)
Research and development			(265	)			(172	)			(189	)
Other operational expenses			(342	)			(538	)			(374	)
Adjusted EBIT			976				2,062				4,630
Depreciation, amortization & exhaustion			643				743				748
Dividends received			106				50				199
Adjusted EBITDA			1,725				2,855				5,577

Table 6 — ADJUSTED EBITDA BY BUSINESS AREA

US$ million		2Q09				1Q10				2Q10
Bulk materials			1,452				2,660				5,038
Ferrous minerals			1,459				2,687				5,047
Coal			(7	)			(27	)			(9	)
Base metals			325				273				522
Fertilizers nutrients			88				26				10
Logistics			91				60				113
Others			(231	)			(164	)			(106	)
Total			1,725				2,855				5,577

• DEBT INDICATORS

As of June 30, 2010, total debt was US$23.959 billion, with an average maturity of 8.8 years and an average cost of 5.25% per annum, with net debt^(c) at US$17.724 billion.

Cash holdings reduced to US$6.235 billion from US$11.136 billion, due to expenditures associated to acquisitions — US$4.7 billion for the fertilizer assets and US$500 million for Simandou.

In this quarter, we also paid the first installment of the minimum dividend for 2010, which totaled US$1.25 billion.

Debt leverage, as measured by total debt/LTM adjusted EBITDA^(d) ratio, went down to 1.8x on June 30, 2010 from 2.4x on March 31, 2010, as a consequence of the improved performance of cash generation.

The total debt/enterprise value^(e) ratio was 17.0% on June 30, 2010, against 13.4% on March 31, 2010.

Interest coverage, measured by the LTM adjusted EBITDA/LTM interest payment^(f) ratio, went to 12.7x from 9.0x on March 31, 2010.

Considering hedge positions, 35% of total debt on June 30, 2010, was linked to floating interest rates and 65% to fixed interest rates, while 98% was denominated in US dollars and the remainder in other currencies.

Despite the increase in market tensions, our bonds have been performing well, reflecting investor confidence in Vale’s strong fundamentals. For instance, the spreads of Vale 2018 @ 4.375% per annum, our first bond in euros issued in March 2010, have been hovering around 130 basis points, reflecting a price increase since its placement.

US GAAP		2Q10

Table 7 — DEBT INDICATORS

US$ million		2Q09				1Q10				2Q10
Total debt			19,493				23,569				23,959
Net debt			8,301				12,433				17,724
Total debt / adjusted LTM EBITDA (x)			1.5				2.4				1.8
Adjusted LTM EBITDA / LTM interest expenses (x)			10.8				9.0				12.7
Total debt / EV (%)			19.9				13.4				17.0

• INVESTMENTS

In 2Q10, Vale’s investments, excluding acquisitions, amounted to US$2.375 billion. US$1.694 billion was spent on project development of organic growth, US$273 million on research and development (R&D), and US$407 million on the maintenance of existing operations.

The capex in the first half of the year totaled US$4.533 billion, compared to US$3.794 billion in the same period of last year. Of the total disbursement in 1H10, 81.5% was allocated to finance growth, involving project execution and R&D.

In 2Q10, R&D investments comprised expenditures of US$79 million in the mineral exploration program, US$75 million in natural gas exploration, US$102 million in conceptual, pre-feasibility and feasibility studies for projects, and US$17 million to develop new processes, technological innovations and adaptation of technologies.

To support our growth strategy, we continue to invest in greenfield mineral exploration to find new reserves and create additional growth options for Vale, searching mainly for non-ferrous minerals, fertilizers and bulk materials in South and North America, Africa, Asia and Oceania.

As result of the investment in gas exploration, Vale obtained certification of its oil and gas resources, which indicates 210 million barrels of oil equivalent (boe), with potential to produce 58,000 boe per day in 2017. The resource base includes quantities of oil and gas that are not classified as proven reserves but are expected to be moved into the proven reserves category and produced in the future.

Investments in the base metals business were US$655 million, while US$806 million was spent in the bulk materials business, including the iron ore brownfield projects Carajás additional 30Mtpy, Tubarão VIII and Conceição Itabiritos, and the Moatize coal project, US$422 million in logistics, US$174 million in fertilizer nutrients, US$164 million in power generation, US$41 million in steel projects and US$113 million in corporate activities and other business segments.

