Vale SA (VALE) Risk Factors

In January 2019, the dam rupture in Brumadinho resulted in 270 fatalities or presumed fatalities, in addition to personal, property and environmental damages. See Overview-Business overview- Responses to the rupture of the tailings dam in Brumadinho. This event has adversely affected and will continue to adversely affect our operations. ¾Liabilities and legal proceedings. We continue to be a defendant in a number of legal proceedings and investigations related to the dam rupture, including criminal investigations in Brazil and securities litigation in the United States. Additional proceedings and investigations may be initiated in the future. Adverse results in these proceedings may have a material adverse effect on our business and financial condition. See Overview-Business overview- Responses to the rupture of the tailings dam in Brumadinho and Additional Information-Legal proceedings. ¾Suspension of operations. Following the dam rupture, we have suspended various operations, which have adversely impacted and may continue to adversely impact our production and cash flows. It is possible that certain of these operations may not be resumed. In addition, orders by the relevant authorities or courts may result in substantial operational inefficiencies, which may lead to the suspension of certain operations. See Operating and Financial Review and Prospects-Tailings dam rupture in Brumadinho. ¾Impact on our financial performance. The dam rupture continues to have a significant impact on our financial performance, which include reduced revenues due to the suspension of operations, increased expenditures for assistance and remediation, impairments of fixed assets, provisions for costs of de-characterization, restoration and recovery, and provisions for legal proceedings. See Operating and Financial Review and Prospects-Overview-Tailings dam rupture in Brumadinho. ¾Increase in production costs and capital investments. We have made investments and adjustments in our operations and may need to make additional investments and adjustments to increase production, mitigate the impact of suspended operations or comply with additional safety requirements. We may also have to use alternative disposal methods to continue operating certain mines and plants, particularly those that rely on tailings dams. These alternative methods may be more expensive or require significant capital investments in our mines and plants. As a result, we expect our costs to increase, which may have a material adverse effect on our business and financial condition. ¾Additional regulation and restrictions on mining operations. Rules on mining activities and ancillary activities, such as dam safety, have become stricter following the Brumadinho dam rupture. Additional rules may be approved. The licensing process for our operations has become longer and subject to more uncertainties. Also, external experts may be reluctant to attest to the stability and safety of our dams, as a result of increasing risks of liability. If any of our dams is unable to comply with the safety requirements or if we are unable to obtain the required certification for any of our dams, we may need to suspend operations, evacuate the area surrounding this dam, relocate communities and take other emergency actions. These measures are costly, may adversely impact our business and financial condition and may cause further damage to our reputation. ¾Additional environmental impacts. The entire environmental consequences of the Brumadinho dam rupture remain uncertain, and additional damages may be identified in the future. Also, failure to implement our de-characterization plan and measures to prevent further accidents could also lead to additional environmental damages, additional impacts on our operations, and additional claims, investigations and proceedings against us. ¾Reserves and resources. New regulations applicable to dam licensing and operations have caused, and may further cause, decreases in our reported reserves and resources or reclassification of proven reserves as probable reserves. ¾Increased cost of insurance. Our cost of insurance may rise, and we may not be able to obtain insurance for certain risks. ¾Increased taxation and other obligations. We may be subject to new or increased taxes or other obligations to fund remediation measures and compensate direct and indirect impacts of dam ruptures.

A substantial number of our employees, and some of the employees of our subcontractors, are represented by labor unions and are covered by collective bargaining or other labor agreements, which are subject to periodic negotiation. Strikes and other labor disruptions at any of our operations could adversely affect the operation of facilities and the timing of completion and cost of our capital projects. For more information about labor relations, see Management and Employees-Employees. Moreover, we could be adversely affected by labor disruptions involving unrelated parties suppliers that may provide us with goods or services.

Costs of fuel oil, gas and electricity are a significant component of our cost of production, representing 7.6% of our total cost of goods sold in 2021. To fulfill our energy needs, we rely on the following sources: oil byproducts, which represented 37.7% of total energy needs in 2021, coal (14.8%), electricity (29.6 %), natural gas (13.6%) and other energy sources (4.3%). Electricity costs represented 2.9% of our total cost of goods sold in 2021. If we are unable to secure reliable access to electricity at acceptable prices, we may be forced to curtail production or may experience higher production costs, either of which would adversely affect our results of operations. We face the risk of energy shortages in the countries where we have operations and projects, especially Brazil, due to lack of infrastructure or weather conditions, such as floods or droughts. Future shortages, and government efforts to respond to or prevent shortages, may adversely impact the cost or supply of electricity for our operations.

China has been the main driver of global demand for minerals and metals over recent decades. In 2021, Chinese demand represented 74% of global demand for seaborne iron ore, 56% of global demand for nickel and 52.5% of global demand for copper. The percentage of our net operating revenues attributable to sales to customers in China was 52% in 2021. Therefore, any contraction of China's economic growth or change in its economic profile, or changes in the political or sanctions environment globally could result in lower demand for our products, leading to lower revenues, cash flow and profitability. Underperformance in the Chinese real estate and infrastructure sectors, the largest consumer of carbon steel in China, would also negatively impact our results. The COVID-19 pandemic control measures, such as shutdowns resulting from localized outbreaks, could potentially impact the industrial activity and supply chain.

