Financial Statements MMX Mineração E Metálicos S.A. (Publicly-Held Company)

Financial Statements

MMX Mineração e Metálicos S.A. (Publicly-held company)

December 31, 2015 with Independent Auditor’s Report

MMX Mineração e Metálicos S.A.

Individual and consolidated financial statements

December 31, 2015

Contents

Independent auditor’s report on individual and consolidated financial statements ...... 1

Audited financial statements

Balance sheets ...... 5 Statements of operations ...... 7 Statements of comprehensive income (loss) ...... 8 Statements of changes in equity ...... 9 Cash flow statements ...... 10 Statements of value added ...... 12 Notes to individual and consolidated financial statements ...... 13

A free translation from Portuguese into English of Independent Auditor’s Report on Individual and Consolidated Financial Statements prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), issued by International Accounting Standards Board (IASB)

Independent auditor’s report on financial statements issued with disclaimer of opinion

The Shareholders, Board of Directors and Officers MMX Mineração e Metálicos S.A. Rio de Janeiro - RJ

Introduction

1. We have audited the accompanying individual and consolidated financial statements of MMX Mineração e Metálicos S.A. (“Company”), identified as Company and Consolidated, respectively, which comprise the balance sheet as at December 31, 2015, and the related statements of operations, comprehensive income (loss), changes in equity and cash flows for the year then ended, and a summary of significant accounting practices and other explanatory information.

Management’s responsibility for the financial statements

2. Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with accounting practices adopted in Brazil, and in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of these financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Brazilian and International Standards on Auditing. Because of the matters described in the “Basis for disclaimer of opinion” paragraph, we were unable to obtain sufficient and appropriate audit evidence to provide a basis for our audit opinion, therefore, this report is issued with a disclaimer of opinion.

Basis for disclaimer of opinion

4. As mentioned in Note 1, on October 16, 2014, the Company filed a petition for an in-court reorganization of its subsidiary MMX Sudeste Mineração S.A. (under in court reorganization process) with the District Court of Minas Gerais state capital - pursuant to Law No. 11101/05, which was accepted on October 22, 2014, in a decision handed down by the 1st Business Court of Belo Horizonte. On December 19, 2014, the Company presented its in-court reorganization plan itemizing the means for the reorganization to be used, demonstration of its economic feasibility, and economic-financial position and valuation reports of its assets and rights. The in-court reorganization plan was approved by the creditors on August 28, 2015 and by the Belo Horizonte 1st Business Court Judge on September 23, 2015. To date, the Company did not measure all possible effects from the in-court reorganization plan on these individual and consolidated financial statements, since they depend on future events, such as sale of assets, which may or not occur.

5. For the year ended December 31, 2015, the Company incurred individual and consolidated accumulated losses totaling R$6,054,478 thousand, the Company’s individual and consolidated current liabilities exceeded its individual and consolidated current assets by R$896,418 thousand and R$562,798 thousand, respectively, and incurred individual and consolidated negative equity totaling in R$734,155 thousand and R$734,161 thousand, respectively. To revert this situation, management plan, as disclosed in Note 1, depends on the successful completion of the in-court reorganization plan of its subsidiary MMX Sudeste Mineração S.A. as mentioned in prior paragraph, in addition to the need for partnerships with new investors to continue the projects that will remain in the subsidiary’s portfolio. These conditions indicate the existence of significant uncertainty, which cast doubt as to the Company’s and its subsidiaries ability to continue as a going concern. At December 31, 2015, the Company’s individual and consolidated assets and liabilities were classified and measured on the assumption that the Company will continue as a going concern.

6. The Company has significant weaknesses in internal controls related to the preparation of individual and consolidated financial statements, such that there is a reasonable possibility that a material misstatement on its individual and consolidated financial statements has not been prevented or detected on a timely basis. Such deficiencies include the lack of adequate controls for segregation of duties that ensure integrity and adequate reporting of information stated in the overall financial statements, reconciliations of all negotiations with suppliers and third parties due to the in-court reorganization plan that ensure the reliability of the provisions for obligations, analysis of the impact from its subsidiary’s in-court reorganization process on the financial statements, especially regarding the presentation and measurement of noncurrent assets available for sale, controls on manual accounting entries, analysis of potential impairment losses on inventory realization due to sale at amounts that are lower than cost amounts, controls and adequate supporting documentation of accrued vacation pay recorded in the year, and analysis for realization of receivables from related parties.

7. The significant uncertainties and the matters described in paragraphs 4 to 6 above did not allow us to conclude on how, when and for how much the assets will be realized and the liabilities will be settled. Future significant events, the outcome of which we cannot anticipate, may have a material impact on the Company’s operations. These impacts may significantly affect how and for how much these assets will be realized and these liabilities will be settled. We were also unable to conclude on how the assets will be realized and the liabilities will be settled, whether by means of the Company’s operations, or by means of sale of all or part of the assets.

8. Over 2015, the Company and its subsidiaries recorded adjustments arising from the rectification of errors relating to prior years not attributable to subsequent events, so that the income for the year ended December 31, 2015 was reduced by R$23,460 thousand in the consolidated financial statements and by R$23,178 thousand in the individual financial statements. According to CPC 23 - Accounting Policies, Changes in Accounting Estimates and Errors and IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, these adjustments should have been made in prior years.

Disclaimer of opinion on the individual and consolidated financial statements

9. In view of the relevance of the matters described in paragraphs 4 to 8, as part of the “Basis for disclaimer of opinion” section, we were unable to obtain sufficient appropriate audit evidence to provide a basis for our audit opinion on the individual and consolidated financial statements referred to above. Accordingly, we do not express an audit opinion on these individual and consolidated financial statements.

Other matters

Statements of value added

10. We were also engaged to audit the individual and consolidated statements of value added (SVA) for the year ended December 31, 2015, prepared under the responsibility of management, the presentation of which is required by Brazilian Corporation Law for publicly- held companies, and as supplementary information under the IFRS, whereby no SVA presentation is required. These statements have been subject to the same audit procedures previously described. In view of the relevance of the matters described in paragraphs 4 to 8 included in the “Basis for disclaimer of opinion” section, we were unable to obtain sufficient appropriate audit evidence to provide a basis for our audit opinion. Accordingly, we do not express an audit opinion on the individual and consolidated financial statements referred to above.

Belo Horizonte, March 30, 2016.

ERNST & YOUNG Auditores Independentes S.S. CRC-2SP015199/F-6

Rogério Xavier Magalhães Accountant CRC-1MG080613/O-1

MANAGEMENT REPORT

1. Message from Management

The Company’s operations remained suspended throughout 2015. However, senior management focused heavily on cash management, cost management, cost reduction and a search for alternatives to generate cash even though the Company had no monthly operating cash flow. In addition, the Company was faced with a deepening economic crisis in Brazil, the deteriorating conditions of the mineral commodities market and great difficulty in obtaining approval for the Judicial Reorganization Plan for its subsidiary MMX Sudeste.

The Judicial Reorganization Plan for MMX Sudeste Mineração S.A. (under Judicial Reorganization) was approved at the General Creditors’ Meeting held on August 28, 2015 and by the court in charge of the Judicial Reorganization on September 24, 2015 as announced to the market in the respective Material Fact Notices. The Company also signed agreements with suppliers of equipment and services for the Serra Azul Expansion Project. In this regard, it is essential to note the conclusion of the arbitration proceeding with MRS by means of an agreement between the parties. This not only allowed the termination of costly disputes, but also eliminated the possibility of an exponential increase in the respective debt and, consequently, the total value of the credits set out in the Judicial Reorganization proceeding.

Early in 2015, MMX also completed the tender offer for holders of MMXM11 Bonds. This allowed those bondholders to be directly connected with Porto Sudeste, the source of cash used to pay royalties. Consequently, MMX completed the sale of Porto Sudeste, started in 2013.

The Company's Management is focused on recovery as a whole. Conservative cash management with no capital contribution or access to lines of creditcoupled with a search for alternative sources of revenue, has allowed the Company to survive during its restructuring process, which will last some time until the Company recovers its investing and cash generation capacity.

The following steps of the Judicial Reorganization of MMX Sudeste Mineração S.A. (under Judicial Reorganization) are already under way, and the Company's executives remain committed to restructuring MMX.

Below are some highlights of 2015 and Subsequent Events. Special note should be given to the items related to the fulfilment of MMX Sudeste’s Judicial Reorganization Plan.

 Completion of the tender offer for MMXM11 Securities

 Dissolution of the Electricity Supply Agreement between MMX and ENEVA Comercializadora de Energia in April 2015

 Discontinuation of the Company’s Stock Options or Common Stock Subscription Program, approved by the Annual and Extraordinary General Meeting held on 04.30.2015

 Instatement of the Company’s Audit Committee for business year 2015 by the Annual and Extraordinary General Meetings held on 04.30.2015

 Approval of the Judicial Reorganization Plan for MMX Sudeste Mineração S.A. (under Judicial Reorganization) by the General Creditors’ Meeting held on 08.28.2015

 Approval of the Judicial Reorganization Plan for MMX Sudeste Mineração S.A. (under Judicial Reorganization) by the court in charge of the Judicial Reorganization on 09.24.2015

 Formal instatement of the Company’s Fiscal Committee on 08.26.2015

 Agreement with MRS Logística to terminate the long-term contract and inclusion of the debt in the Judicial Reorganization

 Approval by the CADE (Conselho Administrativo de Defesa Econômica, or Administrative Council for Economic Defense) for the acquisition of the mineral assets of MMX Sudeste Mineração S.A. (under Judicial

Reorganization), via UPI Operação Minerária, by Trafigura as set forth in the Judicial Reorganization Plan

 Approval by the Board of Directors of the Reverse Split of shares required by Bovespa

 Settlement of debts with Class IV creditors (Micro- and Small Enterprises) of the Judicial Reorganization Plan of MMX Sudeste Mineração S.A. (under Judicial Reorganization)

 Settlement of debts up to R$40 thousand in compliance with the Judicial Reorganization Plan of MMX Sudeste Mineração S.A. (under Judicial Reorganization) and

 Settlement of debts with eligible employees in compliance with the Judicial Reorganization Plan of MMX Sudeste Mineração S.A. (under Judicial Reorganization).

2. Market Analysis

The price of the iron ore delivered in China fluctuated between US$ 60 and US$ 130 / dmt throughout 2014 and the first days of 2015 presented an even stronger negative trend caused by both the falling demand for iron ore and the overseas market oversupply. Chinese government also kept part of the credit restrictions for commodities trading companies as well as forced the shutdown of obsolete, high cost and polluting steel plants, which led the Chinese steel production to fall by 2.3% year over year. Additionally, the Chinese GDP growth slowed down and reached 6.9% in 2015. On the opposite side, the overseas market reached 1.4 billion tons in 2015 due mainly to the production increase at the world’s biggest producers.

These market fluctuations strongly affected the iron ore prices delivered in China, which started 2015 within the US$ 70 / dmt range, but soon started to fall. By the end of the first quarter prices had fallen by 30% taking it close to US$ 50 / dmt. A short recovery occurred during the second quarter when prices reached US$ 65 / dmt by the beginning of June. These positive trends, however, was short-lived and throughout the third quarter prices returned to the previous lower levels.

New projects started production by the fourth quarter and it further increased the already high overseas supply. Since the demand remained stable, prices had a strong decline and reached negative records when it went below US$ 40 / dmt in December, 2015 forcing many iron ore mines into unprofitable operation.

The forecasts for 2016 do not present a better scenario than the one seen in 2015. Prices shall keep oscillating until a clear sign of iron ore demand uptrend can be clearly noted.

3. Cláusula compromissória

The Company, its shareholders, management and members of the Board of Directors undertake to resolve through arbitration any dispute or controversy that may arise between them, related to , or resulting from, especially , the application, validity , effectiveness , interpretation, violation and effects of the provisions of the Participation Agreement in the New Market , New Market Listing rules , the Bylaws , the shareholders' agreements filed at the Company's headquarters , in the Law of Corporations , the rules issued by the National Monetary Council, the Central Bank of Brazil or the CVM , BOVESPA regulations , other rules applicable to the operation of capital markets in general , in the Commitment Clauses and in the Arbitration Rules of the Market Arbitration Chamber, being conducted in accordance with the latter Regulation .

4. Relationship With External Auditors

In compliance with CVM instruction. 381/2003 we inform that Ernst & Young Independent Auditors S / S ( "EY") provides external audit services to MMX, related to the examination of the Company's financial statements.

During the fiscal year ended December 31, 2015, the Company's independent auditors, EY, did not provide services unrelated to the independent audit.

In hiring unrelated to the independent audit, the Company has adopted procedures based on applicable law and internationally accepted principles that preserve the independence and objectivity of the auditor. These principles are: (i) the auditor

should not audit its own work, and (ii) the auditor should not act managerially before his client nor promote the interests of his client.

EY stated to the Company that there is no link or fact situation that conflicts of interest, preventing the exercise of their activity independently.

5. Thanks

MMX's management thanks the shareholders, the federal, state and local governments, partners and suppliers and the communities in which the Company develops its projects, the support and trust always shown , and in particular to its employees for their dedication, commitment, contributions and confidence throughout 2015.

Rio de Janeiro, March 30, 2016.

The Management

MMX MINERAÇÃO E METÁLICOS S.A. CNPJ/MF nº: 02.762.115/0001-49 NIRE: 33.3.0026111-7 (Companhia Aberta)

MINUTES OF THE MEETING OF THE FISCAL COMMITTEE HELD ON MARCH 29, 2016

I. DATE, TIME AND VENUE: Held at 6:30 p.m. on March 29, 2016 at Av. das Américas, 3500, Bl. 7, 1st floor, Room 116, in Barra da Tijuca, Postal Code 22640-102, in the city and state of Rio de Janeiro.

II. CALL NOTICE AND ATTENDANCE: Meeting called in accordance with the Bylaws of MMX Mineração e Metálicos S.A. ("Company") and the applicable legislation.

III. PRESIDING BOARD: Once most of the members of the Company’s Fiscal Committee were confirmed to be in attendance, Mr. Augusto Carneiro de Oliveira Filho took the chair and appointed Mr. Alexandre de Souza Gontijo as Secretary.

IV. AGENDA: Deliberating on (i) the Management Report, the Board of Executive Officers’ accounts and the Company’s Financial Statements for the business year ended December 31, 2015 in accordance with Section 163, subsection II of Law 6404/76; and (ii) on the proposed allocation of net income for the business year ended 12.31.2015 to be submitted to the Annual General Meeting in accordance with Section 163, subsection III of Law 6404/76.

V. DISCUSSIONS AND RESOLUTIONS:

The members of the Fiscal Committee proceeded to deliberate on the agenda and unanimously gave their assent to:

(i) The approval by the General Meeting of the Management Report, the Executive Board’s accounts and the Company’s Financial Statements for the year ended 12.31.2015 since they comply with all the relevant standards and regulatory provisions; and

(ii) The proposed allocation of net income for the business year ended 12.31.2015 to be submitted to the Annual General Meeting.

VII. ADJOURNMENT: There being no other persons to be heard, the Chairman adjourned the meeting. These minutes were then drafted, read out, approved and signed by all attending members.

VIII. BOARD MEMBERS IN ATTENDANCE: Alexandre de Souza Gontijo and Augusto Carneiro de Oliveira Filho.

______Alexandre de Souza Gontijo Augusto Carneiro de Oliveira Filho

A free translation from Portuguese into English of Individual and Consolidated Financial Statements prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), issued by International Accounting Standards Board (IASB)

MMX Mineração e Metálicos S.A.

