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We will pay any cash dividends and make any other cash distributions, if any, with respect to our common shares in Brazilian currency. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by ADS holders on conversion into U.S. dollars of such distributions for payment by the depositary. Fluctuations in the exchange rate between the Brazilianreal and the U.S. dollar may also affect the U.S. dollar equivalent of thereal price of our common shares on BM&FBOVESPA.the São Paulo Stock Exchange (B3 – Brasil, Bolsa, Balcão), or the B3.

3B. Capitalization and Indebtedness

Not required.

3C. Reasons for the Offer and Use of Proceeds

Not required.

3D. Risk Factors

An investment in our ADSs or common shares involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of our ADSs could decline due to any of these risks or other factors, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us.

Risks Relating to Brazil

The Brazilian government exerciseshas exercised, and continues to exercise, significant influence over the Brazilian economy. This influence,involvement, as well as Brazilian political and economic conditions, could materially and adversely affect us.

The Brazilian government has frequently intervenesintervened in the Brazilian economy and occasionally makes significanthas made drastic changes in policy and regulation.regulations. See “—Government efforts to combat inflation mayhinder the growth of the Brazilian economy and could harm us” and “Item 5A. Operating Results—Brazilian Macro-Economic Scenario, Scenario—Effects of Exchange Rate Fluctuations.” The Brazilian government’s actions to control inflation and affect other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency exchange and remittance controls, devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by political, social, and economic developments in or affecting Brazil, and by changes in policy or regulations at the federal, state or municipal levelslevel involving or affecting factors such as:

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·        tax policies and regulations, including frequent changes in tax regulations that may result in uncertainties as to future taxation; and

·        other political, social and economic developments in or affecting Brazil.

RecentUncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors may contribute to economic and political instability, which have become more acute at the end of 2015, may lead to legislative or regulatory changes that could negatively affect us. In addition, such changes may also lead to further economic uncertainty in Brazil and to heightened volatility and negative perception ofin the Brazilian securities markets whichand securities issued abroad by Brazilian companies. These and other developments in the Brazilian economy and governmental policies may adversely affect us and our business and results of operations and may adversely affect the trading price of our common shares.

Political crises, corruption scandals and deadlockSince 2014, Brazil’s economy has deteriorated. Only in Brazil have in the past affected and are currently affecting the development2017 has it shown initial signs of the Brazilian economy and the trust of foreign investors, as well as the public in general. Recent popular unrest has led to large demonstrations in the past three years, with the Brazilian populace expressing growing dissatisfaction with the country’s deteriorating political climate, corruption, mounting inflation,a slow GDP growth and high interest rates.

In addition and as a consequence to the above mentioned, since 2011, Brazil has experienced an economic slowdown.recovery. The Gross Domestic Product, or GDP, growthcontraction rates were a negative 3.8%(3.6)% in 2016 and (3.8)% in 2015, and a slightly growth of 0.1% in 2014, 2.7% in 2013, 1.8% in 2012 and 3.9% in 2011, compared to a GDP growth of 7.5% in 2010. In 2016, analysts project that2014. The Brazilian government projects the Brazilian GDP will contract 3.9%, according to a Focus Report publishedgrow by the Brazilian Central Bank on April 29, 2016.0.7% in 2017. Our results of operations and financial condition have been, and will continue to be, affected by the growth rate of the Brazilian GDP. We cannot assure you that the GDP will increase or remain stable. Developments in the Brazilian economy may affect Brazil’s growth rates and, consequently, the use of our products and services.

Political instability may adversely affect our business and results of operations and the price of our common shares and ADSs.

Brazilian markets have been experiencing heightened volatility due to the uncertainties derived from the ongoingLava Jato investigation, which is being conducted by the Federal Prosecutors’ Office, and its impact on the Brazilian economy and political environment. Numerous members of the Brazilian government and of the legislative branch, as well as senior officers of large state-owned and private companies have been convicted of political corruption of officials accepting bribes by means of kickbacks on contracts granted by the government to several infrastructure, oil and gas and construction companies. Profits from these kickbacks financed the political campaigns of political parties that were unaccounted for or not publicly disclosed, and served to further the personal enrichment of the recipients of the bribery scheme. As a result, a number of senior politicians, including congressmen and officers of the major state-owned and private companies in Brazil, resigned or have been arrested.

