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Electric Vehicle Revolution and

Implications for New Energy Metals

Frank Nikolic

Market Intelligence, Vale Base Metals

Brazil-Canada at PDAC | 2018

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5th Avenue Easter 1900

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Source: McKinsey, EU Commission

5th Avenue Easter 1913

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Shanghai 2015

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Our society is

moving to a low-

carbon future

Emission regulations

are tightening

Monetary & other

incentives

Restrictions on

Internal Combustion

Cars

Movement away from

fossil fuels

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“This presentation may include statements that present Vale's expectations

about future events or results. All statements, when based upon expectations

about the future and not on historical facts, involve various risks and

uncertainties. Vale cannot guarantee that such statements will prove correct.

These risks and uncertainties include factors related to the following: (a) the

countries where we operate, especially Brazil and Canada; (b) the global

economy; (c) the capital markets; (d) the mining and metals prices and their

dependence on global industrial production, which is cyclical by nature; and

(e) global competition in the markets in which Vale operates. To obtain further

information on factors that may lead to results different from those forecast by

Vale, please consult the reports Vale files with the U.S. Securities and

Exchange Commission (SEC), the Brazilian Comissão de Valores Mobiliários

(CVM), the French Autorité des Marchés Financiers (AMF) and in particular the

factors discussed under “Forward-Looking Statements” and “Risk Factors” in

Vale’s annual report on Form 20-F.”

“Cautionary Note to U.S. Investors - The SEC permits mining companies, in

their filings with the SEC, to disclose only those mineral deposits that a

company can economically and legally extract or produce. We present certain

information in this presentation, including ‘measured resources,’ ‘indicated

resources,’ ‘inferred resources,’ ‘geologic resources’, which would not be

permitted in an SEC filing. These materials are not proven or probable

reserves, as defined by the SEC, and we cannot assure you that these

materials will be converted into proven or probable reserves, as defined by the

SEC. U.S. Investors should consider closely the disclosure in our Annual

Report on Form 20-K, which may be obtained from us, from our website or at

http://http://us.sec.gov/edgar.shtml.”

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Vast amount of capital is being committed

Coming after an estimated $2.7 billion

investment programme, the i3 launch is

a milestone for the world’s biggest

luxury carmaker as well as the electric

car fraternity.

Tesla and its partners will

collectively invest about

$5 billion into the factory

by 2020. Tesla itself will

directly invest about $2

billion in the

Gigafactory.Nov, 2016

Porsche is making a big bet on

electric cars, with the upcoming

Mission E representing the first

full-electric car from the German

automaker. Now, Porsche plans

to double its investment in

electric cars to nearly $8 billion

by 2022.

Volkswagen invests $40

Billion on electric cars.

“With the planning round now

approved, we are laying the foundation

for making Volkswagen the world’s No.

1 player in electric mobility by 2025,”

Chief Executive Matthias Mueller. Nov

24, 2017

Toyota, Mazda plan $1.6 billion U.S. plant, will partner on electric

vehicle technology. The plant will have an annual production capacity of

about 300,000 vehicles, and will produce Toyota Corollas as well as a

new Mazda crossover vehicle for the North American market. Aug 4, 2017

Dyson Ltd. says it will build an

electric car using solid-state

batteries in three years. The British

company plans to invest one billion

pounds, $1.3 billion to develop

the car, plus $1.3 billion to create

solid-state batteries for it. Sep 26,

2017

$40 Billion$2.6 Billion

$5 Billion

“We want to shape the profound transformation

of the automotive industry from the forefront.”"Further fundamental changes will be required for

Daimler to remain successful," said Daimler Chairman

Manfred Bischoff, Mar 29, 2017

In the coming years, the company will invest €10

billion in the expansion of its electric portfolio and will

bring more than ten new electric cars in series by

2022.

Automotive News - Mar 29,2017

$10 Billion

Ford announces

$4.5bn investment in

electric vehicles

“Ford is just the latest in

a long line of

manufacturers to

embrace EV and their

actions again

demonstrate the clear

shift that is being made

towards the

electrification of

transport systems across

the global.” Tim Payne,

CEO of InstaVolt

$4.5 Billion

$2.7 Billion

Up to 25 percent of cars may

soon be fully electric, says

Mercedes-Benz USA CEO

after automaker invests $1

billion in electric vehicle

production.

Sep 22, 2017

$1 Billion

$1.6 Billion

"General Motors believes in an

all-electric future," said Mark

Reuss, executive vice president

of product and supply chain.

"General Motors pulled back the

curtain on plans for a new fleet of

all-electric vehicles that

executives believe will push its

global EV sales to 1 million

annually by 2026 — and

generate a profit. “ Oct 4, 2017

Volkswagen & JAC Put $12

Billion Into Chinese EV Boom

JAC, has had a range of electric cars

under the iEV name and has an

established production base in China.

will see the investment of $12 billion

and will help the introduction of 40 locally

produced vehicles. Nov 25, 2017

$12 Billion

$8 Billion

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The e-mobility movement

ride

sharing

autonomous

driving

electrification

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# of Electric vehicles

Electric Vehicle = PHEV and BEV

Electric vehicles will have an increasingly

commanding share of the market

0

5

10

15

20

25

30

35

40

45

2030202520202015

Vale EV Conservative CaseVale EV Upside Case

Upside Case refers to public commitments by various auto manufacturers as

well as governments (such as UK/France committing to no ICE sales by 2040,

California, China, etc.)