Balance sheets December 31, 2015 and 2014 (In thousands of reais)

Company Consolidated Note 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Assets Current assets Cash and cash equivalents 4 1,257 686 1,410 840 Inventories 5 - - 32 549 Taxes recoverable 6 4,557 4,619 5,218 4,929 Noncurrent assets held for sale 7 - - 312,077 335,387 Other receivables 685 3,675 696 3,688 6,499 8,980 319,433 345,393

Noncurrent assets Transactions with related parties 11 Accounts receivable from related parties 87,121 35,365 83 83 Intercompany loans 51,297 45,857 - - Taxes recoverable 6 25,863 28,240 29,103 31,023 Judicial deposits 370 405 420 496 Investments 8 197,209 348,850 - - Property, plant and equipment 9 4,517 5,728 4,517 5,728 Variable income securities (Port11) 16 51,715 2,855,029 51,715 2,855,029 Other receivables 100 101 100 100 418,192 3,319,575 85,938 2,892,459

Total assets 424,691 3,328,555 405,371 3,237,852

Company Consolidated Note 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Liabilities and equity Current liabilities Trade accounts payable 18,336 7,952 18,398 8,008 Loans and financing 12 4,829 4,634 4,829 4,634 Taxes and contributions payable 13 3,573 297 7,074 2,334 Salaries and compensations 764 2,166 770 2,172 Liabilities for investment acquisitions 6,012 - 6,012 - Transactions with related parties 11 Intercompany loans 49,895 42,152 11,543 10,460 Other payables to related parties 502 502 - 1 Provision for capital deficiency in investees 8 798,360 1,144,365 - - Liabilities related to noncurrent assets held for sale 7 - - 812,917 1,082,701 Payables to third parties 20,646 43 20,688 597 902,917 1,202,111 882,231 1,110,907

Noncurrent liabilities Loans and financing 12 146,241 94,547 146,241 94,547 Taxes and contributions payable 13 - - 82 82 Liabilities for investment acquisitions 11 57,600 - 57,600 - Provision for litigation and contingencies 14 373 4,148 1,663 5,578 Variable income securities - MMXM11 16 51,715 2,855,029 51,715 2,855,029 255,929 2,953,724 257,301 2,955,236

Equity 18 Capital 5,404,850 5,404,850 5,404,850 5,404,850 (-) Share issue cost (48,329) (48,329) (48,329) (48,329) Capital reserves 58,688 60,629 58,688 60,629 Cumulative translation adjustments 5 5 5 5 Capital transactions (94,891) (93,991) (94,891) (93,991) Accumulated losses (6,054,478) (6,150,444) (6,054,478) (6,150,444) (734,155) (827,280) (734,155) (827,280)

Attributable to controlling interests (734,155) (827,280) (734,155) (827,280) Noncontrolling interests - - (6) (1,011) Total equity (734,155) (827,280) (734,161) (828,291)

Total liabilities and equity 424,691 3,328,555 405,371 3,237,852

See accompanying notes.

MMX Mineração e Metálicos S.A.

Statements of operations Years ended December 31, 2015 and 2014 (In thousands of reais)

Company Consolidated Note 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Revenue from sales and/or services 19 - - 367 329,046 Cost of assets and/or services 19 - - (859) (197,175) Gross profit - - (492) 131,871

Operating income (expenses) Expenses (reversals) with sales and distribution - - 53,112 (411,020) Administrative expenses 19 (23,806) (44,996) (67,729) (180,349) Expenses with stock options granted 1,941 2,637 1,941 2,637 Equity pickup 8 (189,446) (1,674,896) (367) (22,074) Provision for capital deficiency with investment 8 346,005 (1,099,670) - - Other operating income (expenses) 19 35,771 687,792 217,413 (1,606,479) 170,465 (2,129,133) 204,370 (2,217,285)

Income (loss) before financial income (expense) and taxes 170,465 (2,129,133) 203,878 (2,085,414)

Financial income (expenses) 19 Financial income 8,881 10,895 52,140 55,481 Financial expenses (83,380) (105,437) (158,957) (179,899)

Income (loss) before income taxes 95,966 (2,223,675) 97,061 (2,209,832)

Current income and social contribution taxes - (14,489) (990) (13,856)

Net income (loss) for the year 95,966 (2,238,164) 96,071 (2,223,688)

Attributable to controlling interests 95,966 (2,238,164) 95,966 (2,218,348) Attributable to noncontrolling interests - - 105 (5,340)

Basic and diluted earnings (loss) per share (in R$) 0.59163 (13.79837) - -

See accompanying notes.

MMX Mineração e Metálicos S.A.

Statements of comprehensive income (loss) Years ended December 31, 2015 and 2014 (In thousands of reais)

Company Consolidated Note 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Net income (loss) for the year 95,966 (2,238,164) 96,071 (2,223,688) Loss due to change in ownership interests 18 (900) (1,072) - -

Total comprehensive income (loss) 95,066 (2,239,236) 96,071 (2,223,688)

Total comprehensive income (loss) attributable to: Controlling interests 95,066 (2,239,236) 95,966 (2,218,348) Noncontrolling interests - - 105 (5,340)

See accompanying notes.

MMX Mineração e Metálicos S.A.

Statements of changes in equity Years ended December 31, 2015 and 2014 (In thousands of reais)

Capital reserves Premium Other (-) Share Capital on share Stock comprehensive Accumulated Noncontrolling Total Capital issue cost transactions issue options income (loss) losses Total interests equity

Balances at December 31, 2013 5,404,850 (48,329) (92,919) 1,819 61,447 5 (3,932,096) 1,394,777 3,173 1,397,950 Stock option grants recognized for the year - - - - (2,637) - - (2,637) - (2,637) Reversal of deferred charges written off ------Capital transactions - - (1,072) - - - - (1,072) 1,156 84 Net income (loss) for the year ------(2,238,164) (2,238,164) (5,340) (2,223,688) Balances at December 31, 2014 5,404,850 (48,329) (93,991) 1,819 58,810 5 (6,150,444) (827,280) (1,011) (828,291)

Stock option grants recognized for the year - - - - (1,941) - - (1,941) - (1,941) Capital transactions - - (900) - - - - (900) 900 - Net income for the year ------95,966 95,966 105 96,071 Balances at December 31, 2015 5,404,850 (48,329) (94,891) 1,819 56,869 5 (6,054,478) (734,155) (6) (734,161)

See accompanying notes.

MMX Mineração e Metálicos S.A.

Cash flow statements Years ended December 31, 2015 and 2014 (In thousands of reais)

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Cash flows from operating activities Net income (loss) for the year 95,966 (2,238,164) 96,071 (2,223,688) Non-cash P&L items: Recognized options granted (1,941) (2,637) (1,941) (2,637) Depreciation and amortization 1,079 1,256 1,079 18,888 Equity pickup 189,446 1,674,896 367 22,074 Monetary variation and interest 72,074 102,232 119,743 120,302 Net book value of permanent assets written off 141 6,785 341,152 213,354 Inventory taking adjustment - - 88 18,333 Provision for unrealized tax credits - - (35) 16,209 Provision for inventory loss - - 10,345 36,784 Other provisions (reversals) 6,004 300 (6,067) 31,981 Provision for capital deficiency in investees (346,005) 1,099,670 - - Provision for trade accounts payable - - (233,394) 364,829 Net effect from sale of Porto - (689,399) - (689,399) Impairment of assets - (365,916) 1,739,128 Allowance for doubtful accounts - - (457) 18 Deferred income and social contribution tax effect on sale of Porto - - - (19,816)

Changes in assets and liabilities Accounts receivable - 35,014 438 (16,718) Inventories - - 1,505 13,187 Sundry advances 2,733 - 7,907 - Restricted deposits - 56,664 2,050 133,560 Other receivables (16) (2,154) (2,137) (21,866) Assets available for sale - 6 - (101) Receivables from third parties - (9,366) - - Taxes recoverable (5,415) 9,679 2,639 2,026 Trade accounts payable 658 5,204 15,927 189,011 Taxes and contributions payable 10,021 8,851 18,593 17,542 Liabilities for investment acquisitions - - - (8,898) Payables to third parties 4,969 1,006 11,269 82,147 Subsidiaries and affiliates 10,992 149,030 (323) 114,409 Judicial deposit 35 - (7,809) (54) Prepaid expenses - - - 1,935 Other assets - (210) 102 444 Salaries and compensations (1,402) (4,462) (4,428) (25,407)

Net cash provided by operating activities 39,339 204,201 6,770 127,577

MMX Mineração e Metálicos S.A.

Cash flow statements (Continued) Years ended December 31, 2015 and 2014 (In thousands of reais)

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Cash flow from investing activities Investments - - (15) 46,533 Property, plant and equipment (9) (4,530) (6,305) (73,116) Intangible assets - - - 3,970 Future capital contributions (38,705) (191,694) - - Change in ownership interest - - - 1,165 Net cash used in investing activities (38,714) (196,224) (6,320) (21,448)

Cash flows from financing activities Loans and financing: Borrowings - - - 43,163 Borrowings settled (54) (8,097) (54) (164,279) Net cash used in financing activities (54) (8,097) (54) (121,116)

Foreign exchange gain/loss on cash and cash equivalents - 59 2,814 (21)

Increase (decrease) in cash and cash equivalents 571 (61) 3,210 (15,008)

Statement of increase in cash and cash equivalents At beginning of year 686 747 840 1,240 Net cash from assets held for sale - - 2,640 (14,608) At end of year 1,257 686 1,410 840

Increase (decrease) in cash and cash equivalents 571 (61) 3,210 (15,008)

See accompanying notes.

MMX Mineração e Metálicos S.A.

Statements of value added Years ended December 31, 2015 and 2014 (In thousands of reais)

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Revenues Sales of goods, products and services - - 491 341,921 Other revenues 48,353 698,212 108,208 784,657 Revenue from construction of own assets - - 737,955 - (Reversal of) allowance for doubtful accounts - - 457 (19) 48,353 698,212 847,111 1,126,559 Inputs acquired from third parties (including ICMS and IPI) Cost of sales and services - - (859) (197,177) Materials, energy, third-party services and other expenses (9,677) (4,012) (231,384) (1,045,647) Expenses with construction of own assets - - (372,038) - Loss/recovery of assets - (5,076) - (1,839,070) (9,677) (9,088) (604,281) (3,081,894)

Gross value added 38,676 689,124 242,830 (1,955,335)

Depreciation, amortization and depletion (1,078) (1,257) (1,078) (4,511)

Net value added produced by the Company 37,598 687,867 241,752 (1,959,846)

Value added received in transfer Equity pickup (189,446) (1,674,896) (367) (22,074) Provision for capital deficiency in investees 346,005 (1,099,670) - - Financial income 8,665 10,806 34,815 74,197 165,224 (2,763,760) 34,448 52,123

Total value added to be distributed 202,822 (2,075,893) 276,200 (1,907,723) Distribution of value added Employees Direct compensation 12,919 27,282 19,130 40,537 Benefits 331 1,066 830 3,192 Unemployment Compensation Fund (FGTS) 1,552 2,874 2,504 5,125 14,802 31,222 22,464 48,854 Taxes Federal 8,836 24,141 17,240 60,746 State - - (1,621) 5,382 Municipal - 63 17 92 8,836 24,204 15,636 66,220 Debt remuneration Interest and foreign exchange gain (loss) 83,164 105,347 141,642 198,769 Rent 54 1,498 386 2,122 83,218 106,845 142,028 200,891 Equity remuneration Net income (loss) for the year 95,966 (2,238,164) 95,966 (2,218,348) Noncontrolling interest in retained profits - - 106 (5,340)

95,966 (2,238,164) 96,072 (2,223,688) 202,822 (2,075,893) 276,200 (1,907,723)

See accompanying notes.

MMX Mineração e Metálicos S.A.

Notes to financial statements December 31, 2015 and 2014 (In thousands of reais)

1. Operations

MMX Mineração e Metálicos S.A. (“MMX” or the “Company” or, together with the subsidiaries, “MMX Group”) is a publicly-held corporation headquartered in the city and state of Rio de Janeiro, whose business purpose is to hold interests in other companies, to extract, process, research and develop minerals and to sell iron ore, as well as to hold interests in the logistics and port operations of affiliate Porto Sudeste do Brasil S.A.

As Described in Note 10, in 2014 given the significant downfall in the price of iron ore for the period and the difficulties arising from operating restrictions imposed by the Minas Gerais State environmental agency, Company management reviewed its business plan and the value in use calculation of its assets, having identified the need to record impairment loss of assets held in the Sudeste System and recorded a related impairment provision amounting to R$1,739,128 at December 2014, which was adjusted to R$1,373,212 by December 31, 2015.

Owing to the unfavorable credit scenario, the Company sustained its cash strategies by interrupting the expansion project in Serra Azul, interrupting production, and dedicating efforts in finding business opportunities by seeking new partners.

In-court reorganization process of subsidiary MMX Sudeste Mineração S.A. - (under in-court reorganization)

Over the second and third quarters of 2014, the Company’s financial situation worsened. Thus, on October 16, 2014, MMX Sudeste Mineração (under in-court reorganization) filed an application for in-court reorganization, under the terms of article 51 and the following ones of Law No. 11105/2005 in the Judicial District of Belo Horizonte, Minas Gerais State. On October 22, 2014, the in-court reorganization process was approved, as decided by the 1st Business Court of the Judicial District of Belo Horizonte, Minas Gerais State.

On December 19, 2014, MMX Sudeste Mineração (under in-court reorganization) presented to the 1st Business Court of Belo Horizonte its in-court reorganization plan containing itemization of the means for the reorganization to be employed, demonstration of its economic feasibility, and economic-financial position and valuation reports of its assets and rights. Subsequently, on March 23, 2015, the judge extended for ninety (90) days the terms for approval of the in-court reorganization plan and suspension of actions and executions against MMX Sudeste and, on July 17, 2015, MMX presented the final version of the aforementioned plan to the Business Court.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

1. Operations (Continued)

At the General Creditors’ Meeting held on August 28, 2015, the in-court reorganization plan of MMX Sudeste Mineração (under in-court reorganization) was approved. On September 23, 2015, the aforementioned plan was approved by the 1st Business Court of the District of Belo Horizonte, Minas Gerais State.

The full text of the in-court reorganization plan and the decision approving it are available to the public at www.cvm.gov.br (CVM’s website) and ri.mmx.com.br (Company's website). Approval of the in-court reorganization plan represents another important step in the Company’s restructuring process.

In short, the plan consists of the sale of MMX Sudeste Mineração S.A.’s assets segregated into three (3) groups: (i) UPI Farms, (ii) UPI Terminals and (iii) UPI Mine.

Company management expects that the sale operation of UPI Mine will be completed in the first half of 2016. At the end of UPI Mine disposal process, the Company will be one of the noncontrolling shareholders of the new company (“NewCo”) as established in the approved in- court reorganization plan.

Lease agreement - MMX Corumbá

On July 18, 2014, MMX Corumbá Mineração S.A. (“MMX Corumbá”) and Vetria Mineração S.A. (“Vetria”), company engaged in the processing, transportation, sale and export of iron ore, entered into agreements and executed documents referring to the lease of mineral exploration rights, located in Corumbá, Mato Grosso do Sul state, as well as the assignment of certain contracts to Vetorial Mineração S.A. (“Vetorial”).

The mineral exploration right lease agreement of MMX Corumbá includes (i) the iron ore processing plant with currently production capacity of 2 million tons of iron ore per year; (ii) requirements and mining concession, and requirements and prospecting permits corresponding to an area of more than 100,000,000 square meters; and (iii) stock of iron ore already mined.

According to the contract terms, the lease agreement fixed and annual amount is US$500 (five hundred thousand US dollars) to be paid in monthly installments, corresponding to 1/12 (one twelfth), in reais, of that amount, from the 4th month of its execution date and effective for a 36- month period. This amount may be partially reduced in the event of completion of the purchase by Vetria of all shares issued by MMX Corumbá.

This transaction also comprises the execution of the document for future acquisition by Vetria of all shares issued by MMX Corumbá.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

1. Operations (Continued)

On December 8, 2014, the Board of Directors of MMX Mineração e Metálicos S.A. approved the assignment, by the Company and its subsidiary MMX Corumbá to Vetorial Siderurgia Ltda., of Mineral Exploration Rights Lease Agreement and Other Covenants, entered into with Vetorial Mineração S.A., as well as the Share Purchase and Sale Option and Other Covenants, entered into with Vetria Mineração S.A.

Borrowings from Trafigura

On August 11, 2014, MMX obtained pre-export financing from Trafigura Ventures V B.V in the amount of USD19,817 (R$44,812). In order to guarantee this transaction, MMX, through its subsidiary Gaboard Participações Ltda. and Trafigura increased Porto Sudeste do Brasil S.A.’s capital of USD27,000 (R$45,508), through issue of 250,364,246 new shares - 35% (87,627,486 shares) subscribed by Gaboard in the amount of R$15,927. These subscribed shares were given as collateral to Trafigura for the pre-export financing. After conclusion of this transaction, Gaboard Participações Ltda. now holds 4.25% of Porto Sudeste do Brasil S.A.’s shares, and Porto Participações Ltda. holds 30.75%.

