Edgar Filing: Vale S.A.

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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

For the month of

October 2011

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 x 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 x

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 x

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 x

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

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Vale S.A.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Nr.

Report of Independent Registered Public Accounting Firm		1

Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010		2

Condensed Consolidated Statements of Income for the three-month periods ended September 30, 2011, June 30, 2011 and September 30, 2010 and for the nine-month periods ended September 30, 2011 and September 30, 2010		4

Condensed Consolidated Statements of Comprehensive Income (deficit) for the three-month periods ended September 30, 2011, June 30, 2011 and September 30, 2010 and for the nine-month periods ended September 30, 2011 and September 30, 2010		5

Condensed Consolidated Statements of Cash Flows for the three-month periods ended September 30, 2011, June 30, 2011 and September 30, 2010 and for the nine-month periods ended September 30, 2011 and September 30, 2010		6

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three-month periods ended September 30, 2011, June 30, 2011 and September 30, 2010 and for the nine-month periods ended September 30, 2011 and September 30, 2010		7

Notes to the Condensed Consolidated Financial Statements		8

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Vale S.A.

We have reviewed the accompanying condensed consolidated balance sheet of Vale S.A. and its subsidiaries as of September 30, 2011, and the related condensed consolidated statements of income, of cash flows, of comprehensive income and of stockholders’ equity for each of the three-month periods ended September 30 and June 30, 2011 and September 30, 2010 and for the nine-month periods ended September 30, 2011 and September 30, 2010. This interim financial information is the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2010, and the related consolidated statements of income, of cash flows, of comprehensive income and of stockholders’ equity for the year then ended (not presented herein), and in our report dated February 24, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2010, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.


PricewaterhouseCoopers
Auditores Independentes

Rio de Janeiro, Brazil
October 26, 2011

PricewaterhouseCoopers, Av. José Silva de Azevedo Neto 200, 1º e 2º, Torre Evolution IV, Barra da Tijuca, Rio de Janeiro, RJ, Brasil 22775-056

T: (21) 3232-6112, F: (21) 3232-6113, www.pwc.com/br

PricewaterhouseCoopers, Rua da Candelária 65, 20º, Rio de Janeiro, RJ, Brasil 20091-020, Caixa Postal 949,

T: (21) 3232-6112, F: (21) 2516-6319, www.pwc.com/br

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Condensed Consolidated Balance Sheets

Expressed in millions of United States dollars

	September 30, 2011	December 31, 2010
	(unaudited)
Assets
Current assets
Cash and cash equivalents	7,565	7,584
Short-term investments	––	1,793
Accounts receivable
Related parties	274	435
Unrelated parties	8,421	7,776
Loans and advances to related parties	201	96
Inventories	5,056	4,298
Deferred income tax	517	386
Unrealized gains on derivative instruments	835	52
Advances to suppliers	623	188
Recoverable taxes	2,017	1,603
Assets held for sale	61	6,987
Others	1,208	593
	26,778	31,791

Non-current assets
Property, plant and equipment, net	84,273	83,096
Intangible assets	1,138	1,274
Investments in affiliated companies, joint ventures and others investments	7,837	4,497
Other assets:
Goodwill on acquisition of subsidiaries	3,005	3,317
Loans and advances
Related parties	10	29
Unrelated parties	288	165
Prepaid pension cost	1,737	1,962
Prepaid expenses	206	222
Judicial deposits	1,614	1,731
Recoverable taxes	490	361
Deferred income tax	611	––
Unrealized gains on derivative instruments	56	301
Tax Incentive / reinvestiment	291	144
Others	664	249
	8,972	8,481
Total	128,998	129,139

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Condensed Consolidated Balance Sheets

Expressed in millions of United States dollars

(Except number of shares)

	(Continued)
	September 30, 2011		December 31, 2010
	(unaudited)
Liabilities and stockholders’ equity
Current liabilities
Suppliers	4,777		3,558
Payroll and related charges	1,088		1,134
Minimum annual remuneration attributed to stockholders	1,779		4,842
Current portion of long-term debt	1,567		2,823
Short-term debt	59		139
Loans from related parties	14		9
Provision for income taxes	1,085		751
Taxes payable and royalties	189		257
Employees postretirement benefits	208		168
Unrealized losses on derivative instruments	6		35
Provisions for asset retirement obligations	54		75
Liabilities associated with assets held for sale	30		3,152
Others	1,118		969
	11,974		17,912

Non-current liabilities
Employees postretirement benefits	2,126		2,442
Long-term debt	21,355		21,591
Provisions for contingencies (Note 16 (b))	1,909		2,043
Unrealized losses on derivative instruments	547		61
Deferred income tax	5,991		8,085
Provisions for asset retirement obligations	1,219		1,293
Debentures	1,276		1,284
Others	2,161		1,987
	36,584		38,786

Redeemable noncontrolling interest	556		712

Commitments and contingencies (Note 16)

Stockholders’ equity
Preferred class A stock - 7,200,000,000 no-par-value shares authorized and 1,955,824,156 (2010 - 2,108,579,618) issued	16,728		10,370
Common stock - 3,600,000,000 no-par-value shares authorized and 3,183,360,475 (2010 - 3,256,724,482) issued	25,837		16,016
Treasury stock - 152,755,462 (2010 - 99,649,571) preferred and 73,364,007 (2010 - 47,375,394) common shares	(4,661	)	(2,660	)
Additional paid-in capital	318		2,188
Mandatorily convertible notes - common shares	290		290
Mandatorily convertible notes - preferred shares	644		644
Other cumulative comprehensive loss	(5,088	)	(333	)
Undistributed retained earnings	25,685		42,218
Unappropriated retained earnings	17,487		166
Total Company stockholders’ equity	77,240		68,899
Noncontrolling interests	2,644		2,830
Total stockholders’ equity	79,884		71,729
Total	128,998		129,139

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Condensed Consolidated Statements of Income

Expressed in millions of United States dollars

(Except per share amounts)

	(unaudited)
	Three-month period ended						Nine-month period ended
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Operating revenues, net of discounts, returns and allowances
Sales of ores and metals	14,783		13,659		12,350		40,185		26,401
Aluminum products	—		—		609		383		1,863
Revenues from logistic services	503		476		408		1,307		1,131
Fertilizer products	1,037		867		802		2,691		1,077
Others	418		343		327		1,068		802
	16,741		15,345		14,496		45,634		31,274
Taxes on revenues	(380	)	(356	)	(394	)	(1,071	)	(910	)
Net operating revenues	16,361		14,989		14,102		44,563		30,364
Operating costs and expenses
Cost of ores and metals sold	(4,737	)	(4,361	)	(3,503	)	(13,199	)	(9,068	)
Cost of aluminum products	—		—		(491	)	(289	)	(1,543	)
Cost of logistic services	(391	)	(376	)	(263	)	(1,056	)	(755	)
Cost of fertilizer products	(788	)	(676	)	(669	)	(2,109	)	(882	)
Others	(335	)	(308	)	(187	)	(895	)	(526	)
	(6,251	)	(5,721	)	(5,113	)	(17,548	)	(12,774	)
Selling, general and administrative expenses	(654	)	(434	)	(418	)	(1,507	)	(1,054	)
Research and development expenses	(440	)	(363	)	(216	)	(1,145	)	(577	)
Gain on sale of assets	—		—		—		1,513		—
Others	(643	)	(724	)	(519	)	(1,787	)	(1,431	)
	(7,988	)	(7,242	)	(6,266	)	(20,474	)	(15,836	)
Operating income	8,373		7,747		7,836		24,089		14,528
Non-operating income (expenses)
Financial income	188		226		56		579		173
Financial expenses	(822	)	(514	)	(741	)	(1,918	)	(1,720	)
Gains (losses) on derivatives, net	(568	)	358		500		29		158
Foreign exchange and indexation gains (losses), net	(2,191	)	578		257		(1,533	)	293
	(3,393	)	648		72		(2,843	)	(1,096	)

Income before discontinued operations, income taxes and equity results	4,980		8,395		7,908		21,246		13,432
Income taxes
Current	(1,197	)	(1,719	)	(2,589	)	(4,509	)	(3,447	)
Deferred	846		(688	)	443		374		879
	(351	)	(2,407	)	(2,146	)	(4,135	)	(2,568	)

Equity in results of affiliates, joint ventures and other investments	282		406		305		968		684
Net income from continuing operations	4,911		6,394		6,067		18,079		11,548
Discontinued operations, net of tax	—		—		8		—		(143	)
Net income	4,911		6,394		6,075		18,079		11,405
Net income (loss) attributable to noncontrolling interests	(24	)	(58	)	37		(134	)	58
Net income attributable to the Company’s stockholders	4,935		6,452		6,038		18,213		11,347

Basic and diluted earnings per share attributable to Company’s stockholders
Earnings per preferred share	0.93		1.21		1.13		3.43		2.12
Earnings per common share	0.93		1.21		1.13		3.43		2.12
Earnings per preferred share linked to mandatorily convertible notes (*)	1.78		1.71		1.35		5.16		3.15
Earnings per common share linked to mandatorily convertible notes (*)	1.79		1.79		1.36		5.32		4.94

(*) Basic earnings per share only, as dilution assumes conversion

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Condensed Consolidated Statements of Comprehensive Income (deficit)

Expressed in millions of United States dollars

	(Unaudited)
	Three-month period ended						Nine-month period ended
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Comprehensive income is comprised as follows:
Company’s stockholders:
Net income attributable to Company’s stockholders	4,935		6,452		6,038		18,213		11,347
Cumulative translation adjustments	(7,486	)	1,581		3,352		(4,718	)	1,507

Available-for-sale securities
Gross balance as of the period/year end	—		(13	)	1		(14	)	5
Tax (expense) benefit	—		11		—		11		(4	)
	—		(2	)	1		(3	)	1
Surplus (deficit) accrued pension plan
Gross balance as of the period/year end	(467	)	(195	)	344		(479	)	294
Tax (expense) benefit	150		63		(126	)	150		(102	)
	(317	)	(132	)	218		(329	)	192
Cash flow hedge
Gross balance as of the period	123		138		20		275		148
Tax (expense) benefit	26		3		(33	)	20		(41	)
	149		141		(13	)	295		107
Total comprehensive income attributable to Company’s stockholders	(2,719	)	8,040		9,596		13,458		13,154
Noncontrolling interests:
Net income attributable to noncontrolling interests	(24	)	(58	)	37		(134	)	58
Cumulative translation adjustments	(269	)	40		211		(283	)	189
Pension plan	(1	)	5		—		4		—
Cash flow hedge	—		—		—		1		35
Total comprehensive income (deficit) attributable to Noncontrolling interests	(294	)	(13	)	248		(412	)	282
Total comprehensive income	(3,013	)	8,027		9,844		13,046		13,436

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Condensed Consolidated Statements of Cash Flows

Expressed in millions of United States dollars

	(Unaudited)
	Three-month period ended						Nine-month period ended
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Cash flows from operating activities:
Net income	4,911		6,394		6,075		18,079		11,405
Adjustments to reconcile net income to cash from operations:
Depreciation, depletion and amortization	1,018		979		696		2,954		2,187
Dividends received	240		343		283		833		532
Equity in results of affiliates, joint ventures and other investments	(282	)	(406	)	(305	)	(968	)	(684	)
Deferred income taxes	(846	)	688		(443	)	(374	)	(879	)
Loss on disposal of property, plant and equipment	17		19		229		208		375
Gain on sale of assets available for sale	—		—		—		(1,513	)	—
Discontinued operations, net of tax	—		—		(8	)	—		143
Foreign exchange and indexation gains, net	2,218		257		(150	)	2,371		(229	)
Unrealized derivative losses (gains), net	642		(230	)	(403	)	200		63
Unrealized interest (income) expense, net	78		(41	)	225		44		230
Others	(37	)	(41	)	(17	)	(115	)	84
Decrease (increase) in assets:
Accounts receivable	(730	)	(658	)	(776	)	(1,277	)	(3,161	)
Inventories	(324	)	(73	)	(441	)	(1,140	)	(829	)
Recoverable taxes	(392	)	(79	)	142		(583	)	112
Others	(219	)	(280	)	(467	)	(299	)	(402	)
Increase (decrease) in liabilities:
Suppliers	829		246		876		1,232		1,373
Payroll and related charges	212		204		160		60		10
Income taxes	(2,745	)	(24	)	1,093		(2,293	)	1,404
Others	(379	)	(233	)	110		(135	)	227
Net cash provided by operating activities	4,211		7,065		6,879		17,284		11,961
Cash flows from investing activities:
Short term investments	—		540		—		1,793		3,747
Loans and advances receivable
Related parties
Loan proceeds	—		—		—		—		(28	)
Repayments	—		—		(1	)	—		—
Others	57		(34	)	(17	)	(120	)	(13	)
Judicial deposits	(239	)	(159	)	(27	)	(427	)	(190	)
Investments	(18	)	(26	)	—		(159	)	(51	)
Additions to property, plant and equipment	(3,711	)	(3,480	)	(3,852	)	(10,004	)	(7,905	)
Proceeds from disposal of investments available for sale					—		1,081		—
Acquisition (sale) of subsidiaries	—		—		(1,018	)	—		(6,252	)
Net cash used in investing activities	(3,911	)	(3,159	)	(4,915	)	(7,836	)	(10,692	)
Cash flows from financing activities:
Short-term debt
Additions	20		51		147		838		2,004
Repayments	(63	)	(96	)	(130	)	(919	)	(1,985	)
Loans
Related parties
Proceeds	—		—		7		19		22
Repayments	—		—		—		(1	)	(3	)
Issuances of long-term debt
Third parties
Proceeds	479		268		2,017		1,350		3,545
Repayments	(769	)	(419	)	(1,288	)	(2,539	)	(1,671	)
Treasury stock	(2,001	)	—		(341	)	(2,001	)	(341	)
Transactions of noncontrolling interest					660				660
Dividends and interest attributed to Company’s stockholders	(3,000	)	(2,000	)	—		(6,000	)	(1,250	)
Dividends and interest attributed to noncontrolling interest	—		(60	)	—		(60	)	(59	)
Net cash provided by (used in) financing activities	(5,334	)	(2,256	)	1,072		(9,313	)	922
Increase (decrease) in cash and cash equivalents	(5,034	)	1,650		3,036		135		2,191
Effect of exchange rate changes on cash and cash equivalents	(628	)	306		452		(154	)	239
Cash and cash equivalents, beginning of period	13,227		11,271		6,235		7,584		7,293
Cash and cash equivalents, end of period	7,565		13,227		9,723		7,565		9,723
Cash paid during the period for:
Interest on short-term debt	—		(1	)	(2	)	(2	)	(3	)
Interest on long-term debt	(234	)	(374	)	(242	)	(945	)	(783	)
Income tax	(4,097	)	(1,171	)	(705	)	(6,233	)	(872	)
Non-cash transactions
Interest capitalized	54		69		24		156		126

Conversion of mandatorily convertible notes using 75,435,238 treasury stock (see note 13).