In the first seven months of 2010, Vale already delivered three of the seven projects scheduled to come on stream in the year: (a) Additional 20 Mtpy, a low-cost high-quality iron ore brownfield project at Carajás; (b) TKCSA, a steel slab plant in the state of Rio de Janeiro, Brazil, with a capacity of 5 Mt per year, in which Vale has a 26.87% stake and is the exclusive supplier of iron ore and pellets. In 2H10; (c) Bayóvar, a phosphate rock mine in Peru, with capacity to produce 3.9 Mt per year, which came on stream on time and on budget and is one of the lowest cost phosphate rock mines in the world. It is our first greenfield project in the fertilizer business and also our first greenfield mining project outside Brazil to be concluded so far. Onça Puma (ferronickel), Tres Valles (copper), Oman (pellet plant and distribution center) and Estreito (power plant) are scheduled to start-up in the second half of the year.

The delivery of a pipeline of projects entails production growth, cash generation and value creation, following a transitory phase in which there are large financing needs to support their development and pressures on returns on capital invested. Some of the projects already concluded, such as Bayóvar, and others to be delivered in the near future, such as Moatize and Salobo, also create the opportunity for low-capex brownfield expansions, magnifying their impact on cash flow and return to shareholders.

US GAAP		2Q10

In the first half of 2010, Vale spent US$5.33 billion in acquisitions, involving fertilizer (US$4.74 billion), iron ore (US$500 million), and coal (US$92 million) assets.

On May 27 the main steps in the acquisition of fertilizer assets in Brazil were concluded. Vale acquired 58.6% of Fosfertil for US$3.0 billion, involving 72.6% of the common shares and 51.4% of the preferred shares. The remaining US$1.7 billion is attributable to the acquisition of phosphate assets now under Vale Fosfatados⁷.

On April 30, Vale acquired a 51% interest in Simandou, Guinea, one of the best undeveloped iron ore deposits in the world in terms of size and quality. In an all-cash transaction, Vale will pay US$2.5 billion, of which US$500 million was paid immediately and the remaining US$2.0 billion on a phased basis upon achievement of specific milestones.

On June 1, we acquired an additional 24.5% stake in the Belvedere coal project in Australia for US$92 million. As an outcome of this transaction, Vale increased its share in Belvedere to 75.5% from 51.0%.

As part of our portfolio asset management, we have completed transactions to divest some assets for US$886 million.

Our wholly-owned subsidiary Valesul concluded the sale of its aluminum assets for US$31 million. We have entered into an agreement with a company wholly-owned by the Government of the Sultanate of Oman, to sell 30% of our pellet plant project in the country, for US$125 million.

Vale sold minority stakes in the Bayóvar project in Peru through the newly-formed company MVM Resources International B.V. (MVM). We sold 35% of the total capital of MVM to Mosaic for US$385 million and 25% to Mitsui for US$275 million. We retain control of the Bayóvar project, holding a 51% stake of the voting shares and a 40% stake of the total capital of the newly-formed company. The alliance of Vale, Mosaic and Mitsui in this new venture creates significant shareholder value by providing Bayóvar with access to technical expertise, guaranteed product off-take and enhanced product distribution capabilities.

Vale divested its 86.2% stake in Pará Pigmentos S.A. (PPSA), and other kaolin mineral rights located in the state of Pará, Brazil. The assets were sold to Imerys SA, a company listed on Euronext Paris, for US$70 million.

