Edgar Filing: Vale S.A.

e6vk

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

July 2010

Vale S.A.

Avenida Graça Aranha, No. 26
20030-900 Rio de Janeiro, RJ, Brazil

(Address of principal executive office)

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

(Check One) Form 20-F þ Form 40-F o

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

(Check One) Yes o No þ

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

(Check One) Yes o No þ

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

(Check One) Yes o No þ

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

TABLE OF CONTENT

Press Release

Signature

Press Release

Financial Statements — June 30, 2010

US GAAP

Filed at CVM and SEC on 07/29/10

Gerência Geral de Controladoria — GECOL

Vale S.A.
INDEX TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION


	Nr.
Report of Independent Registered Public Accounting Firm		3

Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009		4

Condensed Consolidated Statements of Income for the three-month periods ended June 30, 2010, March 31, 2010 and June 30, 2009 and for the six-month periods ended June 30, 2010 and 2009		6

Condensed Consolidated Statements of Cash Flows for the three-month periods ended June 30, 2010, March 31, 2010 and June 30, 2009 and for the six-month periods ended June 30, 2010 and 2009		7

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods ended June 30, 2010, March 31, 2010 and June 30, 2009 and for the six-month periods ended June 30, 2010 and 2009		8

Condensed Consolidated Statements of Comprehensive Income (deficit) for the three-month periods ended June 30, 2010, March 31, 2010 and June 30, 2009 and for the six-month periods ended June 30, 2010 and 2009		9

Notes to the Condensed Consolidated Interim Financial Information		10

PricewaterhouseCoopers
Rua da Candelária. 65 — 11°. 14°. 15° e 16°
Cjs. 1302 a 1304
20091-020 — Rio De Janeiro — RJ — Brasil
Caixa Postal 949
Telefone (21)3232-6112
Fax (21)2516-6319
pwc.com/br

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 June 30, 2010, 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 June 30 and March 31, 2010 and June 30, 2009 and for the six-month periods ended June 30, 2010 and June 30, 2009. 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, 2009, 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 10, 2010, 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, 2009, 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
July 29, 2010

Condensed Consolidated Balance Sheets

Expressed in millions of United States dollars


	June 30, 2010		December 31, 2009
	(unaudited)
Assets
Current assets
Cash and cash equivalents		6,235		7,293
Short-term investments		—		3,747
Accounts receivable
Related parties		89		79
Unrelated parties		5,741		3,041
Loans and advances to related parties		14		107
Inventories		3,806		3,196
Deferred income tax		533		852
Unrealized gains on derivative instruments		21		105
Advances to suppliers		328		498
Recoverable taxes		1,303		1,511
Others		845		865

		18,915		21,294


Non-current assets held for sale		6,124		—

Non-current assets
Property, plant and equipment, net		72,616		67,637
Intangible assets		1,133		1,173
Investments in affiliated companies, joint ventures and others		4,444		4,585
Other assets
Goodwill on acquisition of subsidiaries		3,017		2,313
Loans and advances
Related parties		11		36
Unrelated parties		134		158
Prepaid pension cost		1,464		1,335
Prepaid expenses		230		235
Judicial deposits		1,410		1,143
Advances to suppliers — energy		—		511
Recoverable taxes		474		817
Unrealized gains on derivative instruments		638		865
Others		193		177

		7,571		7,590

TOTAL		110,803		102,279

Condensed Consolidated Balance Sheets

Expressed in millions of United States dollars

(Except number of shares)


	(Continued)
				December 31,
	June 30, 2010			2009
	(unaudited)
Liabilities and stockholders’ equity
Current liabilities
Suppliers		2,950			2,309
Payroll and related charges		708			864
Current portion of long-term debt		3,958			2,933
Short-term debt		88			30
Loans from related parties		25			19
Provision for income taxes		144			173
Taxes payable and royalties		124			124
Employees postretirement benefits		198			144
Railway sub-concession agreement payable		391			285
Unrealized losses on derivative instruments		48			129
Provisions for asset retirement obligations		80			89
Dividends payable		421			1,464
Other		546			618

		9,681			9,181


Liabilities associated with non-current assets held for sale		2,532			—

Non-current liabilities
Employees postretirement benefits		2,032			1,970
Long-term debt		19,125			19,898
Provisions for contingencies (Note 17 (b))		1,967			1,763
Unrealized losses on derivative instruments		148			9
Deferred income tax		7,180			5,755
Provisions for asset retirement obligations		1,082			1,027
Debentures		782			752
Other		1,854			1,427

		34,170			32,601


Redeemable noncontrolling interest		724			731

Commitments and contingencies (Note 17)

Stockholders’ equity
Preferred class A stock - 7,200,000,000 no-par-value shares authorized and 2,108,579,618 (2009 - 2,108,579,618) issued		10,370			9,727
Common stock - 3,600,000,000 no-par-value shares authorized and 3,256,724,482 (2009 - 3,256,724,482) issued		16,016			15,262
Treasury stock -51,451,871 (2009 - 77,581,904) preferred and 25,692,694 (2009 - 74,997,899) common shares		(660	)		(1,150	)
Additional paid-in capital		1,790			411
Mandatorily convertible notes — common shares		290			1,578
Mandatorily convertible notes — preferred shares		644			1,225
Other cumulative comprehensive loss		(3,559	)		(1,808	)
Undistributed retained earnings		26,086			28,508
Unappropriated retained earnings		9,234			3,182

Total Company stockholders’ equity		60,211			56,935
Noncontrolling interests		3,485			2,831

Total stockholders’ equity		63,696			59,766

TOTAL		110,803			102,279

The accompanying notes are an integral part of this condensed consolidated financial information.

Condensed Consolidated Statements of Income

Expressed in millions of United States dollars

(Except per share amounts)


										Six-month period ended
	Three-month period ended (unaudited)									(unaudited)
				March 31,
	June 30, 2010			2010			June 30, 2009			June 30, 2010			June 30, 2009
Operating revenues, net of discounts, returns and allowances
Sales of ores and metals		8,402			5,693			4,035			14,095			8,539
Aluminum products		655			599			468			1,254			910
Revenues from logistic services		409			314			281			723			480
Fertilizer products		210			65			121			275			186
Other products and services		254			177			179			431			390

		9,930			6,848			5,084			16,778			10,505

Taxes on revenues		(272	)		(244	)		(136	)		(516	)		(233	)

Net operating revenues		9,658			6,604			4,948			16,262			10,272

Operating costs and expenses
Cost of ores and metals sold		(2,965	)		(2,600	)		(2,254	)		(565	)		(4,400	)
Cost of aluminum products		(545	)		(507	)		(529	)		(1,052	)		(981	)
Cost of logistic services		(262	)		(230	)		(178	)		(492	)		(343	)
Cost of fertilizer products		(175	)		(38	)		(41	)		(213	)		(64	)
Other		(175	)		(164	)		(133	)		(339	)		(247	)

		(4,122	)		(3,539	)		(3,135	)		(7,661	)		(6,035	)
Selling, general and administrative expenses		(343	)		(293	)		(230	)		(636	)		(463	)
Research and development expenses		(189	)		(172	)		(265	)		(361	)		(454	)
Other		(374	)		(538	)		(342	)		(912	)		(659	)

		(5,028	)		(4,542	)		(3,972	)		(9,570	)		(7,611	)

Operating income		4,630			2,062			976			6,692			2,661
Non-operating income (expenses)
Financial income		69			48			93			117			218
Financial expenses		(514	)		(465	)		(293	)		(979	)		(580	)
Gains (losses) on derivatives, net		(112	)		(230	)		873			(342	)		891
Foreign exchange and indexation gains (losses), net		66			(30	)		523			36			539
Gain (loss) on sale of investments		—			—			157			—			157

		(491	)		(677	)		1,353			(1,168	)		1,225


Income before discontinued operations, income taxes and equity results		4,139			1,385			2,329			5,524			3,886

Income taxes
Current		(609	)		(249	)		(1,494	)		(858	)		(1,971	)
Deferred		(52	)		488			(130	)		436			41

		(661	)		239			(1,624	)		(422	)		(1,930	)

Equity in results of affiliates, joint ventures and other investments		283			96			135			379			207

Net income from continuing operations		3,761			1,720			840			5,481			2,163

Discontinued operations, net of tax		(6	)		(145	)		—			(151	)

Net income		3,755			1,575			840			5,330			2,163

Net income (loss) attributable to noncontrolling interests		50			(29	)		50			21			10

Net income attributable to the Company’s stockholders		3,705			1,604			790			5,309			2,153


Basic and diluted earnings per share attributable to Company’s stockholders
Earnings per preferred share		0.69			0.29			0.14			0.99			0.39
Earnings per common share		0.69			0.29			0.14			0.99			0.39
Earnings per preferred share linked to convertible mandatorily notes (*)		1.09			0.54			0.63			1.79			1.16
Earnings per common share linked to convertible mandatorily notes (*)		1.95			0.60			0.69			3.48			1.25


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

The accompanying notes are an integral part of this condensed consolidated financial information.

Condensed Consolidated Statements of Cash Flows

Expressed in millions of United States dollars


										Six-month period ended
	Three-month period ended (unaudited)									(unaudited)
	June 30,			March 31,			June 30,			June 30,			June 30,
	2010			2010			2009			2010			2009
Cash flows from operating activities:

Net income		3,755			1,575			840			5,330			2,163
Adjustments to reconcile net income to cash from operations:
Depreciation, depletion and amortization		748			743			643			1,491			1,202
Dividends received		199			50			106			249			143
Equity in results of affiliates, joint ventures and other investments		(283	)		(96	)		(135	)		(379	)		(207	)
Deferred income taxes		52			(488	)		130			(436	)		(41	)
Loss on disposal of property, plant and equipment		48			98			46			146			87
Loss on sale of investments		—			—			(157	)		—			(157	)
Discontinued operations, net of tax		6			145			—			151			—
Foreign exchange and indexation gains, net		(20	)		(59	)		(817	)		(79	)		(874	)
Unrealized derivative losses (gains), net		223			243			(809	)		466			(805	)
Unrealized interest (income) expense, net		(13	)		18			(54	)		5			(51	)
Others		(17	)		118			(18	)		101			(34	)
Decrease (increase) in assets:
Accounts receivable		(1,608	)		(777	)		271			(2,385	)		662
Inventories		(130	)		(258	)		98			(388	)		217
Recoverable taxes		(78	)		48			1,275			(30	)		1,171
Others		(60	)		125			(8	)		65			(85	)
Increase (decrease) in liabilities:
Suppliers		385			112			(227	)		497			(330	)
Payroll and related charges		127			(277	)		62			(150	)		(77	)
Income taxes		357			(46	)		(276	)		311			(60	)
Others		(15	)		132			96			117			307

Net cash provided by operating activities		3,676			1,406			1,066			5,082			3,231

Cash flows from investing activities:
Short term investments		12			3,735			217			3,747			(692	)
Loans and advances receivable
Related parties
Loan proceeds		—			(28	)		(38	)		(28	)		(61	)
Repayments		1			—			—			1			7
Others		9			(5	)		(14	)		4			(10	)
Judicial deposits		(47	)		(116	)		(34	)		(163	)		(53	)
Investments		(23	)		(28	)		(291	)		(51	)		(429	)
Additions to, property, plant and equipment		(2,236	)		(1,817	)		(2,008	)		(4,053	)		(3,696	)
Proceeds from disposal of investments/property, plant and equipment		—			—			277			—			277
Acquisition of subsidiaries, net of cash acquired		(5,234	)		—			(300	)		(5,234	)		(1,150	)

Net cash provided by (used in) investing activities		(7,518	)		1,741			(2,191	)		(5,777	)		(5,807	)

Cash flows from financing activities:
Short-term debt, additions		225			1,632			351			1,857			454
Short-term debt, repayments		(206	)		(1,649	)		(342	)		(1,855	)		(416	)
Loans
Related parties
Loan proceeds		5			10			—			15			—
Repayments		(2	)		(1	)		(155	)		(3	)		(223	)
Issuances of long-term debt
Third parties		469			1,059			296			1,528			481
Repayments of long-term debt
Third parties		(133	)		(250	)		(52	)		(383	)		(162	)
Treasury stock		—			—			—			—			(10	)
Dividends and interest attributed to Company’s stockholders		(1,250	)		—			(1,255	)		(1,250	)		(1,255	)
Dividends and interest attributed to noncontrolling interest		(58	)		(1	)		—			(59	)		—

Net cash provided by (used in) financing activities		(950	)		800			(1,157	)		(150	)		(1,131	)

Increase (decrease) in cash and cash equivalents		(4,792	)		3,947			(2,282	)		(845	)		(3,707	)
Effect of exchange rate changes on cash and cash equivalents		(97	)		(116	)		1,477			(213	)		1,568
Cash and cash equivalents, beginning of period		11,124			7,293			8,997			7,293			10,331

Cash and cash equivalents, end of period		6,235			11,124			8,192			6,235			8,192

Cash paid during the period for:
Interest on short-term debt		—			(1	)		—			(1	)		—
Interest on long-term debt		(298	)		(243	)		(311	)		(541	)		(588	)
Income tax		(40	)		(127	)		(85	)		(167	)		(228	)
Non-cash transactions
Interest capitalized		56			46			50			102			115

Conversion of mandatorily convertible notes using 75,435,238 treasury stock (see note 14).