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

Expressed in millions of United States dollars

(Except number of shares)

	(Unaudited)
	Three-month period ended						Nine-month period ended
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Preferred class A stock (including twelve golden shares)
Beginning of the period	16,728		10,370		10,370		10,370		9,727
Capital increase	—		6,358		—		6,358		—
Transfer from undistributed retained earnings	—		—		—		—		643
End of the period	16,728		16,728		10,370		16,728		10,370
Common stock
Beginning of the period	25,837		16,016		16,016		16,016		15,262
Capital increase	—		9,821		—		9,821		—
Transfer from undistributed retained earnings	—		—		—		—		754
End of the period	25,837		25,837		16,016		25,837		16,016
Treasury stock
Beginning of the period	(2,660	)	(2,660	)	(660	)	(2,660	)	(1,150	)
Sales (acquisitions)	(2,001	)	—		(868	)	(2,001	)	(378	)
End of the period	(4,661	)	(2,660	)	(1,528	)	(4,661	)	(1,528	)
Additional paid-in capital
Beginning of the period	318		2,188		1,790		2,188		411
Change in the period	—		(1,870	)	398		(1,870	)	1,777
End of the period	318		318		2,188		318		2,188
Mandatorily convertible notes - common shares
Beginning of the period	290		290		290		290		1,578
Change in the period	—		—		—		—		(1,288	)
End of the period	290		290		290		290		290
Mandatorily convertible notes - preferred shares
Beginning of the period	644		644		644		644		1,225
Change in the period	—		—		—		—		(581	)
End of the period	644		644		644		644		644
Other cumulative comprehensive income (deficit)
Cumulative translation adjustments
Beginning of the period	2,515		934		(3,617	)	(253	)	(1,772	)
Change in the period	(7,486	)	1,581		3,352		(4,718	)	1,507
End of the period	(4,971	)	2,515		(265	)	(4,971	)	(265	)
Unrealized gain (loss) - available-for-sale securities, net of tax
Beginning of the period	—		2		—		3		—
Change in the period	—		(2	)	1		(3	)	1
End of the period	—		—		1		—		1
Surplus (deficit) accrued pension plan
Beginning of the period	(71	)	61		(64	)	(59	)	(38	)
Change in the period	(317	)	(132	)	218		(329	)	192
End of the period	(388	)	(71	)	154		(388	)	154
Cash flow hedge
Beginning of the period	122		(19	)	122		(24	)	2
Change in the period	149		141		(13	)	295		107
End of the period	271		122		109		271		109
Total other cumulative comprehensive income (deficit)	(5,088	)	2,566		(1	)	(5,088	)	(1	)
Undistributed retained earnings
Beginning of the period	30,082		43,189		26,086		42,218		28,508
Transfer from/to unappropriated retained earnings	(4,397	)	1,202		1,644		(2,224	)	619
Transfer to capitalized earnings	—		(14,309	)	—		(14,309	)	(1,397	)
End of the period	25,685		30,082		27,730		25,685		27,730
Unappropriated retained earnings
Beginning of the period	11,211		5,995		9,234		166		3,182
Net income attributable to the stockholders’ Company	4,935		6,452		6,038		18,213		11,347
Interest on mandatorily convertible debt
Preferred class A stock	(40	)	(24	)	(11	)	(82	)	(49	)
Common stock	(16	)	(10	)	(5	)	(34	)	(51	)
Dividends and interest attributed to stockholders’ equity
Preferred class A stock	(1,231	)	—		—		(1,231	)	(77	)
Common stock	(1,769	)	—		—		(1,769	)	(121	)
Appropriation from/to undistributed retained earnings	4,397		(1,202	)	(1,644	)	2,224		(619	)
End of the period	17,487		11,211		13,612		17,487		13,612
Total Company stockholders’ equity	77,240		85,016		69,321		77,240		69,321
Noncontrolling interests
Beginning of the period	2,905		2,904		3,485		2,830		2,831
Disposals (acquisitions) of noncontrolling interests	—		—		(680	)	117		1,629
Cumulative translation adjustments	(269	)	40		211		(283	)	189
Cash flow hedge	—		—		—		1		35
Net income (loss) attributable to noncontrolling interests	(24	)	(58	)	37		(134	)	58
Net income (loss) attributable to redeemable noncontrolling interests	22		65		—		155		—
Dividends and interest attributable to noncontrolling interests	—		(59	)	(80	)	(65	)	(86	)
Capitalization of stockholders advances	11		8		—		19		—
Pension plan	(1	)	5		—		4		—
Assets and liabilities held for sale	—		—		(147	)	—		(1,830	)
End of the period	2,644		2,905		2,826		2,644		2,826
Total stockholders’ equity	79,884		87,921		72,147		79,884		72,147

Number of shares issued and outstanding:
Preferred class A stock (including twelve golden shares)	2,108,579,618		2,108,579,618		2,108,579,618		2,108,579,618		2,108,579,618
Common stock	3,256,724,482		3,256,724,482		3,256,724,482		3,256,724,482		3,256,724,482
Buy-backs
Beginning of the period	(147,024,956	)	(147,024,956	)	(77,144,565	)	(147,024,965	)	(152,579,803	)
Acquisitions	(79,094,780	)	—		(31,155,000	)	(79,094,780	)	(31,155,000	)
Conversions	267		—		—		276		75,435,238
End of the period	(226,119,469	)	(147,024,956	)	(108,299,565	)	(226,119,469	)	(108,299,565	)
	5,139,184,631		5,218,279,144		5,257,004,535		5,139,184,631		5,257,004,535

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Notes to the Condensed Consolidated Financial Statements

Expressed in millions of United States dollars, unless otherwise stated

1 The Company and its operations

Vale S.A., (“Vale”, “Company” or “we”) is a limited liability company incorporated in Brazil. Operations are carried out through Vale and our subsidiary companies, joint ventures and affiliates, and mainly consist of mining, basic metals production, fertilizers, logistics and steel activities.

At September 30, 2011, our principal consolidated operating subsidiaries are the following:

Subsidiary	% ownership	% voting capital	Location	Principal activity
Compañia Minera Miski Mayo S.A.C.	40.00	51.00	Peru	Fertilizer
Ferrovia Centro-Atlântica S. A.	99.99	99.99	Brazil	Logistics
Ferrovia Norte Sul S.A.	100.00	100.00	Brazil	Logistics
Mineração Corumbaense Reunida S.A. - MCR	100.00	100.00	Brazil	Iron ore
PT International Nickel Indonesia Tbk	59.14	59.14	Indonesia	Nickel
Sociedad Contractual Minera Tres Valles	90.00	90.00	Chile	Copper
Vale Australia Pty Ltd.	100.00	100.00	Australia	Coal
Vale Austria Holdings GMBH	100.00	100.00	Austria	Holding and Exploration
Vale Canada Limited	100.00	100.00	Canada	Nickel
Vale Coal Colombia Ltd.	100.00	100.00	Colombia	Coal
Vale Fertilizantes S.A	84.27	99.90	Brazil	Fertilizer
Vale International S.A	100.00	100.00	Switzerland	Trading
Vale Manganês S.A.	100.00	100.00	Brazil	Manganese and Ferroalloys
Vale Moçambique, Limitada	100.00	100.00	Mozambique	Coal
Vale Nouvelle-Calédonie SAS	74.00	74.00	New Caledonia	Nickel
Vale Oman Pelletizing Company LLC	100.00	100.00	Oman	Pellets
Vale Shipping Holding PTE Ltd.	100.00	100.00	Singapore	Logistics

2 Basis of consolidation

All majority-owned subsidiaries in which we have both share and management control are consolidated. All significant intercompany accounts and transactions are eliminated. Subsidiaries over which control is achieved through other means, such as stockholders agreement, are also consolidated even if we hold less than 51% of voting capital. Our variable interest entities in which we are the primary beneficiary are consolidated. Investments in unconsolidated affiliates and joint ventures are accounted for under the equity method (Note 10).

We evaluate the carrying value of our equity investments in relation to publicly quoted market prices when available. If the quoted market price is below book value, and such decline is considered other than temporary, we write-down our equity investments to quoted market value.

We define joint ventures as businesses in which we and a small group of other partners each participate actively in the overall entity management, based on a stockholders agreement. We define affiliates as businesses in which we participate as a noncontrolling interest but with significant influence over the operating and financial policies of the investee.

Our participation in hydroelectric projects in Brazil is made via consortium contracts under which we have undivided interests in the assets, and are liable for our proportionate share of liabilities and expenses, which are based on our proportionate share of power output. We do not have joint liability for any obligations. No separate legal or tax status is granted to consortia under Brazilian law. Accordingly, we recognize our proportionate share of costs and our undivided interest in assets relating to hydroelectric projects.

3 Basis of presentation

Our condensed consolidated interim financial statements for the three-month periods ended September 30, 2011, June 30, 2011 and September 30, 2010 and for the nine-month periods ended September 30, 2011 and September 30, 2010, prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), are unaudited. However, in our opinion, such condensed consolidated financial information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for interim periods. The results of operations for the three-month and nine-month periods ended September 30, 2011, are not

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necessarily indicative of the actual results expected for the full fiscal year ending December 31, 2011. This condensed consolidated interim financial statement should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2010, prepared in accordance with US GAAP.

In preparing the condensed consolidated financial statements, we are required to use estimates to account for certain assets, liabilities, revenues and expenses. Our condensed consolidated financial statements therefore include various estimates concerning the selection of useful lives of property, plant and equipment, impairment, provisions necessary for contingent liabilities, fair values assigned to assets and liabilities acquired and assumed in business combinations, income tax uncertainties, employee post-retirement benefits and other similar evaluations. Actual results may vary from our estimates.

Since December 2007, significant modifications have been made to (“Brazilian GAAP”) as part of a convergence project with International Financial Reporting Standards (“IFRS”) and as from December 31, 2010, the convergence was completed and therefore the (“IFRS”) is the accounting practice adopted in Brazil. The Company does expect to continue the (“US GAAP”) reporting during 2011.

The Brazilian real is the parent Company’s functional currency. We have selected the US dollar as our reporting currency.

All assets and liabilities have been translated to US dollars at the closing rate of exchange at each balance sheet date (or, if unavailable, the first available exchange rate). All statement of income accounts have been translated to US dollars at the average exchange rates prevailing during the respective periods. Capital accounts are recorded at historical exchange rates. Translation gains and losses are recorded in the Cumulative Translation Adjustments account (“CTA”) in stockholders’ equity.

The results of operations and financial position of our entities that have a functional currency other than the US dollar have been translated into US dollars and adjustments to translate those statements into US dollars are recorded in the CTA in stockholders’ equity.

The exchange rates used to translate the assets and liabilities of the Brazilian operations at September 30, 2011 and December 31, 2010, were R$ 1.8544 and R$1.6662, respectively.

4 Accounting pronouncements

a) Newly issued accounting pronouncements

Accounting Standards Update (ASU) number 2011-08 Intangibles—Goodwill and Other (Topic 350). The objective of this Update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. We are currently studying the future impact of this statement. We do not expect any significant change in the disclosure of any financial statements.

Accounting Standards Update (ASU) number 2011-04: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in USGAAP and IFRSs. The amendments in this Update generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This Update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with US GAAP and IFRSs. We are currently studying the future impact of this statement.

Accounting Standards Update (ASU) number 2011-03: Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. We do not expect any significant change in the disclosure of our financial statements.

The Company understands that the other recently issued accounting pronouncements that are not effective as of and for the period ending September 30, 2011, are not expected to be relevant for its consolidated financial statements.

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b) Accounting standards adopted in 2011

Accounting Standards Update (ASU) number 2011-05 Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income, so an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income. The Company adopted this standard with no impact on our financial position, results of operations or liquidity.

Accounting Standards Update (ASU) number 2011-02: Receivables (Topic 310) - A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments in this Update would provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The Company adopted this standard with no impact on our financial position, results of operations or liquidity.

Accounting Standards Update (ASU) number 2010-29 Disclosure of Supplementary Pro Forma Information for Business Combinations a consensus of the FASB Emerging Issues Task Force. The objective of this Update is to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The amendments in this Update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The Company fully adopted this standard in 2011. This codification does not impact our financial position, results of operations or liquidity.