Main mineral greenfield exploration investments

		Countries
Copper		Angola, Argentina, Australia, Brazil, Canada, Chile, China, Democratic Republic of Congo, Kazakhstan, Mongolia, Peru
Potash		Argentina, Brazil, Canada
Nickel		Angola, Australia, Brazil, Canada, China, Mongolia, South Africa
Coal		Australia, Canada, Colombia, Mozambique
Iron Ore		Australia, Brazil, Guinea
Phosphates		Brazil, Mozambique
Manganese		Brazil

Table 8 — TOTAL INVESTMENT BY CATEGORY

US$ million		2Q09				%				1Q10				%				2Q10				%
Organic growth			1,617				77.7				1,725				79.9				1,968				82.9
Projects			1,363				65.5				1,540				71.4				1,694				71.3
R&D			254				12.2				185				8.6				273				11.5
Stay-in-business			463				22.3				433				20.1				407				17.1
Total			2,080				100.0				2,158				100.0				2,375				100.0

US GAAP		2Q10

Table 9 — TOTAL INVESTMENT BY BUSINESS AREA

US$ million		2Q09				%				1Q10				%				2Q10				%
Bulk materials			557				26.8				771				35.7				806				33.9
Ferrous minerals			420				20.2				565				26.2				628				26.4
Coal			137				6.6				206				9.5				178				7.5
Base metals			604				29.0				521				24.1				655				27.6
Fertilizers nutrients			91				4.4				103				4.8				174				7.3
Logistics			585				28.1				471				21.8				422				17.8
Power generation			155				7.4				131				6.1				164				6.9
Steel			50				2.4				30				1.4				41				1.7
Others			38				1.8				131				6.1				113				4.8
Total			2,080				100.0				2,158				100.0				2,375				100.0

• Description of the main projects

				Budget
				US$ million
Business		Project		2010				Total				Status
Bulk Materials /Logistics		Carajás — Additional 30 Mtpy			362				2,478			This project will add 30 Mtpy to current capacity. It comprises investments in the installation of a new plant, composed of primary crushing, processing and classification units and significant investments in logistics. Vegetation removal permit and installation license obtained. Start-up planned for 1H12.
		Vargem Grande — Itabiritos			139				1,521			This project in the Southern System will add 10 Mtpy of iron ore to current capacity. It involves investment in a new iron ore treatment plant, which will receive low grade iron ore from the Abóboras mine. Total budget includes the capital expenditures for increasing capacity at the Andaime railroad terminal. Start-up expected for 2H13.
		Conceição Itabiritos			184				1,174			This project in the Southeastern System will add 12 Mtpy of iron ore to current capacity. It involves investment in a new concentration plant, which will receive ROM from the Conceição mine. Start-up expected for 2H13.
		Carajás Serra Sul (mine S11D)			1,126				11,297			Located on the Southern range of Carajás, in the Brazilian state of Pará, this project will have a capacity of 90 Mtpy. Completion is scheduled for 2H13, subject to obtaining the environmental licenses. The project is still subject to approval by the Board of Directors.
		Apolo			38				2,509			Project in the Southeastern System with a production capacity of 24 Mtpy of iron ore. Start-up expected for 1H14. The project is still subject to approval by the Board of Directors.
		Oman			484				1,356			Project for the construction of a pelletizing plant in the Sohar industrial district, Oman, in the Middle East, for the production of 9 Mtpy of direct reduction pellets and a distribution center with capacity to handle 40 Mtpy. Start-up planned for 2H10.