Source: Public Announcements, Media, Vale Analysis

by 2025, on average, an

EV vehicle will contain

8-20% market

share17-38% market

share

8kg27kg 78kg

mil

lio

ns

of

EV

s

McKinsey

Morgan

StanleyBloomberg

Wood

Mackenzie

BofA

BofA

(50M)

UBS

CRU

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Implications for

New Energy

Metals

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New Energy Metals and the Electric Vehicle

Cathode Material

An example of

a Nickel-Rich

Battery

Cell(shell is nickel plated)

Pack

Source: Vale Analysis

1 part 1 part1 part

Lithium

Carbonate

Cobalt

Sulphate

Nickel

Sulphate

Aluminum or

Manganese

Sulphate

OR

8 parts

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Key trends for New Energy Metals

Battery chemistry

favors nickel

o Increasing nickel content improves

energy density (energy storage)

o Increasing nickel content lowers

battery costs

Battery Chemistry Distributions

NCM811NCM622NCM333

NCA

1 Battery size is increasing2

o Increasing battery size increases

vehicle range

2018 China EV Subsidy Rules support >60kWh battery

o <150km range = no subsidyo 300km range = current

subsidyo >400km range = highest

subsidy

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This will have a big impact on future

demand for New Energy Metals

890

260

590

2,100

2018 …by 2025

1,700

…by 2030

115

35

220

80

…by 2025

105

2018 …by 2030

1,570

600

3,430

1,495

…by 20302018 …by 2025

Nickel Demand for NEV

batteries (kt)Cobalt Demand for NEV

batteries (kt)Copper Demand for NEV

but excl. infrastructure (kt)

UpsideConservative

11515

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note: this is our ‘accelerated NCM811’ scenario; NEV = New Energy Vehicle. This specifically refers to Plug-in Hybrids and Battery Electric Vehicles

size of the nickel market today

size of the cobalt

market today

size of the copper

market today

23Mt

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The nickel market is made up of two

very different classes of product

52%Class II48% Class I

FeNi

(15-30% nickel,

balance iron)

Nickel Pig Iron

(2-12% nickel,

balance iron)

99.98% nickel or higher

(also chemicals such as

nickel sulphate)

powdersbriquette

pellets

cathodeSource: Wood Mackenzie, CRU, Vale Analysis

2Mt

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Stainless steel does not need the

high purity and if available

prefers using Class II due to iron,

while Class II due to iron and

impurities can only be

used in stainless steel (with few niche exceptions)

Stainless

Steel

Class IClass II

Non-ferrous

Alloys

Alloy

steels

Foundry

Plating

Batteries

Non-stainless steel

markets need high

purity nickel

Source: Wood Mackenzie, CRU, Vale Analysis

4%

10%

7%

5%

3%

71%

2Mt

16

4%

10%

7%

5%

3%

71%

Stainless

Steel

Class IClass II

Non-ferrous

Alloys

Alloy

steels

Foundry

Plating

Batteries

Source: Wood Mackenzie, CRU, Vale Analysis

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4%

10%

6%

5%

6%

69%

Stainless

Steel

Class IClass II

Non-ferrous

Alloys

Alloy

steels

Foundry

Plating

Source: Wood Mackenzie, CRU, Vale Analysis

Batteries

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4%

9%

5%

4%

19%

59%Stainless

Steel

Class II

Non-ferrous

Alloys

Alloy

steels

Foundry

Plating

Source: Wood Mackenzie, CRU, Vale Analysis using average between conservative and upside case

Class I

Batteries

battery

nickel

growth

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3%7%

4%

3%

37%

46%

Stainless

SteelClass I

Class II

Non-ferrous

Alloys

Alloy

steels

Foundry

Plating

Batteries

Source: Wood Mackenzie, CRU, Vale Analysis using average between conservative and upside case

battery

nickel

growth

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Nickel demand for the Battery Market (kt Ni)

Batteries will be a paradigm shift in

nickel demand, particularly if we

consider battery suitable nickel units

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200 nickel market

size today

maximum Class I

availability today

2030202520202018

Vale EV Upside Ni in non EV batteriesVale EV Conservative

Source: Vale Analysis

350-700kt Ni

1,000-1,800kt Ni

kt Ni

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Nickel supply will grow to meet the needs of

the battery market

Source: SNL, Vale Analysis

1.31% 16%

20% 64%

41%

17%

10%

29%

Undeveloped

Resources*

(outside existing

mining camps)

4%

Global nickel

mine production

Saprolite High Grade Sulphides

Low Grade SulphideLimonite

World nickel production and undeveloped resources

makes Class I

makes Class II

HPAL technology

producing

intermediates

large amount of

Co by-product

vast untapped

resources

expensive

to build

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Cobalt supply is inelastic, although it will come

with nickel there is significant risk tied to Cu DRC

50% of Co is

found and comes

from the DRC

Co is a byproduct

of Cu and Ni

Future of Co is tied

to Ni given HPALs

Still need DRC –

which introduces

a lot of risk

Cobalt Market Balance with no Supply Response

kt Co

-250

-200

-150

-100

-50

0

50

2018 2020 2022 2024 2026 2028 2030

market size today

Vale EV Conservative

Vale EV Upside Ni

Cu

Recycling only

relevant post 2030

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-8,000

-7,000

-6,000

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2030202620242022 202820202018

Vale EV Upside

Copper demand (no EVs)

Vale EV Conservative

Copper Market Balance with no Supply Response

kt Cu

challenged with

declining ore grades

Copper Market ~22Mt

next wave of

projects needed

current prices

supportive for

investment

EVs and infrastructure additive to copper

demand – next wave of projects needed

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o We are at a precipice of an Electric Vehicle revolution

o Electric vehicles will usher in an age of New Energy

Metals

o Nickel for EV batteries will become a significant part

of demand and a key driver for growth

o Supplying the right nickel units will be a challenge

but there is a vast untapped resource accessible with

established technologies

o Cobalt will come with the nickel but still needs DRC

which is a risk

o Copper needs the next wave of projects

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