The ultimate outcome of these investigations is uncertain, but they have already had an adverse impact on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. The development of those unethical conduct cases has and may continue to adversely affect our business, financial condition and results of operations and the trading price ofour common shares and ADSs.

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In the event thereal depreciates in relation to the U.S. dollar, the cost inreais of our foreign currency-denominated borrowings and imports of raw materials, particularly coal and coke, will increase. On the other hand, if therealappreciates in relation to the U.S. dollar, it will causereal-denominated production costs to increase as a percentage of total production costs and cause our exports to be less competitive.competitive.We hadhave a total U.S. dollar-denominated or -linked indebtedness of R$18,38414,607 million or 53%48% of our total indebtedness, as of December 31, 2015. Because of thereal depreciation, the U.S. dollar-denominated debt increased by R$4,227 million compared to December 31, 2014.2016.

Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm us.

Historically, Brazil has inexperienced high inflation rates. Inflation and certain actions taken by the past experienced extremely high rates of inflation, which has ledCentral Bank to curb it have had significant negative effects on the government to pursue monetary policies that have contributed to one of the highest real interest rates in the world. SinceBrazilian economy. After the implementation of thePlano Real Plan in 1994, the annual rate of inflation in Brazil has decreased significantly, as measured by the National Broad Consumer Price Index (Índice Nacional de Preços ao Consumidor AmploAmplo), or IPCA).IPCA. Since 2014, and especially duringin the year of 2015, Brazil has again experienced high rates of inflation, andalthough the tendency is a continuing high levelindex of inflation for 2016.2016 has decreased compared to 2015. Inflation measured by the IPCA index was 5.9%6.4%, 6.4%10.7% and 10.7%6.3% in 2013, 2014, 2015 and 2015,2016, respectively. In 2017, analysts expect the inflation rate to converge towards the target of 3.0% established by the Central Bank of Brazil.

Inflation and the Brazilian government’s inflation containment measures mainly throughto fight it, principally the Central Bank monetary policies,policy, have had and may have significant effects on the Brazilian economy and our business.us. Tight monetary policies with high interest rates have restricted and may restrict Brazil’s growth and the availability of credit. Conversely, more lenient government and Central Bank policies and interest rate decreases have triggered and may trigger increases in inflation, withand, consequently, growth volatility and the consequent reaction ofneed for sudden and significant interest rate increases, which could negatively affect Brazilian economic growth and us. In addition, we may not be able to adjust the price of our products in the foreign markets to offset the effects of inflation in Brazil on our cost structure, given that most of our costs are incurred inreais.The Brazilian government has introduced introduced policies aimed at reducing inflationary pressures, which could have the effect of reducing the overall performance of the Brazilian economy.

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Prices charged for iron ore are subject to volatility. International iron ore prices have been decreasingmay decrease significantly and may have a negative impact on our revenues, cash flow, profitability, as well as result in a need to change the way we operate or in the suspension of certain of our projects and operations.

Our iron ore prices are based on a variety of pricing terms, which generally use market price indices as a basis for determining the customer price. Our prices and revenues for iron ore are consequentlyvolatile, which may adversely affect our results of operations and cash flow. In 2015,2016, average iron ore prices decreased 28.5%increased 5.3% to US$ 55.5/58.4/dmt, from US$96.7/55.5/dmt in 2014.2015. In 2014,2015, average iron ore prices decreased 42.6% to US$96.7/55.5/dmt from US$135.2/96.7/dmt in 2013,2014, according to the average Platts IODEX (62% Fe CFR China). On April 29th 2016,September 29, 2017, the index stood at US$65.85/61.35/dmt. As a result, revenues from our mining business decreased from 31% in 2013 to 23% in 2014 and 19% in 201525% of our total net revenues. in 2014 to 21% in 2015, and increased to 27% in 2016. A continuouspotential decrease in the market prices for iron ore may result in a need to change the way we operate or, depending on the level of price decreases, even in the suspension of certain of our projects and operations and impairment of assets, which could adversely affect our financial position and results of operations.

Adverse economic conditions in China and an increase in global iron ore production capacity could have a negative impact on our revenues, cash flow and profitability.

