Fitch Rates Vale Overseas' Hybrid Notes 'BBB-'

Fitch Ratings has assigned a 'BBB-' rating to the 30-year subordinated bond to be issued by Vale Overseas Limited, guaranteed by Vale S.A. (BBB+; Stable Outlook) on an unsecured and subordinated basis. The bonds are eligible for 50% equity credit. Proceeds from the issuance will be used for general corporate purposes, including the replenishment of Vale's cash on hand after the settlement of the Participating Debentures tender.

The proposed bonds meet Fitch's criteria for subordination, absence of cross-defaults, absence of relevant restrictive covenants, effective maturity of at least five years, ability to defer coupons for at least five years, and absence of look-back clauses. As a result, the securities are eligible for 50% equity credit.

The proposed issuance is rated two notches below Vale's Long-Term Issuer Default Rating (IDR) to reflect higher loss severity and increased default risk compared to senior obligations. This approach is aligned with Fitch's "Corporate Hybrids Treatment and Notching Criteria," published on April 8, 2025.

50% Equity Treatment: Fitch expects the hybrid bond to be subordinated, with priority only over Vale's equity capital. The issuer may defer coupon payments at its discretion, with deferred coupon payments being cumulative. The bonds have a formal maturity date in 2056. Vale has a call option to redeem them after five years from the issue date. Call dates are not considered effective maturity dates under Fitch's criteria, until interest rate step-ups reach 100bps. Fitch assigns the securities a 50% equity credit.

Use of Proceeds: Fitch expects the funds from the issuance to be used for general corporate purposes, including but not limited to partially replenishing cash on hand following the payment of the purchase price of the Participating Debentures accepted in the Optional Acquisition Offer. Vale's metrics will remain below the downgrade sensitivity thresholds, based on fiscal 2025 figures and within rating horizon.

Robust Business Profile: Vale is the world's largest iron ore pellets producer and one of the three largest seaborne iron ore miners. Its Northern System dominant market position is buttressed by abundant reserves, size and cost competitiveness. Operations in Para, northern Brazil, represent about11% of the global seaborne market. About 90% of Vale's EBITDA comes from iron ore. Vale is also one of the world's largest nickel miners (1% of EBITDA) and a large (but not top 10) copper producer (10% of EBITDA).

Margin Over Volume Strategy: Vale is obtaining a stronger balance of size, higher value-added products and flexibility in its mix, improving profitability, FCF and stability. Its portfolio favors premium high-grade iron ore products, direct reduction metallics and faster production flexibility to support more sustainable steelmaking. Vale has also developed medium-grade products that balance silica and alumina to meet shifting blast furnaces baseload burden requirements.

Low-Cost Producer: Vale holds a first-quartile cost position in its largest iron ore systems, according to CRU, supported by high-grade iron ore and integrated infrastructure. Vale kept cash cost guidance at USD20.5/tonne(t)-USD22/t, targets to below USD20/t by 2026, and, through efficiency programs—including autonomous fleet adoption, higher volumes and new product mix—aims for USD18/t-USD19.5/t by 2030.

Sound Capital Structure: Vale's conservative balance sheet is also a key rating consideration. Average gross debt between 2025 and 2027 is forecast at USD18 billion following increases in local debentures. After dividends, share repurchases and payments of interest on capital, Fitch expects Vale's net debt to average USD12 billion between 2025 and 2027. For 2025, 2026 and 2027, Fitch expects net leverage of around 0.9x.

Strong Cash Flow Generation: Vale's EBITDA is expected to be USD14.2 billion in 2025, USD13.4 billion in 2026 and USD13.3 billion in 2027. These figures assume cash cost improvements will continue and capex will average about USD5.7 billion, due to investments requirements, such as for Vargem Grande, Capanema, and Serra Sul (S11D). FCF margin is expected to be 4.2% and 4.0% in 2026 and 2027, respectively.

Controlled Growth Strategy: Fitch expects Vale to maintain a strong balance sheet and disciplined capital allocation, while evaluating diversification across businesses and products. Vale has reevaluated copper, nickel, and other projects over 10 years to cut costs and enhance productivity. By 2030, low-capital projects and productivity improvements target 420,000-500,000t of copper and 210,000-250,000t of nickel annually, about 40% above 2025 levels. Key initiatives are underway in Salobo, Sudbury, and Voisey's Bay, despite a postponed Bacaba start-up, Sossego depletion and lower grades at Salobo.

Manageable Remediation and Litigation Risk: The Samarco Definitive Compensation Program and Brumadinho Integral Reparations Agreement enhance certainty over remediation payments, reduce litigation risks and reinforce Vale's improved environmental policies. Fitch's ratings case includes disbursements to be spent in Samarco remediation of USD900 million in 2026, and USD600 million in 2027; and in Brumadinho, payments of USD700 million in 2026 and USD500 million in 2027. Following recent announcements on UK rulings, Vale added USD500 million to provisions, alongside Fitch-projected annual outflows of about USD250 million in 2029-2031.