Natural disasters, such as windstorms, droughts, floods, earthquakes and tsunamis may adversely affect our operations and projects in the countries where we operate and may cause a contraction in sales to countries adversely affected due to, among other factors, power outages and the destruction of industrial facilities and infrastructure. The physical impact of climate change on our business has been assessed based on both TCFD recommendations and "Vale Climate Forecast", our methodology, but cannot be fully ascentained. We have found, so far, that we are likely to experience changes in rainfall patterns, increased temperatures, floods, droughts, water shortages, sea level rising, increased incidence and intensity of atmospheric discharges (lightning), which may adversely affect our operations. On some occasions in recent years, we have determined that force majeure events have occurred because of the effect of severe weather on our mining and logistics activities.

Our operations depend on authorizations, concessions and licenses from governmental regulatory agencies and other authorities in the countries in which we operate. We are subject to laws and regulations in many jurisdictions that can change at any time, and changes in laws and regulations may require modifications to our technologies and operations and result in unanticipated capital expenditures. Some of our mining concessions are subject to fixed expiration dates and might only be renewed a limited number of times for a limited period of time. Apart from mining concessions, we may need to obtain various authorizations, licenses and permits from governmental or other regulatory bodies in connection with the planning, maintenance, operation and closure of our mines and related logistics infrastructure, which may be subject to fixed expiration dates or periodic review or renewal. There is no assurance that renewals will be granted as and when sought, and there is no assurance that new conditions will not be imposed in connection with renewal. Fees for mining concessions might increase substantially due to the passage of time from the original issuance of each individual exploration license. If so, the costs of holding or renewing our mining concessions may render our business objectives not viable. Accordingly, we need to continually assess the mineral potential of each mining concession, particularly at the time of renewal, to determine if the costs of maintaining the concession are justified by the results of operations to date, and we might elect to let some of our concessions lapse. There can be no assurance that concessions will be obtained on terms favorable to us, or at all, for our future intended mining or exploration targets. In a number of jurisdictions where we have exploration projects, we may be required to retrocede to the state a certain portion of the area covered by the exploration license as a condition to renewing the license or obtaining a mining concession. This requirement can lead to a substantial loss of part of the mineral deposit originally identified in our feasibility studies. We are also subject to laws and regulations and acts by authorities, related to dams, caves, indigenous people that may limit or modify our mining plans, impact our production volumes, costs and reserves and resources. For more information on mining concessions and other similar rights, see Information on the Company-Regulatory matters.

Nearly all aspects of our activities, products and services associated with capital projects and operations, including mine closure activities, around the world are subject to social, environmental and health and safety regulations, which may expose us to increased liability or increased costs. These regulations require us to have environmental licenses, permits and authorizations for our operations and projects, and to conduct environmental and social impact assessments, including a hazard identification and risk analysis, in order to get approval for our projects and permission for initiating construction and continuing operating. Significant changes to existing operations are also subject to these requirements. In connection with our authorizations, licenses and permits, we may be subject to restrictions relating to the operation and maintenance of dams, protection of indigenous people, protection of caves, fauna and flora, climate change, among others, which may require us to limit or modify our mining plans, having an impact our production volumes, costs and reserves and resources. For more information on our mining concessions and other similar rights, see Information on the Company-Regulatory matters.  Difficulties in obtaining or renewing permits may lead to construction delays, cost increases, and may adversely impact our production volumes. Social, environmental and health and safety regulations also impose standards, procedures, monitoring and operational controls on activities relating to mineral research, mining, beneficiation, pelletizing activities, railway and marine services, ports, de-characterization, decommissioning, mine closure activities, distribution and marketing of our products. Such regulation may give rise to significant costs and liabilities. Litigation and legal and regulatory uncertanties relating to these or other related matters may adversely affect our financial condition or cause harm to our reputation. Social, environmental and health and safety regulations in many countries in which we operate have become stricter in recent years, and it is possible that more regulation or more stringent enforcement of existing regulations will adversely affect us by imposing restrictions on our activities, products, and assets, creating new requirements for the issuance or renewal of environmental licenses and labor authorizations, resulting in licensing and operation delays, raising our costs or requiring us to engage in expensive reclamation efforts. All these factors may affect our practices and result in costs or expense increase, require us to new capital expenditures, restrict or suspend operations, write down or write off assets or reserves and resources. For a discussion of the rules relating to licensing and operations of dams following the tailings dam rupture in Brumadinho, see Information on the Company-Regulatory matters-Brazilian regulation of mining dams. For a discussion of the rules relating to the protection of caves in Brazil, which may require us to limit or modify our mining plans from time to time, see Information on the Company-Regulatory matters. For a discussion of national policies and international regulations regarding climate change, which may affect a number of our businesses in various countries, see Information on the Company-Regulatory matters-Environmental regulations. For a discussion of the 2020 regulatory initiatives of Standard of the International Maritime Organization ("IMO") prohibiting high sulfur fuel oil, as well as IMO's goals on greenhouse gas reductions in the industry, see Information on the Company-Regulatory matters-Environmental regulations.

The demand and premium of our iron ore products are defined by the value-in-use and demand for such products by the steel industry according to the existing steel production routes. Given the decarbonization challenge, new decarbonization technologies and production routes are being developed. Successful development of new technologies that allow the use of lower grade ores or ores with higher level of impurities in more competitive conditions may reduce the relative value-in-use of our higher-grade material, and the large adoption of such technologies by the steel industry may have a negative impact on the demand and premium of our iron ore products.