China has been the main driver of global demand for minerals and metals over the last past years, effectively driving global prices for iron ore and steel. In 2015,2016, China accounted for 70%72% of the global seaborne iron ore trade. The percentage of our iron ore sales volume consumed in China was around 60% in 2015.2016. China is also the largest world steel producer, accounting for approximately 50% of the global steel production.

A contraction of China’s economic growth could result in lower global demand for iron ore and steel and increase the global steel industryindustry’s over-capacity, leading to lower revenues, cash flow and profitability. Poor performance in the Chinese real estate sector and low investments in infrastructure, two of the largest markets for carbon steel in China, could also negatively impact our results. The ChinaChina’s GDP increased 6.7% in 2016 compared to 6.9% in 2015, compared to 7.3% in 2014 7.7% in 2013 and 7.7% in 2012.2013.

In addition, the recent strategyramp-up of theprojects started in past years by major iron ore suppliers to maintain their production targetscould affect seaborne iron ore prices and planned capacity increases could have a material adverse effectnegative impact on us and adverselyour revenues. In addition, the recent upsurge of iron ore prices could also stimulate high cost producers to resume operations, expanding our supply base, which may negatively affect our results of operations.      us.

We may not be able to adjust our mining production volume in a timely or cost-efficient manner in response to changes in demand.

Revenues from our mining business represented 31%25%, 25%21% and 19%27% of our total net revenues in 2013, 2014, 2015 and 2015,2016, respectively. Operating at significant idle capacity during periods of weak demand may expose us to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the high capital intensity of mining operations. In addition, efforts to reduce costs during periods of weak demand could be limited by labor regulations or existing labor or government agreements.

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Any prolonged interruption in the supply of raw materials, natural gas, or electricity, or substantial increases in their prices, could materially and adversely affect us. These interruptions and price increases may be a result of changes in laws or trade regulations, the availability and cost of transportation, suppliers’ allocations to other purchasers, interruptions in production by suppliers and/or accidents or similar events on suppliers’ premises or along the supply chain. Our inability to pass those cost increases on to our customers or to meet our customers’ demands because of non-availability of key raw materials could also have a material and adverse effect on us.

Our steel products face significant competition, including price competition, from other domestic or foreign producers, which may adversely affect our profitability and market share.

The global steel industry is highly competitive with respect to price, product quality and customer service, as well as technological advances that enable steel companies to reduce their production costs. Brazil’s export of steel products is influenced by several factors, including the protectionist policies of other countries, especially those of the United States, disputes regarding these policies before the WTO (World Trade Organization), the Brazilian government’s exchange rate policy and the growth rate of the world economy. Further, continuous advances in materials sciences and resulting technologies have given rise to improvements in products such as plastics, aluminum, ceramics and glass that permit them to substitute steel. Due to high start-up costs, the economics of operating a steelworks facility on a continuous basis may encourage mill operators to maintain high levels of output, even in times of low demand, which increases the pressure on industry profit margins. In addition, downward pressure on steel prices by our competitors may affect our profitability.

The steel industry has historically suffered from structural over-capacity which has worsened due to a substantial increase in production capacity in the developing world and particularly in China and India, as well as other emerging markets. China is now, by far, the largest global steel producer and, in addition, Chinese and certain steel exporting countries have favorable conditions (excess steel capacity, undervalued currency or higher market prices for steel in markets outside of such countries), which can have a significant impact on steel prices in other markets. If we are not able to remain competitive in relation to China or other steel-producing countries, our results may be adversely affected.

Since 2010, steel companies in Brazil have faced strong competition from imported products, mainly as a result of the global excess in steel production, reduction in demand for steel products in mature markets, exchange rate appreciation and tax incentives in some of the main exporting countries. Despite Brazilian import duties to protect domestic producers, a substantial volume of steel products is still being imported. If the Brazilian Government does not act against subsidizedsteel imports and there is an increase in imports, our results of operations may be materially and adversely affected. Apart from direct steel imports, the Brazilian industry has also been facing competition from imported finished goods, which affects the whole steel chain.

Protectionist and other measures adopted by foreign governments could adversely affect our export sales.  