US GAAP		2Q10

				Budget
				US$ million
Business		Project		2010				Total				Status
		Tubarão VIII			151				833			Pelletizing plant to be built at the port of Tubarão, in the Brazilian state of Espírito Santo, with a 7.5 Mtpy capacity. Start-up scheduled for 2H12.
		Moatize			722				1,658			This project is located in Mozambique and will have annual production capacity of 11 million tons, of which 8.5 million tons of metallurgic coal and 2.5 million tons of thermal coal. Completion is scheduled for 1H11.
		Teluk Rubiah			98				900			It involves the construction of a maritime terminal that will be able to receive 400,000 dwt vessels and a distribution center with a capacity to handle up to 30 million metric tons of iron ore in this first phase, and the possibility to expand it up to 90 million metric tons in the future. Start-up is planned for 1H13. The project is subject to approval by the Board of Directors.
		Onça Puma			510				2,646			The project will have a nominal production capacity of 58,000 metric tons per year of nickel in ferronickel form, its final product. Start-up expected for 2H10.
		Totten			146				362			Mine in Sudbury, Canada, aiming to produce 8,200 tpy of nickel, copper and precious metals as by-products. Project being implemented and conclusion planned for 1H11.
		Long-Harbour			441				2,821			Nickel processing facility in the province of Newfoundland and Labrador, Canada, to produce 50,000 metric tons of finished nickel per year, together with up to 5,000 metric tons of copper and 2,500 metric tons of cobalt, using the ore from the Ovoid mine in our Voisey’s Bay mining site. The start-up is scheduled for 1H13.
Base Metals		Tres Valles			54				140			Located in the Coquimbo region in Chile, with an annual production capacity of 18,000 metric tons of copper cathode. Conclusion expected for 2H10.
		Salobo			600				1,808			The project will have a production capacity of 100,000 metric tons of copper in concentrate. Project implementation under way and civil engineering work has started. Conclusion of work scheduled for 2H11.
		Salobo expansion			66				1,025			The project will expand the Solobo mine annual production capacity from 100,000 to 200,000 metric tons of copper in concentrate. Conclusion is estimated for 2H13.
		Konkola North			50				145			Located in the Zambian copper belt, this is an underground mine and will have an estimated nominal production capacity of 44,000 tpy of copper in concentrate. This project is part of our 50/50 joint venture with ARM in Africa. We will begin development in the second half of 2010, and the conclusion of the project, which is subject to Board approval, is targeted for 2013.
Fertilizers Nutrients		Rio Colorado			304				4,118			The project includes the development of a mine with an initial nominal capacity of 2.4 Mtpy of potash - KCl, with potential for a future expansion to 4.35 Mtpy, construction of a railway spur of 350 km, port facilities and a power plant. Start-up is expected to take place in the 2H13. This project is subject to Board of Directors approval.

US GAAP		2Q10

Budget

US$ million

Business

Project

2010

Total

Status

Estreito

186

703

Hydroelectric power plant on the Tocantins river, between the states of Maranhão and Tocantins, Brazil. Has already obtained the implementation license, and is being built. Vale has a 30% share in the consortium that will build and operate the plant, which will have a capacity of 1,087 MW. Completion is planned for 2H10.

Karebbe

126

410

Karebbe hydroelectric power plant in Sulawesi, Indonesia, aims to supply 130 MW for the Indonesian operations, targeting production cost reduction by substitution of oil as fuel and enabling the potential expansion to 90,000 tpy of nickel in matte. Work started and main equipment purchased. Scheduled to start-up in 2H11.

Energy

Biofuels

55

407

Consortium with Biopalma to invest in biodiesel to supply our mining and logistics operations in the Northern region of Brazil, using the B20 mix (20% of biodiesel and 80% of ordinary diesel), from 2014 onwards. Vale’s stake in the consortium is 41%. The oil production related to our stake will be used to feed our own biodiesel plant, with estimated capacity of 160,000 metric tons of biodiesel per year.

• PERFORMANCE OF THE BUSINESS SEGMENTS

• Bulk materials

• Ferrous minerals

Shipments of iron ore and pellets in 2Q10 reached 69.602 Mt, 6.0% above the previous quarter. Sales volumes of iron ore were 59.124 Mt, with a 2.2% quarter-on-quarter basis, while pellets sales, supported by very good production performance, amounted to 10.478 Mt, growing 34.9%

Shipments have underperformed the sales program primarily due to operational problems at the discharge in the Ponta da Madeira maritime terminal. At this facility, shipments trended downwards until April, when they reached a low point at 4.9 Mt due to a stoppage caused by an accident with a conveyor belt. Since then and as a result of our efforts, problems are being solved and quantities shipped have been gradually increasing.

As a consequence of the broadening of the recovery in the global iron ore demand, a rebalancing of the composition of our sales by geography is taking place, with China’s share declining, reaching 39.1% in 2Q10, in a significant drop from its peak level of 66.5% in 1Q09.

Revenues generated from the sale of iron ore amounted to US$5.435 billion, 45.0% higher than 1Q10. They were influenced by the average realized price of US$91.93 per metric ton, 42.0% higher than the price of US$64.76 in 1Q10. The price rise in 2Q10 was based on the new pricing regime, although some of the sales were still priced at 1Q10 levels. These sales were made in 1Q10 however they were shipped and accounted for in 2Q10.

