Vale’s iron ore fines production totaled 89.4 Mt in 3Q21, 18.1% higher than in 2Q21, as a result of: (i) seasonal improvement of weather-related conditions in Northern System, boosting Serra Norte and S11D performance; (ii) Vargem Grande production increase by dry processing while adjusting the flowsheet of one of its wet-processing plants; (iii) Itabira’s performance improvement related to better run-of-mine (“ROM”) availability; (iv) higher third-party purchase, although proportionally lower than the previous quarter (5.8% of total production in 3Q21 vs 6.2% in 2Q21); and (v) Fábrica’s reaching its full capacity of 6 Mtpy, after the resumption of beneficiation process in 2Q21.

On September 9th, during 2021 Analyst and Investor Tour, Vale presented an updated view of its production capacity resumption plan and launched new portfolio solutions for decarbonize steelmaking industry. The presentation is available here.

Vale remains committed to its capacity resumption plan, which is also associated with eliminating restrictions and optimizing costs. In 3Q21, Maravilhas III dam operations in Vargem Grande complex started following the issuance of a positive Stability Condition Declaration (DCE). As an additional step on the resumption plan, Vale started to commission the long- distance conveyor belt segment close to Vargem Grande dam in October, resuming after several tests certifying the absence of increased risk to the structure. At the end of commissioning, an increase of 6 Mtpy is expected in the production capacity of the Vargem Grande site.

Vale’s pellet production totalled 8.3 Mt in 3Q21, in line with 2Q21, still restricted by pellet feed availability in Itabira and Brucutu.

Production and sales strategy is based on market conditions, prioritizing value over volume, with focus on margin maximization. As consequence, for the fourth quarter this year, Vale should lower its supply of high-silica low-margin products by around 4 Mt, as demand for this kind of product has been weaker. This movement does not change our production guidance for the year, of 315-335 Mt, but should take us below the middle of the range. If this scenario persists, we should also reduce the offer of low-margin products in 2022 by around 12-15 Mt. The purchase level of third-party ores may also be adjusted accordingly.

Sales volumes of iron ore fines and pellets totalled 75.9 Mt in 3Q21, in line with 2Q21. The approximately 13 Mt gap between production and sales in 3Q21 was an effect of (i) Vale’s value over volume approach, by reducing the sales of high-silica iron ore products in September due to market price level; and (ii) transiting inventories across the supply chain, which is expected to revert in 4Q21, depending on market conditions.

Iron ore price premium was US$ 6.6/t, US$ 1.8/t lower than in 2Q21, due to (i) lower premiums paid to low alumina ores, as BRBF and IOCJ; and (ii) lower contribution from Pellets business as the 65/62% Fe index spread narrowed; which were partially offset by (i) higher Fe content premiums, despite the lower benchmark index, as a result of the lower sales of high-silica iron ore products; and (ii) higher contractual pellet premiums.