Vale’s Iron Ore Surge Masks Nickel Cost Battle

Date of Call: Feb 13, 2026

Guidance:

• Iron ore C1 cash costs expected to range between $20 and $21.5 per ton in 2026, representing a further year-on-year reduction.
• Vale Base Metals aims to achieve at least cash breakeven in nickel by the end of 2026.
• Expected CapEx for 2026 is $5.4 billion to $5.7 billion, with a long-term target below $6 billion.
• Anticipates a reduction of approximately $1.5 billion in cash disbursements related to reparations and decharacterization commitments compared to 2025.

Business Commentary:

Outstanding Operational Performance:

• Vale S.A. delivered record iron ore production of 336 million tons in 2025, 3% higher year-on-year and the highest since 2018.
• This was driven by the start-up of low capital-intensive projects like Capanema and Vargem Grande, combined with solid performance in Brucutu and S11D.

Strong Financial Results:

• The company's pro forma EBITDA reached $4.8 billion in Q4 2025, representing a 17% year-on-year increase and a 10% quarter-on-quarter increase.
• This strong performance was primarily driven by excellent results at Vale Base Metals, supported by favorable pricing conditions for copper and byproducts.

Cost Reduction and Efficiency:

• Vale achieved significant cost reductions across all commodities, with iron ore all-in costs reaching $54 per ton, a $2 per ton year-on-year reduction.
• The cost reductions were a result of successful efficiency programs, greater operational stability, and lower unit costs.

Capital Allocation and Shareholder Returns:

• Vale delivered a dividend yield of 16% in 2025, with announced dividends and interest on capital amounting to $2.8 billion.
• The company maintained a robust and disciplined approach to capital allocation, optimizing its CapEx program and advancing growth initiatives like the Novo Carajás program.

Progress in Safety and Sustainability:

• Vale achieved a 21% reduction in high potential incidents and an 81% execution of the Brumadinho agreement in 2025.
• The company continued to make solid progress on reparations efforts and reducing tailings dam emergency levels, fulfilling commitments made to society.

Sentiment Analysis:

Overall Tone: Positive

• Management described 2025 as 'outstanding' and 'the strongest operational performance in Vale's history,' exceeding production guidance and delivering strong cost reductions. The CEO expressed being 'extremely confident' in the long-term strategy and 'entered 2026 with great optimism.' The tone emphasized operational excellence, value creation, and a clear, ambitious growth plan.

Q&A:

• Question from Leonardo Correa (Banco BTG Pactual S.A., Research Division): Regarding Vale Base Metals' strong cost performance, what are the bottom-up initiatives beyond byproduct credits, and is there upside potential to the recent cost guidance?
  Response: Management has more than doubled its cost reduction target since 2020, driven by restructuring, operational execution, and volume growth to dilute fixed costs. They are on track for 2026 guidance and see potential upside if byproduct prices remain favorable.

• Question from Leonardo Correa (Banco BTG Pactual S.A., Research Division): How can Vale unlock the higher valuation for its copper assets, and is an IPO of VBM being considered?
  Response: The focus is on demonstrating operational excellence and accelerating the growth program for copper. While capital market transactions are possible, the priority is to show the ability to grow faster than peers before considering such moves.

• Question from Daniel Sasson (Itaú Corretora de Valores S.A., Research Division): Why did realized iron ore prices decline in Q4, and how do you view the strategy of selling mid-grade products?
  Response: The price decline was due to lower market premiums and a planned mid-grade product optimization, not structural premium deterioration. The flexible commercial strategy aims to maximize total contribution margin across the supply chain, not just price realization.

• Question from Daniel Sasson (Itaú Corretora de Valores S.A., Research Division): What are the urgent operational goals to reduce cash costs in nickel, independent of byproduct revenues?
  Response: Key initiatives include improving asset reliability, execution, and productivity, as seen with the on-time, under-budget commissioning of Onça Puma furnace 2 and ramping up Voisey's Bay. The goal is to achieve cash flow breakeven in nickel by year-end 2026.

• Question from Alexander Hacking (Citigroup Inc., Research Division): How do you interpret the changes to nickel licenses in Indonesia, and could this be a structural market change?
  Response: Management is cautiously optimistic about potential supply-side rationalization in Indonesia but emphasizes the need for Vale to first improve its own cost competitiveness, as the company still operates at a disadvantage on the cost curve.

• Question from Caio Ribeiro (BofA Securities, Research Division): What are the latest developments on the Fabrica and Viga incident, and what is the current status of restricted AUM?
  Response: The incident was caused by heavy rainfall; operations are expected to resume in 2-3 weeks after restoration. Approximately $1.5 trillion in restricted AUM has been unlocked since the accidents, with more progress expected from continued ESG improvements and direct investor engagement.

• Question from Christopher LaFemina (Jefferies LLC, Research Division): How might CMRG's blending activities affect Vale's premiums, and are you receiving larger premiums due to the lower 61% Fe benchmark?
  Response: CMRG's blending is not expected to impact Vale's strategy, as the market views products based on chemistry and size distribution. The shift to a 61% Fe benchmark does not change price realization, only the price differential between indices.

• Question from Marcio Farid Filho (Goldman Sachs Group, Inc., Research Division): How does the global grade decline trend affect Vale's resources, and what is the status of technical reports for Base Metals projects?
  Response: Lower cutoff grades can improve product mix, increase resource base, and reduce costs. Technical studies for Base Metals projects are in final draft review and will be published on the VBM website soon, with more details to be shared at an upcoming Investor Day.