Revenues from pellets were US$1.610 billion, 109.4% above the 1Q10 figure. Average sales prices increased 55.2%, to US$153.66 per metric ton from US$99.00.

It is worthwhile noting that reported revenues for iron ore and pellets are net of the costs of maritime freight, meaning that prices of cost and freight (CFR) sales are comparable to average FOB prices. In 2Q10, Vale sold 13.8 million metric tons of iron ore and pellets on a CFR basis, against 11.8 million metric tons in 1Q10.

US GAAP		2Q10

Volumes of manganese ore sold in 2Q10 reached 345,000 metric tons, with an 82.5% increase over 1Q10, at 189,000 metric tons. Revenues from the sale of manganese reached US$89 million, from US$58 million in 1Q10, with an average realized price of US$257.97 per metric ton.

Sales of ferroalloys amounted to 105,000 metric tons, above the 1Q10 sales volume of 97,000 metric tons. They generated revenues of US$160 million, against US$131 million in the last quarter. Average prices increased to US$1,523.81 per metric ton from US$1,350.52 in 1Q10.

Sales of ferrous minerals products — iron ore, pellets, manganese, ferroalloys and pig iron — produced a total revenue of US$7.321 billion in 2Q10, increasing 55.0% vis-à-vis US$4.722 billion in 1Q10, and being the second largest ever.

The adjusted EBIT margin for the ferrous minerals business increased to 62.8% in 2Q10 in relation to 49.0% in 1Q10.

Adjusted EBITDA in 2Q10 reached US$5.047 billion, with an 87.8% quarter-on-quarter increase. The increase of US$2.360 billion was mainly caused by higher sales prices, which have added US$2.174 billion to the cash flow.

Table 10 — BULK MATERIALS: FERROUS MINERALS BUSINESS PERFORMANCE
VOLUME SOLD BY DESTINATION — IRON ORE AND PELLETS

‘000 metric tons		2Q09				%				1Q10				%				2Q10				%
Americas			5,094				9.5				10,853				16.5				11,845				17.0
Brazil			4,393				8.2				9,533				14.5				10,521				15.1
Steel mills and pig iron producers			4,393				8.2				8,638				13.2				9,444				13.6
JVs pellets			—				—				895				1.4				1,077				1.5
USA			77				0.1				—				—				—				—
Others			624				1.2				1,320				2.0				1,324				1.9
Asia			42,561				79.1				40,303				61.4				38,612				55.5
China			35,611				66.2				27,626				42.1				27,191				39.1
Japan			3,372				6.3				8,446				12.9				6,470				9.3
South Korea			2,269				4.2				2,769				4.2				2,942				4.2
Others			1,309				2.4				1,462				2.2				2,009				2.9
Europe			4,738				8.8				12,841				19.6				16,966				24.4
Germany			1,396				2.6				4,534				6.9				6,366				9.1
United Kingdom			1,261				2.3				1,770				2.7				2,827				4.1
France			490				0.9				894				1.4				712				1.0
Belgium			—				—				446				0.7				556				0.8
Italy			595				1.1				1,797				2.7				2,568				3.7
Others			996				1.9				3,400				5.2				3,937				5.7
Rest of the World			1,428				2.7				1,646				2.5				2,179				3.1
Total			53,821				100.0				65,643				100.0				69,602				100.0

OPERATING REVENUE BY PRODUCT

US$ million		2Q09				1Q10				2Q10
Iron ore			2,423				3,748				5,435
Pellet plant operation services			3				5				8
Pellets			176				769				1,610
Manganese ore			43				58				89
Ferroalloys			69				131				160
Others			2				11				19
Total			2,716				4,722				7,321

US GAAP		2Q10

AVERAGE SALE PRICE

US$/ metric ton		2Q09				1Q10				2Q10
Iron ore			47.82				64.76				91.93
Pellets			55.82				99.00				153.66
Manganese ore			144.78				306.88				257.97
Ferroalloys			971.83				1,350.52				1,523.81

VOLUME SOLD

‘000 metric tons		2Q09				1Q10				2Q10
Iron ore			50,668				57,875				59,124
Pellets			3,153				7,768				10,478
Manganese ore			297				189				345
Ferroalloys			71				97				105

• Coal

Revenues from sales of coal products reached US$185 million in 2Q10, 45.7% above the 1Q10 figure of US$127 million. US$72 million originated from shipments of thermal coal and US$113 million from metallurgical coal.

