global nondeal roadshow

Information about global nondeal roadshow

Published on April 11, 2008

Author: Melinda

Source: authorstream.com

Content

Slide1:  November 2002 Companhia Vale do Rio Doce Slide2:  Disclaimer ”This presentation may contain statements that express management’s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward-looking statements, and CVRD cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian economy and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore business and its dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which CVRD operates. For additional information on factors that could cause CVRD’s actual results to differ from expectations reflected in forward-looking statements, please see CVRD’s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.” Contents:  Contents Corporate Highlights Macroeconomic Outlook Corporate Governance Business Strategy Financial Performance Investment Appeal Slide4:  Corporate Highlights The Largest Diversified Mining Company of the Americas:  The Largest Diversified Mining Company of the Americas Manganese and Ferro-alloys Iron Ore and Pellets Railroads and Ports Aluminum Bauxite, Alumina and Aluminum Copper, Gold and Nickel Steel Industrial Minerals Kaolin and Potash Slide6:  The Best Iron Ore * The Tex Report, Friday, September 27, 2002 Fines Higher Iron Contents (%) Fines Lower Levels of Impurities (%) Fe Content Phosforus Content Silica and Alumina Content “The analytical results on ore grade at unloading ports with ship-to-ship varieties of imported iron ore by Japanese steel mills for fiscal year 2001 (April 2001 - March 2002) unveiled that, among major fines ore brands of fines, Brazilian fines of CVRD contained high Fe, limited impurities, which are suitable for ironmaking, and had stable and high grade with little ship-to-ship varieties.”* Slide7:  Source: CVRD Global Market Leadership in Iron Ore & Pellets Estimated market size in 2001 = 450 million tons Iron Ore Seaborne Trade 9M02 sales volume 120.2 million tons Leveraged to the Global Economy:  Leveraged to the Global Economy 84% of revenues and 28% of costs are USD-linked By Market By Currency Gross Operating Revenues 9M02 = US$ 3,191 million Slide9:  Free Float Increased as a Result of the Global Offering Others 34.0% Valepar - Principal Shareholder 27.5% Free Float 38.5% 70% Foreign Investors Brazilian Investors 30% Others 13.1% Valepar - Principal Shareholder 27.5% Free Float 59.4% Dec 1999 Sept 2002 64% Foreign Investors Brazilian Investors 36% Slide10:  Golden Share - Limited Powers The Brazilian Government holds a Golden Share, which confers veto rights over: 1. a change in the Company’s name; 2. a change in the location of the Company’s head office; 3. a change in CVRD corporate purpose as regards the exploration of mineral deposits; 4. The continued operation of CVRD integrated iron ore mining systems. Slide11:  Macroeconomic Outlook Slide12:  Global GDP growth prospects are not bright Short Term Macroeconomic Outlook 2003 is likely to be the third consecutive year of below trend growth due to an engineless global growth dynamic. Leading indicators are signalling a US sluggish growth for the near future. IMF cut its Euroland growth forecast for 2002 from 0.9% to 0.75% and from 2.3% to 2.0% for 2003. Current ECB monetary policy is pro-cyclical. Japanese export-led recovery is losing steam. There are indicators that the fragile economic recovery may have peaked. China is the notable exception in a struggling global economy. Export growth, infrastructure spending and FDI are powering fast GDP growth. China is becoming a powerful driver of metals and mining markets. It is boosting the demand for steel, iron ore, alumina and copper. Slide13:  Brazil Major changes in the Brazilian macroeconomic policy regime are not likely. Tight monetary policy limiting pass-through of the BRL depreciation to domestic prices. GDP growth: slow pace. Growth of agricultural output, exports and a repressed demand for logistics services will continue to fuel CVRD railroad and port services expansion. A smaller current account deficit - from US$ 27 billion in May 2001 to US$ 13 billion in September 2002 - seems sustainable, although additional real