Cancelation of contracts - MMX and ENEVA

On April 13, 2015, MMX Mineração e Metálicos S.A. informed its shareholders and the market in general about the cancelation of the contracts for supply of electricity to MMX Mineração e Metálicos S.A. and its subsidiaries for a 15-year period, which started in January 2014, entered into with ENEVA S.A. (under in-court reorganization) and its subsidiary ENEVA Comercializadora de Energia Ltda.

The early and consensual termination of contracts was due to the absolute lack of prospects for the use of energy contracted on account of the interruption of Serra Azul expansion project, which could attract the application of severe penalties for the Company and, especially due to the accounting technical analysis produced by experts of this market that concluded the likelihood of materially measurable losses to the Company in the long term, in the event such contracts were maintained. By means of this cancellation of contracts, on May 18, 2015 ENEVA Comercializadora paid to MMX the amount of R$40,000 for all 180MW negotiated to be delivered as from 2016 and any other right considered in these contracts.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

1. Operations (Continued)

Termination of the Stock Option or Subscription Program of Common Shares Issued by the Company

At the Special General Meeting held on April 30, 2015, termination of the Stock Option or Subscription Program of Common Shares Issued by the Company was unanimously approved. Such Program had been previously approved by the Company’s shareholders at the Special General Meeting held on April 28, 2006, and amended at the Special General Meetings held on December 28, 2010 and on March 2, 2012, due to the change in the economic outlook that jeopardizes the Company’s financial position, as provided for in item XII of the Stock Option Program.

Arbitration - MRS Logística S.A.

On October 2, 2015, FGV Mediation and Arbitration Chamber approved the settlement agreement related to disputes involving the Company and its subsidiary MMX Sudeste Mineração S.A. (under in-court reorganization) with MRS Logística S.A. (“MRS”).

The settlement agreement, under this arbitral dispute, was executed by and between MMX Sudeste and MRS, and establishes that MMX Sudeste, jointly with the Company, is committed to pay MRS Logística S.A. an initial amount of R$225,000 related to the railway cargo transportation service agreement entered into by and between the parties on December 28, 2011.

Therefore, the execution of this agreement met the favorable assessment of a specialized law firm of national renown, and enabled the reversal of the existing provision amounting to R$631,958 (six hundred thirty-one million, nine hundred fifty-eight thousand reais).

Arbitration - Outotec (Filters) Oy

On January 6, 2016, the relevant arbitration court handed down a decision sentencing MMX Sudeste to pay to Outotec (Filters) Oy (“Outotec”) the amount of €9,872 (nine million, eight hundred and seventy-two thousand euros), which corresponds to R$42,150, before the International Chamber of Commerce - ICC (“Arbitration Procedure”). However, considering that MMX Sudeste had already made contractual prepayments to Outotec amounting to €9,598 (nine million, five hundred and ninety-eight thousand euros), which corresponds to R$40,980, the decision under concern will result in the recognition of the debt balance to OUTOTEC only in the amount of €274 (two hundred seventy-four thousand euros), which correspond to R$1,170. Since this event occurred prior to the in-court reorganization process, Outotec will have to record its credit under that process. Therefore, the Company reversed the existing provision of R$60,566 related to Outotec, keeping in liabilities only the amount equivalent to R$1,170 and wrote off the prepayments mentioned above, amounting to R$40,980, generating a net effect on P&L of R$19,586.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

1. Operations (Continued)

Other matters

In 2015, the holders of variable-income securities based on royalties issued by the Company deliberated and approved, unanimously and without qualifications, the grant of statutory lien on all securities, as detailed in Note 16.

On January 19, 2016, MMX Mineração e Metálicos S.A. informed its shareholders and the market in general that on January 18, 2016, in the context of restructuring of Mubadala Development Company (“Mubadala”) investment in EBX Group, its controlling shareholder Eike Fuhrken Batista entered into binding agreements with Mubadala, whereby the controlling shareholder undertook to sell on stock exchange transactions 34,130,324 common shares issued by MMX Mineração e Metálicos S.A. representing 21.04% of the Company’s capital. Transfer of such shares is subject to the usual conditions precedent.

Other effects arising from worsening of the financial situation

In addition to all the above-mentioned measures for preserving cash taken by management - interruption of Serra Azul expansion project, interruption of production and concentration of efforts in finding business opportunities by seeking new partners - various actions were conducted to reduce the Company’s costs. All activities were restructured with consequent dramatic reduction in the headcount and adaptation of new infrastructure to meet the current scenario, allowing greater flexibility from operating activities, adjusting them to the Company’s current cash capacity.

Continuity of the Company’s business operations

Company management is focused on its uplift as a whole. The austere cash management, without any contribution or access to credit facilities, has been enabling the Company’s survival during this restructuring process that still needs time until the Company recovers its investment capacity. The Company remained a shareholder of Porto Sudeste, even after dilution by means of a necessary capital increase demanded by Porto management.

MMX Sudeste Mineração S.A. (under in-court reorganization) held in its portfolio the mineral assets denominated Bom Sucesso, green field project that can be developed and implemented by the Company through partnerships with new investors, as soon as the market shows any reaction in view of the current price decrease.

The lease process of MMX Corumbá should be completed in the 1st half of 2016, enabling an increase in net revenue by reducing the expenses associated with maintenance of that company.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

1. Operations (Continued)

1.1. Licenses

A prerequisite of the environmental policy of the Company and its subsidiaries is to obtain all the licenses required by law for each of its installations and activities. At December 31, 2015, the Company holds the following licenses through its direct and indirect subsidiaries:

Company No. Type Issue date Effectiveness MMX Corumbá LO 002/91 Operating license 10/05/2012 4 years MMX Corumbá (a) LO 387/06 Operating license 09/28/2006 4 years MMX Corumbá (a) LO 075/07 Operating license 04/26/2007 4 years MMX Corumbá (a) LO 135/07 Operating license 04/26/2007 4 years MMX Corumbá (a) LO 136/07 Operating license 04/26/2007 4 years MMX Corumbá (a) LO 437/08 Operating license 12/09/2008 4 years MMX Corumbá (a) LO 438/08 Operating license 12/09/2008 4 years MMX Corumbá LO 013/10 Operating license 08/31/2012 4 years MMX Corumbá LO 252/12 Operating license 11/13/2012 4 years MMX Sudeste LI 073/12 Facility license 05/07/2012 4 years MMX Sudeste LI/LP 124/12 Preliminary and facility license 07/09/2012 4 years MMX Sudeste (b) LP 215/11 Preliminary license 08/29/2011 4 years MMX Sudeste (b) LO 773/04 Operating license 12/09/2004 8 years MMX Sudeste (b) LO 295/10 Operating license 11/29/2010 4 years MMX Sudeste (b) LO 314/07 Operating license 10/25/2007 4 years MMX Sudeste (b) LO 183/08 Operating license 10/20/2008 4 years MMX Sudeste (b) LO 226/08 Operating license 12/09/2008 4 years MMX Sudeste (b) LO 069/09 Operating license 04/22/2009 4 years MMX Sudeste LO 046/10 Operating license 03/29/2010 6 years MMX Sudeste (b) LO 214/09 Operating license 09/21/2009 6 years MMX Sudeste (b) LO 185/08 Operating license 10/20/2008 4 years MMX Sudeste LP/LI 205/12 Operating license 09/24/2012 4 years

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

1. Operations (Continued)

1.1. Licenses (Continued)

Company No. Type Issue date Effectiveness MMX Sudeste LI/ LP 92/13 Facility license 06/25/2013 4 years MMX Sudeste LP 091/13 Preliminary license 06/25/2013 4 years MMX Sudeste LOC 86/13 Operating license 06/25/2013 6 years MMX Sudeste LPI/LI 157/13 Environmental license 10/29/2013 4 years MMX Corumbá LO 002/91 Operating license 10/05/2012 4 years MMX Corumbá (a) LO 387/06 Operating license 09/28/2006 4 years MMX Corumbá (a) LO 075/07 Operating license 04/26/2007 4 years MMX Corumbá (a) LO 135/07 Operating license 04/26/2007 4 years MMX Corumbá (a) LO 136/07 Operating license 04/26/2007 4 years MMX Corumbá (a) LO 437/08 Operating license 12/09/2008 4 years MMX Corumbá (a) LO 438/08 Operating license 12/09/2008 4 years MMX Corumbá LO 013/10 Operating license 08/31/2012 4 years MMX Corumbá LO 252/12 Operating license 11/13/2012 4 years MMX Sudeste LI 073/12 Facility license 05/07/2012 4 years MMX Sudeste LI/LP 124/12 Preliminary and facility license 07/09/2012 4 years MMX Sudeste (b) LP 215/11 Preliminary license 08/29/2011 4 years MMX Sudeste (b) LO 773/04 Operating license 12/09/2004 8 years MMX Sudeste (b) LO 295/10 Operating license 11/29/2010 4 years MMX Sudeste (b) LO 314/07 Operating license 10/25/2007 4 years MMX Sudeste (b) LO 183/08 Operating license 10/20/2008 4 years MMX Sudeste (b) LO 226/08 Operating license 12/09/2008 4 years MMX Sudeste (b) LO 069/09 Operating license 04/22/2009 4 years MMX Sudeste LO 046/10 Operating license 03/29/2010 6 years MMX Sudeste (b) LO 214/09 Operating license 09/21/2009 6 years MMX Sudeste (b) LO 185/08 Operating license 10/20/2008 4 years MMX Sudeste LP/LI 205/12 Operating license 09/24/2012 4 years MMX Sudeste LI/ LP 92/13 Facility license 06/25/2013 4 years MMX Sudeste LP 091/13 Preliminary license 06/25/2013 4 years MMX Sudeste LOC 86/13 Operating license 06/25/2013 6 years MMX Sudeste LPI/LI 157/13 Environmental license 10/29/2013 4 years

(a) The Company has applied for renewal from the Instituto de Meio Ambiente do Mato Grosso do Sul (“IMASUL”).

(b) The Company has applied for renewal from the Superintendência Regional de Meio Ambiente e Desenvolvimento Sustentável do Sul de Minas (“SUPRAM”).

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

2. Basis for preparation and presentation of financial statements

a) Statement of compliance with international and Brazilian accounting standards

The individual and consolidated financial statements were prepared in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) implemented in Brazil by means of the Brazilian Financial Accounting Standards Board - FASB (“CPC”), and its accounting interpretations (“ICPC”) and guidance (“OCPC”), approved by the Brazilian Securities and Exchange Commission (“CVM”).

On March 30, 2016, Company management authorized the completion and disclosure of these financial statements.

b) Basis of preparation and measurement

Owing to the plan for sale of the Company’s control over mining and port logistic projects, the assets related to these projects are classified as “noncurrent assets held for sale”, under current assets for purposes of the consolidated financial statements, and the investments in the companies in which such assets were recorded were kept in noncurrent assets in the Company’s financial statements. Although the assets are available for sale for more than twelve months, management remains committed to the plan of selling the assets, through sale agreement entered into by means of the in-court reorganization plan, see Note 1 (operations). In addition, for purposes of presentation of the statement of operations, in order to provide a statement that facilitates understanding and considering that all the Company’s mining projects are currently operative, the Company elected for not presenting the result of these projects in a sole line in the statement of operations, but line by line. As disclosed in Note 7 (noncurrent asset held for sale), the P&L for the year ended December 31, 2015 mainly resulted from noncurrent assets held for sale. c) Use of estimates and judgments

Judgments, estimates and assumptions are used for measurement and recognition of certain assets and liabilities in the Company’s financial statements.

The use of such factors is inherent to and indispensable in the preparation of the financial statements. The determination of such estimates took into consideration the experience from past and current events, assumptions related to future events, mainly the sale of the Company’s projects and other objective and subjective factors. Significant items subject to estimates include the valuation and classification of noncurrent assets held for sale that, by operation of applicable standard, were classified in current assets, which does not necessarily mean that such assets will be effectively sold within one year or for the amounts presented in the financial statements.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

2. Basis of preparation and presentation of financial statements (Continued)

Besides the extremely relevant estimate referred to above, other relevant estimates are the selection of the useful life of property, plant and equipment, the measurement of the assets recoverable amount, the evaluation of recovery of deferred tax credits and financial instruments.

Settlement of transactions involving these estimates may result in amounts materially different from those recorded in the financial statements due to inaccuracies inherent to their determination process. The Company reviews its estimates and assumptions at least annually.

c) Use of estimates and judgments (Continued)

The determination of such estimates took into consideration the experience from past and current events, assumptions related to future events, mainly the sale of the Company’s projects and other objective and subjective factors. Significant items subject to estimates include the valuation and classification of noncurrent assets held for sale that, by operation of applicable standard, were classified in current assets, which does not necessarily mean that such assets will be effectively sold within one year or for the amounts presented in the financial statements.

Besides the extremely significant estimate referred to above, other significant estimates are the selection of the useful life of property, plant and equipment, the measurement of the assets recoverable amount, the evaluation of recovery of deferred tax credits and financial instruments.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

2. Basis of preparation and presentation of financial statements (Continued)

d) Impairment of assets

Management periodically reviews the net book value of assets in order to evaluate events or changes in economic, operating or technological circumstances that may indicate deterioration or impairment. When such evidence is found, and net book value exceeds recoverable amount, a provision for impairment is recorded so as to adjust the net book value to the recoverable amount. The recoverable amount of an asset or a cash-generating unit (CGU) is defined as the higher of value in use and fair value less costs to sell. In order to estimate the asset’s value in use, estimated future cash flows are discounted to present value by using a discount rate before taxes that reflects the weighted average cost of capital for the industry in which the cash-generating unit operates. Whenever possible, the net sales value is determined considering outright sale agreements in arm’s length transactions between knowledgeable and willing parties less costs of disposal; if no outright sale agreements can be identified, this will be based on the market price of an active market or the price of the most recent transaction involving similar assets.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

2. Basis of preparation and presentation of financial statements (Continued)

e) Consolidation

The consolidated financial statements include financial information from the following investees (except for affiliates that are not consolidated):

Interest - % Headquarter Capital Voting capital s Business 12/31/2015 12/31/2014 12/31/2015 12/31/2014 location purpose Direct subsidiaries MMX Corumbá Mineração S.A. (“MMX Corumbá”) (i) 94.81% 94.69% 94.81% 94.69% Brazil Iron ore MMX Sudeste Mineração S.A.- Em recuperação judicial (“MMX Sudeste”) 99.99% 99.99% 99.99% 99.99% Brazil Iron ore MMX Corumbá Indústria e Comercio de Minérios Ltda. (“MMX Metálicos”) 100.00% 99.99% 100.00% 99.99% Brazil Iron ore MMX Áustria GMBH (“MMX Áustria”) 100.00% 100.00% 100.00% 100.00% Austria Exportação Porto Sudeste Participações S.A. 99.99% 99.99% 99.99% 99.99% Brazil Operação portuária Indirect subsidiaries MMX Trade & Shipping LLC (“MMX Trade”)(iii) - 94.69% - 94.69% United States Export Terminal Ferroviário Funil S.A. Rail Terminal 99.90% 99.90% 99.90% 99.90% Brazil operation MMX Comercializadora de Energia Ltda. 99.90% 99.90% 99.90% 99.90% Brazil Sale of energy

Indirect affiliates Terminal de Cargas Sarzedo Ltda.(“Terminal Sarzedo”) 22.22% 22.22% 22.22% 22.22% Brazil Logistics Terminal de Cargas Paraopeba Ltda. (“TCP”) 22.22% 22.22% 22.22% 22.22% Brazil Logistics Porto Sudeste do Brasil S.A (“Porto Sudeste”) (ii) 4.76% 30.75% 4.76% 30.75% Brazil Port operation

(i) This refers to the capital increase by MMX Mineração e Metálicos S.A. not performed by noncontrolling shareholders. (ii) Dilution of interest due to the capital increase performed by the shareholder in Porto Sudeste do Brasil S.A. not made by the Company. (iii) This refers to the write-off of interest held in the former subsidiary due to the winding up of its activities.

