Brazil’s CVRD to Invest Record US$ 11 Bi in 2008 and US$ 59 Bi in 5 Years

Brazil's CVRD Companhia Vale do Rio Doce (CVRD), a Brazilian company which is the world's largest producer and exporter of iron ore has approved an investment budget of US$ 11 billion for 2008. According to the mining giant this is not only the largest annual investment program ever undertaken by CVRD but also by any mining company in any place in the world.

The 2008 budget is part of the firm's strategic plan and underpins the 5 year, U$ 59 billion investment program and consequently involves a significant increase in capital expenditure for organic growth as compared with the period 2003-2007, estimated at US$ 18 billion. The firm intends to more than double its production of copper and significantly increase the output of nickel and iron ore.

"The decision to invest on such a huge scale," stated the company in a press release, "is firmly based on our 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 promises to concentrate on organic growth, with the development of a worldwide portfolio of projects. In order to support this expansion, CVRD intends to invest heavily in logistics infrastructure and energy generation.

The planned investments should lead to a significant increase in CVRD's main products. In the case of iron-ore, production in 2012 should reach 422 million metric tons (mmt), with production by the end of the same year running at 450 mmt.

Says CVRD: "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."

The program announced 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. This represents an increase of US$ 568 million over the amount budgeted for 2007 (U$ 1.995 billion).

This is explained by the growth in asset base and by the need to increase significantly 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 Onça 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 Mtpa 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.

The main projects in terms of financial disbursements in 2008 are: Carajás 130 Mtpy (US$ 1.165 billion), Goro (US$ 723 million), Onça Puma (US$ 581 million), Salobo I (US$ 387 million), Alunorte 6&7 (US$ 382 million), Itabiritos (US$ 341 million), Serra Sul (US$ 145 million), along with investments in logistics – Southern Corridor (US$ 379 million) and Northern Corridor (US$ 334 million) – and energy generation, Barcarena (US$ 188 million) and Estreito (US$ 165 million).



  • Show Comments (9)

  • conceicao

    I would rather be in Rio Doce’s position as a dominant iron ore exporter than trying to survive as a Chinese steel manufacturer in a fragmented global market. China is
    currently investing an unsustainably high percentage of its GDP into capital spending including construction. Rio Doce will still be selling profitably into global markets
    and the Brasilian steel sector will continue its gradual build out when China is dealing with its inevitable capital spending hangover. There is no reason that a country like Brasil cannot make good profits overtime exporting commodities; if the market distortions in the developed countries like import tariffs, agricultural subsidies, and tax
    preferences were elminated, a lot of these Brasilian commmodity exporters would become great businesses. Also, don’t fall into the trap of overrating China like
    everyone did before the Asian melt-down a decade ago. Brasil’s per capita GDP is still far higher than China’s and, thus, China’s work force, by definition, is far more
    deserving of the description “slave labor”.

  • fernando

    Good chc
    I agreed with you! you are finally making a point here, its was constructive comment. i believe that you are a well educate person and you also like brasil in some way, so keep like this. i think this is what brasil need, constructive ideias,less corruption,more education and definitely strong punishment for corruption. brasil has a big resource potential otherwise we would be sink in deep shit!
    ha i also make caipiroska! and i like better than the cachaca one ! 8) 8)

  • João da Silva

    [quote]It is interesting to note that the world biggest steel producer by far is from INDIA, itself a poor country, and NOT BRAZIL the world largest iron ore producer.
    And even by producing STEEL outside Brazil, as the Indian company also already does, this would generate higher profits than selling IRON ORE to others.In doing so you would also acquire technology so that the second phase should be producing alloys, generating even higher profits than steel plates or rolls.

    Correct me if I am wrong. You must be talking about MITTAL. Didnt that guy buy Acenor?

    [quote]Just think of it…..China is simply doing what Brazil should/could do !!!!!!!. [/quote]

    We were doing it till we were forbidden by your friends in the government 😉

  • ch.c.

    “write something that we could use”
    Take over foreign steel manufacturers and increse your steel production both locally and externally..
    So that ypu export STEEL INSTEAD OF IRON ORE.
    That is already a higher value product.