depreciation of the BRL is not expected. Market expects further reductions in current account deficit, US$ 11 billion by yearend. Strong fiscal stance: primary fiscal surplus of 3.88% of GDP in 2002 and 3.75% in 2003. Manageable public debt. Short Term Macroeconomic Outlook Slide14:  Corporate Governance Slide15:  Corporate Governance Model Shareholders Board of Directors CEO Executive Board Strategic Finance Governance and Ethics Executive Development Audit Committees Board of Directors focused on strategic planning and supervision of Company’s performance. Committees help to facilitate and to improve quality of Board of Directors decisions. Executive Board was empowered and has a clear definition of its roles and responsibilities. Slide16:  Following the implementation of its corporate governance model, announced in October 2001, CVRD is developing new initiatives designed to improve its corporate governance practices, strengthening financial transparency, information disclosure and protection to investor rights. Walking the Talk Dividend distribution policy Each year CVRD will announce, until January 31, a minimum dividend per share in USD to be paid in April and October, in line with the expected performance for the Company. During the year, depending on the actual performance of the Company, CVRD may pay an additional dividend per share in April and October. Disclosure policy. Creates a Disclosure Committee. Enforces simultaneity of information flows. Eliminates information asymmetry. Intensive use of information technology to ensure global diffusion of information. Slide17:  Walking the Talk CVRD securities trading policy Minimizes risks of privileged information use by CVRD management on its own benefit. Limits management purchases and sales of CVRD securities to stock options programs and individual medium term investment programs. Establishes blackout periods for trading. Code of Ethics for CVRD financial managers Requires high standards of ethics from professionals who deal with insider information and large sized financial transactions. Slide18:  Business Strategy CVRD Enjoys Many Different Paths to Profitable Growth, but Organic Growth is our Priority:  CVRD Enjoys Many Different Paths to Profitable Growth, but Organic Growth is our Priority Mineral exploration Greenfield projects Acquisitions Brownfield projects Slide20:  2002 2003 2004 2005 2006 2007 Hydroelectric Power Plants Iron Ore and Pellets Logistics Industrial Minerals Copper Aluminum Nickel Brownfield Projects Greenfield Projects Organic Growth Opportunities and Value Creation CVRD has a project pipeline for 2003/2007 involving capital expenditures of approximately US$ 6 billion. Expected after taxes rates of return higher than 15% Slide21:  Iron Ore and Pellets Strategy Combine large scale production with tailor made products and technical assistance in order to furnish complete burden solutions for our clients; Expand sales in the growing Chinese market (principally fines); Expand pellet sales in the growing direct charge market (lump and pellets). Slide22:  Increasing of reserves through exploration in Brazil; Improving processes in mines and plants; Better use of fine ore; Expanding presence in growing markets. Manganese and Ferro Alloys Strategy Copper Strategy Organic growth & opportunistic acquisitions:  Copper Strategy Organic growth & opportunistic acquisitions Implementation of Sossego, 118, IB Phase IV; Alemão, Cristalino and Salobo as CVRD operations to capture all the operating and administrative synergies. Keep the exploration effort at Carajás to improve CVRD reserves base and projects life. Start exploring abroad to replace the mainstream effort at Carajás in the future. Sossego & 118 - Sulphide and Oxide Project Integrated Plan :  Sossego 118/Oxide Additional oxide ore from Sossego to 118/Oxide project: 17 million tonnes with 1.47% Cu Additional sulphide ore from 118 to Sossego Project: > 50 miliion tonnes with Copper grade >= 1.2 % Cu Sossego & 118 - Sulphide and Oxide Project Integrated Plan Instead of two independent projects, CVRD will operate Sossego & 118 as an integrated mine, with three open pits (Sossego, Sequeirinho and 118) feeding two plants: a flotation plant for sulphide ore