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.Â 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).