DBRS Assigns BBB (high) Rating with Stable Trend to Vale Overseas New Notes

DBRS has today assigned a provisional rating of BBB (high), with a Stable trend, to the proposed long-term notes (the Guaranteed Notes) to be issued by Vale Overseas Limited (Vale Overseas) and to be irrevocably and unconditionally guaranteed as to the full and punctual payment of principal, interest, additional amounts and all other amounts that may become due and payable in respect of the Guaranteed Notes by Vale S.A. (Vale or the Company). Vale Overseas’ Guaranteed Notes are expected to be issued in two tranches, a new ten-year note and a re-opening of its existing 2039 note. Vale intends to use the proceeds for general corporate purposes.

Vale Overseas, a wholly-owned financing subsidiary of Vale, will offer the Guaranteed Notes by way of an amendment with respect to its tenth supplemental indenture dated as of November 10, 2009 and filed with the United States Securities and Exchange Commission. The 2039 note will represent a re-opening of the Vale Overseas $1,000,000,000 6.875% Guaranteed Notes due 2039 issued on November 10, 2009, and the new 2039 notes offered will be consolidated with and form a single series with the original notes due in 2039. Vale will irrevocably and unconditionally guarantee the full and punctual payment of principal, interest, additional amounts and all other amounts that may become due and payable in respect of the Guaranteed Notes. An application will be made to list the 2020 notes and the new 2039 notes on the New York Stock Exchange. The original 2039 notes issued November 10, 2009, are currently listed on the New York Stock Exchange.

The Guaranteed Notes will be general obligations of Vale Overseas and are not secured by any collateral. The rights of holders of the Guaranteed Notes to payments under the Guaranteed Notes will be (1) junior to the rights of secured creditors of Vale Overseas to the extent of their interest in Vale Overseas’ assets; and (2) equal with the rights of creditors under all of Vale Overseas’ other unsecured and unsubordinated debt.

Vale’s guarantee of the Guaranteed Notes of each series will be a general obligation of Vale and is not secured by any collateral. The right to payment of holders of the Guaranteed Notes under the guarantee will be: (1) junior to the rights of secured creditors of Vale to the extent of their interest in Vale’s assets; (2) equal with the rights of creditors under all of Vale’s other unsecured and unsubordinated debt; and (3) effectively subordinated to the rights of any creditor of a subsidiary of Vale over the assets of that subsidiary.

Vale Overseas may redeem the Guaranteed Notes of either series, in whole at any time or in part from time to time, at a redemption price equal to the greater of 100% of the principal amount of the Guaranteed Notes to be redeemed and a “make-whole” amount (as defined in the supplementary prospectus of the Guaranteed Notes) plus accrued and unpaid interest on such Guaranteed Notes to the date of redemption.

Vale is one of the largest diversified mining companies in the world, the world’s largest producer of iron ore and the second largest producer of nickel. Vale’s large reserve base and low production costs underpin a strong business profile. The Company has committed an aggressive capital budget for 2010 of $12.9 billion. In addition, Vale has actively pursued the growth and diversification of its operations through often sizeable acquisitions.

DBRS believes that Vale’s strong business profile and solid financial metrics have allowed it to withstand the 2008-2009 downturn in commodity prices while maintaining a number of growth projects. This strength will allow the Company to continue to pursue its growth and diversification efforts going forward, although Vale will need to remain prudent in the financing of its acquisitions and growth. Over the long term, DBRS believes that Vale should benefit from the economic recovery and a growing demand for minerals as growth in lesser developed countries continues.

The provisional rating listed above is based on the Vale Overseas Limited draft of the preliminary prospectus supplement dated September 8, 2010 and provided to DBRS by Vale, S.A. on September 8, 2010 and related documents as well as the current financial structure, business profile, credit metrics, and market and business outlook for Vale Overseas Limited and Vale S.A., as well as other matters. The assignment of final ratings is subject to receipt by DBRS of final documentation that is consistent with that which DBRS has already received.

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.