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Our activities and the activities of our subsidiaries and joint ventures are subject to governmental authorizations, concessions, licenses or permits, which include environmental licenses for our infrastructure projects and concessions, including for the port terminals we operate and the railways in which we have an equity interest. Although we believe that such authorizations, concessions, licenses and permits will be granted and/or renewed as and when requested, we cannot guarantee that we will be able to maintain, renew or obtain any required authorization, concession, license or permit, as well as that no additional requirement will be imposed in connection with such request. Authorizations, concessions, licenses or permits required for the development of our activities may require that we meet certain performance thresholds or completion milestones. In case we are unable to meet these thresholds or milestones, we may lose or not be able to obtain or renew such authorizations, concessions, licenses or permits.permits, or under the terms of the new concession laws, claims for the amicable contractual termination and the subsequent re-bidding for concessions. We also cannot guarantee that we, or our controlled entities and our joint ventures that hold concessions will timely comply with our/their obligations under any relevant Concession Agreement or in Terms of Undertaking (Termos de Ajustamento de Conduta), or TACs, entered into with governmental agencies. AnyIn addition, we are exposed to supervision, penalties and fiscalization from the government controlling bodies, as the Brazilian court of these eventsaudit (Tribunal de Contas da União), or TCU, and regulatory agencies. A relevant breach of those obligations may result in the loss or early termination of concessions, authorizations, permits and/or licenses, the restriction of access to public financing for the concession or the amortization of the public financing before a project begins to operate, the acceleration or an event of default in indebtedness, related to the affected concession, permit or license or not, as well as the imposition of penalties, such as fines or the closure of facilities. In case of takeover or Concession Agreement termination due government default, if we are entitled to any indemnification from granting authorities for our investments in connection with concessions, permits or licenses, this indemnification may be insufficient to cover our costs, expenses or losses and may be paid long after the events affecting our concessions, permits or licenses, if at all. 

In addition, if laws and regulations applicable to these authorizations, concessions, permits or licenses change, modifications to our technologies and operations could be required, and we may need to make unexpected capital expenditures.expenditures, and capital expenditures that we have already made may not generate the returns we expected, if any. Especially concerning our mining activities, new, more stringent environmental licensing requirements for our projects andproject operations, specifically for our dams, could be imposed as a reaction by government to a major accident occurred in Brazil in 2015 involving the Fundão tailing dam of Samarco Mineração S.A.imposed. As a result, the amount and timing of future environmental and related expenditures may vary substantially from those currently anticipated and we may encounter delays in obtaining environmental or other operating licenses, or not be able to obtain and/or renew an authorization, permit and/or license.license and, therefore, may be exposed to civil responsabilities, administrative penalties, criminal sanctions and closure orders for non-compliance with these regulations. These events and additional costs may have a negative impact on our operations, profitability and the profitability ofreturn from our projects or even make certain projects economically or otherwise unfeasible. SeeFor more information, see “—Current,We are subject to environmental, health and safety incidents. Additionally, current, new or more stringent environmental, safety and health regulations imposed on us may result in increased liabilities and increased capital expenditures.”

Our activities are also subject to governmental regulation in the form of taxes, charges and royalties, which can have an important financial impact on our operations.In the countries where we are present, governments may impose new taxes, raise existing taxes and royalty rates, reduce tax exemptions and benefits or change the basis on which taxes are calculated in a manner that is unfavorable to us. For example,The the Brazilian Congress is currently reviewinggovernment charges us a royalty known as the Financial Compensation for Exploiting Mineral Resources (Compensação Financeira pela Exploração de Recursos Minerais), or CFEM, and a bill that proposes significant changes to the Mineral Code, including a potential increase of the inroyalties (CFEM) charged for our mining activities. Seeactivities, is currently under review bythe Brazilian Congress. For more information, see “Item 4B. Business Overview–Overview—Government Regulation and Other Legal Matters–Matters—Brazil –- Mining Regulation –MineralRegulation—Mineral Rights and Ownership.”

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The loss or inability to obtain and/or renew any authorization, concession, permit or license, or changes in the regulatory framework that we operate in, may materially and adversely affect us.

We cannot assure you that our credit ratings will not be lowered, suspended or withdrawn by the rating agencies.

