VALE – SELL / 9/13/12

MARK BLAZO, PORTFOLIO MANAGER

PITCH OVERVIEW

Sell 36.591 shares @ $18.99 each $694.86

VALE

Exploration, production, and sale of basic metals in Brazil and internationally

Larget producer of iron ore in the world Involved in fertilizers, logistics, and steel

businesses Majority of revenue from selling iron ore

and nickel

IRON ORE IMPORTS

China 34% Japan 23% Germany 7.5% Rest of World 35.5%

IRON ORE PRICES

Iron ore prices down 37% this year

Steepest drop among industrial commodities due to China’s slowdown

CHINESE STEEL PROFITS

Chinese steel companies saw profits decline 49.4% from a year earlier to $6.64 billion

CHINESE INFRASTRUCTURE STIMULUS ¼ size of failed 2008-2009 Chinese

stimulus Iron ore prices will remain low, hurting

margins Stimulus now priced in to stock after

6.75% jump

Do we want to be in a sector that requires stimulus to boost demand?

GROWTH AND COMPETITION Major competitor: BHP Billiton

COMPETITORS

STRENGTHS

Debt to Equity Ratio 0.34 Low debt on the books

Quick Ratio 1.20 High ratio allows Vale to meet short-term

cash needs

WEAKNESSES

Net Income -67% YoY Weak operating cash flow Decreasing stock price

OPPORTUNITIES

New infrastructure spending from Chinese government Roads Water ports Airports

THREATS

Countries are continually being exposed for having financial problems Spain Italy Greece

RECENT NEWS

On September 5th, Vale recently postponed plans of a mining project in Canada. The mine would produce 1500 jobs and 2.9 million metric tons of potash. The reason for the cancellation of immediately starting the job is “because of decreased China demand and drought conditions in the United States. Potash is used in fertilizers and agricultural products and the agrarian industry isn’t doing well.”

The recent drought in the U.S. and lack of demand in China is causing action from Vale.

RECENT NEWS

A report released on September 9th showed Japan’s economy (purchases 23% of world’s iron ore supply) slowing drastically from an estimated 1.4% growth to 0.7%

European debt crisis putting a cap on spending from businessesS

Data released on September 8th shows smallest rise in China’s industrial output in the last three years.

VALUATION

52-week change -31.9% S&P 52-week change 22.2%

Quarterly Revenue Growth -2.1% Quarterly Earnings Growth -48.3%

Total Cash 4.2B Total Debt27.3B

Debt-Equity 34% Current Ratio 2.24 P/E 6.75

SUMMARY

Sell 36.591 shares @ $18.99 each $694.86