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Vale's Second Quarter Earnings And Conference Call Announcement

"Vale is ahead of other mining companies in terms of sustainability, I'm confident and proud of the work we are developing today in Vale and we are prepared to take advantage of good moments in the economy."

ORGANIC GROWTH

"Vale is the only company which can double its capacity with organic investments. So our focus is really organic growth," said Vale's CFO Guilherme Cavalcanti.

"We have been following strictly our plan announced in 2001. Everything that we made in terms of M&A was opportunistic approach and of course there are some assets that we would like to hold, but they are not at our position. If someone is ready to sell their assets and it is something that fits our strategy, will strengthen our position, this is something we can consider," said Roger Agnelli.

CHINESE IRON ORE INDUSTRY

"The performance of the Chinese iron ore industry in the last three months… the Chinese ore industry was operating near full capacity and this is one of the reasons that brought stability to the spot market. They don't have much room to grow, the majority of their mines are underground, so you can imagine how expensive this production is.  Their cost structure is very high," mentioned Jose Carlos Martins.

NICKEL BUSINESS

"Canadian operations should be back in full capacity by the end of September. We are already operating with 50% capacity and this is the reason why we'll be able to reach full capacity in such short time," said Tito Martins, Executive Officer for Base Metals Operations.

ESSENTIAL ELEMENTS TAKEN FROM VALE'S 2Q2010 RESULTS PRESS RELEASE

REVENUE

Gross operating revenues totaled US$ 9.930 billion in 2Q10, with an increase of 45.0% over the US$ 6.848 billion in 1Q10. Higher sales prices produced a positive effect of US$ 2.259 billion on 2Q10 operating revenues, while sales volume growth added US$ 823 million. The implementation of the quarterly pricing system for iron ore and pellets started to be reflected in the revenues for 2Q10. Rising iron ore and pellet prices contributed with an increase of US$ 2.179 billion, while price changes of other products accounted for US$ 80 million.

COSTS

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

OPERATING INCOME

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

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

NET EARNINGS

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

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

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