Our credit ratings are limited in scope, and do not address all material risks relating to an investment in the notes, but rather reflect only the views of the rating agencies at the time the ratings are issued. These ratings may affect the cost and other terms upon which we are able to obtain funding and are subject to change either due to factors specific to us, trends in the industries we operate, or in credit and capital markets more generally. Our high level of indebtedness and other factors have recently resulted in decreases in our credit ratings. In 2016, Fitch Ratings, Moody’s and S&P have decreased our credit ratings from B+, B1 and BB-, respectively, to B-, Caa1 and B,CCC+, respectively, as of the date of this annual report. As of October 31, 2017, our Fitch Ratings, Moody’s and S&P credit ratings were B-, Caa2- and CCC-, respectively. Credit rating agencies regularly evaluate us and their ratings of our long-term debt are based on a number of factors, including our financial strength. We cannot assure that credit rating agencies will not downgrade our credit ratings any further, or that such credit ratings will remain in effect foreffectfor any given period of time or not be withdrawn entirely by the rating agencies, if, in the judgment of such rating agencies, circumstances so warrant.

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Our projects are subject to risks that may result in increased costs and/or delays or that could prevent their successful implementation.

We are investing to further increase our steel, mining and cement production capacity, as well as our logistics capabilities. See “Item 4D. Property, Plant and Equipment—Capital Expenditures—Planned Investments”.Investments.” These projects are subject to a number of risks that may adversely affect our growth prospects and profitability, including the following:

·     we may encounter delays, availability problems or higher than expected costs in obtaining the necessary equipment, services and materials to build and operate a project;

·     our efforts to develop projects according to schedule may be hampered by a lack of infrastructure, including availability of overburden and waste disposal areas as well as reliable power and water supplies;

·     we may fail to obtain, lose, or experience delays or higher than expected costs in obtaining or renewing the required permits, authorizations, licenses, concessions and/or regulatory approvals to build or continue a project; and

·     changes in market conditions, laws or regulations may make a project less profitable than expected or economically or otherwise unfeasible.

Any one or a combination of the factors described above may materially and adversely affect us.

Current,We are subject to environmental, health and safety incidents. Additionally, current, new or more stringent environmental, safety and health regulations imposed on us may result in increased liabilities and increased capital expenditures.

Our steel making, mining, cement, energy and logistics facilities are subject to a broad range of laws, regulations and permit requirements in Brazil relating mainly to the protection of health, safety and the environment.

Brazilian pollution standards are expected to continue to change, including the introduction of new effluent and air emission standards, water management and solid waste-handling regulations, wildlife maintenance regulations, restrictions on business expansions, native forest preservation requirements and the obligation to create privately owned conservation areas (Reserva(Reserva Particular do Patrimônio Natural)Natural), or RPPNs, as an environmental compensation for industrial and mining expansion projects. The Brazilian government has adopted a decree under the national policy for climate change (Política Nacional de Mudanças Climáticas) that contemplates a 5% reduction in carbon emissions projected for 2020 for the industrial sector (including steel making and cement sectors) and an action plan for the sector is being developed by a technical committee composed of representatives from the government, industry associations and academia. The target reduction for the mining sector is yet to be established. In addition, the state of Rio de Janeiro, through its State Environmental Agency (Instituto Estadual do Ambiente), or INEA, issued a law that requires steel making and cement facilities to present action plans to reduce greenhouse gas emissions when renewing or applying for operational licenses. In regard to air emission standards, the Environmental National Council, or CONAMA, issued a resolution that obliges steel companies to comply with certain restrictions until 2018. The federalBrazilian government has also established a national policy for solid waste (Política Nacional de Resíduos Sólidos), which provides for more strict guidelines for solid waste management and industry targets for reverse logistics as part of the environmental licensing process. Finally, a new regulatory framework for mining operations is currently being developed by the Department of Geology, Mining and Mineral Processing from the Ministry of MinesofMines and Energy, which may impose stricter regulations on our mining operations, including requests for environmental recovery of areas and investments for the granting of mining concessions.

