CVRD plans to invest US$ 6.3 billion in 2007

Brazilian mining giant Companhia Vale do Rio Doce (RIO), or CVRD, said Friday that it will invest $6.3 billion to expand production at its mines in 2007, with 40% of its budget aimed at increasing non-ferrous metals output.

The 2007 capex budget represents a 40% increase from 2006, when CVRD invested $4.5 billion.

In a statement, CVRD said that the 2007 capex budget would be focused on consolidating its acquisitions last year, especially CVRD Inco. CVRD Inco, which is responsible for the company's nickel projects, accounts for $1.45 billion of the 2007 capex budget.

CVRD also said that several large projects currently underway, including the Itabiritos iron ore mine, the Onca Puma nickel project and expansion of the Alunorte alumina smelter and refinery, would see heavy investments in 2007.

The company underscored its commitment to diversifying its mineral portfolio, with the lion's share of CVRD's 2007 investment budget aimed at developing non-ferrous metal projects.

Non-ferrous metals investments were pegged at $2.55 billion, slightly more than 40% of the overall capex budget.

However, CVRD said that the key Goro nickel deposit was still under review. CVRD did not provide any funding or development details about the project in its statement.

The Goro project is one of the world's largest nickel mines currently under development, with expected production capacity of 60,000 metric tons per year. Goro is seen as a key swing factor in the critically tight nickel market, as well as a key foothold for CVRD in its expansion in the Asia Pacific region.

Last year, development costs of the mine surged to $3 billion, up from previous estimates of $2.15 billion. The reevaluation of the mine has also pushed back its production schedule. Goro was expected to be completed by mid-2008, with output ramping up to installed capacity of 60,000 metric tons per year over the next 20 months. Now, initial production is expected by end-2008.

On a more positive note, CVRD is moving quickly ahead with development of the Onca Puma nickel deposit in northern Brazil's Para state.

CVRD will invest $613 million to develop the mine, which has an installed production capacity of 58,000 metric tons per year. Onca Puma is expected to enter production in the fourth quarter of 2008 at a total development cost of $1.4 billion.

The nearby Vermelho nickel project, however, is still plodding through the licensing process, CVRD said.

Despite the concentration on non-ferrous metals output, CVRD did not neglect its position as the world's largest producer and exporter of iron ore and iron pellets in the 2007 capex budget.

Some 26% of the 2007 investment funds, or $1.6 billion, will be used to expand output at the company's iron ore mines and pellet plants.

The main projects on tap for the year include development of the Itabiritos pellet plant complex for $385 million. The pellet plant will produce 7 million metric tons of iron blast furnace pellets annually. It's expected to enter operation in the first quarter of 2008.

In addition, $101 million will be invested in the Fazendao iron ore mine. Fazendao is expected to produce 15.8 million metric tons of iron ore per year when it enters operation in the first quarter of 2008.

CVRD's Samarco unit, which is a joint venture with miner BHP Billiton (BHP), is investing $1.2 billion to build a third pellet plant at Ubu in the Atlantic coast state of Espirito Santo.

The plant, which will be fed with ore from the Fazendao mine, will produce 7.6 million metric tons of iron pellets when it enters operation in the first half of 2008.

The company also plans to continue expanding its bauxite and alumina output in 2007.

The Alunorte smelter and refinery will see investments of $846 million to install the No. 6 and No. 7 modules, which will boost alumina ouptut by an additional 1.9 million metric tons per year. The project is expected to be completed by mid-2008.

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