The accompanying notes are an integral part of this condensed consolidated financial information.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Expressed in millions of United States dollars

(Except number of shares)


										Six-month period ended
	Three-month period ended (unaudited)									(unaudited)
	June 30, 2010			March 31, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Preferred class A stock (including twelve golden shares)
Beginning of the period		9,727			9,727			9,727			9,727			9,727
Transfer from undistributed retained earnings		643			—			—			643			—

End of the period		10,370			9,727			9,727			10,370			9,727

Common stock
Beginning of the period		15,262			15,262			15,262			15,262			15,262
Transfer from undistributed retained earnings		754			—			—			754			—

End of the period		16,016			15,262			15,262			16,016			15,262

Treasury stock
Beginning of the period		(1,150	)		(1,150	)		(1,151	)		(1,150	)		(1,141	)
Sales (acquisitions)		490			—			—			490			(10	)

End of the period		(660	)		(1,150	)		(1,151	)		(660	)		(1,151	)

Additional paid-in capital
Beginning of the period		411			411			393			411			393
Change in the period		1,379			—			—			1,379			—

End of the period		1,790			411			393			1,790			393

Mandatorily convertible notes — common shares
Beginning of the period		1,578			1,578			1,288			1,578			1,288
Change in the period		(1,288	)		—			—			(1,288	)		—

End of the period		290			1,578			1,288			290			1,288

Mandatorily convertible notes — preferred shares
Beginning of the period		1,225			1,225			581			1,225			581
Change in the period		(581	)		—			—			(581	)		—

End of the period		644			1,225			581			644			581

Other cumulative comprehensive income (deficit)
Cumulative translation adjustments
Beginning of the period		(2,162	)		(1,772	)		(11,597	)		(1,772	)		(11,493	)
Change in the period		(1,455	)		(390	)		5,212			(1,845	)		5,108

End of the period		(3,617	)		(2,162	)		(6,385	)		(3,617	)		(6,385	)

Unrealized gain (loss) — available-for-sale securities, net of tax
Beginning of the period		2			—			113			—			17
Change in the period		(2	)		2			(64	)		—			32

End of the period		—			2			49			—			49

Surplus (deficit) accrued pension plan
Beginning of the period		100			(38	)		(82	)		(38	)		(34	)
Change in the period		(164	)		138			157			(26	)		109

End of the period		(64	)		100			75			(64	)		75

Cash flow hedge
Beginning of the period		(21	)		2			—			2			—
Change in the period		143			(23	)		1			120			1

End of the period		122			(21	)		1			122			1

Total other cumulative comprehensive income (deficit)		(3,559	)		(2,081	)		(6,260	)		(3,559	)		(6,260	)

Undistributed retained earnings
Beginning of the period		27,875			28,508			18,513			28,508			18,340
Transfer from/to unappropriated retained earnings		(392	)		(633	)		3,417			(1,025	)		3,590
Transfer to capitalized earnings		(1,397	)		—			—			(1,397	)		—

End of the period		26,086			27,875			21,930			26,086			21,930

Unappropriated retained earnings
Beginning of the period		5,377			3,182			10,780			3,182			9,616
Net income attributable to the stockholders’ Company		3,705			1,604			790			5,309			2,153
Interest on mandatorily convertible debt
Preferred class A stock		(19	)		(19	)		(15	)		(38	)		(23	)
Common stock		(23	)		(23	)		(31	)		(46	)		(49	)
Dividends and interest attributed to stockholders’ equity
Preferred class A stock		(77	)		—			—			(77	)		—
Common stock		(121	)		—			—			(121	)		—
Appropriation from/to undistributed retained earnings		392			633			(3,417	)		1,025			(3,590	)

End of the period		9,234			5,377			8,107			9,234			8,107

Total Company stockholders’ equity		60,211			58,224			49,877			60,211			49,877

Noncontrolling interests
Beginning of the period		2,784			2,831			2,085			2,831			1,892
Disposals of noncontrolling interests		2,309			—			29			2,309			29
Cumulative translation adjustments		(11	)		(11	)		313			(22	)		535
Cash flow hedge		31			4			—			35			—
Net income (loss) attributable to noncontrolling interests		50			(29	)		50			21			10
Dividends and interest attributable to noncontrolling interests		5			(11	)		—			(6	)		(1	)
Capitalization of stockholders advances		—			—			—			—			12
Assets and liabilities held for sale		(1,683	)		—			—			(1,683	)		—

End of the period		3,485			2,784			2,477			3,485			2,477

Total stockholders’ equity		63,696			61,008			52,354			63,696			52,354


Number of shares issued and outstanding:
Preferred class A stock (including twelve golden shares)		2,108,579,618			2,108,579,618			2,108,590,250			2,108,579,618			2,108,590,250
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		(152,579,803	)		(152,579,803	)		(152,623,603	)		(152,579,803	)		(151,792,203	)
Acquisitions		—			—			—			—			(831,400	)
Conversions		75,435,238			—			—			75,435,238			—

End of the period		(77,144,565	)		(152,579,803	)		(152,623,603	)		(77,144,565	)		(152,623,603	)

		5,288,159,535			5,212,724,297			5,212,691,129			5,288,159,535			5,212,691,129

The accompanying notes are an integral part of this condensed consolidated financial information.

Consolidated Statements of Comprehensive Income (deficit)

Expressed in millions of United States dollars


										Six-month period ended
	Three-month period ended (unaudited)									(unaudited)
	June 30, 2010			March 31, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Comprehensive income (deficit) is comprised as follows:
Company’s stockholders:
Net income attributable to Company’s stockholders		3,705			1,604			790			5,309			2,153
Cumulative translation adjustments		(1,455	)		(390	)		5,212			(1,845	)		5,108
Unrealized gain (loss) — available-for-sale securities
Gross balance as of the period/year end		(2	)		6			(109	)		4			22
Tax (expense) benefit		—			(4	)		45			(4	)		10

		(2	)		2			(64	)		—			32

Surplus (deficit) accrued pension plan
Gross balance as of the period/year end		(297	)		206			236			(91	)		208
Tax (expense) benefit		133			(68	)		(79	)		65			(99	)

		(164	)		138			157			(26	)		109

Cash flow hedge
Gross balance as of the period/year end		151			3			1			154			1
Tax expense		(8	)		(26	)		—			(34	)		—

		143			(23	)		1			120			1

Total comprehensive income attributable to Company’s stockholders		2,227			1,331			6,096			3,558			7,403


Noncontrolling interests:
Net income (loss) attributable to noncontrolling interests		50			(29	)		50			21			10
Cumulative translation adjustments		(11	)		(11	)		313			(22	)		535
Cash flow hedge		31			4			—			35			—

Total comprehensive income (deficit) attributable to Noncontrolling interests		70			(36	)		363			34			545

Total comprehensive income (deficit)		2,297			1,295			6,459			3,592			7,948

The accompanying notes are an integral part of this condensed consolidated financial information.

Notes to the Condensed Consolidated Interim Financial Information

Expressed in millions of United States dollars, unless otherwise stated

1 The Company and its operations

Vale S.A., (“Vale”, the “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 June 30, 2010, our principal consolidated operating subsidiaries are the following:

% voting

Subsidiary

% ownership

capital

Location

Principal activity

Alumina do Norte do Brasil S.A. — Alunorte (*)

57.03

59.02

Brazil

Alumina

Alumínio Brasileiro S.A. — Albras (*)

51.00

Brazil

Aluminum

CVRD Overseas Ltd

100.00

Cayman Islands

Trading

Ferrovia Centro-Atlântica S. A

99.99

Brazil

Logistic

Ferrovia Norte Sul S.A

100.00

Brazil

Logistic

Fertilizantes Fosfatados S.A — Fosfértil

58.60

72.60

Brazil

Fertilizers

Mineração Corumbaense Reunidas S.A.

100.00

Brazil

Iron ore

PT International Nickel Indonesia Tbk

59.09

Indonesia

Nickel

Vale Australia Pty Ltd.

100.00

Australia

Coal

Vale Colombia Ltd

100.00

Colombia

Coal

Vale Fosfatados S.A

100.00

Brazil

Fertilizers

Vale Inco Limited

100.00

Canada

Nickel

Vale International S.A

100.00

Switzerland

Trading

Vale Manganése Norway

100.00

Norway

Ferroalloys

Vale Manganês S.A.

100.00

Brazil

Manganese and Ferroalloys

Vale Manganèse France

100.00

France

Ferroalloys

Vale Nouvelle-Caledonie SAS

74.00

New Caledonia

Nickel


(*)		assets held for sale

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. 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 11).

We evaluate the carrying value of our equity accounted 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 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 information for the three-month periods ended June 30, 2010, March 31, 2010 and June 30, 2009 and for the six-month periods ended June 30, 2010 and 2009, 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 interim 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 six-month periods ended June 30, 2010, are not necessarily indicative of the actual results expected for the full fiscal year ending December 31, 2010.

This condensed consolidated interim financial information should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2009, prepared in accordance with US GAAP.

In preparing the condensed consolidated financial information, 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 the accounting practices adopted in Brazil (“Brazilian GAAP”) as part of a convergence project with International Financial Reporting Standards (IFRS). The convergence project is expected to be completed by the end of 2010 and therefore our annual consolidated financial statements for 2010 prepared under Brazilian GAAP will be IFRS compliant. The Company does not expect to discontinue the US GAAP reporting during 2010.

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 exchange rate 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 June 30, 2010 and December 31, 2009, were R$1.8015 and R$1.7412, respectively.

The Company has assessed subsequent events through July 29, 2010 which is the date the financial statements were issued.

4 Accounting pronouncements

a) Newly issued accounting pronouncements

Accounting Standards Update (ASU) number 2010-20 Receivables (Topic 310) improves the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. We are currently studying the future impact of this statement.

Accounting Standards Update (ASU) number 2010-18 Receivables (Topic 310) clarifies that modifications of loans that are accounted for within a pool under Subtopic 310-30, which provides guidance on accounting for acquired loans that have evidence of credit deterioration upon acquisition, do not result in the removal of those loans from the pool even if the modification would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The amendments do not affect the accounting for loans under the scope of Subtopic 310-30 that are not accounted for within pools. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40. This Codification does not impact our financial position, results of operations or liquidity.

The Company understands that the other recently issued accounting pronouncements, that are not effective as of and for the year ending December 31, 2010, are not expected to be relevant for its consolidated financial statements.

b) Accounting standards adopted in 2010

Accounting Standards Update (ASU) number 2010-11 Derivatives and Hedging (Topic 815) clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Only one form of

embedded credit derivative qualifies for the exemption—one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. This Codification does not impact our financial position, results of operations or liquidity.