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In addition, we may be requested to enter into Terms of Undertaking (Termos(Termos de Ajustamento de Conduta)Conduta), or TACs, with Brazilian regulators and agencies that require us to minimize or eliminate the risk of environmental impacts in the areas where we operate. If we are unable to comply with a TAC in a timely manner, we may be exposed to penalties, such as fines, revocation of permits, or closure of facilities. See “Item 4B. Government Regulation and Other Legal Matters – Matters—Environmental Expenditures and Claims and Item 8A –8A. Financial Information – Information—Consolidated Statements and Other Financial Information – Information—Legal Proceedings”.Proceedings.”

Our governance and compliance procedures may fail to prevent regulatory penalties and reputational harm.

We operate in a global environment, and our activities straddle multiple jurisdictions and complex regulatory frameworks with increased enforcement activities worldwide. Our governance and compliance procedures may not prevent breaches of law, accounting and/or governance standards. We may be subject to breaches of our Code of Ethics, business conduct protocols and instances of fraudulent behavior and dishonesty by our employees, contractors or other agents. Our employees or our employees’, contractors’ or other agents’ failure to comply with applicable laws and other standards could subject us to fines, loss of operating licenses and reputational harm, as well as other penalties, which may materially and adversely affect us.

We may fail to maintain an effective system of internal controls, which could prevent us from timely and accurately reporting our financial results

The Company's internal controls over financial reporting may not prevent or detect misstatements on a timely manner due to inherent limitations, including human error, circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If the Company fails to maintain the adequacy of its internal controls, including any failure to implement new or improved required controls, the Company's business and financial results could be harmed and the Company could fail to meet its financial reporting obligations. In this regard, and in connection with management’s evaluation of the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2015, management determined that the Company did not maintain effective controls over the Significant Unusual Transactions (SUT) and that the ineffective control over SUT constitutes a material weakness.

While the Company is in the process of improving its internal controls, the material weakness will continue to exist until the remediation actions are fully implemented and tested. If the new controls being implemented to address the material weakness and to strengthen the overall internal control over accounting for SUT do not operate effectively, or if the Company is unsuccessful in implementing or maintaining these new controls or is otherwise unable to remediate this material weakness, the Company’s financial reporting may be disclosed untimely or with inaccuracies, which could negatively impact the Company’s business and financial results.

Some of our operations depend on joint ventures, jointly controlled entities, consortia and other forms of cooperation, and our business could be adversely affected if our partners fail to observe their commitments.

We currently operate parts of our business through joint ventures, strategic alliances and consortia with other companies. We have, among others, established a strategic alliance with an Asian consortium at our controlled investee Congonhas Minérios S.A., or Congonhas, to mine iron ore, a joint venture with other Brazilian steel and mining companies at MRS Logística S.A., or MRS, to explore railway transportation in the Southeastern region of Brazil, a joint venture with certain Brazilian governmental entities at Transnordestina Logística S.A., or TLSA, to explore railway transportation in the Northeastern region of Brazil, a joint venture with Tractebel Energia S.A. and Cia. de Cimento Itambé at Itá Energética S.A., or ITASA, to produce electricity, and a consortium with Vale S.A., Votorantim Metais Zinco S.A., CEMIG Geração e Transmissão S.A. and Anglo Gold Ashant Córrego do Sítio Mineração S.A. at Igarapava Hydroelectric Power Plant to produce electricity.

Our forecasts and plans for theseis strategic alliances, joint ventures and consortia assume that our partners will observe their obligations to make capital contributions, purchase products and, in some cases, provide managerial personnel or financing. In addition, many of the projects contemplated by our joint ventures or consortia rely on financing commitments, which contain certain preconditions for each disbursement. If any of our partners fails to observe their commitments or we fail to comply with all preconditions required under our financing commitments or other partnership arrangements, the affected joint venture, consortium or other project may not be able to operate in accordance with its business plans, or we may have to increase the level of our investment to implement these plans. In addition, certain of our joint venture agreements provide for customary dispute and deadlock resolutionmechanisms, as well as put and call options exercisable under certain circumstances, which may require us to incur disbursements. Any of these events may have an adverse effect on us.

Drilling and production risks could adversely affect the mining process.

Once mineral deposits are discovered, it can take a number of years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change.  Substantial time and expenditures are required to:

·      establish mineral reserves through drilling;

·determine appropriate mining and metallurgical processes for optimizing the recovery of metal contained in ore;

·      obtain environmental and other licenses;

·      construct mining, processing facilities and infrastructure required for greenfield properties; and

·      obtain the ore or extract the minerals from the ore.