Direct subsidiaries are fully consolidated as from their acquisition or organization date, when the Company has obtained their control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as that of the Company, using consistent accounting practices. Porto Sudeste Participações S.A., Terminal Sarzedo and Terminal de Cargas Paraopeba are affiliates of MMX Sudeste and consequently indirect affiliates of the Company. The financial statements of these affiliates are stated by the equity method and therefore, are not included in the Company’s consolidation.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

2. Basis of preparation and presentation of financial statements (Continued)

e) Consolidation (Continued)

Description of main consolidation procedures

(a) Elimination of the balances of intercompany assets and liabilities;

(b) Elimination of balances of investment accounts and corresponding shares in capital and retained earnings (accumulated losses) of subsidiaries;

(c) Noncontrolling interests, which represents the percentage of P&L for the year and equity which is not held by the Group, is presented separately from the consolidated statement of operations and under the group of equity in the consolidated balance sheet, separately in equity attributable to controlling interests;

(d) Elimination of balances of revenues and expenses as well as unrealized profits produced by intercompany transactions. Unrealized losses are eliminated in the same way, but only when there is no evidence of impairment of the related assets;

(e) Balances of intercompany transactions are eliminated and interests of other shareholders are separately disclosed in the balance sheet; and

(f) Changes in the percentage interest in subsidiaries that do not result in loss and/or gain of control are recorded in equity.

Reconciliation of equity and loss - Company and consolidated

Equity Loss for the year 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Company (734,155) (827,280) 95,966 (2,238,164) Deferred charges write-off (*) - - - 19,816 Noncontrolling interests (6) (1,011) 105 (5,340) Consolidated (734,161) (828,291) 96,071 (2,223,688)

(*) Write-off of deferred charges of Porto Sudeste MMX Porto S.A, in the amount of R$19,816, for consolidation purposes, after adoption of Law No. 11638/07.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates

The accounting practices adopted in the preparation of these individual and consolidated financial statements are consistent with those used in the preparation of the financial statements as of December 31, 2014.

The significant accounting practices adopted by the Company, its subsidiaries and affiliate are as follows:

3.1. Discontinued operations and assets held for sale

Assets classified as held for sale are measured based on the lower of book value or fair value, less costs to sell, and this classification only occurs when it is highly likely that the sale will take place and the asset or disposal group is available for immediate sale in its current condition. Management should commit itself to carrying out the sale within one year from the classification date.

Assets and liabilities classified as held for sale are presented separately as current items in the balance sheet.

3.2. Financial instruments

a) Financial assets

Upon initial recognition, financial assets are classified as financial assets measured at fair value through profit or loss, loans and receivables, investments held to maturity, financial assets available for sale or derivatives classified as effective hedging instruments, as applicable. All financial assets are recognized at fair value plus, in the case of financial assets not at fair value through profit or loss, costs directly attributable to their acquisition.

The subsequent measurement of financial assets depends on their classification, which can be as follows:

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading when acquired with the objective of sale in the short term. This category includes derivative financial instruments entered into by the Company that do not meet the hedge accounting criteria. Derivatives are also classified as held for sale, unless they are classified as effective hedging instruments.

Financial assets at fair value through profit or loss are stated in the balance sheet at fair value and the related gains or losses are recognized in the statement of operations.

3.2. Financial instruments (Continued)

a) Financial assets (Continued)

Loans and receivables

Loans and receivables are non-derivative financial assets, with fixed or determinable payments, not quoted in an active market. After initial measurement, these financial assets are stated at amortized cost, using the effective interest rate method, less impairment loss. Amortized cost is calculated taking into consideration any discount or “premium” upon acquisition and charges or costs incurred. Amortization through effective interest method is included in financial income line in the statement of operations.

Financial assets available for sale

Financial assets available for sale are non-derivative financial assets not classified as (a) loans and receivables; (b) investments held to maturity; or (c) financial assets measured at FVTPL. These financial assets may include equity and debt instruments.

After initial measurement, financial assets available for sale are measured at fair value, with unrealized gains and losses being recognized directly in other comprehensive income (loss) until such time as the investment is written off, except for impairment losses, interest calculated using the effective interest rate method and exchange gains or losses on monetary assets which are recognized directly in P&L for the year.

When the investment is written off or when an impairment loss is determined, the cumulative gains or losses which were previously recognized in other comprehensive

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

income (loss) should be recognized in the statement of operations.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.2. Financial instruments (Continued)

a) Financial assets (Continued)

Impairment of financial assets at amortized cost

The Company initially tests whether there is clear evidence of impairment for each financial asset individually. When there is clear evidence of the impairment loss, the loss amount is measured as the difference between the book value of the asset and the present value of estimated future cash flows (less estimated future credit losses not yet incurred). The present value of estimated future cash flows is discounted at the original effective interest rate for the financial asset. When applicable, the asset book value is reduced by a provision and the loss amount is recognized in the statement of operations. If, in any given subsequent year, the estimated impairment loss increases or decreases due to an event which occurred after the recognition of impairment loss, impairment loss previously recognized is increased or decreased by means of an adjustment to the provision.

Derecognition (write-off) of financial assets

A financial asset is written off when the rights to receive cash flows from the asset expire and/or when the Company transfers its rights to receive cash flows of the asset or assumes an obligation to fully pay cash flows received, without significant delay, to a third party under a “pass-through” arrangement, and has transferred substantially all the risks and rewards related to the asset.

When the Company’s continuing involvement takes the form of guaranteeing the transferred asset, it is measured at the lower of the original book value of the asset or the maximum amount of the consideration that the Company could be required to repay.

b) Financial liabilities

Financial liabilities are classified as financial liabilities measured at fair value through profit or loss, loans and financing or derivatives classified as hedging instruments, as the case may be. The Company determines classification of its financial liabilities upon their initial recognition.

Financial liabilities are initially recognized at fair value plus, in the case of loans and financing, transaction cost directly attributable thereto.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.2. Financial instruments (Continued)

b) Financial liabilities (Continued)

Measurement of financial liabilities depends on their classification, which can be as follows:

Financial liabilities at fair value through profit or loss

This category includes derivative financial instruments entered into by the Company that do not meet the hedge accounting criteria. Gains and losses on liabilities held for trading are recognized in the statement of operations.

Loans and financing and debentures

After initial recognition, interest-bearing loans, financing and debentures are subsequently measured at amortized cost using the effective interest rate method. Gains or losses are recognized in the statement of operations.

Derecognition (write-off) of financial liabilities

A financial liability is written off when the obligation thereunder is discharged, cancelled or expires. When an existing financial liability is replaced by another of the same amount with substantially different terms, or the terms of an existing liability are significantly changed, this replacement or change is treated as write-off of the original liability with recognition of a new liability, being the difference in the respective book value recognized in the statement of operations.

c) Financial instruments - net presentation

Financial assets and liabilities are presented net in the balance sheet, if, and only if, there is a current and enforceable legal right to offset the amounts recognized and if there is an intention to offset or realize the asset and settle the liability simultaneously.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.2. Financial instruments (Continued)

d) Fair value of financial instruments

The fair value of financial instruments that are actively traded on organized financial markets is determined based on the purchase prices quoted on the market at the close of trading on the balance sheet date, without any deduction for transaction costs.

The fair value of financial instruments for which there is no active market is determined by means of valuation techniques. These techniques may include the use of recent market transactions (on an arm’s length basis); reference to the current fair value of another similar instrument; discounted cash flow analysis or other valuation models.

3.3. Cash and cash equivalents and marketable securities

Cash equivalents are held by the Company for the purpose of meeting short-term cash commitments rather than for investment or any other purposes. The Company considers cash equivalents a short-term investment readily convertible into a known cash amount and subject to insignificant risk of change in value. Accordingly, an investment normally qualifies as cash equivalent when it is redeemable in the short term, for example, within three months or less from the investment date.

3.4. Foreign currency

The individual and consolidated financial statements are presented in Brazilian reais (R$), which is the Company’s and its subsidiaries’ functional currency.

Transactions in foreign currencies are initially recorded at the functional foreign exchange rate effective at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency by the exchange rate in effect at balance sheet date.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.5. Inventories

Inventories are measured at the lower cost of acquisition or net realizable value, reduced by a provision for loss of market value, when applicable. Inventori es are r equired to be stated at the l ower of cost and net realisable val ue The cost of these items includes expenses incurred on acquisition, transportation and storage of related assets. In the case of finished inventories, the cost includes overall manufacturing expenses based on normal operating capacity.

3.6. Investments

The Company’s investments in its subsidiaries and affiliate are accounted for using the equity method in its individual financial statements. The investment in the affiliates is shown at its equity pickup value in the consolidated financial statements.

Based on the equity method, investments in subsidiaries and affiliates are recorded in the Company’s balance sheets at cost, plus changes after acquisition of equity interest in the referred to subsidiaries or affiliate. Goodwill, if any, is included in the investment’s book value, and is not amortized. Goodwill is reclassified in the consolidated financial statements as an intangible asset.

The statement of operations reflects the portion of the operating results of the subsidiaries and affiliate, and changes directly recognized in equity are reflected, when applicable, in the Company’s statement of changes in equity.

The Company decides whether it is necessary to recognize any additional impairment losses in investment in its investees. If applicable, the Company calculates the amount of impairment loss as the difference between the investment’s recoverable amount and the book value and recognizes this sum in the statement of operations.

When there is a significant loss of control or influence over the subsidiaries and affiliate, the Company assesses the loss and recognizes the investment at fair value at this time.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.7. Property, plant and equipment

Property, plant and equipment are recorded at acquisition, buildup or construction cost, including interest and other financial charges incurred over project construction or development, less accumulated depreciation and/or impairment losses, if any.

An item of property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. Any gains or losses resulting from the asset’s write-off are included in the statement of operations of the year in which the asset is written off.

Expenses incurred referring to maintenance and repairs are capitalized only if the economic benefits associated to these items are likely and the amounts can be reliably measured, while the other expenses are recorded directly in P&L when incurred.

Depreciation

The net book value, the estimated useful life and the depreciation method of these assets are revised annually at year-end, and adjusted on a prospective basis when necessary.

Depreciation is calculated over the depreciable value, which is the cost of an asset, or another substitute for the cost, deducted from the net book value.

Depreciation of property, plant and equipment items is calculated by the straight-line method taking into account the economic useful life of these items, as shown below:

Machinery and equipment 10 years Buildings and improvements 25 years Facilities 20 years Other components 5 years

For the year ended December 31, 2015, there were no significant changes in the useful lives of the assets.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.8. Intangible assets

Mineral exploration rights

Valued at the acquisition cost of the Mineral exploration rights and subject to impairment tests. The amortization is calculated using the estimated useful life of the mines based on the ratio between the effective production and the total sum of the proven and probable reserves.

Cost of asset retirement and reforestation

These are the costs that MMX Group will have to bear in order to restore the areas when the exploration rights expire. The expenses in connection with asset retirement are amortized according to the long-term asset’s useful life based on the units produced method.

3.9. Impairment

Financial assets (including receivables)

An asset is impaired if there is objective evidence that a loss event occurred after the asset’s initial recognition, and that this loss event had a negative impact on the projected future cash flows that can be reliably estimated.

Receivables are valued individually or collectively for impairment. When assessing impairment loss in a collective way, the Company uses historical trends of the probability of default, of the period of recovery and of the loss amounts incurred.

Impairment with regard to a financial asset measured at amortized cost is calculated as the difference between the book value and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in the statement of operations and are reflected in a provision against receivables. When a subsequent event indicates reversal of impairment loss, the reduction in impairment loss is reversed and matched against P&L.

Impairment losses of financial assets available for sale are recognized by the reclassification of the cumulative loss that was recognized in other comprehensive income (loss) in equity to the statement of operations. The cumulative loss that is reclassified from other comprehensive income (loss) to the statement of operations is the difference between the acquisition cost, net of any reimbursement and amortization of principal, and the current fair value, decreased by any impairment loss previously recognized in statement of operations.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.9. Impairment (Continued)

Non-financial assets

The book values of the Company’s non-financial assets are reviewed every reporting date in order to determine whether there is any indication of impairment loss. If such indication exists, the asset recoverable amount is determined. In the case of goodwill and intangible assets with indefinite useful life or intangible assets under development that are not yet available for use, the recoverable amount is estimated every year at the same time.

The recoverable amount of an asset or a cash-generating unit is defined as the higher of value in use and fair value less costs to sell. In evaluating value in use, the estimated future cash flows are discounted to present value through the discount rate before taxes that reflects the conditions prevailing in the market in relation to the capital recoverability period and specific risks of the asset.

Impairment loss is recognized in P&L for the year if the book value of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses related to CGUs are initially allocated to reduce the book value of any goodwill allocated to the CGUs and then, if there is any remaining loss, to reduce the book value of the other assets.

Impairment loss related to goodwill is not reversed. In relation to other assets, impairment losses recognized in prior years are evaluated every reporting date in relation to any indication that the loss has increased, decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, with the reversal being limited to the book value, net of depreciation or amortization, if the loss of value had not been recognized.

3.10. Other current and noncurrent assets and liabilities

Assets are recognized in the balance sheet when it is likely that their future economic benefits will flow to the Company, and their cost or value can be reliably measured.

Liabilities are recognized in the balance sheet when the Company has a legal or constructive obligation arising from past events, the settlement of which may require the use of economic benefits. The provisions are recorded based on the best estimate of the risk involved.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.10. Other current and noncurrent assets and liabilities (Continued)

Noncurrent monetary assets and liabilities are adjusted to present value and so are current monetary assets and liabilities whenever the effects are considered significant on the overall financial statements. The present value adjustment is calculated using contractual cash flows and the explicit, and sometimes implicit, interest rates of the respective assets and liabilities.

3.11. Loans and financing

Loans and financing are recognized, initially at their fair value, net of the costs incurred in the transaction and are, subsequently, stated at their amortized cost, using the effective interest rate method. The rates paid for the establishment of loans and financing are recognized as transaction costs of the said items.

3.12. Lease agreements

Commercial lease for which the Company does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating lease agreements. Initial direct costs incurred in negotiating operating lease agreements are added to the book value of the leased asset and recognized over the lease term at a base similar to lease income. Contingent lease is recognized as income to the extent it is received.

3.13. Liabilities for asset retirement and reforestation

This provision is aimed at the formation of long-term values, for financial use in the future, at the time of the asset’s decommissioning, and basically refers to mine closure, with the ending of the mining activities and the retirement of the assets connected with the mine. Calculation of this provision starts with the assessment of the asset’s condition at the time of provision. The next step consists of the computation of amounts to be discounted to present value using the pre-tax interest rate which reflects the assessment of the market conditions that are in force and of the specific risks associated with the asset that is to be retired. Finally, the present value amount is recorded in books. The calculations of this provision are reviewed at the end of each year, if a new asset exists, or if the situation at that moment indicates a need to review the provision. The provision is initially set up through the recording of a long-term liability matched against the corresponding asset item. The long- term liability is monetarily restated and matched against P&L for the year, under financial expenses. The asset is depreciated on a straight-line basis based on the useful life of the main good, and is matched against P&L for the year.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.14. Taxation

Taxes on sales and services

Revenue from sales and services is subject to the following taxes and contributions at the following statutory rates:

 Contribution Tax on Gross Revenue for Social Integration Program (PIS) - 0.65% to 1.65%;  Contribution Tax on Gross Revenue for Social Security Financing (COFINS) 3.0% and 7.65%;  State VAT (ICMS) - from 7% to 19% (the great majority of iron ore sales on the domestic market are supported by the deferral of ICMS in the States of Minas Gerais and Mato Grosso Sul.

These charges are presented as sales deductions in the statement of operations.

Income and social contribution taxes

Current tax assets and liabilities for the last and prior years are measured at the estimated amount recoverable from or payable to tax authorities. Tax rates and laws used to calculate the amounts are those in force, or substantially in force, at the balance sheet date in the countries in which the Group operates and produces taxable income.

Current income and social contribution taxes related to items posted directly to equity are recognized in equity. From time to time management reviews the tax position in situations in which interpretation of tax regulation is required, and sets up provisions as appropriate. Deferred taxes arise from temporary differences at the balance sheet date between the tax bases of assets and liabilities and their book value.