5 Major acquisitions and disposals

a) Sale of aluminum assets

In February 2011, we concluded the transaction announced in May, 2010 with Norsk Hydro ASA (Hydro), to transfer all of our stakes in Albras-Alumínio Brasileiro S.A. (Albras), Alunorte Alumina do Norte do Brasil S.A. (Alunorte) and Companhia de Alumina do Pará (CAP), along with its respective off-take rights and outstanding commercial contracts, and 60% of Mineração Paragominas S.A. and all our other Brazilian bauxite mineral rights.

For this transaction we received US$ 1,081 in cash and 22% equivalent to 447,834,465 shares of Hydro’s common shares outstanding (approximately US$ 3.5 billion according to Hydro’s closing share price at the date of the transaction). Three and five years after the closing of the transaction, we will receive two equal tranches of US$ 200 each in cash, related to the remaining payment of 40% of Mineração Paragominas S.A. From the date of the transaction, Hydro has been accounted for by the equity method.

The gain on this transaction, of US$ 1,513 was recorded in the income statement in the line Gain on sale of assets.

b) Fertilizers Businesses

In May 2010, we acquired 78.92% of the total capital and 99.83% of the voting capital of Vale Fertilizantes and 100% of the total capital of Vale Fosfatados. In 2011, after the incorporation of Vale Fosfatados by Vale Fertilizantes, our total participation reaches 84.27%.

The purchase price allocation based on the fair values of acquired assets and liabilities was based on studies performed by us with the assistance of external valuation specialists.

Purchase price	5,795
Noncontrolling consideration	767
Book value of property, plant and equipment and mining rights	(1,987	)
Book value of other assets acquired and liabilities assumed, net	(395	)
Adjustment to fair value of property, plant and equipment and mining rights	(5,146	)
Adjustment to fair value of inventories	(98	)
Deferred taxes on the above adjustments	1,783

Goodwill	719

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The goodwill balance arises primarily due to the synergies between the acquired assets and the potash operations in Taquari-Vassouras, Carnalita, Rio Colorado and Neuquém and phosphates in Bayóvar I and II, in Peru, and Evate, in Mozambique. The future development of our projects combined with the acquisition of the portfolio of fertilizer assets will allow Vale to be one of the top players in the world’s fertilizer business.

In June 2011, we announced a public offer to acquire up to 100% of the free float of our subsidiary Vale Fertilizantes S.A. The public offer involves a cash price of R$ 25.00 per share, for both common and preferred shares, amounting a total disbursement by Vale of up to R$ 2.2 billion (equivalent to US$ 1.2 billion as at September 30, 2011) representing 0.09% of the common shares and 31.77% of the preferred shares issued by Vale Fertilizantes. In July 2011, we filed with Comissão de Valores Mobiliários (CVM) the Prospect (Edital) and a request for registration of a public offer to acquire up to 100% of the free float shares of its subsidiary Vale Fertilizantes S.A. (Vale Fertilizantes), in order to subsequently cancel the public company registration, as previously disclosed.

c) Others transactions

In July 2011, we acquired 9% of Norte Energia S.A. (NESA) from Gaia Energia e Participações S.A. (Gaia). NESA was established with the sole purpose of implementing, operating and exploring of the Belo Monte hydroelectric plant, which is still in the early development stage. Vale estimated an investment of US$ 1.4 billion to repay Gaia by capital contributions made in NESA and commitments of future capital contributions arising from the acquired stake. Until September 2011, the total amount of the invested was US$ 70.

6 Income taxes

Income taxes in Brazil comprise federal income tax and social contribution, which is an additional federal tax. The statutory composite enacted tax rate applicable in the periods presented is 34%. In other countries where we have operations, we are subject to various taxes rates depending on the jurisdiction.

We analyze the potential tax impact associated with undistributed earnings by each of our subsidiaries. For those subsidiaries in which the undistributed earnings would be taxable when remitted to the parent company, no deferred tax is recognized, based on generally accepted accounting principles.

The amount reported as income tax expense in our condensed consolidated financial statements is reconciled to the statutory rates as follows:

	(Unaudited)
	Three-month period ended																		Nine-month period ended
	September 30, 2011						June 30, 2011						September 30, 2010						September 30, 2011						September 30, 2010
	Brazil		Foreign		Total		Brazil		Foreign		Total		Brazil		Foreign		Total		Brazil		Foreign		Total		Brazil		Foreign		Total
Income before discontinued operations, income taxes, equity results and noncontrolling interests	4,187		793		4,980		7,303		1,092		8,395		7,378		530		7,908		16,008		5,238		21,246		11,005		2,427		13,432
Exchange variation (not taxable) or not deductible	—		(188	)	(188	)	—		71		71		—		751		751		—		(70	)	(70	)	—		151		151
	4,187		605		4,792		7,303		1,163		8,466		7,378		1,281		8,659		16,008		5,168		21,176		11,005		2,578		13,583

Tax at Brazilian composite rate	(1,424	)	(207	)	(1,631	)	(2,483	)	(395	)	(2,878	)	(2,509	)	(436	)	(2,945	)	(5,443	)	(1,758	)	(7,201	)	(3,742	)	(877	)	(4,619	)
Adjustments to derive effective tax rate:
Tax benefit on interest attributed to stockholders	578		—		578		258		—		258		208		—		208		1,272		—		1,272		626		—		626
Difference on tax rates of foreign income	—		331		331		—		219		219		—		411		411		—		1,298		1,298		—		974		974
Tax incentives	67		—		67		192		—		192		215		—		215		430		—		430		444		—		444
Social contribution contingency payment	506		—		506		—		—		—		—		—		—		506		—		506		—		—		—
Reversal of deferred income tax	—		—		—		—		(141	)	(141	)	—		—		—		—		(141	)	(141	)	—		—		—
Other non-taxable, income/non deductible expenses	36		(238	)	(202	)	(63	)	6		(57	)	(38	)	3		(35	)	(14	)	(285	)	(299	)	(68	)	75		7
Income tax per consolidated statements of income	(237	)	(114	)	(351	)	(2,096	)	(311	)	(2,407	)	(2,124	)	(22	)	(2,146	)	(3,249	)	(886	)	(4,135	)	(2,740	)	172		(2,568	)

Vale and some subsidiaries in Brazil were granted with tax incentives that provide for a partial reduction of the income tax due related to certain regional operations of iron ore, railroad, manganese, copper, bauxite, alumina, aluminum, kaolin and potash. The tax benefit is calculated based on taxable profit adjusted by the tax incentive (so-called “exploration profit”) taking into consideration the operational profit of the projects that benefit from the tax incentive during a fixed period. In general, such tax incentives expire in 2018. Part of the northern railroad and iron ore operations have been granted with tax incentives for a period of 10 years starting from 2009. The tax savings must be registered in a special capital (profit) reserve in the net equity of the entity that benefits from the tax incentive and cannot be distributed as dividends to the stockholders.

We are also allowed to reinvest part of the tax savings in the acquisition of new equipment to be used in the operations that enjoy the tax benefit subject to subsequent approval from the Brazilian regulatory agencies Superintendência de Desenvolvimento da Amazônia - SUDAM and Superintendência de Desenvolvimento do Nordeste - SUDENE. When the reinvestment is approved, the corresponding tax benefit must also be accounted for in a special profit reserve and is also subject to the same restrictions with respect to future dividend distributions to the stockholders.

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We also have income tax incentives related to our Goro project under development in New Caledonia (“The Goro Project”). These incentives include an income tax holiday during the construction phase of the project and throughout a 15-year period commencing in the first year in which commercial production, as defined by the applicable legislation, is achieved followed by a five-year, 50 per cent income tax holiday. The Goro Project also qualifies for certain exemptions from indirect taxes such as import duties during the construction phase and throughout the commercial life of the project. Certain of these tax benefits, including the income tax holiday, are subject to an earlier phase out, should the project achieves a specified cumulative rate of return. We are subject to a branch profit tax commencing in the first year in which commercial production is achieved, as defined by the applicable legislation. To date, we have not recorded any taxable income for New Caledonian tax purposes. The benefits of this legislation are expected to apply with respect to taxes payable once the Goro Project is in operation. We obtained tax incentives for our projects in Mozambique, Oman and Malaysia, that will take effects when those projects start their commercial operation.

We are subject to an examination by the tax authorities for up to five years regarding our operations in Brazil, up to ten years for Indonesia, and up to seven years for Canada for income taxes.

Tax loss carry forwards in Brazil and in most of the jurisdictions where we have tax loss carry forwards have no expiration date, though in Brazil, offset is restricted to 30% of annual taxable income.

Companies adopt the provision accounting for Uncertainty in Income Taxes.

The reconciliation of the beginning and ending amounts is as follows: (see note 16(b)) tax — related actions)

	(Unaudited)
	Three-month period ended					Nine-month period ended
	September 30, 2011		June 30, 2011		September 30, 2010	September 30, 2011		September 30, 2010
Beginning of the period	372		2,623		369	2,555		396
Increase resulting from tax positions taken	1		1,065		5	1,075		9
Decrease resulting from tax positions taken (a)	(2	)	(3,315	)	3	(3,319	)	(22	)
Cumulative translation adjustments	(33	)	(1	)	15	27		9
End of the period	338		372		392	338		392

(a) In July 2011, we made a payment as a consequence of a Brazilian court decision in a case related to the exemption of the Social Contribution (Contribuição Social sobre o Lucro Líquido).

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7 Cash and cash equivalents

	September 30, 2011	December 31, 2010
	(unaudited)
Cash	1,007	560
Short-term investments	6,558	7,024
	7,565	7,584

All the above mentioned short-term investments are made through the use of low risk fixed income securities, in a way that: those denominated in Brazilian Reais are concentrated in investments indexed to the CDI, and those denominated in US dollars are mainly time deposits, with the original due date less than three months.

8 Short-term investments

	September 30, 2011	December 31, 2010
	(Unaudited)
Time deposit	—	1,793

Represent low risk investments with original due date over three months.

9 Inventories

	September 30, 2011	December 31, 2010
	(Unaudited)
Products
Nickel (co-products and by-products)	2,007	1,310
Iron ore and pellets	1,055	825
Manganese and ferroalloys	178	203
Fertilizer	313	171
Copper concentrate	70	28
Coal	189	74
Others	88	143
Spare parts and maintenance supplies	1,156	1,544
	5,056	4,298

In September 30, 2011, the inventory includes provision for adjustment to market value for the products nickel in the amount of US$ 145 (US$ 0 at December 31, 2010).

10 Investments in affiliated companies and joint ventures

	September 30, 2011 (unaudited)						Investments				Equity in earnings (losses) of investee adjustments (unaudited)										Dividends Received (unaudited)
					Net income						Three-month period ended						Nine-month period ended				Three-month period ended			Nine-month period ended
	Participation in capital (%)		Net equity		(loss) of the period		September 30, 2011		December 31, 2010		September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010		September 30, 2011	June 30, 2011	September 30, 2010	September 30, 2011	September 30, 2010
	Voting	Total					(Unaudited)
Bulk Material
Iron ore and pellets
Companhia Nipo-Brasileira de Pelotização - NIBRASCO (1)	51.11	51.00	333		76		168		171		16		15		30		39		36		—	22	3	22	3
Companhia Hispano-Brasileira de Pelotização - HISPANOBRÁS (1)	51.00	50.89	179		(13	)	91		128		(14	)	5		1		(6	)	5		—	20	—	20	25
Companhia Coreano-Brasileira de Pelotização - KOBRASCO (1)	50.00	50.00	134		46		69		87		5		8		25		23		34		15	17	11	32	11
Companhia Ítalo-Brasileira de Pelotização - ITABRASCO (1)	51.00	50.90	152		79		78		86		16		15		—		41		4		—	—	—	—	—
Minas da Serra Geral SA - MSG	50.00	50.00	56		5		28		36		1		(5	)	1		(3	)	1		—	—	—	—	—
SAMARCO Mineração SA - SAMARCO (2)	50.00	50.00	821		1,384		468		561		207		278		245		692		534		225	225	225	700	375
Baovale Mineração SA - BAOVALE	50.00	50.00	67		13		33		31		2		2		—		6		2		—	—	—	—	—
Zhuhai YPM Pellet e Co,Ltd - ZHUHAI	25.00	25.00	90		—		22		25		(1	)	1		1		(1	)	5		—	—	—	—	—
Tecnored Desenvolvimento Tecnológico SA	43.04	43.04	100		(7	)	43		40		(2	)	—		—		(3	)	(11	)	—	—	—	—	—
							1,000		1,165		230		319		303		788		610		240	284	239	774	414
Coal
Henan Longyu Resources Co Ltd	25.00	25.00	1,316		269		329		250		26		18		(27	)	68		12		—	—	44	—	83
Shandong Yankuang International Company Ltd	25.00	25.00	(155	)	(47	)	(39	)	(27	)	(2	)	(4	)	(5	)	(11	)	(12	)	—	—	—	—	—
							290		223		24		14		(32	)	57		—		—	—	44	—	83
Base Metals
Bauxite
Mineração Rio do Norte SA - MRN	40.00	40.00	341		4		136		152		(1	)	1		5		2		7		—	—	—	—	—
							136		152		(1	)	1		5		2		7		—	—	—	—	—
Copper
Teal Minerals Incorporated	50.00	50.00	264		(18	)	132		90		(2	)	(2	)	—		(9	)	(13	)	—	—	—	—	—
							132		90		(2	)	(2	)	—		(9	)	(13	)	—	—	—	—	—
Nickel
Heron Resources Inc (3)	—	—	—		—		6		7		—		—		—		—		—		—	—	—	—	—
Korea Nickel Corp	25.00	25.00	(16	)	—		(4	)	11		—		—		—		—		—		—	—	—	—	—
Others (3)	—	—	—		—		1		5		—		—		—		—		—		—	—	—	—	—
							3		23		—		—		—		—		—		—	—	—	—	—
Aluminium
Norsk Hydro ASA (4)	22.00	22.00	16,320		547		3,590		—		70		50		—		120		—		—	52	—	52	35
							3,590		—		70		50		—		120		—		—	52	—	52	35
Logistic
LOG-IN Logística Intermodal SA	31.33	31.33	353		(8	)	119		135		—		(2	)	—		(2	)	—		—	—	—	—	—
MRS Logística SA	37.86	41.50	1,211		249		502		511		32		35		26		103		62		—	7	—	7	—
							621		646		32		33		26		101		62		—	7	—	7	—
Others
Steel
California Steel Industries Inc - CSI	50.00	50.00	338		28		169		155		2		7		(2	)	15		13		—	—	—	—	—
THYSSENKRUPP CSA Companhia Siderúrgica	26.87	26.87	5,518		(337	)	1,483		1,840		(72	)	(10	)	(10	)	(90	)	(10	)	—	—	—	—	—
							1,652		1,995		(70	)	(3	)	(12	)	(75	)	3		—	—	—	—	—
Other affiliates and joint ventures
Vale Soluções em Energia (1)	51.00	51.00	230		(29	)	121		115		(1	)	(6	)	—		(16	)	—		—	—	—	—	—
Others	—	—	—		—		292		88		—		—		15		—		15		—	—	—	—	—
							413		203		(1	)	(6	)	15		(16	)	15		—	—	—	—	—

