Biodiesel Project

24 June 2009

Why invest in biodiesel self-production?

• Biodiesel in Brazil is produced overwhelmingly using soybean• There are strong indications that the market price of biodiesel will remain high,

in line with the soybean price

Sustainability:Sustainability: sustainable operations using biofuel

Source: BiodieselBR – December 2008

Guaranteed supply:Guaranteed supply: minimize vulnerability in terms of fuel supply and price on the market

85%

11%4%

Soybean oil

Animal fat

Cottonseed oil

Features:Features:• Tests under way using natural gas + diesel

blends in locomotives• Prototype GE and EMD locomotives to be tested

in 2009• Cryogenic tanks built to store gas for locomotives

Benefits:Benefits:• Using natural gas to power trains on the

Vitória-Minas and Carajás railways will cut

CO2 equivalent emissions by 73,000 tons per

year. This corresponds to emissions from

32,000 cars.

Flex-fuel train (being tested)

Biodiesel Project

Key figures:Key figures:

• Vale’s investment: US$305 million

• Production of 160,000 tons of biodiesel to supply Carajás Railway and heavy-

duty machines and equipment in Carajás mines

• 60,000 hectares to be planted, in consortium with Biopalma, within total area of

around 130,000 hectares

• Project covers five municipalities: Moju, Tomé-Açú, Acará, Concórdia and

Abaetetuba

• Biodiesel production to begin in 2014

Benefits

Social – Social – 6,000 direct jobs created

• “Small Producer Project” to benefit 2,000 families of small rural producers in terms of:

– Technical assistance

– Guaranteed purchase of crop

– Financing from Banco da Amazônia

– Seeds supplied by Embrapa

Reduction in rural exodus, Reduction in rural exodus, promoting social inclusion promoting social inclusion and favoring sustainable and favoring sustainable economic developmenteconomic development

Benefits

EnvironmentalEnvironmental

• There will be no deforestation for planting

• Of the total of 130,000 hectares, 70,000 will be allotted for native habitat, to be

restored and protected by the consortium

• Using biodiesel will cut CO2 equivalent atmospheric emissions by 12 million

tons over the course of the project. This corresponds to emissions from more

than 200,000 cars over the period

Self-generation of Self-generation of electricity using biomasselectricity using biomass

• B20 used in EFVM and EFC trains• Vale’s Biodiesel Production Project developed

• B20 used in EFVM and EFC trains• Vale’s Biodiesel Production Project developed

• Vale Biopalma Consortium established to produce palm oil (main biodiesel input)• 5,000 hectares planted

• Vale Biopalma Consortium established to produce palm oil (main biodiesel input)• 5,000 hectares planted

• 12,500 hectares planted

• 12,500 hectares planted

• Fourth extraction plant installed• Biodiesel production begins

• Fourth extraction plant installed• Biodiesel production begins

• First oil extraction plant installed• 12,500 hectares planted• Harvest of first crop; oil production begins

• First oil extraction plant installed• 12,500 hectares planted• Harvest of first crop; oil production begins

• Vale’s Biodiesel Project continues in development

• Vale’s Biodiesel Project continues in development

• Second oil extraction plant installed• 15,000 hectares planted

• Second oil extraction plant installed• 15,000 hectares planted

• Third extraction plant installed• 15,000 hectares planted

• Third extraction plant installed• 15,000 hectares planted

Biodiesel at Vale – timeline

2007 2008 2009 2010 2011 2012 2013 2014

41%59%

• Partner with experience in palm oil production

• Property already acquired by Biopalma in strategic locations, minimizing risks

• Guaranteed continuity of project in partnership with a global company with a strong local presence and knowledge in Pará

• Business objectives of consortium partners do not conflict

Agricultural cropAgricultural crop

Output of 500,000 tons of palm oil per year

Oil extraction plantsOil extraction plants Biodiesel productionBiodiesel production Biodiesel blend distributionBiodiesel blend distribution

Output of 160,000 tons of biodiesel per year

Consortium Vale

Vale Biopalma Consortium

Vale’s consumption in Braziland in North System*

841

247

942

303

1006

343

940

336

1106

420

0

0

0

0

8

3

19

7

44

17

0

200

400

600

800

1.000

1.200

Brazil NorthSystem

Brazil NorthSystem

Brazil NorthSystem

Brazil NorthSystem

Brazil NorthSystem

2005 2006 2007 2008 2009 (forecast)

Mill

ion

lite

rs

Pure diesel Pure biodiesel (B100)

North System: Carajás mines, Carajás Railway, Ponta da Madeira Port North System: Carajás mines, Carajás Railway, Ponta da Madeira Port Terminal, and São Luís Pelletization PlantTerminal, and São Luís Pelletization Plant

North System: Carajás mines, Carajás Railway, Ponta da Madeira Port North System: Carajás mines, Carajás Railway, Ponta da Madeira Port Terminal, and São Luís Pelletization PlantTerminal, and São Luís Pelletization Plant

* Consumption will tend to grow over next few years