Accounting Standards Update (ASU) number 2010-10 Consolidation (Topic 810) defers the effective date of the amendments to the consolidation requirements made by FASB Statement 167 to a reporting entity’s interest in certain types of entities and clarify other aspects of the Statement 167 amendments. As a result of the deferral, a reporting entity will not be required to apply the Statement 167 amendments to the Subtopic 810-10 consolidation requirements to its interest in an entity that meets the criteria to qualify for the deferral. This Update also clarifies how a related party’s interests in an entity should be considered when evaluating the criteria for determining whether a decision maker or service provider fee represents a variable interest. In addition, the Update also clarifies that a quantitative calculation should not be the sole basis for evaluating whether a decision maker’s or service provider’s fee is a variable interest. This Codification does not impact our financial position, results of operations or liquidity.

Accounting Standards Update No. 2010-09 Subsequent Events (Topic 855) addresses both the interaction of the requirements of Topic 855, Subsequent Events, with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provision related to subsequent events (paragraph 855-10-50-4). The amendments in this Update have the potential to change reporting by both private and public entities, however, the nature of the change may vary depending on facts and circumstances. This Codification does not impact our financial position, results of operations or liquidity.

Accounting Standards Update (ASU) number 2010-06 Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This update provides amendments to Subtopic 820-10 and are expected to provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The Company fully adopted this standard in 2010 with no impact on our financial position, results of operations or liquidity.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to Interpretation No. 46(R) on the accounting and disclosure requirements for the consolidation of variable interest entities (“VIEs”). Subsequently, in December 2009, the Accounting Standards Update (ASU) number 2009-17 Amendments to FASB Interpretation No. 46(R) was issued. The amendments replace the quantitative-based risks and rewards calculation, for determining which reporting entity has a controlling financial interest in a VIE, with a qualitative analysis when determining whether or not it must consolidate a VIE. The newly required approach is focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. The amendments also require an enterprise to continuously reassess whether it must consolidate a VIE. Additionally, the amendments eliminated the scope exception on qualifying special-purpose entities (“QSPE”) and require enhanced disclosures about: involvement with VIEs, significant changes in risk exposures, impacts on the financial statements, and, significant judgments and assumptions used to determine whether or not to consolidate a VIE. The Company adopted these amendments in 2010, with no impact on our financial position, results of operations or liquidity.

In June 2009, the “FASB” issued an amendment to the accounting and disclosure requirements for transfers of financial assets. Subsequently, in December 2009, the Accounting Standards Update (ASU) number 2009-16 Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140 was issued. The amendments improve financial reporting requiring greater transparency and additional disclosures for transfers of financial assets and the entity’s continuing involvement with them and also change the requirements for derecognizing financial assets. In addition, the amendments eliminate the exceptions for QSPE from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. The Company adopted these amendments in 2010, with no impact on our financial position, results of operations or liquidity.

Accounting Standards Update (ASU) number 2009-08 Earning per share issued by the FASB provides additional guidance related to calculation of earnings per share. In particular, the effect on income available to common stockholders of a redemption or induced conversion of preferred stock This guidance amends ASC 260. This codification does not impact our financial position, results of operations or liquidity.

5 Major acquisitions and disposals

a) Fertilizers Businesses

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 for a total of US$ 4.7 billion in cash. As part of this acquisition, we have an option contract to acquire additional 20,27% stake in Fosfertil, for US$ 1.0 billion, which is expected to be exercised in the near future. Also, we will launch a mandatory offer to acquire the 0.19% of the common shares held by the noncontrolling stockholders.

Due to the recent closing of this transaction, information about the purchase price allocation presented below based on the fair values of identified assets acquired and liabilities assumed is preliminary. Such allocation, currently being performed internally by the Company, will be finalized during future periods, and accordingly, the preliminary purchase price allocation information set forth below is subject to revision, which may be material.


Purchase price	4,710
Noncontrolling interests consideration (*)	1,793
Book value of assets acquired and liabilities assumed, net	(2,382	)
Adjustment to fair value of property, plant and equipment and mineral properties	(5,043	)
Adjustment to fair value of inventories	(98	)
Deferred taxes on the above adjustments	1,748

Goodwill	728


(*)		Noncontrolling interests consideration is calculated based on the option contract and market prices for the remaining noncontrolling interest.

If the acquisition of these assets had been completed on January 1, 2010, our net income would increased by US$44 and our net revenues would increase by US$461.

The goodwill balance arises primarily due to the synergies between the acquired assets and the potash operations in Taquari-Vassouras, Caranalita, Rio Colorado and Neuquém and phosphates in is 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 fertilizer business.

b) Other transactions

As part of our efforts to meet our future production targets, we acquired 51% interest on iron ore concession rights in Simandou South (Zogota), Guinea and iron ore exploration permits in Simandou North. From this amount, US$500 is payable immediately and the remaining US$2 billion upon achievement of specific milestones. This joint venture is also committed to renovate 660 km of the Trans-Guinea railway for passenger transportation and light commercial use.

In June 2010, we acquired an additional 24.5% stake in the Belvedere coal project (Belvedere) for US$92 (R$168) from AMCI Investments Pty Ltd (AMCI). As an outcome of this transaction, Vale increased its participation in Belvedere to 75.5% from 51.0%.

In May 2010, we entered into agreement with Oman Oil Company S.A.O.C. (OOC), a company wholly-owned by the Government of the Sultanate of Oman, to sell 30% of Vale Oman Pelletizing Company LLC (VOPC), for US$125. The transaction remains subject to the terms set forth in the definitive share purchase agreement to be signed after the fulfillment of precedent conditions.

On July 7, 2010, we concluded the sale of minority stakes in the Bayóvar project in Peru through the newly-formed company MVM Resources International B.V. (MVM). We sold 35% of the total capital of MVM to Mosaic for US$385 and 25% to Mitsui for US$275. Vale retains control of the Bayóvar project, holding 40% stake of the total capital of the newly-formed company. The capital amount invested as at June 30, 2010 was approximately US$400. The gain on this transaction will be accounted for in equity in accordance with the accounting rules related to the gains/losses when control is retained.

We have entered into negotiations and agreements to sell our Kaolin, aluminum and alumina assets. For further details see note 10.

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, the applicable tax rates vary from 1.67% to 40%.

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 consolidated financial statements is reconciled to the statutory rates as follows:


	Three-month period ended (unaudited)
	June 30, 2010									March 31, 2010									June 30, 2009
	Brazil			Foreign			Total			Brazil			Foreign			Total			Brazil			Foreign			Total
Income before income taxes, equity results and noncontrolling interests		3,407			732			4,139			220			1,165			1,385			5,302			(2,973	)		2,329
Exchange variation (not taxable) or not deductible		—			(184	)		(184	)		—			(416	)		(416	)		—			3,762			3,762

		3,407			548			3,955			220			749			969			5,302			789			6,091


Tax at Brazilian composite rate		(1,158	)		(187	)		(1,345	)		(75	)		(254	)		(329	)		(1,803	)		(268	)		(2,071	)
Adjustments to derive effective tax rate:
Tax benefit on interest attributed to stockholders		209			—			209			209			—			209			—			—			—
Difference on tax rates of foreign income		—			239			239			—			324			324			—			338			338
Tax incentives		212			—			212			17			—			17			59			—			59
Other non-taxable, income/non deductible expenses		(25	)		49			24			(4	)		22			18			85			(35	)		50

Income tax per consolidated statements of income		(762	)		101			(661	)		147			92			239			(1,659	)		35			(1,624	)


										Six-month period ended (unaudited)
	June 30, 2010									June 30, 2009
	Brazil			Foreign			Total			Brazil			Foreign			Total
Income before income taxes, equity results and noncontrolling interests		3,627			1,897			5,524			6,711			(2,825	)		3,886
Exchange variation (not taxable) or not deductible		—			(600	)		(600	)		—			3,788			3,788

		3,627			1,297			4,924			6,711			963			7,674


Tax at Brazilian composite rate		(1,233	)		(441	)		(1,674	)		(2,282	)		(327	)		(2,609	)
Adjustments to derive effective tax rate:
Tax benefit on interest attributed to stockholders		418			—			418			—			—			—
Difference on tax rates of foreign income		—			563			563			—			492			492
Tax incentives		229			—			229			77			—			77
Other non-taxable, income/non deductible expenses		(29	)		71			42			102			8			110


Income taxes per consolidated statements of income		(615	)		193			(422	)		(2,103	)		173			(1,930	)

Vale and some related companies in Brazil were granted with a tax incentive that provides 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 as from 2009. The tax saving 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 in a special profit reserve and is also subject to the same restrictions with respect to future dividend distributions to the stockholders.

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 achieve 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 its projects in Mozambique, Oman and Malaysia, that will take effects when those projects start their commercial operation.

We are subject to 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.

Brazilian tax loss carryforwards have no expiration date, though offset is restricted to 30% of annual taxable income.

On January 1, 2007, Company adopted the provision Accounting for Uncertainty in Income Taxes.

The reconciliation of the beginning and ending amounts is as follows: (see note 17(b)) tax – related actions)


									Six-month period ended
	Three-month period ended (unaudited)								(unaudited)
	June 30, 2010			March 31, 2010		June 30, 2009			June 30, 2010			June 30, 2009
Beginning and end of the period		409			396		666			396			666

Increase resulting from tax positions taken		—			4		7			4			21
Decrease resulting from tax positions taken		(25	)		—		(1	)		(25	)		(1	)
Cumulative translation adjustments		(15	)		9		89			(6	)		84

End of the period		369			409		761			369			770

7 Cash and cash equivalents


	June 30, 2010		December 31, 2009
	(unaudited)
Cash		1,423		728
Short-term investments		4,812		6,565

		6,235		7,293

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


	June 30, 2010		December 31, 2009
	(unaudited)
Time deposit		—		3,747

Represent low risk investments with original due date over three-month.

9 Inventories


	June 30, 2010		December 31, 2009
	(unaudited)
Finished products

Nickel (co-products and by-products)		1,545		1,083
Iron ore and pellets		635		677
Manganese and ferroalloys		163		164
Fertilizer		430		—
Aluminum products		—		135
Kaolin		—		42
Copper concentrate		28		35
Coal		66		51
Others		81		51
Spare parts and maintenance supplies		858		958

		3,806		3,196

In June 30, 2010 and December 31, 2009, there were no adjustments to reduce inventories to market values.

10 Assets and liabilities held for sale

•

Aluminium

In connection with our strategy of active portfolio asset management, On May 2, 2010, we entered into an agreement with Norsk Hydro ASA (Hydro), to sell all 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), 60% of our Paragominas bauxite mine and all our other Brazilian bauxite mineral rights (“Aluminum Business”).

For these transactions we will receive US$ 1 billion in cash, and 22% of Hydro’s share capital. In addition, Hydro will assume a net debt of US$700. In 2013 and 2015, we will sell the remaining 40% of Paragominas bauxite mine and other Brazilian bauxite mineral rights, for US$400. The sale is expected to be concluded in the near future.

The company has assessed that the expected fair value of the transaction is higher than the net asset carrying value and accordingly has maintained the original amounts. Also, because of the significant influence the company will hold on Hydro, aluminum was not considered a discontinued operation.

•

Kaolin

As part of our portfolio management, we have entered into negotiations with the intention to sell our net assets linked to kaolin activities. We have measured these assets at fair value less costs to sell and recognized in 1Q10, estimated losses in the amount of US$ 133.

