Vale described its operational performance during the first quarter of 2012 as “good,” despite the challenges posed by severe weather conditions. The summer season in the Southern Hemisphere was extremely rainy, hitting Brazilian mining districts such as the Iron Quadrangle in the southeast and Carajás in the north of the country, where our iron ore operations are concentrated.

The company continues to ramp-up a group of new operations diversified by business—bulk materials, base metals and fertilizers—and by geography—South America, the Middle East and Africa—which includes Moatize, Oman, Tres Valles, Onça Puma and Bayóvar.

Moatize, a world-class coal asset in Mozambique, produced 501,000 metric tons (mt) of high quality hard coking coal and 193,000 mt of thermal coal during the first quarter. The ramping up of these operations was instrumental in reaching quarterly record output levels for pellets, metallurgical coal and phosphate rock.

Tests conducted at VNC through integrated refinery operations were successful and the company was able to produce 1,100 mt of nickel oxide. An important by-product was the knowledge provided by this experience, which will be very useful to further improve the production process. Despite the risks ahead, the production of nickel oxide at VNC is a major achievement, to the extent that it is an important step toward the operation of a large nickel limonite lateritic project for the first time in the industry.

Vale’s iron ore production reached 70 million mt in Q1 2012, slightly below Q1 2011 and a decrease of 15.6% quarter-over-quarter, basically due to the intense rainy season in Brazil. The production of Carajás and the Southeastern System fell in relation to Q1 2011, while the Southern and Midwestern Systems and Samarco had a better performance than the same quarter of last year. Rainfall at Carajás was even heavier than last summer. Precipitation levels were 57% higher than in Q1 2011, reaching a peak in January, when it reached 966.6 mm.

Due to the weather challenges, Vale produced 21.7 million mt at the Carajás mining site in Q1 2012, which was 28.2% and 4.2%, respectively, below the previous quarter and Q1 2011. In addition to the heavy rainfall, it experienced operational issues due to the low availability of loading equipment. As mentioned in a release on January 11, 2012, the company declared force majeure because of heavy rainfall, which caused negative effects on the Southeastern and Southern Systems as it led to stoppages on mining and railroad operations.

The accident with a structure at the Carajás railway bridge, which happened March 16, affected shipments but had no effect on output. The Southeastern System, which encompasses the Itabira, Mariana and Minas Centrais mining sites, produced 26.8 million mt, 9.7% lower than Q4 2011 and 6.7% less than Q1 2011. The severe rainfall mainly affected the Itabira site. At Minas Centrais, output decreased influenced by the performance of the Gongo Soco mine. Due to the impoverishment of its resources, Gongo Soco production has been declining.

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