DBRS Comments on Strike at Vale’s Sudbury Inco Operations

DBRS notes that following approximately three months of negotiations, members of the United Steelworkers (USW) Local 6500, representing production and maintenance workers at the Sudbury, Ontario, operations of Vale S.A. (Vale or the Company), and USW Local 6200 workers at Vale’s Port Colborne Refinery in Ontario have gone on strike. DBRS does not expect the Company’s BBB (high) rating to be affected by the current and potential additional nickel-related work stoppages.

The collective agreement at the Company’s Voisey’s Bay operation in Newfoundland and Labrador expires on August 1, 2009, and workers there have already rejected a contract offer similar to the one rejected by the Sudbury and Port Colborne workers.

The strike comes when nickel markets are weak, with both Vale’s Sudbury and Voisey’s Bay operations in the middle of reduced production periods (eight weeks for Sudbury and four weeks for Voisey’s Bay) aimed at matching nickel output to demand. The length of the work stoppage and whether Vale’s other Canadian units will also go on strike are difficult to predict, but DBRS does not expect the current or potential work stoppages to have a material financial impact on Vale unless they become protracted.

Vale is a very large, diversified mining company, with many other operations worldwide. In addition, the Company has strong credit metrics for its rating and significant liquidity, with approximately $12 billion in cash on hand at March 31, 2009.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.