Total							7,837		4,497		282		406		305		968		684		240	343	283	833	532

(1) Although Vale held a majority of the voting interest of investees accounted for under the equity method, existing veto rights held by noncontrolling shareholders

(2) Investment includes goodwill of US$64 in December, 2010 and US$58 in September, 2011;

(3) Available for sale.

(4) The net equity is adjusted based on our acquisition and the net income refers to the period from March onwards

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11 Short-term debt

Short-term borrowings outstanding on September 30, 2011 are from commercial banks for import financing denominated in US dollars with average annual interest rates of 1.78%.

12 Long-term debt

	Current liabilities		Non-current liabilities
	September 30, 2011	December 31, 2010	September 30, 2011	December 31, 2010
	(unaudited)		(unaudited)
Foreign debt
Loans and financing denominated in the following currencies:
US dollars	570	2,384	2,745	2,530
Others	23	18	238	217
Fixed Rate Notes
US dollars	400	—	9,831	10,242
EUR	—	—	1,009	1,003
Perpetual notes	—	—	78	78
Accrued charges	216	233	—	—
	1,209	2,635	13,901	14,070
Brazilian debt
Brazilian Reais indexed to Long-Term Interest Rate - TJLP/CDI and
General Price Index-Market (IGP-M)	180	76	4,937	3,891
Basket of currencies	—	1	4	125
Non-convertible debentures	—	—	2,513	2,767
US dollars denominated	—	1	—	738
Accrued charges	178	110	—	—
	358	188	7,454	7,521
Total	1,567	2,823	21,355	21,591

The long-term portion at September 30, 2011 was as follows (unaudited):

2012		206
2013		3,164
2014		1,172
2015		879
2016 and after		15,500
No due date		434
		21,355

At September 30, 2011 annual interest rates on long-term debt were as follows (unaudited):

Up to 3%		4,365
3.1% to 5% (*)		2,198
5.1% to 7%		8,816
7.1% to 9% (**)		3,394
9.1% to 11% (**)		93
Over 11% (**)		3,976
Variable		80
		22,922

(*) Includes Eurobonds. For this operation we have entered into derivative transactions at a cost of 4.71% per year in US dollars.

(**) Includes non-convertible debentures and other Brazilian Real denominated debt that bear interest at the Brazilian Interbank Certificate of Deposit (CDI) and Brazilian Government Long-term Interest Rates (TJLP) plus a spread. For these operations we, have entered into derivative transactions to mitigate our exposure to the floating rate debt denominated in Brazilian Real, totaling US$ 6.137 of which US$ 5.154 has an original interest rate above 7.1% per year. The average cost after taking into account the derivative transactions is 3.08% per year in US dollars.

The average cost of all derivative transactions is 3.31% per year in US dollars.

Vale has non-convertible debentures at Brazilian Real denominated as follows:

Quantity as of September 30, 2011

Balance

Non Convertible Debentures

Issued

Outstanding

Maturity

Interest

September 30, 2011

December 31, 2010

include: (unaudited)

2nd Series

400,000

November-2013

100% CDI + 0.25%

2,252

2,429

Tranche “B”

No due date

6.5% p.a + IGP-DI

356

367

2,608

2,796

Long-term portion

2,513

2,767

Accrued chages

2,608

2,796

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The indexation indices/ rates applied to our debt were as follows:

	(Unaudited)
	Three-month period ended			Nine-month period ended
	September 30, 2011	June 30, 2011	September 30, 2010	September 30, 2011		September 30, 2010

TJLP - Long-Term Interest Rate (effective rate)	1.5	1.5	1.5	(1.5	)	4.5
IGP-M - General Price Index - Market	1.0	0.7	2.1	4.1		7.8
Appreciation (devaluation) of Real against US dollar	18.8	4.2	6.3	25.3		2.8

In August 2011, Vale signed an agreement with certain commercial banks with the support of Korean Trade Insurance Corporation (K-SURE), in order to finance the acquisition of five very large ore carriers and two capesizes. The total amount of the facility is US$ 530 and the funds will be disbursed according to the delivery of the vessels. As of September 30, 2011, Vale had drawn US$91 under the facility.

In September 2010, Vale entered into agreements with The Export-Import Bank of China and the Bank of China Limited for the financing to build 12 very large ore carriers with 400,000 dwt, comprising a facility in an amount up to US$1,229. The financing has a 13-year total term to be repaid, and the funds will be disbursed during 3 years according to the construction schedule. As of September 30, 2011, we had drawn US$467 under the facility.

In September 2010, we issued US$1 billion notes due 2020 and US$750 notes due 2039. The 2020 notes were sold at a price of 99.030% of the principal amount and will bear a coupon of 4.625% per year, payable semi-annually. The 2039 notes that were sold at a price of 110.872% of the principal amount will be consolidated with and form a single series with Vale Overseas US$1 billion 6.875% Guaranteed Notes due 2039 issued on November 10, 2009.

Credit Lines

Vale has available revolving credit lines that can be disbursed and paid optionally. On September 30, 2011, the amount available involving credit line was US$ 4,100. Until September 30, 2011, no amounts were withdrawn, but letters of credit totaling US$ 105 relating to the line of credit were issued in favor of subsidiary Vale Canada Limited and continue outstanding according to the revolving credit terms.

In January 2011, Vale entered into an agreement with some commercial banks with the guarantee of Italian credit bureau, Servizi Assicurativi Del Commercio Estero S.p.A. (SACE) to provide the amount of US$300 with a final maturity of 10 years. As of September 30, 2011 we had drawn all amounts available under this facility.

In October 2010, Vale signed an agreement with Export Development Canada (EDC) to finance its investment program. Under the agreement, EDC will provide a credit line of up to US$1 billion. As of September 30, 2011, Vale disbursed US$ 500.

In June 2010, Vale established some credit lines totaling US$ 430 with the Banco Nacional de Desenvolvimento Econômico Social — BNDES, in order to finance the acquisition of domestic equipments. In March 31, 2011, Vale increased the amount of credit lines through a new agreement with BNDES in R$ 103 (US$ 62). Until September 30, 2011, US$ 184 was disbursed in this agreement.

In May 2008, the Company has signed agreements with Japanese long term financing credit agencies in the amount of US$ 5 billion, being US$ 3 billion with Japan Bank for International Cooperation (JIBC) and US$ 2 billion with Nippon Export and Investment Insurance (NEXI), to finance mining projects, logistics and energy generation. Until September 30, 2011, Vale through its subsidiary PT International Nickel Indonesia Tbk (PTI) withdrew US$ 300, under this credit facility to finance the construction of the hydroelectric plant of Karebbe, Indonesia.

In April 2008, Vale has signed a credit line in the amount of R$ 7,300 (US$ 4 billion) with Banco Nacional de Desenvolvimento Econômico e Social - BNDES to finance its investment program. Until September 30, 2011, Vale withdrew R$ 2,391 (US$ 1,289) in this line.

Guarantee

On September 30, 2011, US$ 560 of the total aggregate outstanding debt was secured by fixed assets.

Our principal covenants require us to maintain certain ratios, such as debt to EBITDA and interest coverage. We have not identified any events of noncompliance as of September 30, 2011.

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13 Stockholders’ equity

Each holder of common and preferred class A stock is entitled to one vote for each share on all matters brought before stockholders’ meetings, except for the election of the Board of Directors, which is restricted to the holders of common stock. The Brazilian Government holds twelve preferred special shares which confer permanent veto rights over certain matters.

Both common and preferred stockholders are entitled to receive a mandatory minimum dividend of 25% of annual adjusted net income under Brazilian GAAP, once declared at the annual stockholders’ meeting. In the case of preferred stockholders, this dividend cannot be less than 6% of the preferred capital as stated in the statutory accounting records or, if greater, 3% of the Brazilian GAAP equity value per share.

In October 2011 (subsequent period) the Board of Directors approved the payment on October 31, 2011 of US$ 3 billions to shareholders. The amount of US$ 1,859 will be paid as interest on capital and the total amount of US$ 1,141 will be paid as dividends.

In August 2011, we paid additional dividend to Vale’s shareholders amounting to US$ 3 billion, equivalent to US$ 0.576780063 per outstanding share, common or preferred, of Vale issuance.

On June 2011 the Board of Directors approved a share buy-back program. The shares are to be held in treasury for subsequent sale or cancellation, amounting up to US$ 3 billion and involving up to 84,814,902 common shares and up to 102,231,122 preferred shares. As of September 30, 2011 we had acquired 25,988,880 common shares and 53.105.900 preferred shares. The share buy-back program will be completely executed in November 2011.

In April 2011, we paid the first installment of interest on capital, in the amount of US$ 2 billion, corresponding to US$0.383268113 per outstanding share, common or preferred shares, of Vale issuance.

In January 2011, we made an extraordinary payment through interest of capital, in the total gross amount of US$ 1 billion, which corresponds to approximately US$0.191634056 per outstanding share, common or preferred, of Vale issuance.

On October 14, 2010, the Board of Directors approved the following proposals: (i) payment of the second tranche of the minimum dividend of US$1,250 and (ii) payment of an additional dividend of US$500. The payments were made on October 29, 2010.

On September 23, 2010, the Board of Directors approved a share buy-back program. The shares are to be held in treasury for subsequent sale or cancellation, amounting up to US$2 billion and involving up to 64,810,513 common shares and up to 98,367,748 preferred shares. As of December 31, 2010 we had acquired 21,682,700 common shares and 48,197,700 preferred shares.

In June 2010, the notes series Rio and Rio P were converted into ADS and represent an aggregate of 49,305,205 common shares and 26,130,033 preferred class A shares respectively. The conversion was made using 75,435,238 treasury stocks held by the Company. The difference between the conversion amount and the book value of the treasury stocks of US$ 1,379 was accounted for in additional paid-in capital in the stockholder’s equity.

The outstanding issued mandatory convertible notes as of September 30, 2011, are as follows:

	Date		Value
Headings	Emission	Expiration	Gross	Net of charges	Coupon
Tranches Vale and Vale P - 2012	July/2009	June/2012	942	934	6.75	%p.a.

The notes pay a coupon quarterly and are entitled to an additional remuneration equivalent to the cash distribution paid to ADS holders. These notes were classified as a capital instrument, mainly due to the fact that neither the Company nor the holders have the option to settle the operation, whether fully or partially, with cash, and the conversion is mandatory, consequently, they were recognized as a specific component of shareholders’ equity, net of financial charges.

The funds linked to future mandatory conversion, net of charges are equivalent to the maximum of common shares and preferred shares, as follows. All the shares are currently held in treasury.

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	Maximum amount of action		Value
Headings	Common	Preferred	Common	Preferred
Tranches Vale and Vale P - 2012	18,415,859	47,284,800	293	649

In September 2011, Vale paid additional remuneration to holders of mandatorily convertible notes, series VALE-2012 and VALE P-2012, in the amount of US$ 1.824525 and US$ 2.110263 per note, respectively.

In April 2011, Vale paid additional remuneration to holders of mandatorily convertible notes, series VALE-2012 and VALE P-2012, in the amount of US$ 0.985344 and US$ 1.139659 per note, respectively.

In January 2011, Vale paid additional remuneration to holders of mandatorily convertible notes, series VALE-2012 and VAPE P-2012, R$0.7776700 and R$0.8994610, respectively, and in October 2010, VALE-2012 and VAPE P-2012, R$1.381517 and R$1.597876 per note, respectively.