Deferred tax assets are recognized for all deductible temporary differences and unused tax credits and losses, to the extent that taxable profit will likely be available so that the deductible temporary differences can be realized, and unused tax credits and losses can be used. Deferred tax liabilities are recognized on all temporary tax differences.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.14. Taxation (Continued)

Income and social contribution taxes (Continued)

The book value of deferred tax assets is revised at each balance sheet date, and the balance is maintained to the extent that its recovery is likely, based on future taxable profits.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled.

Deferred tax assets and liabilities are shown net when related to the same entity taxed and when subject to the same tax authority.

3.15. Provisions (including provision for litigation and contingencies)

Provisions are recognized when the Company has a legal or constructive obligation due to a past event, it is probable that economic resources will be required to settle it and a reliable estimate of the obligation amount may be made. When the Company expects that the amount of a provision will be reimbursed, whether in full or in part, the reimbursement is recognized as a separate asset, but only when it is virtually certain.

The Company recognizes provision for civil, labor, tax and environmental proceedings when the likelihood of loss is assessed as probable. Assessment of the likelihood of loss includes analysis of available evidence, the hierarchy of laws, available case law, the most recent court decisions and their relevance in the legal system, as well as the opinion of external legal advisors. Provisions are reviewed and adjusted considering changes in existing circumstances, such as the applicable statutes of limitation, tax audit conclusions, or additional exposures identified based on new matters or court decisions.

Settlement of transactions involving these estimates may result in amounts materially different from those recorded in the financial statements due to inaccuracies inherent to their determination process. The Company’s management annually reviews the estimates and assumptions.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.16. Revenue recognition

Revenue from sale of iron ore

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and can be reliably measured. Revenue is measured based on fair value of the consideration received, net of discounts, rebates and taxes or charges on sales.

The Company measures revenue transactions in accordance with specific criteria to determine whether it is operating as an agent or a principal and eventually concluded that it has been operating as a principal in all its revenue agreements. The following specific criteria must also be met before revenue recognition:

Revenue from sale of iron ore is recognized when the material risks and rewards of ownership are transferred, which in relation to sales in the domestic market occurs at the moment of loading the iron ore for the customers, taking into account a percentage of loss in the process, and for sales on the international market at the moment of the shipments for transportation.

Interest income

For all financial instruments valued at amortized cost and financial assets that earn interest, classified as available for sale, financial income or expense is recorded using the effective interest rate, which exactly discounts the estimated future payments or receipts of cash over the financial instrument’s estimated useful life or over a shorter period of time, when applicable, at the financial asset or liability’s net book value. Interest income is recognized under financial income (expenses) in the statement of operations.

3.17. Earnings (loss) per share

Earnings or loss per share are calculated by dividing the net income or loss for the year attributed to common shareholders by the average number of common shares for the year, plus the weighted average number of common shares that would be issued upon conversion of all potentially dilutive common shares into common shares.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.18. Significant accounting judgments, estimates and assumptions

The preparation of the Company’s financial statements requires that management make judgments and estimates and adopt assumptions that affect the amounts disclosed referring to revenues, expenses, assets and liabilities, as well as the disclosures of contingent liabilities, as at the financial statement reporting date. However, uncertainty associated with those estimates and assumptions could lead to results that would require significant adjustment to the book value of assets or liabilities affected in future periods. Significant items subject to judgments, estimates and assumptions are the fair value of financial instruments, the recognition and analysis of recoverability of tax credits, the useful life of property, plant and equipment and intangible assets, noncurrent assets held for sale, impairment losses and provision for litigation and contingencies.

3.19. Segment reporting

Operational segments are reported in a way that is consistent with the organizational structure and with internal reports supplied to the Chief Operating Decision-Maker (CODM), identified as the Company’s CEO), who is in charge of allocating funds and evaluating the Company’s performance. For management purposes, the Company is divided into business units, based on the services, on the operating segments (i) Sudeste System, (ii) Corumbá System and (iii) Corporate.

3.20. Statements of cash flows and value added

Statements of value added were prepared and are presented in accordance with Accounting Pronouncement CPC 09 - Statement of Value Added. The presentation of statements of value added is required under Brazilian Corporation Law for publicly-held companies and as supplementary information for IFRS purposes.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

3. Summary of significant accounting practices and estimates (Continued)

3.21. New accounting pronouncements and interpretations

The Company analyzed new accounting pronouncements and interpretations applicable, as follows:

IFRS 9 - Financial Instruments This standard introduces new requirements on classification and (effective from 01/01/2018) measurement, impairment loss and hedging accounting. The retrospective application will be required, but comparative information is not mandatory. IFRS 15 - Revenue from The main purpose is to provide clear principles for revenue Contracts with Customers recognition and streamline the process of preparation of the (effective from 01/01/2017) financial statements. IAS 34 - Preparation and This amendment clarifies that the required interim disclosures Disclosure of Interim Financial should be made in the interim financial statements or Reporting (effective from incorporated by cross-reference between the interim financial 01/01/2016) statements and wherever they are included in the interim financial report (for example, in the management’s comments or risk reports). Other information in the interim financial reporting should be available to users under the same terms of the interim financial statements and at the same time. IFRS 8 – Operating Segments Amendments to IFRS 8 are retrospectively applicable and clarify that an entity should disclose the judgments made by management in applying the aggregation criteria described in paragraph 12 of IFRS 8, including a brief description of operating The Company segments that were aggregated and economic characteristics does not used to assess whether the segments are “similar”. The anticipate any reconciliation of segment assets to total assets should be material impact disclosed if reconciliation is reported to the operating decision- therefrom on its maker at the board level, similar to the disclosure required for financial segment liabilities. statements. Amendment to IFRS 10, IFRS Amendments to IFRS 10 clarify that the exemption from 12 and IAS 28 - Investment presenting the consolidated financial statements is applicable to Entities - Applying the the parent company that is a subsidiary of an investment entity, Consolidation Exception when such investment entity measures all its subsidiaries at fair (effective from 01/01/2016) value. In addition, amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity and that renders support services to the investment entity shall be consolidated. Amendments to IAS 28 allow that the investor, upon applying the equity method, retains the measurement at fair value applied by the investment entity, affiliate or joint venture to its interests held in subsidiaries. IFRS 5 - Reclassification of This clarifies the circumstances in which an entity reclassifies noncurrent assets held for sale assets held for sale into assets held for distribution to and for distribution to members/shareholders (and vice-versa), and those cases in members/shareholders which the assets held for distribution to members/shareholders (effective from 01/01/2016) do not meet the criteria to be kept under this classification.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

4. Cash and cash equivalents

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Cash and banks 1,257 686 13,468 23,823 Short-term Investments - - 13,565 - 1,257 686 27,033 23,823

Transfer to noncurrent assets held for sale - - (25,623) (22,983) 1,257 686 1,410 840

The Company’s highly liquid short-term investments are remunerated at 100.75% of the Interbank Deposit Certificate (CDI).

5. Inventories

Consolidated 12/31/2015 12/31/2014 Iron ore 63,599 64,863 Storeroom 16,804 17,121 Provision for losses and obsolescence (49,836) (39,491) 30,567 42,493 Transfer to assets held for sale (Note 7) (30,535) (41,944) 32 549

Changes in provision for inventory losses and obsolescence are as follows:

Consolidated MMX MMX Corumbá Sudeste Total Opening balance at 12/31/2014 (34,168) (5,323) (39,491) Provision for realization (2,582) (7,763) (10,345) Closing balance at 12/31/2015 (36,750) (13,086) (49,836)

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

6. Taxes recoverable

Taxes recoverable or offsettable are stated net of any losses on realization, as follows:

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014

State VAT (ICMS) - - 16,977 32,329 Income and social contribution taxes 28,950 28,088 52,517 49,749 Withholding Income Tax (IRRF) 1,398 4,699 5,101 9,531 PIS and COFINS 72 72 69,401 74,244 Other - - 150 360 30,420 32,859 144,146 166,213 Provision for losses on realization - - (57,442) (63,304) Transfer to noncurrent assets held for sale (Note 7) - - (52,383) (66,957) 30,420 32,859 34,321 35,952

Current 4,557 4,619 5,218 4,929 Noncurrent 25,863 28,240 29,103 31,023

Realization of short-term tax credits is mainly through offset of payroll withholding taxes, services taxes and Tax on Financial Transactions (IOF). The noncurrent assets are mainly composed of income and social contribution tax credits and withholding income tax. The Company is committed to working on the realization of long-term credits.

7. Noncurrent assets held for sale

In 2013, the Company decided to sell its port logistics and mining projects. On February 26, 2014, the transaction involving the investment by Trafigura and Mubadala in Porto Sudeste do Brasil S.A. (former MMX Porto Sudeste Ltda.) was completed. In addition, at June 30, 2014, the Company decided to divest its noncontrolling interests in Porto Sudeste S.A.

There is no irrevocable and irreversible contract ensuring that the sale of mining projects and divestiture of noncontrolling interests in Porto Sudeste S.A. will be made on these dates and for the amounts disclosed in the financial statements. These assets are maintained at cost less impairment loss already recognized. At September 30, 2013, the referred to projects and their related costs were classified in current assets under “Noncurrent assets held for sale”. Similarly, the liabilities related to the referred to projects held for sale were classified in current liabilities under “Liabilities related to noncurrent assets held for sale”.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

7. Noncurrent assets held for sale (Continued)

The main accounts and amounts held for sale are as follows (Consolidated):

Changes for the year By system Investments Balance at Balance at Sudeste Corumbá held for sale 12/31/2014 Changes 12/31/2015 System System (Note 8) Eliminations Total Assets Current assets 114,030 (30,121) 83,909 55,354 28,555 - - 83,909 Cash and cash equivalents 22,983 2,640 25,623 13,541 12,082 - - 25,623 Taxes recoverable 61,023 (14,510) 46,513 35,365 11,148 - - 46,513 Inventories 14,223 (9,981) 4,242 - 4,242 - - 4,242 Other 15,801 (8,270) 7,531 6,448 1,083 - - 7,531 Noncurrent assets 60,924 6,287 67,211 148,423 17,331 - (98,543) 67,211 Taxes recoverable 5,934 (64) 5,870 5,471 399 - - 5,870 Inventories 27,721 (1,428) 26,293 26,293 - - - 26,293 Transactions with related parties 134 (104) 30 81,662 16,911 - (98,543) 30 Other 27,135 7,883 35,018 34,997 21 - - 35,018 Investments 160,433 (3,381) 157,052 - - 157,052 - 157,052 Property, plant and equipment - 3,905 3,905 - 3,905 - - 3,905 Noncurrent assets held for sale 335,387 (23,310) 312,077 203,777 49,791 157,052 (98,543) 312,077

Changes for the year By system Balance at Balance at Sudeste Corumbá Investments

12/31/2014 Changes 12/31/2015 System System held for sale Eliminations Total Liabilities and equity

Current liabilities 954,161 (244,344) 709,817 851,198 4,890 - (146,272) 709,817 Trade accounts payable (a) 774,824 (460,628) 314,196 312,352 1,843 - - 314,196 Loans 457 - 457 457 - - - 457 Taxes and contributions payable 3,890 365 4,255 1,999 2,256 - - 4,255 Transactions with related parties - - - 145,476 796 - (146,272) - Other (b) 174,990 215,919 390,909 390,914 (5) - - 390,909 Noncurrent liabilities 128,540 (25,440) 103,100 61,244 41,856 - - 103,100 Taxes and contributions payable 15,157 313 15,470 - 15,470 - - 15,470 Liabilities for asset retirement and 62,483 5,805 68,288 42,793 25,495 - - 68,288 reforestation Provision for contingencies 34,817 (15,474) 19,344 18,451 893 - - 19,344 Other 16,083 (16,083) ------Liabilities related to noncurrent net assets held for sale 1,082,701 (269,784) 812,917 912,442 46,747 - (146,272) 812,917

Noncurrent net assets held for sale (747,314) 246,474 (500,840) (708,665) 3,044 157,052 47,729 (500,840)

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

7. Assets held for sale (Continued)

(a) The Company adjusted its liabilities based on agreements entered into and the list of approved creditors, as follows:

Provision (i) Write-off (ii) Total MRS Logística S.A. (277,814) (277,814) FL Smidth Ltda. (64,142) (64,142) Multi-Rio Operações Portuárias S.A. (22,130) (22,130) Weir Minerals Netherlands B.V. (44,807) (44,807) Eriez Minerals Group Flotação Brasil Ltda. (18,563) (18,563) Citic Heavy Industries Co. Ltd. (43,095) (43,095) Metso Brasil Indústria (39,992) (39,992) ARG Ltda. (9,432) (9,432) Fidens Engenharia S.A. (34,868) (34,868) Outotec (Filters) OY (60,566) (60,566) ABB SWITZERLAND LTD (7,014) (7,014) Semil (1,372) (1,372) Sepetiba Tecon (11,425) (11,425) Cefar 1,852 1,852 CNEC Worley Parsons Engenharia S.A. 86,579 86,579 Mineradora Rio Bravo Ltda. 40,969 40,969 Glencore International A.G. 16,989 16,989 Infrater Engenharia Ltda. 14,315 14,315 Banco Bradesco BBI S.A. 4,270 4,270 Construções e Emp. e Rep. Nacional de Eng. Ltda. 3,672 3,672 Simol Silva Imóveis Ltda. 2,111 2,111 Other 3,835 3,835 174,593 (635,221) (460,628)

(i) This refers to the addition to the balance recorded after approval of the list of creditors. (ii) This refers to the decrease in the balance recorded after approval of the list of creditors.

(b) Changes for the year substantially refer to the recognition of R$225,000 related to the agreement with MRS Logística S.A., as detailed in Note 1.

The P&L for the year related to assets and liabilities held for sale is as follows:

Company

12/31/2015 12/31/2014

Equity pickup (Note 8) (189 ,446) (1,649,876) Reversal of (provision for) capital deficiency (i) 352,432 (1,097,598) Income (loss) for the 12-month period of investments held for sale 162,986 (2,747,474)

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

7. Assets held for sale (Continued)

Consolidated

12/31/2015 12/31/2014

Operating income (expenses), net (492) 131,871 Selling expenses (ii) 53,112 (411,020) General and administrative expenses (Note 19) (43,240) (128,256) Other operating income/expenses (iii) 181,344 (2,319,251) Financial income (Note 19) 19,205 11,613 Financial expenses (Note 19) (16,928) (70,819) Foreign exchange gain (loss) (28,871) 32,233 Taxes (990) 649 Income (loss) for the year on investments held for sale 163,140 (2,752,980)

(i) The provision for capital deficiency of investee refers to the reversal of interest held in subsidiary MMX Sudeste Mineração S.A. - (under in-court reorganization), in the amount of R$335,846, and reversal in MMX Corumbá Mineração e Metálicos in the amount of R$16,586.

(ii) Selling expenses were impacted by the reversal in the amount of R$277,814 relating to provisions recorded in prior years, and the recording of R$225,000 referring to the agreement entered into with MRS Logística S.A. as detailed in Note 1.

(iii) This mainly refers to reversals of provisions recorded in 2015, due to contracts entered into with suppliers relating to Serra Azul project.

The Company considers that other provisions for trade accounts payable recorded are sufficient and appropriate. It is worth noting that the Company did not measure all the effects arising from approval of the in-court reorganization process, since possible write-offs of provisions remaining from the approved list of creditors cannot yet be reliably measured, since the debt amount within the in-court reorganization process is still subject to litigation. In addition to that, the effects of the adjustment related to the remaining creditors will only be known upon effective realization of sales of the three groups of assets offered to pay the debt, namely, UPI mine, UPI terminals and UPI farms.

The results are detailed in Note 19.