• Question from Rodolfo De Angele (JPMorgan Chase & Co, Research Division): What is the expected iron ore pricing environment for 2026, and can you provide more details on copper growth plans and capex?
  Response: Iron ore fundamentals are expected to remain balanced in 2026, supporting prices similar to 2025. For copper, Vale is focused on low-capital-intensity growth projects like Bacaba and Alemão, with attractive returns, and will provide more details at an Investor Day.

• Question from Carlos de Alba (Morgan Stanley, Research Division): Given the strong share price and debt position, what is the view on returning excess cash to shareholders?
  Response: If expanded net debt falls below the midpoint of the target range, additional returns via dividends or buybacks will be considered. The approach will be balanced, depending on relative valuation.

• Question from Rafael Barcellos (Banco Bradesco BBI S.A., Research Division): How should we think about Vale's mid-grade product strategy and exposure to freight market volatility?
  Response: Mid-grade volumes will be adjusted based on market demand to maximize total contribution. Vale's revised freight strategy has minimized exposure to spot market volatility, limiting impact and potentially enhancing competitiveness.

• Question from Rafael Barcellos (Banco Bradesco BBI S.A., Research Division): How is Vale positioning itself in the current M&A environment, and what about partnerships in Canada?
  Response: The focus is on developing Vale's unique endowment for value creation, as trading at a discount to peers. While evaluating opportunities, the priority is to grow its own assets with below-market capital intensity and strong shareholder returns.

Contradiction Point 1

Capital Allocation Strategy for Shareholder Returns

Timing and conditions for extraordinary dividends appear inconsistent.

Could you discuss your recent financial results? - Carlos de Alba (Morgan Stanley)

2025Q4: If expanded net debt falls below the midpoint of the $10B-$20B target range, additional returns to shareholders will be considered. The decision will be balanced between dividends and buybacks... - Marcelo Bacci(EVP of Finance & Investor Relations)

Given the strong share price and debt levels, what are Vale's plans to return excess cash to shareholders through buybacks or dividends? - Rafael Barcellos (Banco Bradesco BBI S.A.)

2025Q3: The stability of the company, high iron ore prices, and strong cash flow create favorable conditions for extraordinary dividends. While a decision cannot be anticipated yet, it is likely that extraordinary dividends will be announced in the coming months. - Marcelo Bacci(EVP of Finance & Investor Relations)

Contradiction Point 2

Copper Business Growth Communication

Timeline for releasing detailed growth plans shifts from imminent to future event.

Who is Rodolfo De Angele at JPMorgan Chase & Co? - Rodolfo De Angele (JPMorgan Chase & Co)

2025Q4: There is a significant, underrecognized copper growth profile... details of which will be shared via Investor Day. - Shaun Usmar(CEO of Vale Base Metals Ltd)

1) What's the outlook for the iron ore market and prices in 2026? 2) Will detailed copper growth plans be released soon to trigger re-rating? - Carlos de Alba (Morgan Stanley)

2025Q3: Detailed project sequencing and growth plans will be shared at Vale Day. - Shaun Usmar(CEO of Vale Base Metals Ltd)

Contradiction Point 3

Outlook on Iron Ore Benchmarks (61% Fe) and Premiums

Contradiction on the impact of the shift to a 61% Fe benchmark on Vale's product premiums and pricing strategy.

Christopher LaFemina of Jefferies LLC? - Christopher LaFemina (Jefferies LLC)

2025Q4: Some clients are moving from the 62% to the 61% benchmark, which will change price differentials but does not affect Vale's price realization. - Rogério Nogueira(EVP of Commercial & Development)

Does the emergence of China Mineral Resources Group's blending activities and the shift in the iron ore benchmark from 62% Fe to 61% Fe impact the premiums Vale can achieve for its blended ores? - Marcio Farid (Goldman Sachs)

2025Q3: There is uncertainty as competitors shift to 61% Fe benchmarks. Vale's products are naturally higher (e.g., BRBF is 63% Fe). The company is discussing with pricing agencies the possibility of launching a low-alumina 61% Fe benchmark... - Gustavo Pimenta(CEO)

Contradiction Point 4

Shareholder Returns Strategy and Timing

Contradiction on the timing and conditions for announcing extraordinary dividends.

Carlos de Alba (Morgan Stanley)? - Carlos de Alba (Morgan Stanley)

2025Q4: If expanded net debt falls below the midpoint of the $10B-$20B target range, additional returns to shareholders will be considered. - Marcelo Bacci(EVP of Finance & Investor Relations)

What is Vale's view on returning excess cash to shareholders via buybacks or special dividends, given the share price rally and debt position? - Rafael Barcelos (Banco Bradesco BBI S.A.)

2025Q3: Given the strong performance... it is likely that extraordinary dividends will be announced in the coming months. - Marcelo Bacci(EVP of Finance & Investor Relations) and Gustavo Pimenta(CEO)

Contradiction Point 5

Copper Growth Plan Communication and Investor Day

Contradiction on the timeline for providing detailed copper growth plans to investors.

What are your thoughts on JPMorgan Chase & Co's earnings? - Rodolfo De Angele (JPMorgan Chase & Co)

2025Q4: The strategy is to deliver immediate operational results... details of which will be shared via Investor Day. - Shaun Usmar(CEO of Vale Base Metals Ltd)

What is your assessment of the iron ore market and copper growth plans for 2026, and could these trigger a re-rating? - Carlos De Alba (Morgan Stanley)

2025Q3: More details on sequencing and growth will be provided within weeks. - Shaun Usmar(CEO of Vale Base Metals)