Morningstar DBRS Confirms Vale S.A.'s Issuer Rating at BBB (low) With a Stable Trend

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and Senior Unsecured Debt rating of Vale S.A. (Vale or the Company) at BBB (low). Morningstar DBRS also confirmed the credit ratings on Vale Overseas Limited's Senior Unsecured Debt and Vale Canada Limited`s All Series Debentures & Notes at BBB (low). All trends are Stable.

KEY CREDIT RATING CONSIDERATIONS
The confirmations are primarily a recognition of Vale's investment-grade business-risk profile as well as its robust financial risk profile that continues to benefit from robust iron ore prices relative to historical levels. Morningstar DBRS previously confirmed the Federative Republic of Brazil's (Brazil) Long-Term Foreign Currency - Issuer Rating at BB with a Stable trend on July 26, 2024 (refer to the press release: https://dbrs.morningstar.com/research/436849). In the determination of Brazilian-domiciled Vale's Issuer Rating, Morningstar DBRS considers a two-notch uplift from Brazil's sovereign rating as appropriate. Generally, the uplift is limited to no more than three notches.

CREDIT RATING DRIVERS
Vale's key credit metrics are supportive of a higher rating within the investment-grade BBB category. Morningstar DBRS' sovereign rating for Brazil is BB with a Stable trend, which does not preclude Vale from having an investment-grade rating. However, if Morningstar DBRS assesses Brazil's credit outlook as weakening and a downgrade to the B rating category or lower results, a negative rating action could follow for Vale, tipping the Company into the non-investment-grade category, irrespective of its strong credit metrics.

EARNINGS OUTLOOK
Morningstar DBRS expects total 2025 iron ore production volumes to be in line with the midpoint of management guidance of between 325 million and 335 million tonnes and 2025 sales to align with production volumes. Based on Bloomberg consensus commodity price forecasts (as of June 10, 2025), Morningstar DBRS expects 2025 net income to be between $7.0 billion and $7.5 billion, mainly because of 8% higher forecast iron ore sales volumes with relatively stable benchmark 62% Fe iron ore prices, compared with 2024.

FINANCIAL OUTLOOK
Morningstar DBRS expects Vale to generate robust net free cash flow (i.e., after capital expenditure, dividends, and noncash changes to working capital) in 2025 of between $1.0 billion and $1.5 billion (based on Bloomberg consensus estimates as of June 10, 2025) that should allow the Company to continue to fund its responsibilities in the aftermath of the Brumadinho event.

CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): BBB
The ratings are supported by Vale's business risk profile, including the Company's long-life iron ore reserves, low operating cost structure, significant size, and strongly integrated supply chain, particularly with China.

Vale continues to recover from the Brumadinho event. Production has been gradually increasing with management guidance of between 325 million tonnes and 335 million tonnes of iron ore in 2025. Management expects production capacity to return to the 360 million tonnes-per-year level in the medium term. Morningstar DBRS notes that Vale reported a net increase of approximately 11% in its proven and probable iron ore reserves at the end of 2024, with the increase due to incorporation of additional mineral exploration data, mine design reviews, the addition of tailings dam reserves, a review of reserve model/mine designs, and the revision of iron ore price assumptions across the Southeastern, Northern, and Southern Systems. At the end of 2024, Vale reported approximately 12.1 billion tonnes of iron ore reserves and had approximately 25.9 billion tonnes of iron ore resources that could potentially be upgraded to reserves in a cost-effective manner.

Comprehensive Financial Risk Assessment (CFRA): AL
Vale's financial metrics weakened in the last 12 months (LTM) ending March 31, 2025, with adjusted cash flow-to-debt declining to 47.8% mainly as a result of weaker iron ore price realization, but with all of the metrics except EBITDA-to-interest still within the "A" category. Morningstar DBRS expects Vale's key credit metrics to improve in 2025 compared with the LTM ending March 31, 2025 period because of higher revenue associated with increased production, but remain in the same categories for cash flow-to-debt, debt-to-EBITDA, EBITDA-to-interest, and debt-to-capital.

Intrinsic Assessment (IA): BBBH
The IA of BBBH is within the Intrinsic Assessment range and is based on the CBRA and CFRA, also taking into consideration current rating trends and peer comparisons, among other factors.

Additional Considerations: Sovereign Constraint
Vale's credit ratings include a negative adjustment because of sovereign risk considerations as previously discussed.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, and Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/454196 (May 16, 2025).

Further details on the Issuer's Intrinsic Assessment can be found at https://www.dbrsmorningstar.com/research/456972.

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

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in the Mining and Forest Products Industries (May 27, 2025), https://dbrs.morningstar.com/research/454754.

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025), https://dbrs.morningstar.com/research/447186 which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:

Morningstar DBRS Global Corporate Criteria (February 3, 2025)
https://dbrs.morningstar.com/research/447186.

Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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