Basic and diluted earnings per share

Basic and diluted earnings per share amounts have been calculated as follows:

	Three-month period ended (unaudited)						Nine-month period ended (unaudited)
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
Net income from continuing operations attributable to Company’s stockholders	4,935		6,452		6,030		18,213		11,490
Discontinued operations, net of tax	—		—		8		—		(143	)
Net income attributable to Company’s stockholders	4,935		6,452		6,038		18,213		11,347

Interest attributed to preferred convertible notes	(40	)	(24	)	(11	)	(82	)	(49	)
Interest attributed to common convertible notes	(16	)	(10	)	(5	)	(34	)	(51	)
Net income for the period adjusted	4,879		6,418		6,022		18,097		11,247

Basic and diluted earnings per share

Income available to preferred stockholders	1,846		2,440		2,314		6,871		4,324
Income available to common stockholders	2,972		3,898		3,635		11,000		6,783
Income available to convertible notes linked to preferred shares	44		57		53		162		100
Income available to convertible notes linked to common shares	17		23		20		64		40
Weighted average number of shares outstanding
(thousands of shares) - preferred shares	1,986,461		2,008,930		2,056,473		2,002,352		2,043,102
Weighted average number of shares outstanding
(thousands of shares) - common shares	3,197,984		3,209,349		3,230,765		3,206,032		3,204,885
Treasury preferred shares linked to mandatorily convertible notes	47,285		47,285		47,285		47,285		47,285
Treasury common shares linked to mandatorily convertible notes	18,416		18,416		18,416		18,416		18,416
Total	5,250,146		5,283,980		5,352,939		5,274,085		5,313,688

Earnings per preferred share	0.93		1.21		1.13		3.43		2.12
Earnings per common share	0.93		1.21		1.13		3.43		2.12
Earnings per convertible notes linked to preferred share (*)	1.78		1.71		1.35		5.16		3.15
Earnings per convertible notes linked to common share (*)	1.79		1.79		1.36		5.32		4.94

Continuous operations
Earnings per preferred share	0.93		1.21		1.13		3.43		2.14
Earnings per common share	0.93		1.21		1.13		3.43		2.14
Earnings per convertible notes linked to preferred share (*)	1.78		1.71		1.35		5.16		3.17
Earnings per convertible notes linked to common share (*)	1.79		1.79		1.36		5.32		4.96

Discontinued operations
Earnings per preferred share	—		—		—		—		(0.02	)
Earnings per common share	—		—		—		—		(0.02	)
Earnings per convertible notes linked to preferred share (*)	—		—		—		—		(0.02	)
Earnings per convertible notes linked to common share (*)	—		—		—		—		(0.02	)

(*) Basic earnings per share only, as dilution assumes conversion

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If the conversion of the convertible notes had been included in the calculation of diluted earnings per share they would have generated the following effect as shown below:

	Three-month period ended (unaudited)			Nine-month period ended (unaudited)
	September 30, 2011	June 30, 2011	September 30, 2010	September 30, 2011	September 30, 2010

Income available to preferred stockholders	1,930	2,521	2,378	7,115	4,473
Income available to common stockholders	3,005	3,931	3,660	11,098	6,874
Weighted average number of shares outstanding (thousands of shares) - preferred shares	2,033,746	2,056,215	2,103,758	2,049,637	2,090,387
Weighted average number of shares outstanding (thousands of shares) - common shares	3,216,400	3,227,765	3,249,181	3,224,448	3,223,301
Earnings per preferred share	0.95	1.23	1.13	3.47	2.14
Earnings per common share	0.93	1.22	1.13	3.44	2.13

Continuous operations
Earnings per preferred share	0.95	1.23	1.13	3.47	2.17
Earnings per common share	0.93	1.22	1.13	3.44	2.16

Discontinued operations
Earnings per preferred share	—	—	—	—	(0.03	)
Earnings per common share	—	—	—	—	(0.03	)

14 Pension plans

We previously disclosed in our consolidated financial statements for the year ended December 31, 2010, that we expected to contribute US$310 to our defined benefit pension plan in 2011. As of September 30, 2011, total contributions of US$ 254 had been made. We do not expect any significant change in our previous estimate.

A special contribution was made to the Vale Canada Limited Defined Benefit plans of US$342 during the period. The contribution was made to bring the adequate ratios which provide Vale Canada with more certain funding requirements for 2011-2013.

	Three-month period ended (unaudited)
	September 30, 2011
	Overfunded pension plans		Underfunded pension plans		Underfunded other benefits
Service cost - benefits earned during the period	—		18		8
Interest cost on projected benefit obligation	98		107		26
Expected return on assets	(164	)	(99	)	—
Amortizations and (gain) / loss	—		6		(5	)
Net periodic pension cost (credit)	(66	)	32		29

	Three-month period ended (unaudited)
	June 30, 2011
	Overfunded pension plans		Underfunded pension plans		Underfunded other benefits
Service cost - benefits earned during the period	—		19		8
Interest cost on projected benefit obligation	103		106		26
Expected return on assets	(175	)	(99	)	—
Amortizations and (gain) / loss	—		6		(4	)
Net deferral	—		—		(3	)
Net periodic pension cost (credit)	(72	)	32		27

	Three-month period ended (unaudited)
	September 30, 2010
	Overfunded pension plans		Underfunded pension plans		Underfunded other benefits
Service cost - benefits earned during the period	1		19		8
Interest cost on projected benefit obligation	104		92		26
Expected return on assets	(159	)	(83	)	—
Amortizations and (gain) / loss	—		1		—
Net deferral	(1	)	12		(9	)
Net periodic pension cost (credit)	(55	)	41		25

	Nine-month period ended (unaudited)
	September 30, 2011
	Overfunded pension plans		Underfunded pension plans		Underfunded other benefits
Service cost - benefits earned during the period	—		57		24
Interest cost on projected benefit obligation	299		317		77
Expected return on assets	(505	)	(291	)	—
Amortizations and (gain) / loss	—		21		(11	)
Net deferral	—		—		(3	)
Net periodic pension cost (credit)	(206	)	104		87

	Nine-month period ended (unaudited)
	September 30, 2010
	Overfunded pension plans		Underfunded pension plans		Underfunded other benefits
Service cost - benefits earned during the period	1		51		20
Interest cost on projected benefit obligation	244		270		74
Expected return on assets	(392	)	(245	)	—
Amortizations and (gain) / loss	—		1		—
Net deferral	(1	)	12		(9	)
Net periodic pension cost (credit)	(148	)	89		85

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15 Long-term incentive compensation plan

Under the terms of the long-term incentive compensation plan, the participants, restricted to certain executives, may elect to allocate part of their annual bonus to the plan. The allocation is applied to purchase preferred shares of Vale, through a predefined financial institution, at market conditions and with no benefit provided by Vale.

The shares purchased by each executive are unrestricted and may, at the participant’s discretion, be sold at any time. However, the shares must be held for a three-year period and the executive must be continually employed by Vale during that period. The participant then becomes entitled to receive from Vale a cash payment equivalent to the total amount of shares held, based on the market rates. The total shares linked to the plan at September 30, 2011 and December 31, 2010, are 3,130,620 and 2,458,627, respectively.

Additionally, as a long-term incentive certain eligible executives have the opportunity to receive at the end of the triennial cycle, a certain number of shares at market rates, based on an evaluation of their career and performance factors measured as an indicator of total return to stockholders.

We account for the compensation cost provided to our executives under this long-term incentive compensation plan, following the requirements for Accounting for Stock-Based Compensation. Liabilities are measured at each reporting date at fair value, based on market rates. Compensation costs incurred are recognized, over the defined three-year vesting period. At September 30, 2011 and December 31, 2010, we recognized a liability of US$ 106 and US$ 120, respectively, through the Statement of Income.

16 Commitments and contingencies

a) In connection with the Girardin Act tax - advantaged lease financing arrangement sponsored by the French government, we provided guarantees to BNP Paribas for the benefit of the tax investors associated with the Girardin Act lease financing certain payments due from VNC. We also committed that assets associated with the Girardin Act lease financing would be substantially complete by December 31, 2010. The French government and the tax investors have mutually agreed to extend this date to December 31, 2011.

Sumic Nickel Netherlands B.V. (“Sumic”), a 21% stockholder of VNC, has a put option to sell to us 25%, 50%, or 100% of the shares they own of VNC if the defined cost of the initial nickel cobalt development project, as measured by funding provided to VNC, in natural currencies and converted to U.S. dollars at specified rates of exchange, in the form of Girardin Act lease financing, funding, shareholder loans and equity contributions by shareholders to VNC, exceeded US$ 4.6 billion and an agreement cannot be reached on how to proceed with the project. On May 27, 2010 the threshold was reached. An agreement has been reached with Sumic for an extension of their put option to 2012.

In addition, in the course of our operations we have provided letters of credit and guarantees in the amount of US$ 490 that are associated with items such as environment reclamation, asset retirement obligation commitments, electricity commitments, and community service commitments.

b) We and our subsidiaries are defendants in numerous legal actions in the normal course of business. Based on the advice of our legal counsel, management believes that the amounts recognized are sufficient to cover probable losses in connection with such actions.

The provision for contingencies and the related judicial deposits are composed as follows:

	September 30, 2011 (unaudited)		December 31, 2010
	Provision for contingencies	Judicial deposits	Provision for contingencies	Judicial deposits
Labor and social security claims	728	842	748	874
Civil claims	489	314	510	410
Tax - related actions	663	453	746	442
Others	29	5	39	5
	1,909	1,614	2,043	1,731

Labor and social security related actions principally comprise of claims by Brazilian current and former employees for (i) payment of time spent traveling from their residences to the work-place, (ii) additional health and safety related payments and (iii) various other matters, often in connection with disputes about the amount of indemnities paid upon dismissal and the one-third extra holiday pay.

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Civil actions principally relate to claims made against us by contractors in Brazil in connection with losses alleged to have been incurred by them as a result of various past Government economic plans, during which full inflation indexation of contracts was not permitted, as well, as for accidents and land appropriation disputes.

Tax related actions principally comprise of challenges initiated by us, on certain taxes on revenues and uncertain tax positions. We continue to vigorously pursue our interests in all the actions but recognize that we probably will incur some losses in the final instance, for which we have made provisions.

Judicial deposits are made by us following court requirements in order to be entitled to either initiate or continue a legal action. These amounts are released to us upon receipt of a final favorable outcome from the legal action, and in the case of an unfavorable outcome, the deposits are transferred to the prevailing party.

Contingencies settled during the three-month periods ended September 30, 2011, June 30, 2011 and September 30, 2010, totaled US$ 98, US$ 130 and US$ 67 and nine-month periods ended September 30, 2011 and September 30, 2010, totaled US$ 659 and US$ 128, respectively. Provisions recognized in the three-month periods ended September 30, 2011, June 30, 2011 and September 30, 2010, totaled US$ 134, US$ 176 and US$ 101 and nine-month periods ended September 30, 2011 and September 30, 2010, totaled US$ 364 and US$ 71, respectively, classified as other operating expenses.

In addition to the contingencies for which we have made provisions, we are defendants in claims where in our opinion, and based on the advice of our legal counsel, the likelihood of loss is reasonably possible but not probable, in the total amount of US$ 20,709 at September 30, 2011, and for which no provision has been made (December 31, 2010 — US$4,787). The variation in reasonably possible contingencies is related to the discussion of the payment in Brazil of income tax and social contribution on net income on the profits of foreign subsidiaries.

c) At the time of our privatization in 1997, the Company issued debentures to its then-existing stockholders, including the Brazilian Government. The terms of the debentures, were set to ensure that the pre-privatization stockholders, including the Brazilian Government would participate in possible future financial benefits that could be obtained from exploiting certain mineral resources.

A total of 388,559,056 Debentures were issued at a par value of R$ 0.01 (one cent), whose value will be restated in accordance with the variation in the General Market Price Index (IGP-M), as set forth in the Issue Deed.

The debentures holders have the right to receive premiums, paid semiannually, equivalent to a percentage of net revenues from specific mine resources as set forth in the indenture.

d) Asset retirement obligations

We use various judgments and assumptions when measuring our asset retirement obligations.

Changes in circumstances, law or technology may affect our estimates and we periodically review the amounts accrued and adjust them as necessary. Our accruals do not reflect unasserted claims because we are currently not aware of any such issues. Also the amounts provided are not reduced by any potential recoveries under cost sharing, insurance or indemnification arrangements because such recoveries are considered uncertain.

The changes in the provisions for asset retirement obligations are as follows (unaudited):

	Three-month period ended						Nine-month period ended
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010

Beginning of period	1,410		1,368		1,162		1,368		1,116
Accretion expense	29		30		21		100		79
Liabilities settled in the current period	(11	)	(20	)	(2	)	(41	)	(12	)
Revisions in estimated cash flows (*)	(3	)	(10	)	(11	)	(76	)	15
Cumulative translation adjustment	(152	)	42		60		(78	)	32
End of period	1,273		1,410		1,230		1,273		1,230

Current liabilities	54		56		79		54		79
Non-current liabilities	1,219		1,354		1,151		1,219		1,151
Total	1,273		1,410		1,230		1,273		1,230

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17 Other expenses

In the nine months period, the line “Other operating expenses” most due to pre operational expenses, idle capacity and stoppage operations of US$ 805 in 2011 (US$ 646 in 2010).