As at June 30, 2010, detailed amounts of these assets and liabilities classified as held for sale are included in the table below:


Non-current assets held for sale
Inventories			375
Property, plant and equipment			4,353
Advances to suppliers — energy			476
Recoverable taxes			538
Other assets			382

Total			6,124


Liabilities associated with non-current assets held for sale
Short — term debt			141
Long term debt			624
Noncontrolling interests			1,695
Other			72

Total			2,532

11 Investments in affiliated companies and joint ventures


																	Equity in earnings (losses) of
	June 30, 2010										Investments						investee adjustments															Dividends Received
																	Three-month period ended									Six-month period ended						Three-month period ended						Six-month period ended
								Net income									(unaudited)									(unaudited)						(unaudited)						(unaudited)
	Participation in capital							(loss) of			June 30,			December			June 30,			March 31,			June 30,			June 30,			June 30,			June 30,		March 31,		June 30,		June 30,		June 30,
	(%)				Net equity			the period			2010			31, 2009			2010			2010			2009			2010			2009			2010		2010		2009		2010		2009
	Voting		Total					(unaudited)			(unaudited)
Bulk Material
Iron ore and pellets
Companhia Nipo-Brasileira de Pelotização — NIBRASCO (1)		51.11		51.00		258			12			131			132			1			5			3			6			8			—		—		—		—		20
Companhia Hispano-Brasileira de Pelotização — HISPANOBRÁS (1)		51.00		50.89		168			10			86			83			(4	)		8			(5	)		5			(8	)		25		—		—		25		—
Companhia Coreano-Brasileira de Pelotização — KOBRASCO (1)		50.00		50.00		114			19			57			59			3			6			3			9			14			—		—		—		—		—
Companhia Ítalo-Brasileira de Pelotização — ITABRASCO (1)		51.00		50.90		130			6			66			90			2			2			—			3			3			—		—		—		—		—
Minas da Serra Geral SA — MSG		50.00		50.00		58			2			30			31			1			(1	)		1			1			1			—		—		—		—		—
SAMARCO Mineração SA — SAMARCO (2)		50.00		50.00		1,665			582			892			673			245			44			90			291			132			100		50		50		150		50
Baovale Mineração SA — BAOVALE		50.00		50.00		47			3			23			30			—			1			(1	)		1			(4	)		—		—		—		—		—
Zhuhai YPM Pellet e Co,Ltd — ZHUHAI		25.00		25.00		90			20			22			13			1			3			2			5			(2	)		—		—		—		—		—
Tecnored Desenvolvimento Tecnológico SA		37.40		37.40		94			(27	)		35			—			—			(10	)		—			(10	)		—			—		—		—		—		—

												1,342			1,111			249			58			93			311			144			125		50		50		175		70
Coal
Henan Longyu Resources Co Ltd		25.00		25.00		801			155			200			250			19			20			13			39			31			39		—		—		39		—
Shandong Yankuang International Company Ltd		25.00		25.00		(55	)		(28	)		(14	)		(7	)		(5	)		(2	)		(5	)		(8	)		(12	)		—		—		—		—		—

												186			243			14			18			8			31			19			39		—		—		39		—
Base Metals
Bauxite
Mineração Rio do Norte SA — MRN		40.00		40.00		348			4			140			143			1			1			13			2			12			—		—		13		—		30

												140			143			1			1			13			2			12			—		—		13		—		30
Copper
Teal Minerals Incorpored		50.00		50.00		138			(26	)		69			80			(18	)		5			(9	)		(14	)		(9	)		—		—		—		—		—

												69			80			(18	)		5			(9	)		(14	)		(9	)		—		—		—		—		—
Nickel
Heron Resources Inc (cost US$24) — available-for-sale		—		—		—			—			5			8			—			—			—			—			—			—		—		—		—		—
Korea Nickel Corp		—		—		—			—			12			13			—			—			—			—			1			—		—		—		—		—
Others — available for sale		—		—		—			—			5			9			—			—			—			—			—			—		—		—		—		—

												22			30			—			—			—			—			1			—		—		—		—		—
Logistic
LOG-IN Logística Intermodal SA		31.33		31.33		361			(1	)		121			125			1			(1	)		—			—			2			—		—		3		—		3
MRS Logística SA		37.86		41.50		1,172			83			486			468			23			13			24			34			43			35		—		33		35		33

												607			593			24			12			24			34			45			35		—		36		35		36
Others
Steel
California Steel Industries Inc — CSI		50.00		50.00		330			30			165			150			9			6			(1	)		15			(12	)		—		—		—		—		—
THYSSENKRUPP CSA Companhia Siderúrgica		26.87		26.87		6,362			(1	)		1,709			2,049			4			(4	)		—			—			—			—		—		—		—		—
Usinas Siderúrgicas de Minas Gerais SA — USIMINAS		—		—		—			—			—			—			—			—			7			—			7			—		—		7		—		7

												1,874			2,199			13			2			6			15			(5	)		—		—		7		—		7
Other affiliates and joint ventures
Vale Soluções em energia		51.00		51.00		283			—			144			99			—			—			—			—			—			—		—		—		—		—
Others		—		—		—			—			60			87			—			—			—			—			—			—		—		—		—		—

												204			186			—			—			—			—			—			—		—		—		—		—

												4,444			4,585			283			96			135			379			207			199		50		106		249		143


(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 under shareholder agreements preclude consolidation;

(2)		Investment includes goodwill of US$62 in December, 2009 and US$60 in June, 2010;

12 Short-term debt

Short-term borrowings outstanding on June 30, 2010 are from commercial banks for import financing denominated in US dollars, with average annual interest rates of 1,56%.

13 Long-term debt


	Current liabilities				Long-term liabilities
			December 31,				December 31,
	June 30, 2010		2009		June 30, 2010		2009
	(unaudited)				(unaudited)
Foreign debt
Loans and financing denominated in the following currencies:
US dollars		2,718		1,543		2,915		4,332
Others		64		29		253		411
Fixed Rate Notes
US dollars		—		—		8,496		8,481
EUR		—		—		918		—
Debt securities — export sales (*) — US dollar denominated		—		150		—		—
Perpetual notes		—		—		78		78
Accrued charges		185		198		—		—

		2,967		1,920		12,660		13,302

Brazilian debt
Brazilian Reais indexed to Long-term Interest Rate — TJLP/CDI and General Price Index-Market (IGPM)		60		62		3,360		3,433
Basket of currencies		1		1		3		3
Non-convertible debentures		834		861		2,531		2,592
US dollars denominated		—		—		571		568
Accrued charges		96		89		—		—

		991		1,013		6,465		6,596

Total		3,958		2,933		19,125		19,898


(*)		Secured by receivables from future export sales. Redeemed in January, 2010.

The long-term portion at June 30, 2010 falls due as follows:


2011			1,032
2012			1,055
2013			3,021
2014			857
2015 and thereafter			12,770
No due date (Perpetual notes and non-convertible debentures)			390


			19,125

At June 30, 2010 annual interest rates on long-term debt were as follows:


Up to 3%			6,295
3.1% to 5% (*)			1,011
5.1% to 7%			8,085
7.1% to 9% (**)			2,788
9.1% to 11% (**)			3,669
Over 11% (**)			1,153
Variable (Perpetual notes)			82


			23,083


(*)		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$6,375 of which US$6,130 has original interest rate above 7,1% per year. The average cost after taking into account the derivative transactions is 4,42% per year in dollars.

The average cost of all derivative transactions is 4,46% per year in US dollars.

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

Quantity as of June 30, 2010

Balance

June 30,

December

Non Convertible Debentures

Issued

Outstanding

Maturity

Interest

2010

31, 2009

(unaudited)

1st Series

150,000

November 20, 2010

101.75% CDI

841

869

2nd Series

400,000

November 20, 2013

100% CDI + 0.25%

2,244

2,318

Tranche “B”

No due date

6.5% p.a + IGP-DI

312

295

3,397

3,482

Short-term portion

834

861

Long-term portion

2,531

2,592

Accrued charges

3,397

3,482

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


	Three-month period ended									Six-month period
	(unaudited)									ended (unaudited)
	June 30,			March 31,			June 30,			June 30,			June 30,
	2010			2010			2009			2010			2009
TJLP — Long-Term Interest Rate (effective rate)		1.5			1.5			1.6			3.0			3.1
IGP-M — General Price Index — Market		2.8			2.8			(0.3	)		5.7			(1.2	)
Appreciation (devaluation) of Real against US dollar		(1.1	)		(2.2	)		18.6			(3.3	)		19.8

In June 2010 we entered into a bilateral pre-export finance agreement with a local Brazilian bank in the amount of US$500 and final tenor of 10 years.

In March, 2010, Vale issued EUR750, equivalent to US$1 billion, of 8-year euronotes at a price of 99,564% of the principal amount. These notes will mature in March 2018 and will bear a coupon of 4,375% per year, payable annually.

In January 2010, we redeemed all outstanding export receivables securitization 10-year notes issued in September 2000 at an interest rate of 8.926% per year and the notes issued in July 2003 at an interest rate of 4.43% per year. The outstanding principal amounts of those September 2010 notes were US$28 and for the July 2013 notes were US$122, totaling US$150 of debt redeemed.

Credit Lines

We have revolving credit lines available under which amounts can be drawn down and repaid at the option of the borrower. At June 30, 2010, the total amount available under revolving credit lines was US$1,600, of which US$850 was granted to Vale International and the balance to Vale Inco. As of June 30, 2010, neither Vale International nor Vale Inco had drawn any amounts under these facilities, but US$108 of letters of credit were issued and remained outstanding pursuant Vale Inco’s facility.

In May 2008, we entered into framework agreements with the Japan Bank for International Cooperation in the amount of US$3 billion and Nippon Export and Investment Insurance in the amount of US$2 billion for the financing of mining, logistics and power generation projects. In November, 2009, Vale has signed a US$300 export facility agreement, through its subsidiary PT International Nickel Indonesia Tbk (PTI), with Japanese financial institutions using credit insurance provided by Nippon Export and Investment Insurance — NEXI, to finance the construction of the Karebbe hydroelectric power plant on the Larona river, island of Sulawesi, Indonesia. Through June 30, 2010, PT International had drawn down US$150 on this facility.

In 2008, we established a credit line for R$7,300, or US$4 billion, with Banco Nacional de Desenvolvimento Econômico e Social — BNDES (the Brazilian National Development Bank) to help finance our investment program. As of June 30, 2010, we had drawn the equivalent of US$862 under this facility.

Guarantee

On June 30, 2010, US$5 (December 31, 2009 — US$753) of the total aggregate outstanding debt were secured, being US$2 (December 31, 2009 — US$34) guaranteed by the Brazilian Federal Government and US$3 (December 31, 2009 — US$567) guaranteed by others receivables. In December 31, 2009 US$152 was guaranteed by receivables from future export sales of CVRD Overseas Ltd, redeemed in January, 2010. The remaining outstanding debt in the amount of US$23,078 (December 31, 2009 — US$22,078) were unsecured.

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 June 30, 2010.

14 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 April 2010, we paid US$1,250 as a first installment of the dividend to stockholders. The distribution was made in the form of interest on stockholders’ equity.

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 treasury stocks book value of US$ 1,379 was accounted for in additional paid-in capital in the stockholder’s equity.

The outstanding issued mandatory convertible notes on June 30, 2010 is 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.

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 April, 2010, we paid to holders of mandatorily convertible notes additional interest: series RIO and RIO P, US$0.417690 and US$0.495742 per note, respectively and series VALE-2012 and VALE.P-2012, US$ 0.602336 and US$ 0.696668 per note, respectively.

