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Nickel for Electric Vehicle Batteries: Long Term Supply Dynamics

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“This presentation may include declarations about Vale’s expectations

regarding future events or results. All declarations based upon future

expectations, rather than historical facts, are subject to various risks

and uncertainties. Vale cannot guarantee that such declarations will

prove to be correct. These risks and uncertainties include factors

related to the following: (a) the countries where Vale operates, mainly

Brazil and Canada; (b) the global economy; (c) capital markets; (d) the

mining and metals businesses and their dependence upon global

industrial production, which is cyclical by nature; and (e) the high

degree of global competition in the markets in which Vale operates. To

obtain further information on factors that may give rise to results

different from those forecast by Vale, please consult the reports filed

with the Brazilian Comissão de Valores Mobiliários (CVM), the French

Autorité des Marchés Financiers (AMF), the Stock Exchange of Hong

Kong Limited, and with the U.S. Securities and Exchange Commission

(SEC), including Vale’s most recent Annual Report on Form 20F and its

reports on Form 6K. The views expressed here contain information that

have been derived from publicly available sources that have not been

independently verified. No representation or warranty is made as to the

accuracy, completeness or reliability of the information. This

presentation should not be relied upon as a recommendation or

forecast by Vale.”

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Then and now…

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Electric vehicles have come a long way since

they were first invented back in the 19th century

19th and early 20th century:

the beginning + among the earliest automobiles

+ well adopted due to limited road

infrastructure (neighborhood cars)

Thomas Parker Thomas Edison

Mid 20th century: the decline + various internal combustion engine

improvements (muffler, electric starter)

+ decline of gasoline prices

+ improved road infrastructure meant

longer driving distances

Electric vans in use by East

German Deutsche Post

Henney Kilowatt

1990s: slow revival + energy crisis of 1970s and 1980s renewed interest

+ introduction of ‘test’ vehicles but low speed and very limited

range arrest penetration

+ success of hybrid

Toyota Prius

Honda EV Plus

2010 to today: start of the boom + greater environmental awareness

+ government subsidies

+ all major car manufacturers entering market

+ highway capable: extended range and higher speeds

+ significant R&D

+ declining battery costs per kWh

Nissan Leaf

Chevrolet Volt BMW i3

Renault Zoe

Smart EV (Daimler)

Tesla Model 3

GM EV 1

Roewe E50

Kia Soul EV+

Mitsubishi i-MiEV

Chery QQ3 EV

In the context of this

presentation, EVs include

hybrid (HEV), plug-in

hybrids (PHEV) and battery

electric (BEV). Colloquially

referred to as xEV.

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“There is no alternative to

electrification. We have to

tackle it,” Skoda chairman

Bernhard Maier, March

2016

“We want to make sure that we’re either

among the leaders or in a leadership

position,” Ford CEO Mark Fields April 28,

2016 when talking about electric vehicles

and unveiling plans to invest US$ 4.5B

over next 4 years to develop a line of 13

electrified vehicles by 2020

“100,000 would have been an

impressive number. Now, with some

400,000 pre-orders, the number is

almost unbelievable…real wake up call

for the rest of the industry,” Tesla CEO

Elon Musk, April 29, 2016

“We are investing a good

billion euros in the Mission

E alone. That shows how

seriously we are taking the

matter. We are not just

experimenting around to

see what comes out of it.,”

Porsche CEO Oliver Blume,

March 2016

“I don’t think anybody envisions

today a future without the

electrification of cars,” Renault

Nissan CEO Carlos Gosn, Nov 2015

“Electrification as an option for the

masses, not just at the top end,” GM

CEO Mary Barra, Nov 2015

No longer a fringe automotive segment. Major

players are investing heavily in EV development

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Nickel is one of the key ingredients for the

manufacture of lithium-ion batteries

Lithium

Carbonate

Cobalt

Sulphate

Nickel

Sulphate

Lithium Cathode

Material

Aluminum

Sulphate

0

50

100

150

200

250

Energy Density

Wh/kg

LFP NiMH LTO NiCd NiFe Lead

Acid

NCA NMC LCO LMO

Nickel Containing

Non-Nickel Containing

Why Nickel?

Nickel battery formulations offer highest energy density

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Electric vehicles have had a significant growth

rate and nearly tripled market share since 2010

Global Production of Cars and xEV Market Share (million passenger vehicles)

Source: Takeshita 2015, OICA

68.5

EV CAGR 22% ICE CAGR 2.9%

2015

66.3

2.2

(3%)

2010

58.2

57.4

0.8

(1%)

Internal Combustion Cars (ICE)

Electric Cars

incl. Hybrid, Plug-in Hybrid, and Pure EV

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Nickel containing batteries are capturing more

market share as well

Source: Takeshita 2015

60%

40%

80%

20%

0%

100%

2011 2015 2012 2014 2010 2013

Non-Nickel

Nickel

Containing

Nickel selection bias in xEV batteries Distribution in xEV batteries by Nickel content