If a mining project proves not to be economically feasible by the time we are able to profit from it, we may incur substantial losses and be obliged to take write-offs.  In addition, potential changes or complications involving metallurgical and other technological processes arising during the life of a project may result in delays and cost overruns that may render the project not economically feasible.

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We are currently and may in the future be a party to legal proceedings and judicial, administrative or arbitration claims. For some of these legal proceedings and claims, we have not established a provision on our balance sheet or have only established provisions for part of the amounts in question, based on our external or internal counsel’s judgment as to the likelihood of an outcome favorable to us.

Although we are contesting such proceedings and claims, the outcome of each specific proceeding and claim is uncertain and may result in obligations that could materially and adversely affect our business and the value of our shares and ADSs. See “Item 8A. Consolidated Statements and Other Financial Information—Legal Proceedings” for additional information.

Risks Relating to our Common Shares and ADSs

Our controlling shareholder has the ability to direct our business and affairs and its interests could conflict with yours.

Our controlling shareholder has the power to, among other things, elect a majority of our directors and determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations, acquisitions, dispositions, the destination and diversification of our investments, and the timing and payment of any future dividends, subject to minimum dividend payment requirements imposed under Brazilian Corporate Law. Our controlling shareholder may have an interest in pursuing acquisitions, dispositions, financings or similar transactions that could conflict with your interests as a holder of our common shares and ADSs. For a description of our ownership structure, see “Item 7A. Major Shareholders”.Shareholders.”

If you surrender your ADSs and withdraw common shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.

As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our common shares underlying the ADSs in Brazil, which allows the custodian to convert dividends and other distributions with respect to the common shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw common shares, you will be entitled to continue to rely on the custodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal. Thereafter, upon the disposition of, or distributions relating to, the common shares, you will not be able to remit abroad non-Brazilian currency unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration. If you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our common shares. For more information regarding exchange controls, see “Item 10.D.10D. Exchange Controls”.Controls.” If you seek to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to ourcommon shares or the return of your capital in a timely manner. The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.

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The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the common shares underlying the ADSs at the price and time you desire.

Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature. The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States. The ten largest companies in terms of market capitalization represented 40%55% of the total market capitalization of the BM&FBOVESPAB3 as of December 31, 2015.2016. The top ten stocks in terms of trading volume accounted for 45%, 46%, 47.2% and 36.9%47.2% of all shares traded on the BM&FBOVESPAB3 in 2016, 2015 2014 and 2013,2014, respectively. Accordingly, although you are entitled to withdraw the common shares underlying the ADSs from the depositary at any time, your ability to sell the common shares underlying the ADSs at a price and time at which you wish to do so may be substantially limited.

Holders of ADSs may be unable to exercise preemptive rights with respect to our common shares.

We may not be able to offer our common shares to U.S. holders of ADSs pursuant to preemptive rights granted to holders of our common shares in connection with any future issuance of our common shares unless a registration statement under the Securities Act is effective with respect to such common shares and preemptive rights, or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement relating to preemptive rights with respect to our common shares or to undertake steps that may be needed to find exemptions from registration that are available, and we cannot assure you that we will file any such registration statement or take any such steps. If such a registration statement is not filed and an exemption from registration does not exist. Theexist, the JP Morgan Chase Bank, N.A., as depositary, may attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of such sale. However, these preemptive rights will expire if the depositary does not sell them, and U.S. holders of ADSs will not realize any value from the granting of such preemptive rights. For a more complete description of preemptive rights with respect to the underlying shares, see “Item 10B. Memorandum and Articles of Association—Preemptive Rights”. Rights.”

A decrease in our market capitalization may increase volatility.

       In recent years our market capitalization has decreased and as a result the volatility in the trading price of our common shares and ADSs has increased. Any further decreases in our market capitalization may further increase volatility.  In 2015,2016, the trading price of our ADSs dropped for a certain period below the levels required by the listing standards of the New York Stock Exchange (“NYSE”).  If the trading price of our ADSs again drops below those levels, we may be required to do a reverse stock split or a ratio change of the number of common shares per ADS in order to regain compliance with NYSE´sNYSE’s listing standards.

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