Dam De-Characterization Achievements: Vale has accomplished important milestones in its environmental risk reduction strategy, launched in 2020 after the Mariana and Brumadinho incidents. It has de-characterized 60% of its 30 upstream dams, with four more scheduled by 2027 and eight thereafter. Vale now has no dams at Emergency Level 3, four at Level 2, and six at Level 1, from four, seven and 24, respectively, in 2020.

Vale is a top-three global miner and a low-cost iron ore leader, comparable to BHP Group Limited (A/Stable), Rio Tinto Plc (A/Stable), and Anglo American Plc (BBB+/Stable).

Vale is concentrated in iron ore (90% of EBITDA), followed by copper, nickel, and other minerals. BHP is more diversified; Rio Tinto earns over two-thirds of EBITDA from iron ore, with the rest from aluminum and copper; Anglo American's broader mix spans copper, PGMs, diamonds, nickel, premium met coal, and iron ore.

Vale's iron ore costs are first quartile; Rio Tinto ranges first-second; BHP spans first-third; most of Anglo's assets are second-third quartile. Australia's proximity to China benefits BHP and Rio Tinto. Vale relies on Brazil (iron ore, copper) and Canada/Indonesia (nickel), while BHP and Rio Tinto skew to OECD assets.

Leverage is low for Vale, BHP, and Rio; Anglo's is modestly higher. Vale's flexibility is tempered by Brazilian remediation.

-- Benchmark iron ore prices average USD95/ton in 2025, USD85/ton in 2026, USD75/ton in 2027;

-- Copper prices of USD9,500/MT in 2025, USD9,000/MT in 2026 and USD8,500/MT in 2027;

-- Nickel prices of USD15,300/MT in 2025, USD15,000/MT in 2026 and USD15,000/MT in 2027;

-- Iron ore fines and pellets volumes sold of 315 million tons in 2025, 320 million tons in 2026 and 335 million tons in 2027;

-- Copper volumes sold of 365,000 MT in 2025, 375,000 MT in 2026 and 390,000 MT in 2027;

-- Nickel volumes sold of 177,000 MT in 2025, 210,000 MT in 2026 and 225,000 MT in 2027;

-- Capex of USD5.6 billion, USD5.8 billion, and USD5.8 billion in 2025, 2026 and in 2027;

-- Dividend distribution at Vale's policy of 30% of EBITDA less sustaining capex. Forecast also includes USD500 million discretionary special dividends in 2025;

-- Participative shareholder debentures are considered an operating cost and part of other liabilities instead of debt. It is assumed that it is partially redeemed by the hybrids issuance.

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

-- Sizable debt-funded dividends or share buybacks leading to deterioration of the financial profile;

-- Net debt/EBITDA above 1.5x on a sustained basis;

-- Aggressive debt financed growth strategy seeking product of business diversification;

-- Unfavorable additional litigation penalties arising from previous environmental accidents;

-- Material weakness in corporate governance independence and assertiveness.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

-- A medium-term upgrade is unlikely considering limited diversification and geographical concentration, compared to peers;

-- Higher cash flow from sustainable diversification into other segments with lower business risk, higher value-added product mix, and lower correlation to its ferrous mining operations;

-- Reach more than 25 upstream dam decommissions and keep no dams at emergency level 3;

-- FCF positive at all times, regardless of capex plans;

-- Consistent net debt/EBITDA below 0.5x.

Vale has a track record of maintaining a robust cash position and diverse access to funding which supports its high financial flexibility. Vale ended Sept. 30, 2025, with USD5.9 billion of cash and marketable securities, USD5.0 billion of committed revolving credit lines due in 2026 and in 2029. Fitch adjusted total debt reached USD17.6 billion, including debt repayments expected of USD225 million in 2025, USD124 million in 2026 and USD1.7 billion in 2027. Average debt maturity was 8.7 years. More than half of Vale's debt matures in 2030 or later.

Vale's current hybrid issuance along with cash holdings is financing Vale's partial tender offer of the participative shareholder's debentures. This is part of the company's strategy to optimize its capital structure through liability management while reinforcing its capital allocation strategy.

Vale is one of the world's leading mining companies. It is one of the largest producers of iron ore and iron ore pellets and the sixth-largest producer of nickel. The company is present in approximately 19 countries.

Fitch does not provide ESG relevance scores for Vale Overseas Limited.

In cases where Fitch does not provide ESG relevance scores in connection with the credit rating of a transaction, programme, instrument or issuer, Fitch will disclose any ESG factor that is a key rating driver in the key rating drivers section of the relevant rating action commentary. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products

Vale Overseas Limited

----subordinated; Long Term Rating; New Rating; BBB-

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Hector Collantes,

Director

+1 212 908 0369

hector.collantes@fitchratings.com

Fitch Ratings, Inc.

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Debora Jalles,

Senior Director

+55 21 4503 2621

debora.jalles@fitchratings.com

Committee Chairperson

Natalia O'Byrne,

Senior Director

+57 601 241 3255

natalia.obyrne@fitchratings.com

MEDIA RELATIONS: Eleis Brennan, New York, Tel: +1 646 582 3666, Email: eleis.brennan@thefitchgroup.com

Additional information is available on www.fitchratings.com

Applicable Model

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

Corporate Monitoring & Forecasting Model (COMFORT Model), v8.2.0 (1,2)

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