Vale S.A. (VALE) Placed on Review for Downgrade by Moody's

Moody's América Latina (Moody's) placed the ratings of Vale S.A. (NYSE: VALE) on review for downgrade. The rating action follows Moody's Investors Service rating action on January 21, 2016 that has placed the ratings of 9 mining companies in Latin America, and their rated subsidiaries, on review for downgrade. For further information, please refer to the press release dated January 21, 2016 and posted on www.moodys.com

The following ratings are placed on Review for Downgrade:

..Issuer: Vale S.A.

LT Issuer Rating: Baa3/Aa1.br, Placed on Review for Downgrade

BRL 800 million Senior Unsecured Notes (Debentures de Infraestrutura) due 2020 -- Baa3/Aa1.br, Placed on Review for Downgrade.

BRL 550 million Senior Unsecured Notes (Debentures de Infraestrutura) due 2022 -- Baa3/Aa1.br, Placed on Review for Downgrade.

BRL 750 million Senior Unsecured Notes (Debentures de Infraestrutura) -- Baa3/Aa1.br, Placed on Review for Downgrade.

The actions reflect Moody's effort to recalibrate the ratings in the mining portfolio to align with the fundamental shift in the credit conditions of the global mining sector.

"Slowing growth in China, which consumes and produces at least half of base metals, and is a material player in the precious metals, iron ore and metallurgical coal markets is weakening demand for these commodities and driving prices to multi-year lows," said Barbara Mattos, Moody's Vice President and Senior Credit Officer. "China's outsized influence on the commodities market, coupled with the need for significant recalibration of supply to bring the industry back into balance indicates that this is not a normal cyclical downturn, but a fundamental shift that will place an unprecedented level of stress on mining companies."

RATINGS RATIONALE

As part of an ongoing assessment of mining companies, Moody's sharply reduced its price sensitivity assumptions on December 8, 2015. Since then, credit conditions in the mining industry have weakened further, with prices continuing to decline. The likelihood has increased that prices for base metals, precious metals, iron ore and metallurgical coal will approach levels closer to Moody's stressed sensitivity scenario. In addition, the strong US dollar is a further factor contributing to weakening demand and driving prices lower since most metals are traded in dollars.

This broad ratings review will consider each mining company's asset base, cost structure, likely cash burn and liquidity, as well as management's strategy for coping with a prolonged downturn and the ability to execute on same. The review will assess each company's cash flow and credit metrics closer to our latest stressed price assumptions and the relative rating positioning.

Moody's believes that this downturn will mark an unprecedented shift for the mining industry. Whereas previous downturns have been cyclical, the effect of slowing growth in China indicates a fundamental change that will heighten credit risk for mining companies. This review reflects the belief that deteriorating industry fundamentals require a recalibration of the global mining portfolio rated by Moody's. Although all issuers in these sectors have been adversely affected by declining prices, severity varies substantially by issuer. Accordingly, the range of possible outcomes upon conclusion of the review for given issuers varies from possible confirmation of ratings to multi-notch downgrades. Moody's expects to conclude a majority of the reviews by the end of the first quarter. While this review focuses on companies rated in the range from A1 to B3, Moody's is also reevaluating higher and lower rated companies in the context of industry conditions. The higher rated companies, on average, are somewhat more resilient to low commodity prices and many of the lower rated companies have recently been downgraded.

This broad ratings review incorporates the ratings of Compania de Minas Buenaventura S.A.A. (Ba1), which ratings were placed under review for downgrade on December 16, 2015.

The principal methodology used in these ratings was Global Mining Industry published in August 2014. Please see the Credit Policy page on www.moodys.com.br for a copy of this methodology.

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