18 Fair value disclosure of financial assets and liabilities

The Financial Accounting Standards Board, through Accounting Standards Codification and Accounting Standards Updates, defines fair value and set out a framework for measuring fair value, which refers to valuation concepts and practices and requires certain disclosures about fair value measurements.

a) Measurements

The pronouncements define fair value as the exchange price that would be received for an asset, or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Under this standard, those inputs used to measure the fair value are required to be classified on three levels. Based on the characteristics of the inputs used in valuation techniques the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed as follows:

Level 1 — Unadjusted quoted prices on an active, liquid and visible market for identical assets or liabilities that are accessible at the measurement date;

Level 2 - Quoted prices for identical or similar assets or liabilities on active markets, inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability;

Level 3 - Assets and liabilities, which quoted prices do not exist, or those prices or valuation techniques are supported by little or no market activity, unobservable or illiquid. At this point, fair market valuation becomes highly subjective.

b) Measurements on a recurring basis

The description of the valuation methodologies used for recurring assets and liabilities measured at fair value in the Company’s Consolidated Balance Sheet at September 30, 2011 and December 31, 2010 are summarized below:

· Available-for-sale securities

They are securities that are not classified either as held-for-trading or as held-to-maturity for strategic reasons and have readily available market prices. We evaluate the carrying value of some of our investments in relation to publicly quoted market prices when available. When there is no market value, we use inputs other than quoted prices.

· Derivatives

The market approach is used to estimate the fair value of the swaps discounting their cash flows using the interest rate of the currency they are denominated and, also for the commodities contracts, since the fair value is computed by using forward curves for each commodity.

· Debentures

The fair value is measured by the market approach method, and the reference price is available on the

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secondary market.

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis as follows:

	September 30, 2011 (unaudited)
	Carrying amount		Fair value		Level 1	Level 2
Available for sale	7		7		7	—
Unrealized gain on derivatives	338		338		—	338
Debentures	(1,276	)	(1,276	)	—	(1,276	)

	December 31, 2010
	Carrying amount		Fair value		Level 1	Level 2
Available for sale	12		12		12	—
Unrealized gains on derivatives	257		257		1	256
Debentures	(1,284	)	(1,284	)	—	(1,284	)

c) Measurements on a non-recurring basis

The Company also has assets under certain conditions that are subject to measurement at fair value on a non-recurring basis. These assets include goodwill and assets acquired and liabilities assumed in business combinations. During the period ended September 30, 2011, we have not recognized any additional impairment for those items.

d) Financial Instruments

Long-term debt

The valuation method used to estimate the fair value of our debt is the market approach for the contracts that are quoted on the secondary market, such as bonds and debentures. The fair value of both fixed and floating rate debt is determined by discounting future cash flows of Libor and Vale’s bonds curves (income approach).

Time deposits

The method used is the income approach, through the prices available on the active market. The fair value is close to the carrying amount due to the short-term maturities of the instruments.

Our long-term debt is reported at amortized cost, and the income of time deposits is accrued monthly according to the contract rate. The estimated fair value measurement is disclosed as follows:

	September 30, 2011 (Unaudited)
	Carrying amount		Fair value		Level 1		Level 2
Long-term debt (*)	(22,528	)	(23,415	)	(17,436	)	(5,979	)

	December 31, 2010
	Carrying amount		Fair value		Level 1		Level 2
Time deposits	1,793		1,793		—		1,793
Long-term debt (*)	(24,071	)	(25,264	)	(19,730	)	(5,534	)

(*) Less accrued charges of US$ 394 and US$343 as of September 30, 2011 and December 31, 2010, respectively.

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19 Segment and geographical information

We adopt disclosures about segments of an enterprise and related information with respect to the information we present about our operating segments. The relevant standard requiring such disclosures introduced a “management approach” concept for reporting segment information, whereby such information is required to be reported on the basis that the chief decision-maker uses internally for evaluating segment performance and deciding how to allocate resources to segments. In line with our strategy to become a leading global player in the fertilizer business, on May 27, 2010 we acquired 58.6% of the equity capital of Fertilizantes Fosfatados S.A. - Fosfertil (Fosfertil) and the Brazilian fertilizer assets of Bunge Participações e Investimentos S.A. (BPI), currently renamed Vale Fosfatados S.A. Considering this new segment acquisition, fertilizers, and the related reorganization that occurred for the operating segments are:

Bulk Material - comprised of iron ore mining and pellet production, as well as our Brazilian Northern and Southern transportation systems, including railroads, ports and terminals, as they pertain to mining operations. Manganese mining and ferroalloys are also included in this segment.

Base Metals — comprised of the production of non-ferrous minerals, including nickel (co-products and by-products), copper and investments in joint ventures and affiliates engaged in aluminum.

Fertilizers — comprised of the three important groups of nutrients: potash, phosphates and nitrogen. This business is being formed through a combination of acquisitions and organic growth.

Logistic Services — comprised of our transportation systems as they pertain to the operation of our ships, ports and railroads for third-party cargos.

Others — comprised of our investments in joint ventures and affiliates engaged in other businesses.

Information presented to senior management with respect to the performance of each segment is generally derived directly from the accounting records maintained in accordance with accounting practices adopted in Brazil together with certain minor inter-segment allocations.

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Consolidated net income and principal assets are reconciled as follows:

Results by segment - after eliminations (aggregated)

	Three-month period ended (unaudited)
	September 30, 2011												June 30, 2011												September 30, 2010
	Bulk Material		Base Metals		Fertilizers		Logistic		Others		Consolidated		Bulk Material		Base Metals		Fertilizers		Logistic		Others		Consolidated		Bulk Material		Base Metals		Fertilizers		Logistic		Others		Consolidated
RESULTS
Gross revenues	12,763		2,287		1,037		502		152		16,741		11,682		2,230		867		476		90		15,345		11,257		1,919		802		408		110		14,496
Cost and expenses	(3,844	)	(1,627	)	(798	)	(395	)	(246	)	(6,910	)	(3,449	)	(1,528	)	(658	)	(396	)	(225	)	(6,256	)	(3,204	)	(1,398	)	(748	)	(292	)	(106	)	(5,748	)
Research and development	(188	)	(100	)	(32	)	(37	)	(83	)	(440	)	(130	)	(98	)	(16	)	(30	)	(89	)	(363	)	(70	)	(68	)	(21	)	(23	)	(34	)	(216	)
Depreciation, depletion and amortization	(439	)	(379	)	(129	)	(64	)	(7	)	(1,018	)	(438	)	(350	)	(129	)	(60	)	(2	)	(979	)	(379	)	(224	)	(48	)	(32	)	(13	)	(696	)
Operating income (loss)	8,292		181		78		6		(184	)	8,373		7,665		254		64		(10	)	(226	)	7,747		7,604		229		(15	)	61		(43	)	7,836
Financial result	(2,865	)	(206	)	(129	)	(149	)	(44	)	(3,393	)	840		(210	)	29		(17	)	6		648		286		(177	)	17		(10	)	(44	)	72
Discontinued operations, net of tax	—		—		—		—		—		—		—		—		—		—		—		—		—		8		—		—		—		8
Equity in results of affiliates, joint ventures and others investments	248		118		—		32		(116	)	282		339		(2	)	—		33		36		406		302		(26	)	—		27		2		305
Income taxes	(224	)	(106	)	(13	)	(8	)	—		(351	)	(2,120	)	(228	)	(57	)	(2	)	—		(2,407	)	(2,116	)	(26	)	(6	)	2		—		(2,146	)
Noncontrolling interests	52		(9	)	(22	)	—		3		24		1		33		(1	)	—		25		58		5		(46	)	—		—		4		(37	)
Net income attributable to the Company’s stockholders	5,503		(22	)	(86	)	(119	)	(341	)	4,935		6,725		(153	)	35		4		(159	)	6,452		6,081		(38	)	(4	)	80		(81	)	6,038

Sales classified by geographic destination:
Foreign market
America, except United States	331		289		24		—		13		657		298		258		2		—		—		558		207		296		11		—		—		514
United States	46		403		—		—		—		449		5		400		1		—		—		406		39		158		—		—		—		197
Europe	2,552		553		48		—		14		3,167		2,415		601		41		—		11		3,068		2,041		448		—		—		4		2,493
Middle East/Africa/Oceania	452		34		—		—		—		486		361		55		—		—		—		416		434		39		—		—		—		473
Japan	1,658		277		—		—		2		1,937		1,488		299		—		—		2		1,789		1,311		360		—		—		3		1,674
China	5,612		271		—		—		44		5,927		4,680		325		—		—		—		5,005		4,965		193		—		—		—		5,158
Asia, other than Japan and China	693		440		—		—		—		1,133		899		290		8		—		1		1,198		1,018		330		—		—		—		1,348
Brazil	1,419		20		965		502		79		2,985		1,536		2		815		476		76		2,905		1,242		95		791		408		103		2,639
	12,763		2,287		1,037		502		152		16,741		11,682		2,230		867		476		90		15,345		11,257		1,919		802		408		110		14,496

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	nine-month period ended (unaudited)
	September 30, 2011												September 30, 2010
	Bulk Material		Base Metals		Fertilizers		Logistic		Others		Consolidated		Bulk Material		Base Metals		Fertilizers		Logistic		Others		Consolidated
RESULTS
Gross revenues	33,964		7,266		2,691		1,306		407		45,634		23,603		5,181		1,077		1,131		282		31,274
Cost and expenses	(10,327	)	(4,689	)	(2,100	)	(1,081	)	(762	)	(18,959	)	(8,062	)	(3,865	)	(987	)	(842	)	(226	)	(13,982	)
Research and development	(430	)	(272	)	(66	)	(88	)	(289	)	(1,145	)	(186	)	(168	)	(33	)	(45	)	(145	)	(577	)
Gain on sale of assets	—		1,513		—		—		—		1,513		—		—		—		—		—		—
Depreciation, depletion and amortization	(1,311	)	(1,086	)	(375	)	(168	)	(14	)	(2,954	)	(1,117	)	(879	)	(72	)	(105	)	(14	)	(2,187	)
Operating income (loss)	21,896		2,732		150		(31	)	(658	)	24,089		14,238		269		(15	)	139		(103	)	14,528
Financial result	(1,940	)	(643	)	(37	)	(185	)	(38	)	(2,843	)	(411	)	(635	)	19		(28	)	(41	)	(1,096	)
Discontinued operations, net of tax	—		—		—		—		—		—		—		(143	)	—		—		—		(143	)
Equity in results of affiliates, joint ventures and													610		(19	)	—		62		31		684
others investments	845		113		—		101		(91	)	968		—		—		—		—		—		—
Income taxes	(3,325	)	(735	)	(67	)	(8	)	—		(4,135	)	(2,712	)	115		(3	)	11		21		(2,568	)
Noncontrolling interests	55		38		(19	)	—		60		134		7		(65	)	—		—		—		(58	)
Net income attributable to the Company’s stockholders	17,531		1,505		27		(123	)	(727	)	18,213		11,732		(478	)	1		184		(92	)	11,347

Sales classified by geographic destination:
Foreign market
America, except United States	876		1,009		44		—		13		1,942		525		700		11		—		—		1,236
United States	56		1,272		1		—		2		1,331		43		437		—		—		15		495
Europe	6,992		1,727		108		—		43		8,870		4,922		1,269		—		11		29		6,231
Middle East/Africa/Oceania	1,250		107		—		—		1		1,358		1,031		129		—		—		—		1,160
Japan	4,278		951		—		—		6		5,235		2,620		950		—		—		8		3,578
China	13,950		927		—		—		79		14,956		9,567		543		—		—		2		10,112
Asia, other than Japan and China	2,363		1,135		16		—		1		3,515		1,838		963		—		6		1		2,808
Brazil	4,199		138		2,522		1,306		262		8,427		3,057		190		1,066		1,114		227		5,654
	33,964		7,266		2,691		1,306		407		45,634		23,603		5,181		1,077		1,131		282		31,274

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Operating segment - after eliminations (disaggregated)

	Three-month period ended (unaudited)
	September 30, 2011
	Revenue	Value added tax		Net revenues	Cost and expenses		Operating profit		Depreciation, depletion and amortization		Operating income		Property, plant and equipment, net	Addition to property, plant and equipment	Investments
Bulk Material
Iron ore	10,136	(139	)	9,997	(2,500	)	7,497		(349	)	7,148		30,800	2,014	104
Pellets	2,158	(76	)	2,082	(789	)	1,293		(57	)	1,236		1,951	72	896
Manganese	45	(2	)	43	(60	)	(17	)	(2	)	(19	)	58	1	—
Ferroalloys	139	(12	)	127	(107	)	20		(16	)	4		228	13	—
Coal	285	—		285	(347	)	(62	)	(15	)	(77	)	3,727	189	290
	12,763	(229	)	12,534	(3,803	)	8,731		(439	)	8,292		36,764	2,289	1,290
Base Metals
Nickel and other products (*)	2,005	—		2,005	(1,482	)	523		(360	)	163		28,128	674	3
Copper (**)	282	—		282	(245	)	37		(19	)	18		3,759	110	132
Aluminum products	—	—		—	—		—		—		—		—	—	3,726
	2,287	—		2,287	(1,727	)	560		(379	)	181		31,887	784	3,861
Fertilizers
Potash	80	(3	)	77	(97	)	(20	)	(8	)	(28	)	1,864	10	—
Phosphates	707	(27	)	680	(516	)	164		(77	)	87		6,130	91	—
Nitrogen	217	(29	)	188	(154	)	34		(44	)	(10	)	1,220	125	—
Others fertilizers products	33	(4	)	29	—		29		—		29		375	—	—
	1,037	(63	)	974	(767	)	207		(129	)	78		9,589	226	—

Logistics
Railroads	358	(61	)	297	(269	)	28		(52	)	(24	)	1,296	54	502
Ports	144	(15	)	129	(87	)	42		(12	)	30		522	77	—
Ships	—	—		—	—		—		—		—		1,519	81	119
	502	(76	)	426	(356	)	70		(64	)	6		3,337	212	621
Others	152	(12	)	140	(317	)	(177	)	(7	)	(184	)	2,696	200	2,065
Gain on sale of assets	—	—		—	—		—		—		—		—	—	—
	16,741	(380	)	16,361	(6,970	)	9,391		(1,018	)	8,373		84,273	3,711	7,837

(*) Includes nickel co-products and by-products (copper, precious metals, cobalt and others).