Basic and diluted earnings per share

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


										Six-month period ended
	Three-month period ended (unaudited)									(unaudited)
	June 30,			March 31,			June 30,			June 30,			June 30,
	2010			2010			2009			2010			2009
Net income from continuing operations attributable to Company’s stockholders		3,711			1,749			790			5,460			2,153

Discontinued operations, net of tax		(6	)		(145	)		—			(151	)		—

Net income attributable to Company’s stockholders		3,705			1,604			790			5,309			2,153

Interest attributed to preferred convertible notes		(19	)		(19	)		(15	)		(38	)		(23	)
Interest attributed to common convertible notes		(23	)		(23	)		(31	)		(46	)		(49	)

Net income for the period adjusted		3,663			1,562			744			5,225			2,081

Basic and diluted earnings per share

Income available to preferred stockholders		1,409			591			285			2,010			797
Income available to common stockholders		2,208			926			447			3,150			1,250
Income available to convertible notes linked to preferred shares		33			23			4			47			12
Income available to convertible notes linked to common shares		13			22			8			18			22
Weighted average number of shares outstanding
(thousands of shares) — preferred shares		2,035,740			2,030,998			2,030,954			2,033,272			2,030,805
Weighted average number of shares outstanding
(thousands of shares) — common shares		3,190,675			3,181,727			3,181,727			3,186,018			3,181,715
Treasury preferred shares linked to mandatorily convertible notes		47,285			77,580			30,295			47,285			30,295
Treasury common shares linked to mandatorily convertible notes		18,416			74,998			56,582			18,416			56,582

Total		5,292,116			5,365,303			5,299,558			5,284,991			5,299,397


Earnings per preferred share		0.69			0.29			0.14			0.99			0.39
Earnings per common share		0.69			0.29			0.14			0.99			0.39
Earnings per convertible notes linked to preferred share (*)		1.09			0.54			0.63			1.79			1.16
Earnings per convertible notes linked to common share (*)		1.95			0.60			0.69			3.48			1.25

Continuous operations
Earnings per preferred share		0.69			0.32			—			1.02			—
Earnings per common share		0.69			0.32			—			1.02			—
Earnings per convertible notes linked to preferred share (*)		1.10			0.57			—			1.82			—
Earnings per convertible notes linked to common share (*)		1.95			0.63			—			3.53			—

Discontinued operations
Earnings per preferred share		—			(0.03	)		—			(0.03	)		—
Earnings per common share		—			(0.03	)		—			(0.03	)		—
Earnings per convertible notes linked to preferred share (*)		—			(0.03	)		—			(0.03	)		—
Earnings per convertible notes linked to common share (*)		—			(0.03	)		—			(0.05	)		—


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

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


								Six-month period ended
	Three-month period ended (unaudited)							(unaudited)
	June 30,		March 31,			June 30,		June 30,			June 30,
	2010		2010			2009		2010			2009
Income available to preferred stockholders		1,461		633			304		2,095			832
Income available to common stockholders		2,244		971			486		3,214			1,321
Weighted average number of shares outstanding (thousands of shares) — preferred shares		2,083,025		2,108,578			2,061,249		2,080,557			2,061,100
Weighted average number of shares outstanding (thousands of shares) — common shares		3,209,091		3,256,725			3,238,309		3,204,434			3,238,297
Earnings per preferred share		0.70		0.30			0.15		1.01			0.40
Earnings per common share		0.70		0.30			0.15		1.00			0.40

Continuous operations
Earnings per preferred share		0.70		0.33			—		1.04			—
Earnings per common share		0.70		0.33			—		1.03			—

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

15 Pension plans

We previously disclosed in our consolidated financial statements for the year ended December 31, 2009, that we expected to contribute US$240 to our defined benefit pension plan in 2010. As of June 30, 2010, total contributions of US$117 had been made. We do not expect any significant change in our previous estimate.


	Three-month period ended (unaudited)
	June 30, 2010
	Overfunded			Underfunded			Underfunded
	pension plans			pension plans			other benefits
Service cost — benefits earned during the period		—			15			6
Interest cost on projected benefit obligation		71			90			24
Expected return on assets		(118	)		(81	)		—

Net periodic pension cost (credit)		(47	)		24			30


	Three-month period ended (unaudited)
	March 31, 2010
	Overfunded			Underfunded			Underfunded
	pension plans			pension plans			other benefits
Service cost — benefits earned during the period		—			17			6
Interest cost on projected benefit obligation		69			88			24
Expected return on assets		(115	)		(81	)		—

Net periodic pension cost (credit)		(46	)		24			30


	Three-month period ended (unaudited)
	June 30, 2009
	Overfunded			Underfunded			Underfunded
	pension plans			pension plans			other benefits
Service cost — benefits earned during the period		3			11			4
Interest cost on projected benefit obligation		71			60			20
Expected return on assets		(98	)		(49	)		—
Amortizations and (gain) / loss		3			—			—
Net deferral		—			1			(6	)

Net periodic pension cost (credit)		(21	)		23			18


	Six-month period ended (unaudited)
	June 30, 2010								June 30, 2009
	Overfunded			Underfunded			Underfunded		Overfunded			Underfunded			Underfunded
	pension			pension			other		pension			pension			other
	plans			plans			benefits		plans			plans			benefits
Service cost — benefits earned during the year		—			32			12		4			22			8
Interest cost on projected benefit obligation		140			178			48		115			114			38
Expected return on assets		(233	)		(162	)		—		(158	)		(92	)		—
Amortizations and (gain) / loss		—			—			—		5			1			—
Net deferral		—			—			—		—			8			(13	)

Net periodic pension costs (credit)		(93	)		48			60		(34	)		53			33

16 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 June 30, 2010 and December 31, 2009, is 2,896,038 and 1,809,117, 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 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 June 30, 2010 and December 31, 2009, we recognized a liability of US$75 and US$72, respectively, through the Statement of Income.

17 Commitments and contingencies

a) In connection with a tax-advantaged lease financing arrangement sponsored by the French Government, we provided certain guarantees on December 30, 2004 on behalf of Vale New Caledonia S.A.S. (VNC) pursuant to which we guaranteed payments due from VNC of up to a maximum amount of US$100 (“Maximum Amount”) in connection with an indemnity. This guarantee was provided to BNP Paribas for the benefit of the tax investors of GniFi, the special purpose vehicle which owns a portion of the assets in our nickel cobalt processing plant in New Caledonia (“Girardin Assets”). We also provided an additional guarantee covering the payments due from VNC of (a) amounts exceeding the Maximum Amount in connection with the indemnity and (b) certain other amounts payable by VNC under a lease agreement covering the Girardin Assets. This guarantee was provided to BNP Paribas for the benefit of GniFi.

Another commitment incorporated in the tax-advantaged lease financing arrangement was that the Girardin Assets would be substantially complete by December 31, 2009. In light of the delay in the start up of VNC processing facilities the December 31, 2009 substantially complete date was not met. Management proposed an extension to the substantially complete date from December 31, 2009 to December 31, 2010. Both the French government authorities and the tax investors have agreed to this extension, although a signed waiver has not yet been received from the tax investors. The French tax authorities issued their signed extension on March 12, 2010. Accordingly the benefits of the financing structure are fully expected to be maintained and we anticipate that there will be no recapture of the tax advantages provided under this financing structure.

In 2009, two new bank guarantees totaling US$53 (€43) as at June 30, 2010 were established by us on behalf of VNC in favor of the South Province of New Caledonia in order to guarantee the performance of VNC with respect to certain environmental obligations in relation to the metallurgical plant and the Kwe West residue storage facility.

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. The put option can be exercised 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 funding, shareholder loans and equity contributions by stockholders to VNC, exceeded $4.2 billion and an agreement cannot be reached on how to proceed with the project. On February 15, 2010, we formally amended our agreement with Sumic to increase the threshold to approximately $4.6 billion at specified rates of exchange. On May 27, 2010 the threshold was reached and we are currently discussing with Sumic an extension of the put option date into the first half of 2011.

We provided a guarantee covering certain termination payments due from VNC to the supplier under an electricity supply agreement (“ESA”) entered into in October 2004 for the VNC project. The amount of the termination payments guaranteed depends upon a number of factors, including whether any termination of the ESA is a result of a default by VNC and the date on which an early termination of the ESA were to occur. During the first quarter of 2010 the supply of electricity under the ESA to the project began, and the guaranteed amount now decreases over the life of the ESA from its maximum amount. As at June 30, 2010 the guarantee was US$160 (Euro 131).

In February 2009, we and our subsidiary, Vale Newfoundland and Labrador Limited (“VNL”), entered into a fourth amendment to the Voisey’s Bay Development agreement with the Government of Newfoundland and Labrador, Canada, that permitted VNL to ship up to 55,000 metric tonnes of nickel concentrate from the Voisey’s Bay area mines. As part of the agreement, VNL agreed to provide the Government of Newfoundland and Labrador financial assurance in the form of letters of credit each in the amount of Canadian US$16 (CAD$16) for each shipment of nickel concentrate shipped out of the province from January 1, 2009 to August 31, 2009. The amount of this financial assurance was Canadian US$110 (CAD$112) based on seven shipments of nickel concentrate and as of June 30, 2010, US$11 (CAD$11) remains outstanding.

As at June 30, 2010, there was an additional US$108 in letters of credit issued and outstanding pursuant to our syndicate revolving credit facility, as well as an additional US$40 of letters of credit and US$42 in bank guarantees that were issued and outstanding. These are associated with environmental reclamation and other operating associated items such as insurance, electricity commitments and import and export duties.

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:


	June 30, 2010 (unaudited)				December 31, 2009
	Provision for		Judicial		Provision for		Judicial
	contingencies		deposits		contingencies		deposits
Labor and social security claims		703		713		657		657
Civil claims		646		363		582		307
Tax — related actions		595		328		489		175
Others		23		6		35		4

		1,967		1,410		1,763		1,143

Labor and social security — related actions principally comprise of claims by Brazilian employees 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.

Civil — actions principally related 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 — 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 above 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 the 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; in the case of an unfavorable outcome, the deposits are transferred to the prevailing party.

Contingencies settled during the three-month periods ended June 30, 2010, March 31, 2010 and June 30, 2009, totaled US$61, US$55, US$39, respectively. Provisions recognized in the three-month periods ended June 30, 2010, March 31, 2010 and June 30, 2009, totaled US$101, US$70, US$73, 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 possible but not probable, in the total amount of US$3,984 at June 30, 2010, and for which no provision has been made (December 31, 2009 — US$4,190).

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

In April 2010 we paid remuneration on these debentures of US$ 5.

d) Assets 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:


										Six-month period ended
	Three-month period ended (unaudited)									(unaudited)
	June 30, 2010			March 31, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Beginning of period		1,129			1,116			877			1,116			887
Accretion expense		31			27			15			58			21
Liabilities settled in the current period		(2	)		(8	)		(15	)		(10	)		(18	)
Revisions in estimated cash flows (*)		28			(2	)		—			26			(9	)
Cumulative translation adjustment		(24	)		(4	)		122			(28	)		118

End of period		1,162			1,129			999			1,162			999


Current liabilities		80			79			31			80			31
Non-current liabilities		1,082			1,050			968			1,082			968

Total		1,162			1,129			999			1,162			999


(*)		Includes $ 44 for the purchase of Fosfértil and Vale Fosfatados S.A.

18 Other expenses

The line “Other operating expenses” totaled US$912 in June 30, 2010, mostly due to pre operational expenses and, idle capacity and stoppage operations of US$127 and US$359 respectively.

19 Fair value disclosure of financial assets and liabilities

The Financial Accounting Standards Board, through Accounting Standards Codification and Accounting Standards Updates, define fair value, set out a framework for measuring fair value, which refers to valuation concepts and practices and require 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 June 30, 2010 and December 31, 2009 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 for the swaps to estimate the fair value discounting their cash flows using the interest rate of the currency they are denominated. Also for the commodities contracts, since the fair value is computed by using forward curves for each commodities.

	•		Debentures

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

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


	As of June 30, 2010
	Carry amount			Fair value			Level 1		Level 2
Available-for-sale securities		10			10			10		—
Unrealized gain on derivatives		463			463			—		463
Debentures		(782	)		(782	)		—		(782	)


	As of December 31, 2009
	Carry amount			Fair value			Level 1		Level 2
Available-for-sale securities		17			17			17		—
Unrealized gains on derivatives		832			832			—		832
Debentures		(752	)		(752	)		—		(752	)

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 intangible assets. During the year ended June 30, 2010 we have not recognized any additional impairment loss 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, however its estimated fair value measurement is disclosed as follows:


	June 30, 2010 (unaudited)
	Carry amount			Fair value			Level 1			Level 2
Long-term debt (less interests) (*)		(22,802	)		(24,410	)		(14,356	)		(10,054	)


(*)		Less accrued charges US$281


	As of December 31, 2009
	Carry amount			Fair value			Level 1			Level 2
Time deposits		3,747			3,747			—			3,747
Long-term debt (less interests) (*)		(22,544	)		(23,344	)		(12,424	)		(10,920	)


(*)		Less accrued charges US$287

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 standard 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. We analyze our segment information on an aggregated and disaggregated basis.

		Considering the new segment acquired, fertilizer, and the related reorganization occurred the operating segments are: 1) Bulk materials represented by Iron ore, Pellets, Manganese ore and ferroalloys, Coal; 2) Base Metals represented by Nickel, Aluminum and Copper, 3) Fertilizers; and 4) Logistics services.