Total coal sales reached 2.245 million metric tons, 46.2% higher than in 1Q10, at 1.536 million metric tons. Coal shipments in 2Q10 were comprised of 1.390 Mt of thermal coal — vs. 912,000 metric tons in 1Q10 — and 855,000 metric tons of metallurgical coal — vs. 624,000 metric tons in 1Q10.

The average sale price of metallurgical coal in 2Q10 was US$132.03 per metric ton, showing an increase of 28.1% over 1Q10, and US$52.05 per metric ton for thermal coal against US$67.98 in the previous quarter.

Table 11 — BULK MATERIALS: COAL BUSINESS PERFORMANCE
OPERATING REVENUE BY PRODUCT

US$ million		2Q09				1Q10				2Q10
Thermal coal			50				62				72
Metallurgical coal			46				65				113
Total			96				127				185

AVERAGE SALE PRICE

US$/ metric ton		2Q09				1Q10				2Q10
Thermal coal			71.83				67.98				52.05
Metallurgical coal			108.64				103.08				132.03

VOLUME SOLD

‘000 metric tons		2Q09				1Q10				2Q10
Thermal coal			692				912				1,390
Metallurgical coal			425				624				855

Table 12 — BULK MATERIALS: SELECTED FINANCIAL INDICATORS

		2Q09				1Q10				2Q10
Adjusted EBIT margin (%)
Bulk materials			37.3				46.6				60.6
Ferrous minerals			39.8				49.0				62.8
Coal			(31.3	)			(38.6	)			(25.9	)
Adjusted EBITDA (US$ million)
Bulk materials			1,452				2,660				5,038
Ferrous minerals			1,459				2,687				5,047
Coal			(7	)			(27	)			(9	)

US GAAP		2Q10

• Base metals

Total revenues from base metals reached US$1.736 billion in 2Q10, increasing US$210 million relatively to 1Q10⁸. The revenue growth was mostly determined by higher sales volumes, which contributed with US$130 million, whereas higher prices added only US$36 million as a consequence of the price correction from April until June 2010.

Although the strike at the Sudbury and Voisey’s Bay operations negatively affected the performance of the base metals business in 2Q10, a gradual normalization of our production is underway. Following the partial resumption of operations at Sudbury and Voisey’s Bay, the Clydach refinery reached full capacity operation — 40,000 metric tons per year — and the strike at Sudbury came to an end in July.

Nickel sales produced revenues of US$820 million in 2Q10, against US$687 million in 1Q10. Higher sales prices were responsible for an increase of US$93 million, while volumes added US$40 million. Despite the price fall between April and June, as sales prices tend to lag behind LME prices average nickel prices for 2Q10 were US$22,732 per metric ton, versus US$20,147 in 1Q10.

Total shipments of finished nickel reached 36,000 metric tons in 2Q10, increasing by 5.9% against 1Q10. Sales to Asia amounted to 27,000 metric tons, representing 74.0% of the total volume, decreasing from 78.0% in the previous quarter. North America was responsible for 18.4%, and Europe 7.3%.

Copper revenues rose slightly to US$233 million, compared with US$227 million in 1Q10. The positive effect of higher volumes sold — US$30 million — was almost entirely offset by the decline in price, US$24 million.

Revenues from the sale of PGMs increased to US$14 million in 2Q10 from US$1 million in 1Q10, due to higher volumes. Revenues from the sale of cobalt remained at US$5 million in 2Q10.

Revenues from sales of bauxite, alumina and aluminum amounted to US$655 million, 9.3% higher than in 1Q10. This increase was almost totally due to increased volumes shipped.

The average sales price of aluminum was US$2,179 per metric ton in 2Q10 against US$2,263 per metric ton in the previous quarter. The price of alumina rose to US$286.93 per metric ton from US$280.27 in 1Q10.

In 2Q10, Vale shipped 112,000 metric tons of primary aluminum versus 106,000 tons in 1Q10.

