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CVRD to Invest US$ 11 Billion in 2008

10/15/2007 - Companhia Vale do Rio Doce’s Board of Directors approves an investment budget of US$ 11.0 billion for 2008, representing the largest annual investment program ever undertaken by CVRD or by any mining company in the world.

Companhia Vale do Rio Doce (CVRD) announced that its Board of Directors has approved an investment budget of US$ 11.0 billion for 2008, representing the largest annual investment program ever undertaken by CVRD or by any mining company in the world.
 

Companhia Vale do Rio Doce’s US$ 11.0 billion investment budget of for 2008 concentrates on organic growth and continued development of a wide portfolio of projects founded on its world-class asset base.
 
With the implementation of its strategic plan, CVRD's goals include maintaining a solid increase in cash generation, production of substantial shareholder value, and the creation of thousands of new jobs.
The 2008 budget is part of the firm's strategic plan and underpins the 5-year, U$59-billion investment program. It involves a significant increase in capex for organic growth as compared with the period 2003-2007, estimated at US$ 18 billion.

 
The company says its decision to invest on such a large scale is based on its confidence in the long-term fundamentals of the global economy, and on the belief in a structural change in the demand for minerals and metals.
 
The company will concentrate on organic growth, developing a wide portfolio of projects founded on its world-class asset base. In order to support the expansion, CVRD will invest heavily in logistics infrastructure and energy generation. This investment process is anchored a rigorous, disciplined management of capital allocation, research excellence, development of projects and operations, and in corporate social responsibility.
 
The company will place priority on the financing of growth-related activities, within a framework of a solid balance sheet and a low-risk debt profile.
 
According to the company, completion of the planned investments should lead to a significant increase in its main products. In the case of iron-ore, production in 2012 should reach 422 million tonnes, with production by the end of the same year running at 450 million tonnes.
 
With the implementation of the strategic plan, the company's goal is to maintain a solid increase in cash generation, produce substantial shareholder value, and create thousands of new jobs. This process is rooted in the company's basic values: ethical standards, transparency, emphasis on corporate social responsibility, respect for life and diversity, entrepreneurial spirit and the ongoing quest for operational excellence.
 
CVRD’s investment program involves more than 30 projects, located in Brazil, Peru, Chile, Canada, Australia, Indonesia, New Caledonia, Mozambique and Oman. Investments in Brazil will account for 73% of the budgeted resources for 2008, an amount of US$ 8 billion.
 
Of the 2008 budget, US$ 8.436 billion will be invested in organic growth, corresponding to 76.7% of total spending, with US$ 7.552 billion going to project execution and US$ 884 million in R&D. Expenses with R&D include US$ 349 million set aside for the mineral exploration program.
 
Investments to support existing operations are estimated at US$ 2.563 billion, which represents an increase of US$ 568 million over the amount budgeted for 2007 (U$ 1.995 billion). The increase is due in part to growth in asset base, as well as the need to significantly increase investments in the Canadian nickel operations, which had received little investment in the past. Consequently, in 2008, US$ 1,019 billion will be dedicated to nickel operations.
 
US$ 3.618 billion will be invested on non-ferrous minerals, some 32.9% of total capex for 2008, considering the final phases of Goro and Onca Puma, both important nickel projects, and the beginning of development of
Vermelho (nickel), Totten (nickel), Salobo I (copper), Papomono (copper) and Bayovar (phosphate).
 
Growth in iron-ore production capacity to 450 million tonnes/year will require heavy investment in the development of new mines, plant construction, and increased logistics infrastructure. For the ferrous minerals businesses US$ 3.251 billion is set apart for 2008, whilst US$ 1.870 billion will go to logistics; of this amount for logistics, US$ 1.152 billion will go to supporting growth in iron-ore production capacity, US$ 755 million for aluminum, US$ 470 million for energy generation and US$ 390 million for coal.
 
In terms of financial disbursements, CVRD’s main projects in 2008 are:
  • Carajas 130 million tonnes/year (US$ 1.165 billion)
  • Goro (US$ 723 million)
  • Onca Puma (US$ 581 million)
  • Salobo I (US$ 387 million)
  • Alunorte 6&7 (US$ 382 million)
  • Itabiritos (US$ 341 million)
  • Serra Sul (US$ 145 million)
  • Additional investments in logistics:
    • Southern Corridor (US$ 379 million)
    • Northern Corridor (US$ 334 million)
  • Additional investments in energy generation:
  • Barcarena (US$ 188 million)
  • Estreito (US$ 165 million).