    It is interesting to note that the world biggest steel producer by far is from INDIA, itself a poor country, and NOT BRAZIL the world largest iron ore producer.
    And even by producing STEEL outside Brazil, as the Indian company also already does, this would generate higher profits than selling IRON ORE to others.In doing so you would also acquire technology so that the second phase should be producing alloys, generating even higher profits than steel plates or rolls.
    Cia Vale doesnt produce only iron ore but many different metals, especially since their takeover of INCO in 2006 for nearly US$ 20 billion.
    Thus obliging China and others to buy more value added products, THEY WOULD NOT EXPORT LESS BUT IMPORT MORE !
    Just think of it.You could even use your own charcoal made mostly by slaves alike workers….instead of exporting the charcoal to developed countries such as Japan, the USA and the EU !

    Just think of it again and again. The chain of added value just stops when it reaches the point of a final product….such as cars/trucks.

    Who is stupid enough to export BASIC commodites only ?
    Brazil !
    When in fact Brazil should have the place that China has…if you were LESS idiots !

    Just think of it…..China is simply doing what Brazil should/could do !!!!!!!.

  • ch.c.

    Thank you Fernando and Joao !
    for your info I dont really like cachaÀƒ§a alcohol.

    But I do enjoy drinking Caipiroska. (True)
    As you know….same as caipirinha but with vodka instead of cachaÀƒ§a !

    😉 😀

  • João da Silva

    [quote]Come to see me, when you have any time to take a holiday, i give you a caipirinha free!!!! [/quote]

    Willie, you better accept FernandoÀ‚´s offer. He sounds to be a hospitable and generous person. Also he seems to know about “Value Added Product”. I am sure he will make a good Capirinha out of pure Ethanol and serve you FREE! 😉

    Fernando, serve one more to him on my behalf, please. 😉

  • fernando

    good mate!
    You just said, what i want to hear! but i still here in maresias SP by the beach, running “pousada and about the weather i dont need to say anything, you know tropicalSo why should i stress about it? its been like this for so many years. i think we should use this website as a place to talk about ideas to change this not to make worst. stop! say what we already know and come up with anything that could help. if you dont agree with the article, write something that we could use. otherwise dont waste your time. Time means money in the way that you might take your live! Come to see me, when you have any time to take a holiday, i give you a caipirinha free!!!! 8) 8) 8)

  • ch.c.

    Of course………fernando !
    Extracting iron ore from the ground is energy extensive…..AND NOT HIGH TECH….BUT LOW TECH !

    Even idiots all over the world could do that with Caterpillar, Komatsu tractors, dozers, foreign trucks. and GE locomotives.

    Just look… Africa, a continent full of BASIC commodities in the ground.
    That still doesnt make their exports with added value.
    Therefore why should it be….with Brazil ?????

    You may as well look at the over 500 millions tons of sugarcane you produce. How much does that generate for sugar and ethanol producers ?????
    And of those 500 millions tons, well over 60′ %…are manually harvested, just like 200 years ago, proving how backward Brazil is, and knowing that mechanical harvester exist for several decades.
    Australia, for example, have 100 % of their sugarcane mechanilly harvested….since 1979/80 !!!!!
    And still, no australian pretend that sugarcane generates high added value to the products generated…from sugarcane !!!!!

    Same for OJ, coffee, timber just to name another few products for which Brazil shines for its productions.

    Brazil is known worldwide to export BASIC commodites……wether you like or not !
    And also for smuggling money…..out of the country !
    Well over 100 billion BRL were smuggled out of the country during 1998-2002 !
    And your Central Bank just said nothing or viewed nothing….despite it was illegal.
    But Palocci your previous finance minister discovered in 48 hours that an innocent brazilian had a bank account…in a brazilian bank….worth BRL 30’000.- or so !!!!
    Funny that your government officials can locate BRL 30^000.- but not the thousands of Brazilians who smuggled illegally well over BRL 100 billion.
    I just remind you, that you senate voted NOT to open an investgation. Reason being because 90 politiicians were clearly named
    in the report.
    The vote took place in December 2004. Just scroll the news in this site, and you could see that I invent…..NOTHING !!!!

    Fernando, be proud with your exports prowess, totalling less than US$ 1000.- annually…per capita !!!!!!


    Viva Bin Lula and his 4000 thieves !!!!

    😀 😉

  • fernando

    so CHC
    Are you going to make any comment about that?

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