(**)Includes copper concentrate

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Operating segment - after eliminations (disaggregated)

	Three-month period ended (unaudited)
	June 30, 2011
	Revenue	Value added tax		Net revenues	Cost and expenses		Operating profit		Depreciation, depletion and amortization		Operating income		Property, plant and equipment, net	Addition to property, plant and equipment	Investments
Bulk Material
Iron ore	9,102	(134	)	8,968	(2,157	)	6,811		(347	)	6,464		33,602	1,259	123
Pellets	2,122	(73	)	2,049	(778	)	1,271		(31	)	1,240		2,678	—	1,093
Manganese	52	(2	)	50	(48	)	2		(4	)	(2	)	25	1	—
Ferroalloys	150	(15	)	135	(96	)	39		(16	)	23		321	10	—
Coal	256	—		256	(276	)	(20	)	(40	)	(60	)	3,686	218	262
	11,682	(224	)	11,458	(3,355	)	8,103		(438	)	7,665		40,312	1,488	1,478
Base Metals
Nickel and other products (*)	1,966	—		1,966	(1,411	)	555		(326	)	229		29,801	613	13
Copper	264	(1	)	263	(214	)	49		(24	)	25		4,206	348	133
Aluminum products	—	—		—	—		—		—		—		—	—	3,686
	2,230	(1	)	2,229	(1,625	)	604		(350	)	254		34,007	961	3,832
Fertilizers
Potash	68	(3	)	65	(66	)	(1	)	(18	)	(19	)	1,846	293	—
Phosphates	586	(22	)	564	(404	)	160		(62	)	98		7,132	96	—
Nitrogen	194	(25	)	169	(151	)	18		(49	)	(31	)	1,592	45	—
Others fertilizers products	19	(3	)	16	—		16		—		16		—	—	—
	867	(53	)	814	(621	)	193		(129	)	64		10,570	434	—

Logistics
Railroads	357	(54	)	303	(277	)	26		(45	)	(19	)	1,464	66	565
Ports	119	(14	)	105	(81	)	24		(15	)	9		739	23	—
Ships	—	—		—	—		—		—		—		1,482	140	141
	476	(68	)	408	(358	)	50		(60	)	(10	)	3,685	229	706
Others	90	(10	)	80	(304	)	(224	)	(2	)	(226	)	3,103	368	2,536
	15,345	(356	)	14,989	(6,263	)	8,726		(979	)	7,747		91,677	3,480	8,552

(*) Includes nickel co-products and by-products (copper, precious metals, cobalt and others).

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Operating segment - after eliminations (disaggregated)

	Three-month period ended (unaudited)
	September 30, 2010
	Revenue	Value added tax		Net revenues	Cost and expenses		Operating profit		Depreciation, depletion and amortization		Operating income		Property, plant and equipment, net	Addition to property, plant and equipment	Investments
Bulk Material
Iron ore	8,725	(108	)	8,617	(1,982	)	6,635		(325	)	6,310		29,523	1,591	95
Pellets	2,082	(81	)	2,001	(774	)	1,227		(23	)	1,204		1,325	137	1,407
Manganese	67	1		68	(41	)	27		(1	)	26		24	—	—
Ferroalloys	166	(16	)	150	(74	)	76		(2	)	74		287	2	—
Coal	217	—		217	(199	)	18		(28	)	(10	)	2,771	58	203
	11,257	(204	)	11,053	(3,070	)	7,983		(379	)	7,604		33,390	1,788	1,705
Base Metals
Nickel and other products (*)	1,074	—		1,074	(758	)	316		(206	)	110		27,719	448	25
Copper	236	(8	)	228	(152	)	76		(22	)	54		2,748	566	74
Aluminum products	609	(15	)	594	(533	)	61		(4	)	57		84	65	152
	1,919	(23	)	1,896	(1,443	)	453		(232	)	221		30,551	1,079	251
Fertilizers
Potash	87	(5	)	82	(53	)	29		(9	)	20		208	—	—
Phosphates	556	(25	)	531	(524	)	7		(33	)	(26	)	6,521	206	—
Nitrogen	147	(20	)	127	(133	)	(6	)	(6	)	(12	)	1,446	46
Others fertilizers products	12	(3	)	9	(6	)	3				3		325	—
	802	(53	)	749	(716	)	33		(48	)	(15	)	8,500	252	—
Logistics
Railroads	308	(57	)	251	(184	)	67		(27	)	40		1,138	43	545
Ports	100	(15	)	85	(59	)	26		(5	)	21		269	11	—
Ships	—	—		—	—		—		—		—		—	—	128
	408	(72	)	336	(243	)	93		(32	)	61		1,407	54	673
Others	110	(42	)	68	(98	)	(30	)	(5	)	(35	)	4,309	679	2,282
	14,496	(394	)	14,102	(5,570	)	8,532		(696	)	7,836		78,697	3,852	4,911

(*) Includes nickel co-products and by-products (copper, precious metals, cobalt and others).

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Operating segment - after eliminations (disaggregated)

	Nine-month period ended (unaudited)
	September 30, 2011
	Revenue	Value added tax		Net revenues	Cost and expenses		Operating profit		Depreciation, depletion and amortization		Operating income		Property, plant and equipment, net	Addition to property, plant and equipment	Investments
Bulk Material
Iron ore	26,525	(383	)	26,142	(6,393	)	19,749		(1,053	)	18,696		30,800	4,450	104
Pellets	6,158	(210	)	5,948	(2,407	)	3,541		(124	)	3,417		1,951	425	896
Manganese	140	(6	)	134	(129	)	5		(11	)	(6	)	58	2	—
Ferroalloys	446	(39	)	407	(314	)	93		(43	)	50		228	34	—
Coal	695	—		695	(876	)	(181	)	(80	)	(261	)	3,727	795	290
	33,964	(638	)	33,326	(10,119	)	23,207		(1,311	)	21,896		36,764	5,706	1,290
Base Metals
Nickel and other products (*)	6,086	—		6,086	(4,043	)	2,043		(1,024	)	1,019		28,128	1,658	3
Copper (**)	797	(18	)	779	(591	)	188		(61	)	127		3,759	628	132
Aluminum products	383	(5	)	378	(304	)	74		(1	)	73		—	16	3,726
	7,266	(23	)	7,243	(4,938	)	2,305		(1,086	)	1,219		31,887	2,302	3,861
Fertilizers
Potash	210	(10	)	200	(232	)	(32	)	(33	)	(65	)	1,864	310	—
Phosphates	1,829	(77	)	1,752	(1,328	)	424		(226	)	198		6,130	314	—
Nitrogen	583	(77	)	506	(432	)	74		(116	)	(42	)	1,220	170	—
Others fertilizers products	69	(10	)	59	—		59		—		59		375	—	—
	2,691	(174	)	2,517	(1,992	)	525		(375	)	150		9,589	794	—

Logistics
Railroads	965	(160	)	805	(743	)	62		(134	)	(72	)	1,296	156	502
Ports	341	(38	)	303	(228	)	75		(34	)	41		522	137	—
Ships	—	—		—	—		—		—		—		1,519	244	119
	1,306	(198	)	1,108	(971	)	137		(168	)	(31	)	3,337	537	621
Others	407	(38	)	369	(1,013	)	(644	)	(14	)	(658	)	2,696	665	2,065
Gain on sale of assets	—	—		—	1,513		1,513		—		1,513		—	—	—
	45,634	(1,071	)	44,563	(17,520	)	27,043		(2,954	)	24,089		84,273	10,004	7,837

(*) Includes nickel co-products and by-products (copper, precious metals, cobalt and others).

(**) Includes copper concentrate

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Operating segment - after eliminations (disaggregated)

	Nine-month period ended (unaudited)
	September 30, 2010
	Revenue	Value added tax		Net revenues	Cost and expenses		Operating profit		Depreciation, depletion and amortization		Operating income		Property, plant and equipment, net	Addition to property, plant and equipment	Investments
Bulk Material
Iron ore	17,907	(265	)	17,642	(5,089	)	12,553		(947	)	11,606		29,523	3,184	95
Pellets	4,475	(211	)	4,264	(1,730	)	2,534		(81	)	2,453		1,325	266	1,407
Manganese	214	(5	)	209	(103	)	106		(6	)	100		24	—	—
Ferroalloys	478	(48	)	430	(225	)	205		(19	)	186		287	10	—
Coal	529	—		529	(577	)	(48	)	(59	)	(107	)	2,771	210	203
	23,603	(529	)	23,074	(7,724	)	15,350		(1,112	)	14,238		33,930	3,670	1,705
Base Metals
Nickel and other products (*)	2,695	—		2,695	(2,056	)	639		(691	)	(52	)	27,719	1,156	25
Copper	623	(18	)	605	(420	)	185		(62	)	123		2,748	1,097	74
Aluminum products	1,863	(28	)	1,835	(1,511	)	324		(126	)	198		84	126	152
	5,181	(46	)	5,135	(3,987	)	1,148		(879	)	269		30,551	2,379	251
Fertilizers
Potash	207	(11	)	196	(138	)	58		(22	)	36		208	7	—
Phosphates	670	(35	)	635	(627	)	8		(42	)	(34	)	6,521	250	—
Nitrogen	186	(24	)	162	(170	)	(8	)	(8	)	(16	)	1,446	46	—
Others fertilizers products	14	(4	)	10	(11	)	(1	)	—		(1	)	325	—	—
	1,077	(74	)	1,003	(946	)	57		(72	)	(15	)	8,500	303	—

Logistics
Railroads	845	(144	)	701	(526	)	175		(86	)	89		1,138	89	545
Ports	281	(39	)	242	(165	)	77		(16	)	61		269	14	—
Ships	5	—		5	(13	)	(8	)	(3	)	(11	)	—	—	128
	1,131	(183	)	948	(704	)	244		(105	)	139		1,407	103	673
Others	282	(78	)	204	(288	)	(84	)	(19	)	(103	)	4,309	1,450	2,282
	31,274	(910	)	30,364	(13,649	)	16,715		(2,187	)	14,528		78,697	7,905	4,911

(*) Includes nickel co-products and by-products (copper, precious metals, cobalt and others).

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20 Derivative financial instruments

Risk management policy

Vale has developed its risk management strategy in order to provide an integrated approach of the risks the Company is exposed to. To do that, Vale evaluates not only the impact of market risk factors in the business results (market risk), but also the risk arising from third party obligations with Vale (credit risk), those inherent to inadequate or failed internal processes, people, systems or external events (operational risk), those arising from liquidity risk, among others.

Vale considers that the effective management of risk is a key objective to support its growth strategy, strategic planning and business sustainability. The management of Vale’s future cash flows risks contributes to a better perception of the Company’s credit quality, improving its ability to access different markets. As a commitment to the risk management strategy, the Board of Directors has established an enterprise-wide risk management policy and an Executive Risk Management Committee.

The corporate risk management policy determines that Vale should measure and monitor regularly its corporate risk on a consolidated approach in order to guarantee that the overall risk level of the Company remains aligned with the guidelines defined by the Board of Directors and the Executive Board.

The Executive Risk Management Committee, created by the Board of Directors, is responsible for supporting the Executive Board in the risk assessments and for issuing opinion regarding the Company’s risk management. It’s also responsible for the supervision and revision of the principles and instruments of corporate risk management.

The Executive Board is responsible for the approval of the policy decomposition into norms, rules and responsibilities and for reporting to the Board of Directors about such procedures.

The risk management norms and instructions complement the corporate risk management policy and define practices, processes, controls, roles and responsibilities in the Company regarding risk management.

Besides the risk management governance model, Vale has put in place a well defined corporate governance structure. The recommendation and execution of the transactions with derivatives are performed by independent areas. The risk management department is responsible for defining and proposing to the Executive Risk Management Committee market risk mitigation strategies aligned with Vale’s and its wholly owned subsidiaries corporate objectives. The finance department is responsible for the execution of such strategies. The independence of the areas guarantees an effective control and transparency in this process.

When measuring Vale’s exposures, the correlations between market risk factors are taken into consideration to evaluate their combined impact on cash flows and also to quantify the overall risk reduction due to the diversification effect between the products prices and currencies exchange rates of the portfolio.

The consolidated market risk exposure and the derivatives portfolio are measured and monitored monthly in order to evaluate the financial results and to verify the consistency of the mitigation strategies. The mark-to-market of this portfolio is reported weekly to management.

Considering the nature of Vale’s business and operations, the main market risk factors which the Company is exposed to are:

· Interest rates;

· Foreign exchange;

· Product prices and input costs

Foreign exchange rate and interest rate risk

Vale’s cash flows are exposed to volatility of several currencies. While most of the product prices are indexed to US dollars, most of the costs, disbursements and investments are indexed to currencies other than the US dollar, namely the Brazilian real and the Canadian dollar.

Derivative instruments may be used to reduce Vale’s potential cash flow volatility arising from its currency mismatch.

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Vale’s foreign exchange and interest rate derivative portfolio consists, basically, of interest rate swaps to convert floating cash flows in Brazilian real to fixed or floating US dollar cash flows, without any leverage.

Vale is also exposed to interest rate risks on loans and financings. Its floating rate debt consists mainly of loans including export pre-payments, commercial banks and multilateral organizations loans.