The EBIT margin of the base metals business shifted upward, with a positive figure after two quarters of negative margins, coming to 7.8%, from -5.7% in 1Q10. The higher volumes of nickel and copper sales, the increase of 12.8% in average nickel prices and the reduction of expenses related to idle capacity were instrumental in the margin improvement.

Adjusted EBITDA for base metals in 2Q10 was US$522 million, the highest since the US$1.3 billion figure for 3Q08, and an increase of 91.2% on a quarter-on quarter basis. Lower SG&A and other expenses (US$149 million) and larger sales volumes (US$106 million) contributed to that result.

US GAAP		2Q10

Table 13 — BASE METALS BUSINESS PERFORMANCE
OPERATING REVENUE BY PRODUCT

US$ million		2Q09				1Q10				2Q10
Nickel			916				687				820
Copper			271				227				233
PGMs			54				1				14
Precious metals			26				8				9
Cobalt			12				5				5
Aluminum			180				258				244
Alumina			275				331				404
Bauxite			—				6				6
Others			55				4				1
Total			1,788				1,526				1,736

AVERAGE SALE PRICE

US$/ metric ton		2Q09				1Q10				2Q10
Nickel			13,223.86				20,146.63				22,731.51
Copper			5,051.54				6,881.85				6,112.22
Platinum (US$/oz)			1,028.53				—				1,626,27
Cobalt (US$/lb)			7.99				15.06				12.76
Aluminum			1,451.61				2,263.16				2,178.57
Alumina			196.01				280.27				286.93
Bauxite			—				30.61				31.75

VOLUME SOLD

‘000 metric tons		2Q09				1Q10				2Q10
Nickel			69				34				36
Copper			54				33				38
Precious metals (oz)			522				142				110
PGMs (oz)			97				—				15
Cobalt (metric ton)			681				151				178
Aluminum			124				114				112
Alumina			1,403				1,181				1,408
Bauxite			—				196				189

		2Q09				1Q10				2Q10
Adjusted EBIT margin (%)			(4.0	)			(5.7	)			7.8
Adjusted EBITDA (US$ million)			325				273				522

• Fertilizer nutrients

Total revenues from fertilizer nutrients reached US$210 million in 2Q10, of which US$155 million stemming from the consolidation of revenues from the sales of phosphates and nitrogen fertilizers generated in June by the newly acquired assets.

As a response to a collapse in potash demand in 2H08, there was an unprecedented cutback in production and a phase of destocking during 2009. Given the completion of inventory adjustment and the need to replenish soil nutrient levels, demand for potash is beginning to normalize. Therefore, we expect an increasing demand in 2H10, when sales in the Brazilian market are seasonally strong.

US GAAP		2Q10

Potash sales produced revenues of US$55 million in 2Q10, against US$65 million in the previous quarter. Lower sales volumes — 133,000 in 2Q10 vis-à-vis 157,000 metric tons in 1Q10 — accounted for a majority of the decrease in revenues, since average sales prices remained stable, hovering around US$415.

Revenues of phosphate fertilizers amounted to US$107 million in June. Total shipments of MAP (monoammonium phosphate) reached 47,000 metric tons (t), TSP (triple superphosphate) 71,000 t, SSP (single superphosphate) 215,000 t, and DCP (dicalcium phosphates) 37,000 t.

The sale of nitrogen fertilizers reached US$35 million in this quarter, while other related products amounted to US$13 million in 2Q10.

The EBIT margin of the fertilizer nutrients business decreased, coming to -6.3%, from 19.4% in 1Q10. If the effect of inventory adjustment of US$24 million described in the “Costs” section is excluded, the operating margin would be 6.3%.

Adjusted EBITDA for fertilizer nutrients totaled US$10 million in 2Q10 versus US$26 million in 1Q10. Excluding the effect of inventory adjustment, adjusted EBITDA would total US$34 million.

Table 14 — FERTILIZERS NUTRIENTS BUSINESS PERFORMANCE
OPERATING REVENUE BY PRODUCT

US$ million		2Q09				1Q10				2Q10
Potash			121				65				55
Phosphates			—				—				107
Nitrogen			—				—				35
Others			—				—				13
Total			121				65				210