and a SxEw plant for oxide ore. Sossego 118 Progress construction PFS concl. Sulphide (million tonnes) 196 50 Grade (% Cu) 1.0% 1.2% Oxide (million tonnes) 17 57 Grade (% Cu) 1.46% 1.0% Stripping ratio (w/o) 3.58 2.8 Process flotation SxEw Copper recovery 92% 68% Concentrate output (kty) 470 Concentrate grade 30% Cu Cathode output (kty) 40 Copper production (kty) 140 40 Gold recovery 80% Mine life (y) 16 11 CAPEX (US$ million) 384 150 Slide25:  IB Phase IV Alemão Progress PFS concl. Appraisal S. Sulphide (million tonnes) 15 200 Grade (% Cu) 1.57% 1.52% Grade (g/t Au) 1.37 0.92 Stripping ratio (w/o) 7.5 5.7 Process flotation Copper recovery 93% 90% Gold recovery 80% 80% Concentrate output (kty) 110 670 Copper production (kty) 36 210 Mine life (y) 6 14 CAPEX (US$ million) 55 508 IB Phase IV Alemão IB Phase IV & Alemão Project Integrated Plan IB Phase IV concept is to adapt existing gold mine facilities and anticipate copper concentrate production from Alemão deposit. The IB Phase IV pit will reduce Alemão pre-stripping (from 150 to 103 million tonnes), representing a synergy of US$ 50 million. Slide26:  Salobo Project Salobo Progress Re-appraisal Study Reserves (million tonnes) 740 Grade (% Cu) 0.87% Grade (g/t Au) 0.52 Stripping ratio (w/o) 2.8 Process flotation Copper recovery 85% Gold recovery 63% Concentrate grade (% Cu) 38% CVRD is about to conclude a final study to select the best approach for Salobo. Salobo Project Four options are being assessed::  Salobo Project Four options are being assessed: CESL Brownfield Greenfield Custom Smelter Smelter Smelter Copper production (kt) 200 200 200 200 Production start-up 2009 2006 2007 2006 Product cathode cathode cathode concentrate Identified Synergies:  Identified Synergies 1- Sossego oxide 2- 118 sulphide 3- Alemão pre-stripping 4- Incorporation of copper mines into CVRD operations 5- Satellite deposits 6- Logistics 7- Infrastructure Projects Schedule:  Projects Schedule 2002 2003 2005 Jul/04 2004 2006 2007 2008 Nov/02 Operation Jul/03 Jun/05 Sep/02 Mar/03 Nov/04 Dec/04 Jun/07 Jul/03 Jul/04 Dec/06 Apr/02 Feasibility Construction Construction Pre-Feasibility Feasibility Construction Pre-Feasibility Feasibility Construction Pre-Feasibility Feasibility Construction Pre-Feasibility Feasibility Construction jan/06 Oct/03 Sossego 118/Oxide IB Phase IV Alemão Cristalino Salobo Operation Operation Operation Operation Operation STATUS PROJECTS Dec/04 Dec/07 Vermelho Operation Feasibility Construction Pre-Feasibility Oct/03 Slide30:  Given the expected growth in smelting capacity, driven by some producers with no internal alumina production capacity, we believe that the alumina price will trade at a higher long term level (from 12.5% to 13% LME). We expect global primary aluminum demand to grow at an average annual rate of 2.5% from 2002 to 2015, below GDP long term growth trend. This will require an additional capacity of approximately 50 million tons of bauxite and 20 million tons of alumina. Aluminum Industry Overview and Outlook Slide31:  Our strategic focus is on the upstream of the aluminum production chain, bauxite and alumina. Opportunistic approach: CVRD may acquire minority equity stakes in low cost smelters abroad as a way to become exclusive supplier of alumina on a long term basis. We do have some important competitive advantages in bauxite and alumina production. Aluminum Strategy Slide32:  CVRD owns high quality bauxite reserves estimated at 2.68 billion tons, representing 11% of world reserves. Alunorte, our alumina refinery, has very low conversion costs and world class safety and environmental protection standards. Its capacity can be expanded up to 6.1 million tons. Besides superior asset quality, the competitiveness of the bauxite-alumina operation is leveraged by efficient logistics. Competitive Advantages Bauxite and Alumina Slide33:  CVRD Bauxite Reserves Paragominas is the largest bauxite district. Its bauxite is very similar to Trombetas in terms of quality: (a) tri-hydrate bauxite; (b) no organics; (c) 49% to 50% Al2O3 Trombetas 320 million tons Almeirim 120 million tons Paragominas 2 billion tons Tiracambu 240 million tons Maranhão Pará Slide34:  Alunorte Wagerup Jamalco Worsley 343 374 460 480 Brownfield