In general, the US dollar floating rate debt is subject to changes in the LIBOR (London Interbank Offer Rate in US dollar). To mitigate the impact of the interest rate volatility on its cash flows, Vale considers the natural hedges resulting from the correlation of commodities prices and US dollar floating rates. If such natural hedges are not present, Vale may search for the same effect by using financial instruments.

The Brazilian real denominated debt subject to floating interest rates refers to debentures, loans obtained from Banco Nacional de Desenvolvimento Econômico e Social (BNDES) and property and services acquisition financing in the Brazilian market. These debt instruments are mainly linked to CDI and TJLP.

The swap transactions used to convert debt linked to Brazilian real into US dollar have similar - or sometimes shorter - settlement dates than the final maturity of the debt instruments. Their notional amounts are similar to the principal and interest payments, subjected to liquidity market conditions. The swaps with shorter settlement dates are renegotiated through time so that their final maturity matches - or becomes closer - to the debts` final maturity.

At each settlement date, the results of the swap transactions partially offset the impact of the foreign exchange rate in Vale’s obligations, contributing to stabilize the cash disbursements in US dollar. In the event of an appreciation (depreciation) of the Brazilian real against the US dollar, the negative (positive) impact on Brazilian real denominated debt obligations (interest and/or principal payment) measured in US dollars will be partially offset by a positive (negative) effect from a swap transaction, regardless of the US dollar / Brazilian real exchange rate in the payment date.

Vale has other exposures associated with the outstanding debt portfolio. In order to reduce cash flow volatility associated with Euro denominated financings, Vale entered into swap contracts where the cash flows in Euro are converted into cash flows in US dollar.

Vale has a program of cash allocation in US dollar where the goal is to link part of cash investments in Brazilian real with US dollar yields in the Brazilian market. To do that, Vale uses swaps to convert cash investments linked to CDI into a US dollar fixed rate. In these operations, Vale receives US dollar fixed rates and pays profitability linked to CDI.

Vale had South African Rand forwards instruments in order to reduce the volatility of the value in US dollar of the payment in South African Rand regarding the bid offer made for assets in the African copperbelt. After the announcement that Vale decided to terminate the agreement to acquire these assets on July 11, these derivatives were settled in advance.

Product price risk

Vale is also exposed to several market risks associated with commodities price volatilities. Currently, the derivative portfolio includes nickel, copper and bunker oil derivatives with the purpose of mitigating Vale’s cash flow volatility.

Nickel — The Company has the following derivative strategies in this category:

· Sales hedging program - in order to protect future cash flows in 2011 and 2012, Vale entered into derivative transactions fixing the prices of part of nickel sales during the period.

· Fixed price sales program - Vale uses nickel future contracts on the London Metal Exchange (LME) with the purpose of maintain its exposure to nickel prices, as the commodity is sold at a fixed price to some customers. Whenever the ‘Sales hedging program’ is executed, the ‘Fixed price sales program’ is interrupted.

· Nickel purchase program - Vale has also sold nickel futures on the LME in order to minimize the mismatch between the pricing period of the intermediate products costs and the finished goods.

Copper — Vale uses derivatives to reduce cash flow volatility due to the quotation period mismatch between the pricing period of copper scrap purchase and the pricing period of final products sale to clients.

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Bunker Oil — Vale implemented a derivative program that consists of bunker oil forward purchases and swaps in order to reduce the impact of bunker oil price fluctuation on its freight hiring and on its own consumption.

Embedded derivatives — In addition to the contracts mentioned above, Vale Canada Ltd., Vale’s wholly-owned subsidiary, has nickel concentrate and raw materials purchase agreements, in which there are provisions based on the movement of nickel and copper prices. These provisions are considered embedded derivatives.

Under the Standard Accounting for Derivative Financial Instruments and Hedging Activities, all derivatives, whether designated in hedging relationships or not, are required to be recorded in the balance sheet at fair value and the gain or loss in fair value is included in current earnings, unless if qualified as hedge accounting. A derivative must be designated in a hedging relationship in order to qualify for hedge accounting. These requirements include a determination of what portions of hedges are deemed to be effective versus ineffective. In general, a hedging relationship is effective when a change in the fair value of the derivative is offset by an equal and opposite change in the fair value of the underlying hedged item. In accordance with these requirements, effectiveness tests are performed in order to assess effectiveness and quantify ineffectiveness for all designated hedges.

At September 30, 2011, Vale has outstanding positions designated as cash flow hedge. A cash flow hedge is a hedge of the exposure to variability in expected future cash flows that is attributable to a particular risk, such as a forecasted purchase or sale. If a derivative is designated as cash flow hedge, the effective portion of the changes in the fair value of the derivative is recorded in other comprehensive income and recognized in earnings when the hedged item affects earnings. However, the ineffective portion of changes in the fair value of the derivatives designated as hedges is recognized in earnings. If a portion of a derivative contract is excluded for purposes of effectiveness testing, the value of such excluded portion is included in earnings.

	Assets				Liabilities
	September 30, 2011 (unaudited)		December 31, 2010		September 30, 2011 (unaudited)		December 31, 2010
	Short-term	Long-term	Short-term	Long-term	Short-term	Long-term	Short-term	Long-term
Derivatives not designated as hedge
Foreign exchange and interest rate risk
CDI & TJLP vs. floating & fixed swap	428	7	—	300	—	511	—	—
EURO floating rate vs. US$ floating rate swap	—	—	1	—	—	—	—	—
US$ floating rate vs. fixed US$ rate swap	—	—	—	—	1	—	4	—
EuroBond Swap	—	—	—	—	4	10	—	8
Pre Dollar Swap	13	—	—	1	—	26	—	—
AUD floating rate vs. fixed US$ rate swap	—	—	2	—	—	—	—	—
Swap US$ fixed rate vs. CDI	142	—	—	—	—	—	—	—
	583	7	3	301	5	547	4	8
Commodities price risk
Nickel
Fixed price program	10	—	13	—	1	—	12	—
Strategic program	—	—	—	—	—	—	15	—
Bunker Oil Hedge	14	—	16	—	—	—	—	—
Coal	—	—	—	—	—	—	2	—
Maritime Freight Hiring Protection Program	—	—	—	—	—	—	2	—
	24	—	29	—	1	—	31	—
Derivatives designated as hedge
Foreign exchange cash flow hedge	1	—	20	—	—	—	—	—
Strategic Nickel	227	49	—	—	—	—	—	53
	228	49	20	—	—	—	—	53
Total	835	56	52	301	6	547	35	61

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The following table presents the effects of derivatives for the periods ended:


	Amount of gain or (loss) recognized as financial income (expense)										Financial settlement: (Inflows)/ Outflows										Amount of gain or (loss) recognized in OCI
	Three-month period ended						Nine-month period ended				Three-month period ended						Nine-month period ended				Three-month period ended					Nine-month period ended
	September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010		September 30, 2011		June 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010		September 30, 2011		June 30, 2011	September 30, 2010		September 30, 2011		September 30, 2010

Derivatives not designated as hedge

Foreign exchange and interest rate risk
CDI & TJLP vs. USD fixed and floating rate swap	(685	)	389		433		(121	)	192		(63	)	(112	)	(33	)	(223	)	(137	)	—		—	—		—		—
EURO floating rate vs. USD floating rate swap	—		—		—		—		(1	)	—		—		—		—		—		—		—	—		—		—
USD floating rate vs. USD fixed rate swap	—		—		(1	)	—		(2	)	1		1		1		3		5		—		—	—		—		—
Swap Convertibles	—		—		—		—		37		—		—		—		—		(37	)	—		—	—		—		—
Swap NDF	(1	)	—		3		(1	)	4		—		—		(2	)	—		(2	)	—		—	—		—		—
EuroBond Swap	(59	)	11		72		(6	)	(6	)	1		—		(1	)	1		(1	)	—		—	—		—		—
Pre Dollar Swap	(21	)	6		—		(13	)	—		—		—		—		—		—		—		—	—		—		—
Swap USD fixed rate vs. CDI	164		(47	)	—		117		—		31		—		—		31		—		—		—	—		—		—
South African Rande Forward	(10	)	2		—		(8	)	—		8		—		—		8		—		—		—	—		—		—
AUD floating rate vs. fixed USD rate swap	—		—		1		—		2		—		—		(1	)	(2	)	(8	)	—		—	—		—		—
	(612	)	361		508		(32	)	226		(22	)	(111	)	(36	)	(182	)	(180	)	—		—	—		—		—
Commodities price risk
Nickel
Fixed price program	8		12		(5	)	33		4		(5	)	(19	)	(8	)	(25	)	(7	)	—		—	—		—		—
Strategic program	—		—		(34	)	15		(85	)	—		—		16		—		66		—		—	—		—		—
Copper
Purchased scrap protection program	1		—		—		1		—		—		—		—		—		—		—		—	—		—		—
Aluminum	—		—		—		—		—		—		—		—		7		16		—		—	—		—		—
Maritime Freight Hiring Protection Program	—		—		9		—		(10	)	—		—		6		2		(13	)	—		—	—		—		—
Coal	—		—		1		—		(2	)	—		—		1		2		1		—		—	—		—		—
Bunker Oil Hedge	1		2		4		35		(9	)	(13	)	(15	)	(4	)	(36	)	(27	)	—		—	—		—		—
	10		14		(25	)	84		(102	)	(18	)	(34	)	11		(50	)	36		—		—	—		—		—
Embedded derivatives:
Energy - Aluminum options	—		—		(44	)	(7	)	(44	)	—		—		—		—		—		—		—	—		—		—
	—		—		(44	)	(7	)	(44	)	—		—		—		—		—		—		—	—		—		—
Derivatives designated as hedge

Aluminum	—		—		—		—		—		—		—		3		—		29		—		4	(11	)	4		24
Strategic Nickel	15		(17	)	—		(35	)	(2	)	(15	)	17		—		35		—		198		137	(68	)	326		(27	)
Foreign exchange cash flow hedge	19		—		61		19		80		(19	)	—		(75	)	(32	)	(106	)	(49	)	—	66		(35	)	110
	34		(17	)	61		(16	)	78		(34	)	17		(72	)	3		(77	)	149		141	(13	)	295		107
Total	(568	)	358		500		29		158		(74	)	(128	)	(97	)	(229	)	(221	)	149		141	(13	)	295		107

Unrealized gains (losses) in the period are included in our income statement under the caption of gains (losses) on derivatives, net.

Final maturity dates for the above instruments are as follows:

Interest rates/ Currencies		December 2019
Bunker Oil		December 2011
Nickel		December 2012

21 Board of Directors, Fiscal Council, Advisory committees and Executive Officers

Board of Directors		Governance and Sustainability Committee
		Gilmar Dalilo Cezar Wanderley
Ricardo José da Costa Flores		Renato da Cruz Gomes
Chairman		Ricardo Simonsen

Mário da Silveira Teixeira Júnior		Fiscal Council
Vice-President
		Marcelo Amaral Moraes
Fuminobu Kawashima		Chairman
José Mauro Mettrau Carneiro da Cunha
José Ricardo Sasseron		Aníbal Moreira dos Santos
Luciano Galvão Coutinho		Antonio Henrique Pinheiro Silveira
Oscar Augusto de Camargo Filho		Arnaldo José Vollet
Paulo Soares de Souza
Renato da Cruz Gomes
Robson Rocha		Alternate
Nelson Henrique Barbosa Filho		Cícero da Silva
		Marcus Pereira Aucélio
Alternate		Oswaldo Mário Pêgo de Amorim Azevedo

Eduardo de Oliveira Rodrigues Filho		Executive Officers
Estáquio Wagner Guimarães Gomes
Deli Soares Pereira		Murilo Pinto de Oliveira Ferreira
Hajime Tonoki		Chief Executive Officer
João Moisés de Oliveira
Luiz Carlos de Freitas		Vania Lucia Chaves Somavilla
Marco Geovanne Tobias da Silva		Executive Officer for Human Resources and Corporate
Paulo Sergio Moreira da Fonseca		Services
Raimundo Nonato Alves Amorim
Sandro Kohler Marcondes		Eduardo de Salles Bartolomeo
		Executive Officer for Integrated Bulk Operations
Advisory Committees of the Board of Directors
		Eduardo Jorge Ledsham
Controlling Committee		Executive Office for Exploration, Energy and Projects
Luiz Carlos de Freitas
Paulo Ricardo Ultra Soares		Guilherme Perboyre Cavalcanti
Paulo Roberto Ferreira de Medeiros		Chief Financial Officer and Investor Relations

Executive Development Committee		José Carlos Martins
João Moisés de Oliveira		Executive Officer for Marketing, Sales and Strategy
José Ricardo Sasseron
Oscar Augusto de Camargo Filho		Mario Alves Barbosa Neto
		Executive Officer for Fertilizers
Strategic Committee
Murilo Pinto de Oliveira Ferreira		Tito Botelho Martins
Luciano Galvão Coutinho		Executive Officer for Base Metals Operations
Mário da Silveira Teixeira Júnior
Oscar Augusto de Camargo Filho		Marcus Vinicius Dias Severini
Ricardo José da Costa Flores		Chief Officer of Accounting and Control Department

Finance Committee		Vera Lucia de Almeida Pereira Elias
Guilherme Perboyre Cavalcanti		Chief Accountant
Eduardo de Oliveira Rodrigues Filho		CRC-RJ - 043059/O-8
Luciana Freitas Rodrigues
Luiz Maurício Leuzinger

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Vale S.A.
	(Registrant)

	By:	/s/ Roberto Castello Branco
Date: October 26, 2011		Roberto Castello Branco
		Director of Investor Relations