Earnings (loss) per share for the year referring to assets held for sale:

Company 12/31/2015 12/31/2014 Basic and diluted (in R$) 1.00577 (16.97223) 1.00577 (16.97223)

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

7. Assets held for sale (Continued)

The net cash flows incurred are as follows:

Consolidated

12/31/2015 12/31/2014

Cash flow from assets held for sale

Net cash provided by operating activities (32,062) 89,277

Net cash provided by (used in) investing activities 31,887 (391,499)

Net cash provided by (used in) financing activities - 287,247

Net cash provided by assets held for sale (175) (14,975)

Foreign exchange gain/loss on cash and cash equivalents 2,814 365

Increase (decrease) in cash and cash equivalents 2,639 (14,610)

Statement of increase in cash and cash equivalents

At beginning of year 22,984 37,594 At end of year 25,623 22,984

Increase in cash and cash equivalents 2,639 (14,610)

8. Investments

Changes in investments

Company Equity Equity Future capital interest 12/31/2014 pickup contributions adjustment 12/31/2015 Subsidiaries MMX Metálicos 48 (48) 505 - 505 MMX Corumbá 16,901 (14,651) 1,700 (900) 3,050 MMX Sudeste 174,745 (174,747) 36,500 - 36,498 Porto Sudeste Participações 157,052 - - - 157,052 MMX Austria 104 - - - 104 348,850 (189,446) 38,705 (900) 197,209

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

8. Investments (Continued)

Changes in investments (Continued)

Terminal Sarzedo and Terminal de Cargas Paraopeba are affiliates of MMX Sudeste, and Porto Sudeste do Brasil is an affiliate of Porto Sudeste Participações, and consequently indirect affiliates of the Company. Investments in these affiliates are stated by the equity method and correspond to R$1,010, R$911 and R$157,052 (R$2,486, R$897 and R$157,052 at December 31, 2014), respectively, in the Company’s consolidated balance sheet. At June 30, 2015, the Company classified its interest in Terminal de Sarzedo and Terminal de Cargas de Paraopeba as noncurrent assets held for sale. At December 31, 2015, the investment balances in subsidiaries MMX Sudeste and MMX Corumbá remained classified as held for sale.

Changes in capital deficiency

At December 31, 2015, equity pickup was calculated up to the limit of the investment balance in subsidiary MMX Corumbá Mineração S.A. - (under in-court reorganization), and a provision for loss was set up on the capital deficienc, jointly with MMX Metálicos that had already recorded capital deficiency in prior years.

Capital deficiency 12/31/2014 Changes 12/31/2015

Subsidiaries MMX Metálicos Corumbá (46,767) (6,427) (53,194) MMX Corumbá Mineração (16,586) 16,586 - MMX Sudeste (1,081,012) 335,846 (745,166) (1,144,365) 346,005 (798,360)

Ownership interest

Information on subsidiaries

12/31/2015 Number of shares/units Liabilities of interest and Equity (capital Net (thousand) Assets equity deficiency) revenue P&L for the year Direct subsidiaries MMX Corumbá Mineração 710,841 49,791 46,747 3,044 36 2,041 MMX Metálicos Corumbá 482,155 29,891 82,581 (52,690) - (6,476) MMX Sudeste 2,535,412,958 203,777 912,442 (708,665) 331 161,099 MMX Austria 36,000 155 52 103 - - Porto Sudeste Participações 999 463,174 - 463,174 - -

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

9. Property, plant and equipment

Company Machinery Buildings and and Advances to

improvements Facilities equipment Land suppliers Other Total Cost

Balance at January 1, 2014 7,787 4 4 9,573 34,543 3,896 55,807 Additions 3,812 - 717 - - 1 4,530 Write-off (8,634) - (224) (9,573) (34,543) (379) (53,353) Transfers ------Depreciation for the year (210) (1) - - - (1,045) (1,256) Net balance at December 31, 2014 2,755 3 497 - - 2,473 5,728 Additions - - - - - 8 9 Write-off (5) - - - - (136) (141) Transfers ------Depreciation for the year (153) - - - - (925) (1,079) Net balance at December 31, 2015 2,597 3 497 - - 1,420 4,517

Consolidated Machinery Buildings and and Advances to Construction

improvements Facilities equipment Land suppliers in progress Other Total Cost

Balance at January 1, 2014 7,783 4 - 9,572 34,545 - 3,903 55,807 Balance of noncurrent assets held 3,362 62,534 55,646 229,385 1,099,122 3,283,433 20,393 4,753,875 for sale Additions 3,811 314 1,880 58 28,241 38,501 311 73,116 Write-offs - Sale of Porto (176) (169) (4,874) (80,620) (628,061) (2,332,495) (1,649) (3,048,044) Write-offs (8,630) 43 (825) (9,594) (120,058) (73,200) (594) (212,858) Transfers - 11,430 874 12,538 (12,539) (12,303) - - Depreciation for the year (347) (6,484) (6,848) - - - (5,004) (18,683) Impairment (3,048) (67,669) (45,356) (161,339) (401,250) (903,936) (14,887) (1,597,485) Net balance at December 31, 2014 2,755 3 497 - - - 2,473 5,728 Additions - 245 24 - 497 5,527 12 6,305 Foreign exchange gain (loss) - - - - (27,297) - - (27,297) Write-offs (4) (18) - - (337,691) (3,293) (145) (341,152) Transfers - - - - (10,877) 10,877 - - Depreciation for the year (153) (1) - - - - (925) (1,079) Impairment (reversal) - (226) (24) - 375,368 (13,111) 5 362,012 Net balance at December 31, 2015 2,598 3 496 - - - 1,420 4,517

Considerations on impairment of assets are disclosed in Note 10.

Advances to suppliers

Advances recorded by the Company basically refer to the project for expanding the Serra Azul plant and were transferred to assets held for sale.

Construction in progress

Significant expenses capitalized refer to expenses incurred in the project for expansion of the Serra Azul plant, including third-party services, labor costs regarding directly allocated employees.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

10. Impairment of assets

Discount rate (%)

12/31/2015 12/31/2014

MMX Consolidated - current 13 13 MMX Consolidated - noncurrent 12 12

Company management reviewed the value in use of its noncurrent assets based on the Company’s business plan revised at June 30, 2014. Revising the Company’s business plan was required in view of the scenario of market price downturn and also because of operating restrictions imposed by the environmental agency of Minas Gerais state. The business plan recorded at June 30, 2014 remains unaltered, having not undergone significant changes for December 31, 2015.

12/31/2014 Changes 12/31/2015 Property, plant and equipment - Serra Azul project (i) (1,293,916) 334,851 (959,065) Taxes recoverable - Serra Azul project (35,003) - (35,003) Property, plant and equipment - Serra Azul operation (ii) (303,569) 27,115 (276,454) Property, plant and equipment – Corumbá (iii) - 3,950 3,950 Mineral exploration rights (21,219) - (21,219) Right of inventory withdrawals (62,677) - (62,677) Cost of asset retirement and reforestation (22,744) - (22,744) (1,739,128) 365,916 (1,373,212)

(i) Write-off and/or offsetting of advances relating to agreements entered into, substantially including: Eriez Minerals Group Flotação Brasil Ltda. of R$11,917, ABB Switzerland Ltda. of R$52,880, Weir Minerals Netherlands B.V. of R$25,818, Metso Brasil Indústria of R$193,957, Citic Heavy Industries Co. Ltd. of R$21,858, FL Smidth Ltda of R$ 4,991 and Outotec (Filters) Oy of R$ 25,153 (principal).

(ii) Exchange variation referring to advances to suppliers of PP&E items, of which approximately R$ 6,000 refers to write-off of exchange variation of the award referring to Outotec (Filters) Oy.

(iii) At December 31, 2015, given the commencement of the Mining Right Lease Agreement and Other Covenants entered into with Vetorial Mineração S.A. for lease of MMX Corumbá Mineração S.A, management reversed impairment of R$3,950, amount resulting from the amount to be received over the agreement term, adjusted to present value.

a) Property, plant and equipment and taxes recoverable

The impairment of “Serra Azul” mining project is directly associated with the reduction in the credit available for financing, price downturn and non-obtainment of licenses within the expected terms. The decrease in taxes recoverable refers to PIS and COFINS credits arising from investments in Serra Azul project.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

10. Impairment test of assets (Continued)

b) Mineral exploration rights

In 2014, the Company identified the need for recording impairment of Sudeste System and thus recorded impairment loss on 100% of mineral exploration rights in the amount of R$21,219.

c) Cost of asset retirement and reforestation

In 2014, the Company identified the need for recording impairment of Sudeste System and thus recorded impairment loss on asset retirement costs in the amount of R$22,744, which corresponds to 100% of the balance recorded.

d) Right of inventory withdrawals

In 2014, the Company identified the need for recording impairment of Sudeste System and thus recorded impairment loss on the right of inventory withdrawals in the amount of R$62,677, which corresponds to 100% of the balance recorded.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

11. Transactions with related parties

On March 26, 2007, the Company and its subsidiaries entered into a Master Intercompany Loan Agreement with its direct and indirect subsidiaries and related parties. Transactions are documented as trade notes, and the involved parties determine the amount, interest and restatement rate, equivalent to 101% of the CDI, as well as the payment term, which ranges from 180 to 360 days.

a) Balances with related parties

Company Assets Liabilities Other accounts Debit notes (i) Intercompany loans Debit notes (i) Intercompany loans receivable (ii) 12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014 MMX Sudeste - - 26,596 34,687 51,297 45,857 - - 4,402 3,944 MMX Corumbá - - 176 593 - - - - 9,029 5,416 MMX Minérios ------502 502 24,922 22,332 Other 60,349 - - 85 - - - - 11,542 10,460 60,349 - 26,772 35,365 51,297 45,857 502 502 49,895 42,152

(i) The balances of apportionment of shared expenses refer to shared services charged through apportionment of expenses of the parent company MMX to its subsidiaries.

(ii) On September 25, 2015, the former shareholders of GVA Mineração Ltda. waived their credit right with MMX Sudeste Mineração S.A (under in-court reorganization), with holding MMX Mineração S.A now being liable for the payment of the original debt. Thus, MMX S.A recorded such amount receivable from MMX Sudeste Mineração S.A under assets, since MMX Mineração S.A has a right of recovery for having assumed the aforementioned debt.

Company P&L Intercompany Intercompany Debit notes (i) loans Debit notes loans 12/31/2015 12/31/2014

MMX Sudeste 9,049 (5,614) 21,591 483 Eike Batista. - 1,406 - - MMX Porto Ltda. - - - 5,819 MMX Corumbá 635 979 4,851 - MMX Metálicos Corumbá - 3,048 - (2,685) EBX Holding Ltda. ("EBX") - - (486) - 9,684 (181) 25,956 3,617

(i) The balances of apportionment of shared expenses refer to shared services charged through apportionment of expenses of the parent company MMX to its subsidiaries.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

11. Transactions with related parties (Continued)

a) Balances with related parties (Continued)

Consolidated Assets Liabilities Trade accounts Other accounts receivable receivable Debit notes Intercompany loans 12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Porto Sudeste - - 83 83 - - - - Sarzedo Cargo Terminal - - - 102 - - - - Eike Fuhrken Batista ------11,543 10,460 Corumbá - - - - 1 - - Transfer to assets held for sale - - - (102) ------83 83 - 1 11,543 10,460

b) Management

Compensation of Company management is as follows:

Consolidated 12/31/2015 12/31/2014

Executive Board compensation (*) 12,037 25,354 Board of Directors fees 445 650 Recognized stock options granted from the Company’s plan 565 113 13,047 26,117

(*) This includes portion for annual bonus and amount withheld from management members referring to 2014 and 2015, according to the Minutes of the Special General Meetings held on January 29, 2014 and on September 15, 2014.

c) Stock option plan

In the Special General Shareholders' Meeting held on April 30, 2015, termination of the Stock Option Plan for Purchase or Subscription of Common Shares issued by the Company was unanimously approved. Accordingly, the Company recognized R$565 as expenses with option cancellation for the period.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

12. Loans and financing

Company Current liabilities Noncurrent liabilities 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Taken out in foreign currency US Dollars Fixed-interest securities - - 119,384 81,210 Charges incurred (5.99% p.a.) - - 26,857 13,337 - - 146,241 94,547 Taken out in local currency Fixed-interest securities - Indexed to CDI or TJLP 3,750 3,750 - - Charges incurred (3.04% p.a.) 1,079 884 - - 4,829 4,634 - - 4,829 4,634 146,241 94,547

Consolidated Current liabilities Noncurrent liabilities 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Taken out in foreign currency US Dollars Fixed-interest securities Indexed to Libor - 119,384 81,667 Charges incurred (5.99% p.a.) - - 26,857 13,337 - - 146,241 95,004

Taken out in local currency Fixed-interest securities - - - - Indexed to CDI or TJLP 4,207 3,750 - - Charges incurred (3.04% p.a.) 1,079 884 - - 5,286 4,634 5,286 4,634 146,241 95,004 Transfer of liabilities related to noncurrent assets held for sale (Note 7) (457) - - (457) 4,829 4,634 146,241 94,547

Installments classified as noncurrent liabilities mature in 2017.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

13. Taxes and contributions payable

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Tax on Financial Transactions (IOF) 681 98 1,884 1,972 Withheld PIS, COFINS and CSLL 20 130 1,133 1,336 Service Tax (ISS) 8 12 45 - Social Security Tax (INSS) - third parties - - 7 12 Withholding Income Tax (IRRF) 2,827 - 6,110 1,899 Financial compensation for exploitation of mineral resources (CFEM) - - 7 - Social Contribution Tax on Net Profit (CSLL) - - 268 - Corporate Income Tax (IRPJ) - - 721 - Tax Recovery Program (REFIS) - - 13,573 13,154 Other 37 57 3,133 3,090 3,573 297 26,881 21,463

Transfer of liabilities related to noncurrent assets held for sale (Note 7) - - (19,725) (19,047)

3,573 297 7,156 2,416

Current 3,573 297 7,074 2,334 Noncurrent - - 82 82

14. Provision for litigation and contingencies

The Company and its subsidiaries are parties to legal and administrative proceedings involving civil, labor and environmental matters arising from the ordinary course of operations. The provisions for losses arising from these proceedings are estimated and restated based on the opinion of legal advisors.

a) Probable contingencies

The Company and its subsidiaries set up a provision for contingencies whose likelihood of loss was assessed as probable.

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Tax - 3,854 35 3,854 Civil 231 230 3,838 16,009 Labor 142 64 15,720 19,091 Environmental - - 1,414 1,441 373 4,148 21,007 40,395 Transfer of liabilities related to noncurrent assets held for sale - - (19,344) (34,817) 373 4,148 1,663 5,578

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

14. Provision for litigation and contingencies (Continued)

a) Probable contingencies (Continued)

The tax proceedings are primarily related to tax assessment notices related to ICMS, IRPJ, PIS, CSLL and COFINS payment.

Labor contingencies primarily refer to commuting time, health exposure premium and hazardous duty pay, pain and suffering and property damages, work accident, salary equivalence and severance pay.

The environmental proceedings are mainly related to administrative lawsuits filed by IBAMA.

Civil contingencies refer to collections related to service agreements in connection with the Serra Azul project, representatively by Mecma Terraplanagem Ltda. in the amount of R$2,410.

The changes in the provision for contingencies for the year ended December 31, 2015 were as follows:

Consolidated Transfer of liabilities related to noncurrent Write-off of Write- assets held for investment - 12/31/2014 Additions offs sale Porto 12/31/2015 MMX 3,918 127 (3,902) - - 143 MMX Metálicos Corumbá 1,430 210 (350) - - 1,290 MMX Corumbá 7 960 (74) (893) - - MMX Sudeste 35,040 3,132 (19,491) (18,451) - 230 40,395 4,429 (23,818) (19,344) - 1,663

b) Possible contingencies

The Company and subsidiaries are also parties to labor, tax, civil and environmental proceedings, whose likelihood of loss are assessed as possible, as under:

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Civil 27,315 23,186 133,337 398,585 Tax 2,329,336 2,129,469 2,351,179 2,146,836 Labor 287 297 20,492 18,944 Environmental - - 44,625 42,443 2,356,938 2,152,952 2,549,633 2,606,808

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

14. Provision for litigation and contingencies (Continued)

b) Possible contingencies (Continued)

Civil proceedings are mainly represented by compensation claims for property damage related to the mineral exploration in the state of Bahia during the administration of IRX Mineração Ltda. - reimbursement claim relating to the service rendering agreement entered into with MMX Sudeste, as well as contractual compensation due to stoppage of Serra Azul Project.

Tax proceedings substantially refer tax deficiency notices from the Brazilian Internal Revenue Service (IRS) regarding IRPJ and CSLL, allegedly due on calendar year 2007, in the amount of approximately R$4,345,515, of which R$2,308,366 are classified as possible loss.

Labor contingencies primarily refer to commuting time, health exposure premium and hazardous duty pay, pain and suffering and property damages, work accident, salary equivalence and severance pay.