100%

80%

40%

0%

60%

20%

NCM 523

(30.4% Ni)

NCM 622

(36.3% Ni)

2014 2011 2010 2012 2013

NCA

(48.9% Ni)

NCM 111

(20.3% Ni)

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Nickel consumption in the battery segment has

been growing, outpacing all other non stainless

segments

55

50

45

40

35

0

‘000 mt Ni

Auto 14% CAGR Non-Auto 2%

Aggregate 5.4%

2015 2010

Nickel Consumption in Battery Segment

Source: Takeshita 2015, Wood Mackenzie, Vale Analysis

6.0

5.4

4.0

2.2

1.8

0.2

Stainless Battery Non-Ferrous Plating Alloy Steel Foundry

& Other

Comparing nickel segment CAGR 2010-2015 (%)

Non-Automotive

Nickel in xEV Batteries

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Looking ahead…

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Although there are differing views on how fast the

electric vehicle production will grow, it’s not a matter of

if but when the growth will take off

Source: Takeshita 2015, Goldman Sachs, Bloomberg, Deutsche Bank, Conaccord Genuity, Vale Analysis

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30

20

0

5

10

15

‘000 000 cars

14-28% CAGR

2020 2025 2015

Goldman Sachs

Deutsche Bank

Bloomberg

Takeshita

Outlook in the Production of xEVs (HEV, PHEV, BEV)

23% market share

new car production

14%

7%

Conaccord

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One of the reasons for the projected increase in the

adoption of electric vehicles is the decreasing cost. One

analyst projects cost equality by early 2020s

2010 2015 2020 2025

0

16

12

8

4

‘000 USD

Cost Comparison between ICE and xEV Powertrains

Internal Combustion Engine

Electric Vehicle

Source: Deutsche Bank

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As a consequence, nickel demand from the battery

segment is expected to grow at a faster pace than

seen historically with upside potential

Source: Takeshita 2015, CRU, Macquarie, Vale sources

0

50

100

150

200

‘000t Ni

2015

5-13% CAGR

2020 2025

Forecast nickel consumption in the battery segment

Macquarie view

Upside view from

Major Cathode Mfg.

Takeshita view

Downside view from

Major Cathode Mfg.

CRU view

Potential opportunity from

energy storage applications

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EV Battery

Nickel Supply

Dynamics

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EV batteries require high purity nickel sulphate, and

there are three main routes to get there

Integrated

Refineries SMM

Norilsk (OMG)

Jilin Jien

Jinchuan

Intermediates/

byproduct streams Ravensthorpe

Ramu

Vale (VNC)

Chinese

Refined nickel

metals Vale

BHP

Sherritt

Glencore

Solvent Extraction

Refining

Dissolved in

sulphuric acid

exam

ple

s

ex

am

ple

s

exam

ple

s

Nickel Sulphate Nickel Sulphate Nickel Sulphate

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Nickel Products Stainless Alloys Plating /

Batteries

Comments

Stainless Scrap Availability fluctuates

Nickel Pig Iron (NPI) Low nickel, less expensive

FeNi Ideal for Stainless

Others such as Uni,

Tonimet, NOS

Higher purity, mainly stainless

applications

Cathode Wide field of applications

Briquette Wide field of applications

Pellets High purity, high alloys or special

applications

Powders High purity, special applications and salts

Not all nickel products are suited for lithium batteries.

Handleability, dissolving time as well as purity come into

play when selecting the appropriate product.

High

purity

Cla

ss 2

C

lass 1

Low

purity

Lithium battery cathode makers need clean nickel sulphate

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There will be increased competition for the

most suitable nickel units

Source: Wood Mackenzie, Vale Analysis

Class I and High Purity Chemical Nickel Balance 2015 vs. 2025

0

200

400

600

800

1,000

1,200

1,400

market deficit

‘000t Ni

Excess to Inventory

2025

Demand

2015

Demand

Supply of

Class I or

High Purity Chemical

Demand for Class I from SS

Alloys, Plating, Foundry,

Non-Ferrous, and others

Battery

Improved dissolving time: briquette, pellets

Long dissolving time: Cathode

Ideal for use: powders, Ni sulphate

Supply Dynamic

Not expecting supply

development for Class I, and

very limited HPAL for refining

into nickel sulphate –

Indonesian development is

geared towards FeNi

Demand Dynamic

Demand is expected to continue

growing. Ideal use products will

be insufficient for battery use,

and battery segment will need to

dip into metallic nickel products

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o Rapid growth in Electric Vehicle production

over the next decade will drive nickel

consumption in EV battery applications

o Batteries will be the fastest growing nickel

segment over the next decade, with

significant upside potential

o Not all finished nickel products can be

economically used within the battery supply

chain

o There will be intense competition for suitable

units, particularly as the nickel market shifts

towards deficits in the future

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