		Consolidated net income and principal assets are reconciled as follows:

		Results by segment — before eliminations (aggregated)


	Three-month period ended (unaudited)
	June 30, 2010																					March 31, 2010																					June 30, 2009
	*Bulk*			Basie																		*Bulk*			Basie																		Bulk			Basie
	*Material*			Metals			Fertilizers			Logistic			Others			Elimination			Consolidated			*Material*			Metals			Fertilizers			Logistic			Others			Elimination			Consolidated			Material			Metals			Fertilizers			Logistic			Others			Elimination			Consolidated
RESULTS
Gross revenues — Foreign		12,038			2,222			—			—			5			(6,092	)		8,173			6,870			1,932			—			12			6			(3,230	)		5,590			5,192			2,088			—			11			19			(3,028	)		4,282
Gross revenues — Domestic		1,110			157			221			457			138			(326	)		1,757			833			201			65			340			71			(252	)		1,258			344			166			121			278			45			(152	)		802
Cost and expenses		(8,270	)		(1,857	)		(211	)		(344	)		(99	)		6,418			(4,363	)		(5,093	)		(1,860	)		(39	)		(292	)		(69	)		3,482			(3,871	)		(4,182	)		(1,941	)		(33	)		(201	)		(23	)		3,180			(3,200	)
Research and development		(72	)		(58	)		(5	)		(11	)		(43	)		—			(189	)		(44	)		(42	)		(7	)		(11	)		(68	)		—			(172	)		(67	)		(61	)		(6	)		(11	)		(120	)		—			(265	)
Depreciation, depletion and amortization		(362	)		(330	)		(17	)		(38	)		(1	)		—			(748	)		(376	)		(325	)		(7	)		(35	)		—			—			(743	)		(273	)		(331	)		(7	)		(29	)		(3	)		—			(643	)

Operating income		4,444			134			(12	)		64			—			—			4,630			2,190			(94	)		12			14			(60	)		—			2,062			1,014			(79	)		75			48			(82	)		—			976
Financial income		745			388			1			2			(188	)		(879	)		69			566			(2	)		—			1			188			(705	)		48			601			168			—			1			3			(680	)		93
Financial expenses		(961	)		(625	)		(1	)		(11	)		205			879			(514	)		(757	)		(199	)		—			(7	)		(207	)		705			(465	)		(643	)		(322	)		—			6			(14	)		680			(293	)
Gains (losses) on derivatives, net		(157	)		40			—			—			5			—			(112	)		(199	)		(31	)		—			—			—			—			(230	)		939			(66	)		—			—			—			—			873
Foreign exchange and monetary gains (losses), net		687			(55	)		2			(1	)		(567	)		—			66			(53	)		26			—			(2	)		(1	)		—			(30	)		208			253			—			(9	)		71			—			523
Discontinued operations, net of tax		—			(6	)		—			—			—			—			(6	)		—			(145	)		—			—			—			—			(145	)		157			—			—			—			—			—			157
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments		250			1			—			23			9			—			283			58			6			—			12			20			—			96			90			13			—			23			9			—			135
Income taxes		(743	)		74			3			5			—			—			(661	)		147			67			—			4			21			—			239			(1,615	)		6			—			(10	)		(5	)		—			(1,624	)
Noncontrolling interests		2			(48	)		—			—			(4	)		—			(50	)		—			29			—			—			—			—			29			12			(56	)		—			—			(6	)		—			(50	)

Net income attributable to the Company’s stockholders		4,267			(97	)		(7	)		82			(540	)		—			3,705			1,952			(343	)		12			22			(39	)		—			1,604			763			(83	)		75			59			(24	)		—			790


Sales classified by geographic destination:
Foreign market
America, except United States		391			252			—			—			5			(259	)		389			193			271			—			12			2			(145	)		333			69			431			—			—			1			(149	)		352
United States		12			161			—			—			—			(10	)		163			1			148			—			—			2			(16	)		135			13			198			—			—			11			(24	)		198
Europe		3,331			785			—			—			—			(1,735	)		2,381			2,151			665			—			—			2			(1,461	)		1,357			1,372			579			—			—			5			(1,291	)		665
Middle East/Africa/Oceania		747			55			—			—			—			(344	)		458			193			49			—			—			—			(13	)		229			215			53			—			—			—			(153	)		115
Japan		1,260			330			—			—			—			(518	)		1,072			1,206			272			—			—			—			(646	)		832			372			166			—			—			2			(162	)		378
China		5,332			173			—			—			—			(2,711	)		2,794			2,675			201			—			—			—			(716	)		2,160			2,749			267			—			11			—			(1,009	)		2,018
Asia, other than Japan and China		965			466			—			—			—			(515	)		916			451			326			—			—			—			(233	)		544			402			394			—			—			—			(240	)		556

		12,038			2,222			—			—			5			(6,092	)		8,173			6,870			1,932			—			12			6			(3,230	)		5,590			5,192			2,088			—			11			19			(3,028	)		4,282
Domestic market		1,110			157			221			457			138			(326	)		1,757			833			201			65			340			71			(252	)		1,258			344			166			121			278			45			(152	)		802

		13,148			2,379			221			457			143			(6,418	)		9,930			7,703			2,133			65			352			77			(3,482	)		6,848			5,536			2,254			121			289			64			(3,180	)		5,084

Operating segment — after eliminations (disaggregated)


	As of and for the three-month period ended (unaudited)
	June 30, 2010
																								Property,		Addition to
																								plant and		property,
																		Depreciation,						equipment,		plant and
	Revenue																	depletion						net and		equipment
							Value			Net		Cost and			Operating			and			Operation			intangible		and
	Foreign		Domestic		Total		added tax			revenues		expenses			profit			amortization			income			assets		intangible		Investments
Bulk Material
Iron ore		4,782		653		5,435		(87	)		5,348		(1,658	)		3,690			(297	)		3,393			26,408		1,039		88
Pellets		1,285		333		1,618		(62	)		1,556		(524	)		1,032			(34	)		998			1,698		77		1,254
Manganese		81		8		89		(6	)		83		(47	)		36			(4	)		32			23		—		—
Ferroalloys		103		67		170		(16	)		154		(79	)		75			(6	)		69			240		3		—
Pig iron		9		—		9		—			9		(4	)		5			(5	)		—			—		—		—
Coal		185		—		185		—			185		(217	)		(32	)		(16	)		(48	)		1,734		123		186

		6,445		1,061		7,506		(171	)		7,335		(2,529	)		4,806			(362	)		4,444			30,103		1,242		1,528
Base Metals
Nickel and other products (*)		874		—		874		—			874		(640	)		234			(246	)		(12	)		27,471		386		22
Copper concentrate		207		—		207		(3	)		204		(145	)		59			(22	)		37			2,662		307		69
Aluminum Products		634		21		655		(3	)		652		(481	)		171			(62	)		109			228		—		140

		1,715		21		1,736		(6	)		1,730		(1,266	)		464			(330	)		134			30,361		693		231

Fertilizers
Potash		—		55		55		(3	)		52		(42	)		10			(6	)		4			1,889		2		—
Phosphates		—		155		155		(15	)		140		(145	)		(5	)		(11	)		(16	)		7,153		44		—

		—		210		210		(18	)		192		(187	)		5			(17	)		(12	)		9,042		46		—

Logistics
Railroads		—		301		301		(45	)		256		(190	)		66			(32	)		34			1,944		25		486
Ports		11		95		106		(14	)		92		(51	)		41			(5	)		36			245		1		—
Ships		2		—		2		—			2		(7	)		(5	)		(1	)		(6	)		—		—		121

		13		396		409		(59	)		350		(248	)		102			(38	)		64			2,189		26		607
Others		—		69		69		(18	)		51		(50	)		1			(1	)		—			2,054		229		2,078

		8,173		1,757		9,930		(272	)		9,658		(4,280	)		5,378			(748	)		4,630			73,749		2,236		4,444


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

Operating segment — after eliminations (disaggregated)


	As of and for the three-month period ended (unaudited)
	March 31, 2010
																								Property,		Addition to
																								plant and		property,
																		Depreciation,						equipment,		plant and
																		depletion						net and		equipment
	Revenue						Value			Net		Cost and			Operating			and			Operation			intangible		and
	Foreign		Domestic		Total		added tax			revenues		expenses			profit			amortization			income			assets		intangible		Investments
Bulk Material
Iron ore		3,319		428		3,747		(70	)		3,677		(1,449	)		2,228			(325	)		1,903			24,664		554		98
Pellets		523		252		775		(68	)		707		(432	)		275			(24	)		251			1,581		52		1,033
Manganese		50		8		58		—			58		(15	)		43			(1	)		42			24		—		—
Ferroalloys		78		64		142		(16	)		126		(72	)		54			(11	)		43			251		5		—
Coal		127		—		127		—			127		(161	)		(34	)		(15	)		(49	)		1,735		29		219

		4,097		752		4,849		(154	)		4,695		(2,129	)		2,566			(376	)		2,190			28,255		640		1,350
Base Metals
Nickel and other products (*)		743		4		747		—			747		(658	)		89			(239	)		(150	)		28,050		322		27
Copper concentrate		154		26		180		(7	)		173		(123	)		50			(18	)		32			2,483		224		85
Aluminum products		552		47		599		(10	)		589		(497	)		92			(60	)		32			4,536		61		141

		1,449		77		1,526		(17	)		1,509		(1,278	)		231			(317	)		(86	)		35,069		607		253

Fertilizers
Potash		—		65		65		(3	)		62		(43	)		19			(7	)		12			1,792		5		—

		—		65		65		(3	)		62		(43	)		19			(7	)		12			1,792		5		—

Logistics
Railroads		—		236		236		(42	)		194		(152	)		42			(27	)		15			1,950		21		470
Ports		2		73		75		(10	)		65		(55	)		10			(6	)		4			239		2		—
Ships		3		—		3		—			3		(6	)		(3	)		(2	)		(5	)		—		—		122

		5		309		314		(52	)		262		(213	)		49			(35	)		14			2,189		23		592
Others		39		55		94		(18	)		76		(136	)		(60	)		(8	)		(68	)		1,940		542		2,321

		5,590		1,258		6,848		(244	)		6,604		(3,799	)		2,805			(743	)		2,062			69,245		1,817		4,516


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

Operating segment — after eliminations (disaggregated)


	As of and for the three-month period ended (unaudited)
	June 30, 2009
																								Property,		Addition to
																								plant and		property,
																		Depreciation,						equipment,		plant and
																		depletion						net and		equipment
	Revenue						Value			Net		Cost and			Operating			and			Operation			intangible		and
	Foreign		Domestic		Total		added tax			revenues		expenses			profit			amortization			income			assets		intangible		Investments
Bulk Material
Iron ore		2,261		161		2,422		(30	)		2,392		(1,014	)		1,378			(243	)		1,135			18,466		597		62
Pellets		112		67		179		(21	)		158		(213	)		(55	)		(19	)		(74	)		645		57		940
Manganese		39		4		43		(1	)		42		(23	)		19			(2	)		17			21		1		—
Ferroalloys		38		32		70		(8	)		62		(82	)		(20	)		(2	)		(22	)		231		17		—
Pig iron		—		—		—		—			—		—			—			—			—			144		32		—
Coal		96		—		96		—			96		(117	)		(21	)		(9	)		(30	)		1,433		153		—

		2,546		264		2,810		(60	)		2,750		(1,449	)		1,301			(275	)		1,026			20,940		857		1,002
Base Metals
Nickel and other products (*)		1,106		3		1,109		—			1,109		(884	)		225			(243	)		(18	)		22,504		279		88
Kaolin		32		10		42		(2	)		40		(36	)		4			(13	)		(9	)		188		27		—
Copper concentrate		161		9		170		—			170		(105	)		65			(17	)		48			3,831		185		—
Aluminum products		414		54		468		(9	)		459		(494	)		(35	)		(58	)		(93	)		4,356		58		146

		1,713		76		1,789		(11	)		1,778		(1,519	)		259			(331	)		(72	)		30,879		549		234

Fertilizers
Potash		—		121		121		(2	)		119		(37	)		82			(7	)		75			159		—		—

		—		121		121		(2	)		119		(37	)		82			(7	)		75			159		—		—
Logistics
Railroads		—		224		224		(38	)		186		(136	)		50			(22	)		28			1,733		20		372
Ports		—		57		57		(8	)		49		(36	)		13			(5	)		8			1,441		69		—
Ships		—		—		—		—			—		—			—			—			—			638		267		112