The environmental proceedings are mainly related to administrative lawsuits filed by IBAMA.

c) Tax deficiency notice - IRPJ and CSLL

The Company is a party to administrative and legal proceedings whose likelihood of loss is assessed by its legal advisors as remote, and therefore, no provision is recorded and no disclosure is made in this regard in the financial statements. On December 28, 2012, the Company was served a tax deficiency notice by the Brazilian IRS regarding IRPJ and CSLL, allegedly due in calendar year 2007, in the amount of approximately R$4,345,515.

The decision at lower court reduced the tax deficiency notice to approximately R$ 1,700,000, in connection with which both MMX and the Brazilian IRS have already lodged appeals. Based on the assessment of its internal and outside legal advisors, management considers that the case involves possible likelihood of loss.

The higher court decision affirmed the lower court decision, making it final, and the amount disputed at the administrative level totaled 2,308,366, classified as a possible loss.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

15. Income tax and social contribution

a) Deferred income and social contribution taxes

Deferred income and social contribution taxes are calculated on respective tax losses, and temporary differences between the tax bases on assets and liabilities and their book values contained in the financial statements. The applicable tax rates, currently defined for calculation of deferred taxes, are 25% for income tax and 9% for social contribution tax.

Please note that temporary differences include costs, expenses, losses, revenues and gains comprising the net income of a certain year, which, according to legislation currently in force, will only be considered for tax computation purposes in subsequent periods.

Accordingly, deferred income and social contribution tax assets are recognized to the extent that it is probable that taxable profit will be available to offset temporary differences, based on deferred income projections prepared considering Company’s internal assumptions and future economic scenarios that may, therefore, change.

Considering the history of income and social contribution tax losses and based on any future taxable profit projections, Company management, aware of a scenario of uncertainty related to the recovery of IRPJ and CSLL tax credits, chose not to recognize deferred income tax assets. At December 31, 2015, the Company's unrecorded tax credits amounted to R$1,331,283.

Tax credits from temporary differences relating to nondeductible provisions mainly comprise the provision for labor and civil contingencies, which will be realized to the extent the corresponding proceedings are completed, as well as the provisions for inventory and investment losses, the provision for unrealized recoverable taxes (ICMS, PIS/PASEP and COFINS) and the provision for impairment of assets.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

15. Income tax and social contribution (Continued)

Amounts that may offset or reduce IRPJ and CSLL bases are as follows:

b) Unrecognized deferred income and social contribution tax assets

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Income tax losses 70,855 57,510 472,232 418,497 Social contribution tax losses 25,508 20,704 170,004 150,659 Present value adjustment – Law No. 11638/07 (3) (3) 4,030 4,030 Exchange gain (loss) 7,418 7,418 7,418 7,418 Impairment of assets - - 549,942 782,476 Provision for contingencies 198 1,410 (1,142) 15,188 Provision for capital deficiency (272,021) - (272,021) - Provision for unrealized taxes - - 5,567 4,293 Provision for inventory losses - - 20,240 12,984 Allowance for suppliers - - 233,454 153,797 Loss on payment of Company interest 60,227 60,227 60,227 60,227 Other adjustments 118,669 145,978 81,332 195,362 10,851 293,244 1,331,283 1,804,931

Unrecognized deferred income and social contribution tax assets result mainly from income and social contribution tax losses and temporary differences that the Company and its subsidiaries do not expect to fully realize.

16. Variable income securities

Considering that the investment transaction of Trafigura and Mubadala in Porto Sudeste do Brasil S.A. was completed, the latter entity undertook the payment of liabilities referring to MMXM11 Securities (recorded in MMX S.A. at transaction date, totaling R$2,253,352). Under formal terms, MMX S.A. is still responsible for payment of remuneration on MMXM11 Securities to their holders. However, with the amendment of the deed of MMXM11 Securities, which was approved by their holders, in substance, MMX is not primarily responsible for the payment of such remuneration, once remuneration of MMXM11 Securities is now due by Porto Sudeste.

In addition, the remuneration method was also changed, and linked to the remuneration of Port11 Securities.

Calculation of royalties for iron ore cargo and contracted volumes are described in the Instrument of Securities attached to the Notice of Voluntary Public Barter Offering for Acquisition of Shares available on the Company’s website and filed at CVM in May 2011.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

16. Variable income securities (Continued)

By the end of December 31, 2014, the Company intended to carry out a Public Barter Offering, whereby MMXM11 Securities could be exchanged for securities that would indirectly confer to their holders economic rights essentially corresponding to those under Port11 Securities (“Barter Offering”). On November 27, 2014, the Board of Directors approved the cancellation of this barter offering and instead, MMX public offerings were approved for secondary distribution of (a) Class A and B shares issued by Porto Sudeste Royalties Fundo de Investimento em Participações em Infraestrutura, which will be held by MMX (“Shares”); and (b) marketable securities of royalty- based variable compensation deriving from Port Terminal, to be issued by a wholly-owned subsidiary of Porto Sudeste, Porto Sudeste V.M. S.A., which will be held by MMX (“PORTFIN securities”), pursuant to CVM Rule No. 400 of December 29, 2003, as amended (“CVM Rule No. 400”) and intermediated by XP Investimentos Corretora de Câmbio, Títulos e Valores Mobiliários S.A. (“Offer”).

On January 9, 2015, the holders of securities of royalty-based variable compensation issued by the Company deliberated and approved, unanimously and without qualifications, by the affirmative vote of Holders of Securities representing 89.42% of MMXM11 Securities, the following items: (a) the grant by the Company of statutory lien on 100% of the shares from Fundo de Investimento em Participações em Infraestrutura Porto Sudeste royalties (“Fund” and “Shares”, respectively) and held by the Company to the Holders of Securities (“Guarantee”); (b) appointment of Planner Trustee DTVM Ltda. as a collateral agent; (c) execution of the respective statutory lien instrument formally providing for the Guarantee; and (d) authorization for Company management to take all necessary measures for the legal, technical and/or regulatory formal performance of these acts.

On March 2, 2015, the public offering for secondary distribution (“Secondary Offering”) was completed, whereby 604,059,826 (six hundred four million, fifty-nine thousand, eight hundred twenty-six) MMXM11 Securities were exchanged for Class A Shares held by MMX Mineração e Metálicos S.A. and issued by Porto Sudeste Royalties Fundo de Investimento em Participações em Infraestrutura (“Fund”) set up as a closed-end fund, under the terms of CVM Rule No. 460 of October 10, 2007, as amended, and CVM Rule No. 391 of July 16, 2003, as amended, enrolled with the Brazilian IRS Registry of Legal Entities (CNPJ/MF) under No. 20.082.573/0001-19, the operating license of which was obtained from the CVM on September 2, 2014, under the CVM Code No. 1075- 8], all registered and book-entry shares, free and clear of any liens or encumbrances, subject to the terms and conditions of the final prospectus of the Secondary Offering.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

16. Variable income securities (Continued)

On that same date, the public offering for secondary distribution (“Secondary Offering”) of 12,539,802 (twelve million, five hundred thirty-nine thousand, eight hundred and two) securities of royalty-based variable remuneration issued by Porto Sudeste V.M. S.A. (“Issuer”) and held by the Offeror was also completed, all registered and book-entry shares, free and clear of any liens or encumbrances, (“PortFin Securities”) by MMXM11 Securities, subject to the terms and conditions of the final prospectus of the Secondary Offering.

In April 2015, royalty-based remuneration securities issued by MMX Mineração e Metálicos S.A. were exchanged for class b shares issued by Porto Sudeste royalties Fundo de Investimento em Participações em Infraestrutura (“FIP-IE”), an investment fund share enrolled with the Brazilian IRS Registry of Legal Entities (CNPJ/MF) under No. 20.082.573/0001-19 held by MMX. This exchange was conducted through a secondary offering, under the terms of CVM Rule No. 476 of January 16, 2009, whereby MMX offered up to 354,585,423 (three hundred fifty-four million, five hundred eighty-five thousand, four hundred twenty-three) class B shares issued by FIP-IE, which should necessarily be exchanged for MMXM11 Securities. The exchange of this number of class B shares for the same number of MMXM11 Securities held by Banco Itaú BBA S.A. - - Nassau Branch and Banco Bradesco S.A. was recorded. Therefore, remaining balances of 12,221,959 (twelve million, two hundred twenty-one thousand, nine hundred fifty-nine) MMXM11 Securities were recorded in the balance sheet at December 31, 2015 for R$51,715, which accounts for 1.24% of total M11 securities, allocated in the Company’s noncurrent assets, against Port11 securities, recorded in noncurrent liabilities.

17. Liabilities for asset retirement and reforestation

The Company and its subsidiaries have asset retirement and reforestation obligations established by regulatory requirements upon termination of the corresponding operating rights. These expenses are capitalized and depreciated during the useful life of the noncurrent assets based on the method of units produced.

The amounts estimated for the current discontinuity situation, according to the estimated remaining useful lives of ventures, were reviewed based on expected long-term inflation rate (6.0% p.a.), adjusted by market risk premium (5.0% p.a.) and subsequently discounted at the adjusted risk-free discount rate of 9.61% p.a.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

17. Liabilities for asset retirement and reforestation (Continued)

Changes in liabilities related to retirement of assets are shown below:

Consolidated 12/31/2015 12/31/2014 Incurred liability 62,483 60,755 Review of estimates - (3,637) Expense increase 5,805 5,365 Transfer of liabilities related to noncurrent assets held for sale (68,288) 62,483 Balance at the end of the year - -

18. Equity

a) Capital

The Company’s capital comprises registered common shares without par value.

Number of common shares (thousand) R$ At December 31, 2015 and 2014 162,205 5,404,850

Shareholding structure of the Company at December 31, 2015 is as follows:

Number of shares Shareholders (thousand) R$ %

Centennial Asset Mining Fund LLC (*) 53,019 1,766,642 32.69% Eike Fuhrken Batista 30,857 1,015,616 19.02% Wisco Brasil Investimentos em Metalurgia Ltda. 16,964 565,245 10.46% SK Networks Co Ltd. 14,248 474,777 8.78% FIM Mercatto Botafogo (*) 4,484 149,414 2.76% Centennial Asset Brazilian Equity Fund LLC (*) 4,772 137,702 2.94% Other 37,861 1,295,454 23.35%

Total 162,205 5,404,850 100.00%

(*) Controlled by Eike Fuhrken Batista.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

18. Equity (Continued)

b) Share issue cost

Represented by the costs related to the subscription transaction of the Company’s new shares by Wisco Brasil Investimentos em Metalurgia Ltda. and by SK Networks Co Ltd. in the amount of R$48,329 (R$48,329 at December 31, 2014).

c) Capital reserve

The capital reserve of R$58,689 (R$60,269 at December 31, 2014) is represented by: (i) book record of the stock option plan in the amount of R$56,869 (R$ 58,810 at December 31, 2014), and (ii) goodwill on the issue of the Company’s shares in the amount of R$ 1,819, approved at the general shareholders’ meeting held on May 13, 2010.

d) Basic and diluted earnings (loss) per share

Basic earnings (loss) per share are calculated by dividing the loss attributable to shareholders by the weighted average number of outstanding shares (total shares less treasury shares).

Diluted earnings (loss) per share are calculated by adjusting the weighted average number of outstanding shares to assume the conversion of all potential diluted common shares, when applicable.

Company 12/31/2015 12/31/2014

Net income (loss) attributable to shareholders 95,966 (2,238,164) Average number of outstanding common shares 162,205 162,205 (in thousands of shares) Basic and diluted earnings (loss) per share 0.59163 (13.79837)

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

19. Operating income, costs and expenses by nature, financial income (expenses) and other operating income (expenses)

Gross revenue vs. net revenue

Consolidated

12/31/2015 12/31/2014

Gross revenue 491 344,317 PIS and COFINS (42) (11,120) ICMS (82) (1,755) Cancelled sales - (2,396) Net revenue 367 329,046

Cost of sales

Consolidated 12/31/2015 12/31/2014

Personnel (308) (53,080) Services (78) (28,507) Royalties - (22,356) Materials (4) (18,270) Inventory adjustment (88) (18,333) Rentals (23) (15,909) Fuel and energy (318) (17,312) Depreciation - (13,909) Financial compensation for mineral resources exploration (CFEM) (7) (5,260) Mineral resources inspection charge (TFRM) (16) (2,655) Other costs (17) (1,584) (859) (197,175)

Selling and distribution expenses

Consolidated 12/31/2015 12/31/2014 Freight, port and stowage charges (*) 52,654 (388,202) Penalties - (8,884) Fuel - (7,045) Demurrage - (1,692) Personnel - (1,233) Services - (967) Other 458 (2,997) 53,112 (411,020)

(*) This basically refers to reversal of provisions made in prior year in the amount of R$277,814 and the recording of R$225,000 referring to the agreement with MRS Logística S.A., described in Note 1. 64

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

19. Operating income, costs and expenses by nature, financial income (expenses) and other operating income (expenses) (Continued)

Administrative expenses by nature

Consolidated 12/31/2015 12/31/2014 Payroll and related charges (*) (25,958) (59,182) Third-party services (33,199) (43,896) Rents and leases (522) (4,080) Depreciation and amortization (1,079) (4,512) Taxes and charges (**) (13,404) (9,098) Provision for unrealized tax credits 5,862 (16,209) Nondeductible donations - (710) Fines and penalties (***) (15,659) (4,394) Allowance for doubtful accounts - related parties - - Provision for litigation and contingencies 19,389 (32,395) Sundry expenses (3,159) (5,873) (67,729) (180,349)

(*) This includes portion for annual bonus and amount withheld from managing officers referring to 2014 and 2015.

(**) This mainly comprises COFINS of R$3,096and PIS of R$672 referring to receipt of R$40,000 for the dissolution of the agreement with ENEVA Comercializadora de Energia Ltda.

(***) The consolidated balance of fines and penalties basically refers to the agreements with Eriez and Fidens, corresponding to variation in the year of R$11,917 and R$3,038, respectively.

Other operating income (expenses)

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Provision for losses on property, plant and equipment for sale (i) - - - (54,012) Write-off of investment - Porto (ii) - 689,399 - 689,399 Provision for contractual costs – Serra Azul contracts (iii) - - 177,986 (364,829) Write-off of advances due to settlement agreements (iv) (324,657) - Impairment (v) - - 365,916 (1,739,128) Other (vi) 35,771 (1,607) (1,833) (137,909) 35,771 687,792 217,413 (1,606,479)

(i) The write-off of asset account includes write-off of dam construction costs.

(ii) This refers to the investment transaction on February 26, 2014.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

19. Operating income, costs and expenses by nature, financial income (expenses) and other operating income (expenses) (Continued)

Other operating income (expenses) (Continued)

(iii) The Company adjusted its liabilities based on executed agreements and the list of approved creditors, as shown below: Allowance Write-off Total FL Smidth Ltda. (64,142) (64,142) Multi-Rio Operações Portuárias S.A. (22,130) (22,130) Weir Minerals Netherlands B.V. (44,807) (44,807) Eriez Minerals Group Flotação Brasil Ltda. (18,563) (18,563) Citic Heavy Industries Co. Ltd. (43,095) (43,095) Metso Brasil Indústria (39,992) (39,992) ARG Ltda. (9,432) (9,432) Fidens Engenharia S.A. (34,868) (34,868) Outotec (Filters) OY (60,566) (60,566) ABB SWITZERLAND LTD (7,014) (7,014) Semil (1,372) (1,372) Sepetiba Tecon (11,425) (11,425) Cefar 7,185 7,185 CNEC Worley Parsons Engenharia S.A. 86,579 86,579 Mineradora Rio Bravo Ltda. 40,969 40,969 Glencore International A.G. 16,989 16,989 Infrater Engenharia Ltda. 14,315 14,315 Banco Bradesco BBI S.A. 4,270 4,270 Construções e Emp. e Rep. Nacional de Eng. Ltda. 3,672 3,672 Simol Silva Imóveis Ltda. 2,111 2,111 Other 3,330 3,330 179,421 (357,407) (177,986)

(iv) Write-off of advances relating to settlement agreements that substantially include: ABB Switzerland Ltda. of R$52,880, Weir Minerals Netherlands B.V. of R$25,818, Metso Brasil Indústria of R$193,957, Citic Heavy Industries Co. Ltd. of R$21,858, FL Smidth Ltda of R$ 4,991 and Outotec (Filters) Oy of R$ 25,153.