projects CAPEX cost - US$ per ton How Good is the Alunorte Project? Sources: Brook Hunt and CVRD Slide35:  How Good is the Alunorte Operation? Global Conversion Cost Curve ALUNORTE US$ 65 per ton US$/ton Cumulative Capacity (1,000 tpy) Conversion Cost = Cash Cost - Bauxite Cost Sources: CRU and Aluvale Slide36:  CVRD Aluminum Operations and Logistics CVRD Mineral Rights - Paragominas District GURUPI FUTURO JABUTI MILTONEA CAMOAI Atlantic Ocean RAILROAD PIPELINE MARAJÓ ISLAND Scale CARAJÁS Ponta da Madeira Port Albras (Aluminum Smelter) Alunorte (Alumina Refinery) PPSA PARAGOMINAS Vila do Conde Port CARAJÁS TROMBETAS Slide37:  Brownfield Projects Strategy Execution Capacity Expansion CAPEX Start-up million tons US$ million From to Bauxite MRN (Trombetas) 11.0 16.3 223 1Q 03 Alumina Alunorte 1.6 2.4 286 January 2003 Slide38:  We are studying the development of a new bauxite mine, wholly owned by CVRD, at the Paragominas bauxite district. Simultaneously, we are analyzing further expansions of Alunorte’s capacity. Strategy Execution Power Generation Strategy:  Power Generation Strategy Selective investments in hydroelectric generation assets. Power generation capacity as a hedge against price and supply volatility. CVRD Electricity Generation and Consumption:  CVRD Electricity Generation and Consumption 1,000 MWh 12,467 14,510 15,788 16,598 18,928 19,600 21,362 21,381 21,603 Generation/Consumption Logistics Strategy :  Logistics Strategy Provider of transportation services Horizon 1 Value added to customer Horizon 2 Manager of transportation and related services Logistics services provider Horizon 3 Time Quest for operational excellence Broadening services menu Focus on technology Slide42:  Strategy Execution Focus on maximization of asset utilization to maximize ROIC -> ntks per active loco per day/ ntks per active wagon per day Focus on cost savings -> use of Locotrol to maximize ntks per liter of fuel. Integration of CVRD transportation assets -> FCA/EFVM/Tubarão port, Norte Sul/EFC/Ponta da Madeira port Exploration of intermodal connectivity -> trains/trucks, trains/ports/coastal shipping. New services -> scheduled trains -> Campinas/Salvador (2,890 km), Anápolis/Port of Santos, Brasília/Port of Santos. Transporting Soybeans:  Transporting Soybeans Truck Transportation Railroad Transportation Port of Tubarão Grain Silos EFVM FCA Slide44:  Financial Performance Slide45:  US$ million US GAAP Weathering the downcycle and leveraging off the upturn CAGR (97/01) = 41.7% Years of global recession Slide46:  US$ million US GAAP EBITDA EBITDA / Sales CAGR (97/01) = 13.3% Weathering the downcycle and leveraging off the upturn Steady cash flow and high margins Years of global recession Strong Cash Flow Supports Growth Initiatives:  Strong Cash Flow Supports Growth Initiatives US GAAP EBITDA / CAPEX CAPEX US$ million A Sound Balance Sheet:  EV = Market Capitalization + Total Debt 1Q 02 2Q 02 3Q 02 Total Debt 3,935 3,914 3,579 Net Debt 1,927 2,342 2,177 EBITDA/Interest Coverage (x) 8.07 7.35 9.29 Total Debt/LTM EBITDA (x) 2.28 2.17 2.02 Total Debt/EV (%) 27.2 27.1 29.2 A Sound Balance Sheet US GAAP US$ million As of September 30, 2002 Slide49:  Investment Appeal Slide50:  Polymineral reserves - from iron ore to PGMs -, world class assets, availability of core competencies in mining and logistics and cost & investment discipline allow us to expect a continuous value creation. CVRD has been a Consistent Value Adder Economic Profit = US$ 1,445 million WACC 12% * annualized Slide51:  Investment Appeal A clearly defined long term strategy. Good strategy execution: customer focus, cost and investment discipline, conservative financial policy, focus on shareholder value creation. Global market leadership in iron ore - stability with high profitability. World class mining assets capable of earning above average market returns. A pipeline of profitable growth opportunities. Strong and stable cash flow allows us to meet dividend expectations and capex funding without concerns about short term cash disruptions. Last but not least, CVRD is traded at a discount to its peers. Slide52:  www.cvrd.com.br e-mail: [email protected] CVRD - The Best of Brazil

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