		—		281		281		(46	)		235		(172	)		63			(27	)		36			3,812		356		484
Others		23		60		83		(17	)		66		(152	)		(86	)		(3	)		(89	)		3,506		246		1,248

		4,282		802		5,084		(136	)		4,948		(3,329	)		1,619			(643	)		976			59,296		2,008		2,968


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

Results by segment — before eliminations (aggregated)


	Six-month period ended (unaudited)
	June 30, 2010																					June 30, 2009
	Bulk																					Bulk
	Material			Basie Metals			Fertilizers			Logistic			Others			Elimination			Consolidated			Material			Basie Metals			Fertilizers			Logistic			Others			Elimination			Consolidated
RESULTS
Gross revenues — Foreign		18,908			4,154			—			12			11			(9,322	)		13,763			11,084			3,738			—			16			269			(6,015	)		9,092
Gross revenues — Domestic		1,943			358			286			797			209			(578	)		3,015			596			337			186			479			103			(288	)		1,413
Cost and expenses		(13,363	)		(3,717	)		(250	)		(636	)		(168	)		9,900			(8,234	)		(8,113	)		(3,670	)		(52	)		(378	)		(278	)		6,303			(6,188	)
Research and development		(116	)		(100	)		(12	)		(22	)		(111	)		—			(361	)		(93	)		(117	)		(18	)		(27	)		(199	)		—			(454	)
Depreciation, depletion and amortization		(738	)		(655	)		(24	)		(73	)		(1	)		—			(1,491	)		(478	)		(657	)		(10	)		(53	)		(4	)		—			(1,202	)

Operating income		6,634			40			—			78			(60	)		—			6,692			2,996			(369	)		106			37			(109	)		—			2,661

Financial income		1,311			386			1			3			—			(1,584	)		117			1,261			334			—			2			4			(1,383	)		218
Financial expenses		(1,718	)		(824	)		(1	)		(18	)		(2	)		1,584			(979	)		(1,307	)		(634	)		—			—			(22	)		1,383			(580	)
Gains (losses) on derivatives, net		(356	)		9			—			—			5			—			(342	)		973			(82	)		—			—			—			—			891
Foreign exchange and monetary gains (losses), net		634			(29	)		2			(3	)		(568	)		—			36			237			247			—			(10	)		65			—			539
Discontinued Operations, Net of tax		—			(151	)		—			—			—			—			(151	)		—			—			—			—			—			—			—
Gain on sale of investments		—			—			—			—			—			—			—			157			—			—			—			—			—			157
Equity in results of affiliates and joint ventures and change in provision for losses on equity investments		308			7			—			35			29			—			379			144			12			—			44			7			—			207
Income taxes		(596	)		141			3			9			21			—			(422	)		(2,081	)		179			—			(14	)		(14	)		—			(1,930	)
Minority interests		2			(19	)		—			—			(4	)		—			(21	)		22			(23	)		—			—			(9	)		—			(10	)

Net income attributable to the Company’s stockholders		6,219			(440	)		5			104			(579	)		—			5,309			2,402			(336	)		106			59			(78	)		—			2,153


Sales classified by geographic destination:
Foreign market
America, except United States		584			523			—			12			7			(404	)		722			109			710			—			—			14			(233	)		600
United States		13			309			—			—			2			(26	)		298			24			417			—			—			19			(42	)		418
Europe		5,482			1,450			—			—			2			(3,196	)		3,738			2,538			1,104			—			—			12			(2,175	)		1,479
Middle East/Africa/Oceania		940			104			—			—			—			(357	)		687			482			125			—			—			14			(382	)		239
Japan		2,466			602			—			—			—			(1,164	)		1,904			855			316			—			—			111			(420	)		862
China		8,007			374			—			—			—			(3,427	)		4,954			6,217			466			—			16			19			(2,277	)		4,441
Asia, other than Japan and China		1,416			792			—			—			—			(748	)		1,460			859			600			—			—			80			(486	)		1,053

		18,908			4,154			—			12			11			(9,322	)		13,763			11,084			3,738			—			16			269			(6,015	)		9,092
Domestic market		1,943			358			286			797			209			(578	)		3,015			596			337			186			479			103			(288	)		1,413

		20,851			4,512			286			809			220			(9,900	)		16,778			11,680			4,075			186			495			372			(6,303	)		10,505

Operating segment — after eliminations (disaggregated)


	Six-month period ended (unaudited)
	June 30, 2010

																								Property,		Addition to
																								plant and		property,
																		Depreciation,						equipment,		plant and
																		depletion						net and		equipment
	Revenue						Value added			Net		Cost and			Operating			and			Operation			intangible		and
	Foreign		Domestic		Total		tax			revenues		expenses			profit			amortization			income			assets		intangible		Investments
Bulk Material
Iron ore		8,101		1,081		9,182		(157	)		9,025		(3,107	)		5,918			(622	)		5,296			26,408		1,593		88
Pellets		1,808		585		2,393		(130	)		2,263		(956	)		1,307			(58	)		1,249			1,698		129		1,254
Manganese		131		16		147		(6	)		141		(62	)		79			(5	)		74			23		—		—
Ferroalloys		181		131		312		(32	)		280		(151	)		129			(17	)		112			240		8		—
Pig iron		9		—		9		—			9		(4	)		5			(5	)		—			—		—		—
Coal		312		—		312		—			312		(378	)		(66	)		(31	)		(97	)		1,734		152		186

		10,542		1,813		12,355		(325	)		12,030		(4,658	)		7,372			(738	)		6,634			30,103		1,882		1,528

Base Metals
Nickel and other products (*)		1,617		4		1,621		—			1,621		(1,298	)		323			(485	)		(162	)		27,471		708		22
Copper concentrate		361		26		387		(10	)		377		(268	)		109			(40	)		69			2,662		531		69
Aluminum products		1,186		68		1,254		(13	)		1,241		(978	)		263			(122	)		141			228		61		140

		3,164		98		3,262		(23	)		3,239		(2,544	)		695			(647	)		48			30,361		1,300		231

Fertilizers
Potash		—		120		120		(6	)		114		(85	)		29			(13	)		16			1,889		7		—
Phosphates		—		155		155		(15	)		140		(145	)		(5	)		(11	)		(16	)		7,153		44		—

		—		275		275		(21	)		254		(230	)		24			(24	)		—			9,042		51		—

Logistics
Railroads		—		537		537		(87	)		450		(342	)		108			(59	)		49			1,944		46		486
Ports		13		168		181		(24	)		157		(106	)		51			(11	)		40			245		3		121
Ships		5		—		5		—			5		(13	)		(8	)		(3	)		(11	)		—		—		—

		18		705		723		(111	)		612		(461	)		151			(73	)		78			2,189		49		607
Others		39		124		163		(36	)		127		(186	)		(59	)		(9	)		(68	)		2,054		771		2,078

		13,763		3,015		16,778		(516	)		16,262		(8,079	)		8,183			(1,491	)		6,692			73,749		4,053		4,444

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

Operating segment — after eliminations (disaggregated)


	Six-month period ended (unaudited)
	June 30, 2009

																								Property,		Addition to
																								plant and		property,
																		Depreciation,						equipment,		plant and
																		depletion						net and		equipment
	Revenue						Value added			Net		Cost and			Operating			and			Operation			intangible		and
	Foreign		Domestic		Total		tax			revenues		expenses			profit			amortization			income			assets		intangible		Investments
Bulk Material
Iron ore		5,225		326		5,551		(62	)		5,489		(2,012	)		3,477			(424	)		3,053			18,466		1,333		62
Pellets		353		99		452		(29	)		423		(432	)		(9	)		(29	)		(38	)		645		84		940
Manganese		52		6		58		(1	)		57		(41	)		16			(4	)		12			21		2		—
Ferroalloys		89		59		148		(15	)		133		(142	)		(9	)		(4	)		(13	)		231		35		—
Pig iron		11		—		11		—			11		(13	)		(2	)		—			(2	)		144		48		—
Coal		230		—		230		—			230		(216	)		14			(17	)		(3	)		1,433		153		—

		5,960		490		6,450		(107	)		6,343		(2,856	)		3,487			(478	)		3,009			20,940		1,655		1,002

Base Metals
Nickel and other products (*)		1,966		6		1,972		—			1,972		(1,717	)		255			(496	)		(241	)		22,504		1,120		22
Kaolin		62		19		81		(4	)		77		(70	)		7			(19	)		(12	)		188		22		69
Copper concentrate		240		37		277		(5	)		272		(211	)		61			(34	)		27			3,831		51		140
Aluminum products		822		88		910		(17	)		893		(920	)		(27	)		(108	)		(135	)		4,356		99		146

		3,090		150		3,240		(26	)		3,214		(2,918	)		296			(657	)		(361	)		30,879		1,292		377

Fertilizers
Potash		—		186		186		(5	)		181		(65	)		116			(10	)		106			159		—		—

		—		186		186		(5	)		181		(65	)		116			(10	)		106			159		—		—

Logistics
Railroads		—		381		381		(60	)		321		(261	)		60			(43	)		17			1,733		41		372
Ports		—		99		99		(14	)		85		(70	)		15			(10	)		5			1,441		106		—
Ships		—		—		—		—			—		—			—			—			—			638		267		112

		—		480		480		(74	)		406		(331	)		75			(53	)		22			3,812		414		484
Others		42		107		149		(21	)		128		(239	)		(111	)		(4	)		(115	)		3,506		423		1,248

		9,092		1,413		10,505		(233	)		10,272		(6,409	)		3,863			(1,202	)		2,661			59,296		3,784		3,111


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

21 Derivative financial instruments

Risk management policy

Vale’s risk management strategy encompasses an enterprise risk management approach where we evaluate not only market risk impacts on the business, but also the impacts arising from credit and operating risks.

Vale considers that the effective management of risk is a key objective to support its growth strategy and financial flexibility. The risk reduction on Vale’s future cash flows 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 a risk management committee.

The risk management policy determines that Vale should evaluate regularly its cash flow risks and potential risk mitigation strategies. Whenever considered necessary, mitigation strategies should be put in place to reduce cash flow volatility. The executive board is responsible for the evaluation and approval of long-term risk mitigation strategies recommended by the risk management committee.

The risk management committee assists our executive officers in overseeing and reviewing our enterprise risk management activities including the principles, policies, process, procedures and instruments employed to manage risk. The risk management committee reports periodically to the executive board on how risks have been monitored, what are the most important risks we are exposed to and their impact on cash flows.

The risk management policy and procedures, that complement the normative of risk management governance model, explicitly prohibit speculative transactions with derivatives and require the diversification of operations and counterparties.

Besides the risk management governance model, Vale has put in place a well defined corporate governance structure. The recommendation and execution of the derivative transactions are implemented by independent areas. The strategy and risk management department is responsible for defining and proposing to the risk management committee market risk mitigation strategies consistent with Vale’s and its wholly owned subsidiaries corporate strategy. The finance department is responsible for the execution of the risk mitigation strategies through the use of derivatives. The independence of the areas guarantees an effective control on these operations.

When measuring our exposures, the correlations between market risk factors are taken into consideration once we must be able to evaluate the net impact on our cash flows from all main market variables. We are also able to identify a natural diversification of products and currencies in our portfolio and therefore a natural reduction of the overall risk of the Company.

The consolidated market risk exposure and the portfolio of derivatives are measured monthly and monitored in order to evaluate the financial results and market risk impacts on our cash flow, as well as to guarantee that the initial goals will be achieved. The mark-to-market of the derivatives 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 are:

	•		Interest rates;

	•		Foreign exchange;

	•		Product prices and input costs

Foreign exchange and interest rate risk

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

Derivative instruments may be used to reduce Vale’s potential cash flow volatility arising from its currency mismatch. 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. Our floating rate debt consists mainly of loans including export pre-payments, commercial banks and multilateral organizations loans. In general, our US dollars floating rate debt is subject to changes in the LIBOR (London Interbank Offer Rate in US dollars). To mitigate the impact of the interest rate volatility on its cash flows, Vale takes advantage of natural hedges resulting from the correlation of metal prices and US dollar floating rates. When natural hedges are not present, we may opt to look for the same effect by using financial instruments.