(iv) Considerations on impairment of assets are presented in Note 10.

(v) Basically refers to revenue of R$40,000 referring to the Termination Agreement with Eneva Comercializadora de Energia, and loss on asset disposals.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

19. Operating income, costs and expenses by nature, financial income (expenses) and other operating income (expenses) (Continued)

Financial income (expenses)

Company Consolidated 12/31/2015 12/31/2014 12/31/2015 12/31/2014 Financial expenses Interest (11,265) (3,075) (67,007) (81,432) Interest on intercompany loans (5,962) (2,832) - - Present value adjustment - (6,121) - (6,121) Tax on Financial Transactions (IOF) (91) 1,911 3,111 (1,426) Brokerage and commissions (1,017) (307) (1,022) (359) Exchange gain (loss) (47,793) (89,354) (76,664) (57,121) Other (17,252) (5,659) (17,375) (33,440) (83,380) (105,437) (158,957) (179,899) Financial income Gains on hedging transaction - - - 15,086 Interest 2,659 3,419 47,822 38,705 Interest on intercompany loans 6,142 6,299 - - Short-term investment yield 4 1,109 2,084 1,634 Other 76 68 2,234 56 8,881 10,895 52,140 55,481 Financial income (expenses), net (74,499) (94,542) (106,817) (124,418)

20. Financial instruments and risk management

These instruments are managed through operational strategies and internal control intended to ensure liquidity, profitability, and safety. Control policy consists of permanent monitoring of contracted rates versus market rates in effect. The Company and its subsidiaries do not invest in derivatives or any other risk financial instrument or assets for speculation purposes, and this determination is provided for in the risk management policy reviewed and approved by the Board of Directors.

Estimated realizable values of the financial assets and liabilities of the Company and its subsidiaries were determined through information available in the market and appropriate valuation methodologies. However, considerable judgment was required in interpreting market data to produce the most adequate estimated realizable value. As a result, the estimates below do not necessarily indicate the amounts that could be realized in the current exchange market. The use of different market methodologies may have a material effect on the estimated realizable values.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

20. Financial instruments and risk management (Continued)

The main financial assets are classified into the following categories:

Company 12/31/2015 12/31/2014 Assets at fair Assets at fair Receivable value through Receivable value through Financial assets s profit or loss Total s profit or loss Total

Cash and cash equivalents - 1,257 1,257 - 686 686 - 1,257 1,257 - 686 686

Consolidated 12/31/2015 12/31/2014 Assets at fair Assets at fair value through Receivable value through Financial assets Receivables profit or loss Total s profit or loss Total

Cash and cash equivalents - 27,033 27,033 - 23,823 23,823 Accounts receivable from related parties 26,772 - 26,772 35,365 - 35,365 26,772 27,033 53,805 35,365 23,823 59,188

The main financial liabilities, except for derivative financial instruments, are classified and measured at amortized cost, as follows:

Company Consolidated Financial liabilities 12/31/2015 12/31/2014 12/31/2015 12/31/2014

Loans and financing 151,070 99,181 151,527 99,637 Accounts payable 43,319 7,952 752,679 830,250 Accounts payable to related parties 50,397 42,654 11,543 10,461 GVA agreement 61,918 61,918 Royalties MMX11 51,715 2,855,029 51,715 2,855,829 358,419 3,004,816 1,029,382 3,796,177

The “fair value” concept embodies the valuation of assets and liabilities by reference to market prices when this involves liquid assets or otherwise using mathematical pricing methodologies. The level of fair value hierarchy gives priority to unadjusted quoted prices in an active market. Part of the financial assets and liabilities of the Company and its subsidiaries has its fair value equivalent to its book value, such as cash and cash equivalents, trade accounts payable and receivable, and short- term and bullet debt.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

20. Financial instruments and risk management (Continued)

20.1. Market risk

Risk of variation in price of goods (commodities), foreign exchange and interest rates.

20.2. Currency risk

Risk of fluctuations in foreign exchange rates that may be associated to the Company’s assets and liabilities.

20.3. Interest rate risk

The Company’s remaining debt balance is fully indexed at fixed interest rate, thus eliminating the risk of interest rate variations.

20.4. Liquidity risk

The Company and its subsidiaries monitor their liquidity level considering the expected cash flows matched against the available amount of cash and cash equivalents. Managing the liquidity risk means maintaining sufficient cash, marketable securities and capacity to settle market positions. However, given the financial difficulties faced by the Company, MMX, in conjunction with its subsidiary MMX Sudeste S.A. (under in-court reorganization), filed an application for in-court reorganization on October 16, 2014 in the judicial district of the capital of Minas Gerais State, which was approved on October 24, 2014. Thus, the payments of the Company’s obligations are currently processed within the scope of the in- court reorganization process.

20.5. Credit risk

This risk arises from the Company and its subsidiaries’ likelihood to record losses due to the default of their counterparties or of financial institutions depositary of funds or investments. This risk factor could come either from trade transactions or cash management.

In order to mitigate these risks, MMX makes it a practice to review the financial position of its counterparties and monitor, on an ongoing basis, the outstanding positions. Financial institutions with which the Company operates are evaluated based on Riskbank index.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

20. Financial instruments and risk management (Continued)

20.5. Credit risk (Continued)

The Company and its subsidiaries adopt an Investment Policy, in which investment limits by institution are established and consider the evaluation of rating as a benchmark to limit the amount invested. The average maturity and the investment indexers for purposes of portfolio diversification are constantly evaluated.

The operations of the Company and its subsidiaries are subject to the credit risk described below, disregarding the reclassification to noncurrent assets held for sale:

Consolidated Positions that represent credit risk 12/31/2015 12/31/2014

Cash and cash equivalents 27,033 23,823 27,033 23,823

21. Segment reporting

21.1. Description of segments

Company is divided into business units in accordance with products and services, with two operating segments subject to disclosure of information. Company management considers these two segments separated by region, but with a single product, iron ore (Corumbá and Sudeste systems), which is subject to risks and remunerations managed by centralized decisions.

Management monitors the business units operating results separately to allow for decision making regarding allocation of funds and performance assessment.

At December 31, 2015, the assets of Sudeste and Corumbá systems remain intended for sale, as well as the noncontrolling interest in Porto Sudeste S.A. See Note 7 for further details.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

21. Segment reporting (Continued)

21.1. Description of segments (Continued)

Projects and activities

At December 31, 2015, the Company, through its direct or indirect subsidiaries, develops the projects and activities summarized below:

a) Sudeste System

Sudeste System comprises an iron ore extraction and sale unit in Minas Gerais state composed of MMX Sudeste and its affiliates Terminal Sarzedo Ltda. and TCP.

As described in the Company’s financial statements, at December 31, 2013, the Company identified the need for recording impairment of assets held in MMX Sudeste system, amounting to R$913,166, related to property, plant and equipment and intangible assets of Bom Sucesso and Serra Azul expansion projects, as well as goodwill on the acquisition of operations of AVG and Minerminas.

In addition, as described in Note 10, in 2015 the Company reviewed the value in use of the Sudeste system assets and determined the need of reversal of the provision for impairment, in the amount of R$365,916.

b) Corumbá System

Corumbá System comprises an iron ore extraction unit of MMX Corumbá and its subsidiary MMX Trade. MMX Corumbá is the holders of mineral exploration rights and lessee of mining rights in the Municipality of Corumbá, in Mato Grosso do Sul state. Subsidiary MMX Trade is committed to sale in the international market of iron ore produced by MMX Corumbá.

As described in the Company’s financial statements at December 31, 2013, the Company identified the need for recording impairment of assets held in MMX Corumbá system, amounting to R$133,748, referring to construction in progress, goodwill, mineral exploration rights, and cost for recovery of assets.

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

21. Segment reporting (Continued)

21.1. Description of segments (Continued)

Projects and activities (Continued)

b) Corumbá System (Continued)

As described in Note 1, on July 18, 2014, MMX Corumbá Mineração S.A. (“MMX Corumbá”) and Vetria Mineração S.A. (“Vetria”), a company engaged in the processing, transportation, sale and export of iron ore, entered into agreements and documents referring to the lease of mineral exploration rights located in Corumbá, Mato Grosso do Sul state, as well as the assignment of certain contracts to Vetorial Mineração S.A. (“Vetorial”).

At December 31, 2015, given the commencement of the Mining Right Lease Agreement and Other Covenants entered into with Vetorial Mineração S.A. for lease of MMX Corumbá Mineração S.A, management reversed impairment of R$3,905, amount resulting from the amount to be received over the agreement term.

c) Other operations

At December 31, 2015, Sudeste and Corumbá systems are still classified as held for sale. For further details, see Note 7.

21.2. Major trade accounts receivable

Consolidated 12/31/2015 12/31/2014 Sudeste System Glencore International Ag 0% 27% Companhia Siderúrgica Nacional 0% 22% Vale S.A. 0% 20% Corumbá System Siderar S.A.I.C. 0% 5%

MMX Mineração e Metálicos S.A.

Notes to financial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

21. Segment reporting (Continued)

21.3. Balance sheets by segment

Adjustments Sudeste Corumbá and Eliminations 12/31/2015 System System Corporate eliminations held for sale Consolidated Assets Current 55,354 28,555 470,528 (306,123) 71,119 319,433 Noncurrent 148,423 17,331 245,658 (262,777) (67,214) 81,421 Investments - - 197,209 (197,209) - - Property, plant and equipment - 3,905 4,517 - (3,905) 4,517 Intangible assets ------203,777 49,791 917,912 (766,109) - 405,371 Liabilities Current 851,198 4,891 984,179 (1,061,138) 103,101 882,231 Noncurrent 61,244 41,856 257,302 - (103,101) 257,301 Equity (708,665) 3,044 (323,568) 295,029 - (734,161) 203,777 49,791 917,912 (766,109) - 405,371

Adjustments Sudeste Corumbá and Eliminations Consolidate 12/31/2014 System System Corporate eliminations held for sale d Assets Current 83,547 30,485 473,179 (306,123) 64,305 345,393 Noncurrent 130,321 12,846 2,991,178 (186,692) (60,922) 2,886,731 Investments 3,383 - 348,850 (348,850) (3,383) - Property, plant - - 5,728 - - 5,728 and equipment Intangible assets ------217,251 43,331 3,818,935 (841,665) - 3,237,852 Liabilities Current 1,033,396 5,604 1,274,422 (1,331,057) 128,542 1,110,907 Noncurrent 90,118 38,424 2,955,236 - (128,542) 2,955,236 Equity (906,263) (697) (410,723) 489,392 - (828,291) 217,251 43,331 3,818,935 (841,665) - 3,237,852

MMX Mineração e Metálicos S.A.

Notes to finanial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

21. Segment reporting (Continued)

21.4. Statement of operations by segment

Consolidated Year ended December 31, 2015 Iron ore Adjustments Sudeste Corumbá and System System Corporate eliminations Consolidated Revenue from sale of goods and/or services - domestic market 331 36 - - 367 Revenue from sale of goods and/or services – foreign market - - - - - 331 36 - - 367 331 - Cost of sales (814) (45) - - (859) - Gross profit (483) (9) - - (492)

Operating income (expenses) General and administrative expenses (40,966) (2,274) (24,489) - (67,729) Expenses with stock options granted - - 1,941 - 1,941 Selling expenses 52,859 253 - - 53,112 Equity pickup (367) - (189,446) 189,446 (367) Provision for capital deficiency - - 346,006 (346,006) - Other operating income (expenses) 179,358 2,353 35,702 - 217,413 190,884 332 169,714 (156,560) 204,370

Income (loss) before financial income (expenses) and income taxes 190,401 323 169,714 (156,560) 203,878 Financial income (expenses) Financial income 15,973 3,232 12,334 20,601 52,140 Financial expenses (45,275) (524) (92,557) (20,601) (158,957)

(29,302) 2,708 (80,223) - (106,817)

Income (loss) before income taxes 161,099 3,031 89,491 (156,560) 97,061 Current income and social contribution taxes - (990) - - (990) Deferred income and social contribution taxes - - - - -

Consolidated net income (loss) for the year 161,099 2,041 89,491 (156,560) 96,071

Other disclosures Depreciation and amortization expenses - - 1,079 - 1,079

MMX Mineração e Metálicos S.A.

Notes to finanial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

21. Segment reporting (Continued)

21.4. Statement of operations by segment (Continued)

Consolidated Year ended December 31, 2014 Iron ore Adjustments Sudeste Corumbá and System System Corporate eliminations Consolidated Revenue from sale of goods and/or services - domestic market 175,568 - - - 175,568 Revenue from sale of goods and/or services – foreign market 135,760 17,718 - - 153,478 311,328 17,718 - - 329,046 - Cost of sales (186,760) (10,415) - - (197,175) - Gross profit 124,568 7,303 - - 131,871

Operating income (expenses) General and administrative expenses (123,372) (4,884) (52,093) - (180,349) Expenses with stock options granted - - 2,637 - 2,637 Selling expenses (371,152) (39,868) - - (411,020) Equity pickup 2,920 (142) (1,688,931) 1,664,079 (22,074) Provision for capital deficiency - - (1,099,671) 1,099,671 - Other operating income (expenses) (2,256,389) (65,643) 715,553 - (1,606,479) (2,747,993) (110,537) (2,122,505) 2,763,750 (2,217,285)

Income (loss) before financial income (expenses) and income taxes (2,623,425) (103,234) (2122,505) 2,763,750 (2,085,414)

Financial income (expenses) Financial income 25,553 1,146 13,451 15,331 55,481 Financial expenses (55,184) 1,515 (110,899) (15,331) (179,899)

(29,631) 2,661 (97,448) - (124,418)

Income (loss) before income taxes (2,653,056) (100,573) (2,219,953) 2,763,750 (2,209,832)

Current income and social contribution taxes 644 5 (14,505) - (13,856) Deferred income and social contribution taxes - - - - -

Consolidated net income (loss) for the year (2,652,412) (100,568) (2,234,458) 2,763,750 (2,223,688)

Other disclosures Depreciation and amortization expenses 3,255 - 1,257 - 4,512

MMX Mineração e Metálicos S.A.

Notes to finanial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

22. Insurance coverage

The Company and its direct and indirect subsidiaries take out insurance coverage for assets subject to risks at amounts deemed sufficient by management to cover losses, if any, considering the nature of their activity.

Insurance covers civil liability, automobile, fire, and operational risks. There is also a group life insurance policy for the Company’s employees.

Insured risk Amount insured

Property damage 102,106 Civil liability 10,000

The Company and its subsidiaries consider that the policies taken out are consistent with the coverage adopted in the mining industry and are in line with the Company’s objectives, pursuant to the best corporate risk management practices. The assumptions considered in relation to the balances above are not within the audit work scope.

MMX Mineração e Metálicos S.A.

Notes to finanial statements (Continued) December 31, 2015 and 2014 (In thousands of reais)

Board of Directors Executive Board

Eike Fuhrken Batista - Chairman Ricardo Furquim Werneck Guimarães - CEO Julio Alfredo Klein Junior – Board Member and Investor Relations Officer Linhong Zhang - Board Member Vladimir Senra Moreira - Officer Ricardo Furquim Werneck Guimarães - Board Member Flávia Soeiro – Independent Member

Controllership Manager Marcela Roque Leite CRC-MG 090.101/O7

Statement of the Directors on the Financial Statements

Pursuant to the provisions in Article 25 of Instruction 480/09 of December 7, 2009, the Company’s Directors state that they have reviewed , discussed and agreed with the Financial Statements (Individual and Consolidated) for the year ended December 31, 2015.

Rio de Janeiro, March 30, 2016.

Ricardo Furquim Werneck Guimaraes - CEO and Investor Relations Officer

Vladimir Senra Moreira – Director

Statement of the Directors on the Independent Auditor’s Report

In compliance with the provisions in Article 25 of Instruction No. 480/09, of December 7, 2009, the Company’s Directors state that they have reviewed, discussed and agreed with the view expressed in the opinion of the Independent Auditors dated March 30, 2016 on the Financial Statements (Individual and Consolidated) for the year ended December 31, 2015 .

Rio de Janeiro, March 30, 2016.

Ricardo Furquim Werneck Guimaraes - CEO and Investor Relations Investor

Vladimir Senra Moreira - Director