Our 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 debts are mainly linked to CDI and TJLP.

The swap transactions used to convert debt linked to Brazilian reais into U.S. Dollars have similar — and sometimes shorter — settlement dates than the final maturity of the debt instruments. Their amounts are similar to the principal and interest payments, subjected to liquidity market conditions. The swaps with shorter settlement date than the debts’ final maturity are renegotiated through time so that their final maturity match — or become closer — to the debt final maturity. At each settlement date, the results on the swap transactions partially offset the impact of the foreign exchange rate in our obligations, contributing to stabilize the cash disbursements in U.S. Dollars for the interest and/or principal payment of our Brazilian Real denominated debt.

In the event of an appreciation (depreciation) of the Brazilian real against the US dollar, the negative (positive) impact on our 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 on the payment date.

We have other exposures associated with our outstanding debt portfolio. In order to reduce cash flow volatility associated with a financing from KFW (Kreditanstalt Für Wiederaufbau) indexed to Euribor, Vale entered into a swap contract where the cash flows in Euros are converted into cash flows in US dollars. We have also entered into a swap to convert the cash flow from a debt instrument issued originally in Euro into US dollars. In this derivative transaction, we receive fixed interest rates in Euros and pay fixed interest rates in US dollars.

In order to reduce the cash flows volatility associated with the foreign exchange exposure from some coal fixed price sales, Vale purchased forward Australian dollars.

Product price risk

Vale is also exposed to several market risks associated with commodities price volatilities. Currently, our derivative transactions include nickel, aluminum, coal, copper, bunker oil and maritime freight (FFA) derivatives and all have the same purpose of mitigating Vale’s cash flow volatility.

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

	•		Strategic derivative program — in order to protect our cash flows in 2010 and 2011, we entered into derivative transactions where we fixed the prices of some of our nickel sales during the period.

	•		Fixed price sales program — we use to enter into nickel future contracts on the London Metal Exchange (LME) with the purpose of maintaining our exposure to nickel price variation, regarding the fact that, in some cases, the commodity is sold at a fixed price to some customers. Whenever the ‘Strategic derivative 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 risk of mismatch between the pricing on the costs of intermediate products and finished goods.

Aluminum — In order to protect our cash flow in 2010, we entered into derivatives transactions where we fixed the prices of some of our aluminum sales during the period. Aluminum operations are available for sale since June 2010.

Coal — In order to protect our cash flow in 2010, we entered into derivatives transactions where we fixed the prices of some of our coal sales during the period.

Copper — We entered into derivatives transactions in order to reduce the 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 the clients.

Bunker Oil — In order to reduce the impact of bunker oil price fluctuation on Vale’s freight hiring and, therefore, on Vale’s cash flow, Vale implemented a derivative program that consists of forward purchases and swaps.

Maritime Freight — In order to reduce the impact of freight price fluctuations on the Company’s cash flows, Vale

implemented a derivative program that consists of purchasing Forward Freight Agreements (FFA).

Embedded derivatives — In addition to the contracts mentioned above, Vale Inco Ltd., Vale’s wholly-owned subsidiary, has nickel concentrate and raw materials purchase agreements, where there are provisions based on the movement of nickel and copper prices. These provisions are considered embedded derivatives. There is also an embedded derivative related to energy purchase in our subsidiary Albras on which there is a premium that can be charged based on the movement of aluminum prices.

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 June 30, 2010, we have outstanding positions designated as cash flow hedge and fair value 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, such as time value, the value of such excluded portion is included in earnings. A fair value hedge is a hedge of an exposure to the changes in the fair value of a recognized asset or liability that is attributable to a particular risk and will affect reported net income.

The assets and liabilities balances of derivatives measured at fair value and the effects of their recognition are shown in the following tables:


	Assets								Liabilities
	June 30, 2010 (unaudited)				December 31, 2009				June 30, 2010 (unaudited)				December 31, 2009
	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		—		490		—		794		—		64		—		—
EURO floating rate vs. USD floating rate swap		—		—		—		1		—		—		—		—
USD floating rate vs. fixed USD rate swap		—		—		—		—		—		6		7		1
EuroBond Swap		—		—		—		—		—		78		—		—
AUD floating rate vs. fixed USD rate swap		2		—		—		9		—		—		—		—

		2		490		—		804		—		148		7		1

Commodities price risk
Nickel
Fixed price program		19		—		12		2		4		—		3		8
Strategic program		—		—		—		—		31		—		32		—
Aluminum		—		—		—		—		—		—		16		—
Bunker Oil Hedge		—		10		49		—		—		—		—		—
Coal		—		—		—		—		3		—		—		—
Maritime Freight Hiring Protection Program		—		—		29		—		10		—		—		—

		19		10		90		2		48		—		51		8

Derivatives designated as hedge
Foreign exchange cash flow hedge		—		96		15		59		—		—		—		—
Strategic Nickel		—		42		—		—		—		—		—		—
Aluminum		—		—		—		—		—		—		71		—

		—		138		15		59		—		—		71		—


Total		21		638		105		865		48		148		129		9

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


	Amount of gain or (loss) recognized in financial income (expense)															Financial settlement															Amount of gain or (loss) recognized in OCI
										Six-month period ended															Six-month period ended													Six-month period ended
	Three-month period ended (unaudited)													(unaudited)		Three-month period ended (unaudited)													(unaudited)		Three-month period ended (unaudited)							(unaudited)
				March 31,															March 31,														March 31,
	June 30, 2010			2010			June 30, 2009			June 30, 2010			June 30, 2009			June 30, 2010			2010			June 30, 2009			June 30, 2010			June 30, 2009			June 30, 2010		2010			June 30, 2009		June 30, 2010		June 30, 2009
Derivatives not designated as hedge

Foreign exchange and interest rate risk
CDI & TJLP vs. USD fixed and floating rate swap		(191	)		(50	)		927			(241	)		959			(75	)		(29	)		(101	)		(104	)		(121	)		—		—			—		—		—
EURO floating rate vs. USD floating rate swap		(1	)		—			—			(1	)		(1	)		—			—			(1	)		—			(1	)		—		—			—		—		—
USD floating rate vs. USD fixed rate swap		—			(1	)		—			(1	)		(1	)		2			2			2			4			2			—		—			—		—		—
Swap Convertibles		37			—			—			37			—			(37	)		—			—			(37	)		—			—		—			—		—		—
Swap NDF		1			—			—			1			—			—			—			—			—			—			—		—			—		—		—
EuroBond Swap		(78	)		—			—			(78	)		—			—			—			—			—			—			—		—			—
AUD floating rate vs. fixed USD rate swap		(1	)		2			7			1			10			(6	)		(1	)		(1	)		(7	)		(1	)		—		—			—		—		—

		(233	)		(49	)		934			(282	)		967			(116	)		(28	)		(101	)		(144	)		(121	)		—		—			—		—		—
Commodities price risk
Nickel
Fixed price program		18			(9	)		42			9			24			2			(1	)		9			1			30			—		—			—		—		—
Purchase program		—			—			(32	)		—			(22	)		—			—			27			—			25			—		—			—		—		—
Strategic program		88			(139	)		(42	)		(51	)		(42	)		36			14			—			50			—			—		—			—		—		—
Natural gas		—			—			(1	)		—			(4	)		—			—			2			—			4			—		—			—		—		—
Aluminum		—			—			—			—			—			—			16			—			16			—			—		—			—		—		—
Maritime Freight Hiring Protection Program		(16	)		(3	)		34			(19	)		34			(9	)		(10	)		(5	)		(19	)		(5	)		—		—			—		—		—
Coal		(2	)		(1	)		—			(3	)		—			—			—			—			—			—			—		—			—		—		—
Bunker Oil Hedge		(7	)		(6	)		—			(13	)		—			(10	)		(13	)		—			(23	)		—			—		—			—		—		—

		81			(158	)		1			(77	)		(10	)		19			6			33			25			54			—		—			—		—		—
Embedded derivatives:
For nickel concentrate costumer sales		—			—			(18	)		—			(16	)		—			—			5			—			(18	)		—		—			—		—		—
Customer raw material contracts		—			—			(57	)		—			(63	)		—			—			—			—			—			—		—			—		—		—
Energy — Aluminum options		23			(23	)		—			—			—			—			—			—			—			—			—		—			—		—		—

		23			(23	)		(75	)		—			(79	)		—			—			5			—			(18	)		—		—			—		—		—

Derivatives designated as hedge
Bunker Oil Hedge		—			—			—			—			13			—			—			—			—			(1	)		—		—			—		—		—
Aluminum hedge		—			—			13			—			—			13			13			(1	)		26			—			33		2			—		35		—
Strategic Nickel		(2	)		—			—			(2	)		—			—			—			—			—			—			94		(53	)		—		41		—
Foreign exchange cash flow hedge		19			—			—			19			—			(27	)		(4	)		—			(31	)		—			16		28			1		44		1

		17			—			13			17			13			(14	)		9			(1	)		(5	)		(1	)		143		(23	)		1		120		1


		(112	)		(230	)		873			(342	)		891			(111	)		(13	)		(64	)		(124	)		(86	)		143		(23	)		1		120		1

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
Aluminum		December 2010
Bunker Oil		December 2011
Freight		December 2010
Nickel		December 2011
Coal		December 2010
Copper		October 2010

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


Board of Directors		Governance and Sustainability Committee
		Jorge Luiz Pacheco
Sérgio Ricardo Silva Rosa		Renato da Cruz Gomes
Chairman		Ricardo Simonsen

Mário da Silveira Teixeira Júnior		Fiscal Council
Vice-President

		Marcelo Amaral Moraes
Eduardo Fernando Jardim Pinto		Chairman
Jorge Luiz Pacheco
José Mauro Mettrau Carneiro da Cunha		Aníbal Moreira dos Santos
José Ricardo Sasseron		Antônio José de Figueiredo Ferreira
Ken Abe Luciano Galvão Coutinho Oscar Augusto de Camargo Filho Renato da Cruz Gomes		Nelson Machado Alternate Cícero da Silva
Sandro Kohler Marcondes		Marcus Pereira Aucélio
		Oswaldo Mário Pêgo de Amorim Azevedo

Alternate
		Executive Officers
Deli Soares Pereira
Hajime Tonoki João Moisés de Oliveira Luiz Augusto Ckless Silva Luiz Carlos de Freitas Luiz Felix Freitas Paulo Sérgio Moreira da Fonseca Raimundo Nonato Alves Amorim		Roger Agnelli Chief Executive Officer and Investor Relations Carla Grasso Executive Officer for Human Resources and Corporate Services
Rita de Cássia Paz Andrade Robles		Eduardo de Salles Bartolomeo
Wanderlei Viçoso Fagundes		Executive Officer for Integrated Bulk Operations

Advisory Committees of the Board of Directors		Eduardo Jorge Ledshan
		Executive Office for Exploration, Energy Projects
Controlling Committee
Luiz Carlos de Freitas		José Carlos Martins
Paulo Ricardo Ultra Soares		Executive Officer for Strategy, Marketing and Business
Paulo Roberto Ferreira de Medeiros		Development

Executive Development Committee		Mário Alves Barbosa Neto
João Moisés de Oliveira		Executive Officer for Fertilizers
José Ricardo Sasseron
Oscar Augusto de Camargo Filho		Tito Botelho Martins
		Executive Officer for Base Metals Operations

Strategic Committee
Roger Agnelli		Marcus Vinícius Dias Severini
Luciano Galvão Coutinho		Chief Officer of Accounting and Control Department
Mário da Silveira Teixeira Júnior
Oscar Augusto de Camargo Filho		Vera Lúcia de Almeida Pereira Elias
Sérgio Ricardo Silva Rosa		Chief Accountant
		CRC-RJ — 043059/O-8

Finance Committee
Luiz Maurício Leuzinger
Ricardo Ferraz Torres
Wanderlei Viçoso Fagundes

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: July 29, 2010		Roberto Castello Branco
		Director of Investor Relations