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Ferrous Minerals

The Iron Ore Market & CVRD’s Long Term Commitment to the Steel IndustryThe Iron Ore Market & CVRD’s Long Term Commitment to the Steel Industry

MINING LOGISTICSCVRD ENERGY                                                                      

2nd International Meeting on Ironmaking1st International Symposium on Iron Ore

September 12 - 15, 2004 - Vitória - Espírito Santo – Brazil

22

Ferrous MineralsThe largest diversified mining The largest diversified mining company of the Americascompany of the Americas

CVRD

World Class AssetsManganese Manganese and and

Ferro-alloysFerro-alloys

Manganese Manganese and and

Ferro-alloysFerro-alloys

Iron Ore and Iron Ore and PelletsPellets

Iron Ore and Iron Ore and PelletsPellets

LogisticsLogistics LogisticsLogistics

AluminiumAluminiumBauxite, Bauxite,

Alumina and Alumina and AluminiumAluminium

AluminiumAluminiumBauxite, Bauxite,

Alumina and Alumina and AluminiumAluminium

Copper, Gold Copper, Gold and Nickeland Nickel

Copper, Gold Copper, Gold and Nickeland Nickel

SteelSteelSteelSteel

Industrial Industrial MineralsMinerals

Kaolin and PotashKaolin and Potash

Industrial Industrial MineralsMinerals

Kaolin and PotashKaolin and Potash

                              

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Ferrous Minerals

Ferrous minerals

55%

Aluminum15%

Logistics15%

Non-ferrous minerals

15%

Sources of Cash GenerationSources of Cash Generation

Ferrous minerals

78%

Aluminum9%

Logistics9%

Non-ferrous minerals

2%

Others2%

20032003 2010E2010E

The Ferrous Minerals business is and will continue to be CVRD’s largest revenue generator

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Ferrous Minerals

Sepetiba

Northern System

Pelletizing PlantSão Luís 6 Mtpa

Reserves of Carajás

1.5 billion tons

Carajás Railroad892 km

Ponta da Madeira Port

70 Mtpa

Southern System

Pelletizing Complex30 Mtpa

Reserves CVRD Minas Gerais State

3.4 billion tons

Vitória to Minas Railroad905 km

Tubarão+ Sepetiba Ports

100 MtpaUrucum1 Mtpa

3

2 1

Produc.Cap. (Mtpa) 2003IO Pellets Sales (Mt)

Samarco 50 Brazil 2 14 16

MBR 60 Brazil 36 - 36

GIIC 50 Bahrain - 4 4

Localization% CVRD

3

2

1

Flexibility & ReliabilityFlexibility & Reliability

CVRD can produce & deliver fines, pellets and lump from both systems

55

Ferrous MineralsCVRD´s contribution to the CVRD´s contribution to the Brazilian economy recoveryBrazilian economy recovery

Investments of US$ 1.8 billion in 2004

Annualized exports of US$ 4 billion in 1Q04 - nearly 15% of

total Brazilian trade balance surplus.

100

1100

2100

3100

4100

5100

1999 2000 2001 2002 2003

CVRD Exports (US$ million)CVRD Exports (US$ million)

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Ferrous Minerals

The ‘soft landing’ of the Chinese economy has not been The ‘soft landing’ of the Chinese economy has not been translated into steel production. There has been no landing at translated into steel production. There has been no landing at all!all!

Chinese crude steel productionChinese crude steel production

Chinese Crude Steel ProductionChinese Crude Steel Production

Source: Deutsche Bank (Basic Materials Chartbook, 30/07/04)

Mt

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Ferrous Minerals

0

50

100

150

200

250

300

75 80 85 90 95 ´00 ´03 ´04E ´10E

Finished steel consumption in China may reach 275 Kg/cap by 2010

Steel consumption in China shows a strong potential for growth

179 Kg per capita

0 200 400 600 800 1000

SouthKorea

Japan

EU-15

USA

China

Brazil

India20032003

Source: IISI, CVRD

Steel ConsumptionSteel Consumption

KgKg

...

Finished steel consumption Finished steel consumption per capita - Chinaper capita - China

88

Ferrous MineralsCHINA: YesterdayCHINA: Yesterday

PudongPudong

99

Ferrous MineralsCHINA: NowCHINA: Now

PudongPudong

1010

Ferrous MineralsThe China FactorThe China Factor

China is the key driver of global iron ore tradeChina is the key driver of global iron ore trade

Steel production is growing at a rapid rate.

Seaborne iron ore demand is growing at an even higher pace.

China’s requirement of high quality fines and pellets is increasing due to its need for:

– Higher productivity;

– Efficiency gains;

– Improvements in steel product quality;

– Lower emissions.

China is committed to infrastructure development.

Improvements have been made that provide the conditions to receive larger volumes of Brazilian ore more efficiently.

1111

Ferrous Minerals

100

120

140

160

180

200

220

240

92 93 94 95 96 97 98 99 ´ 00 ´ 01 ´ 02 ´ 03 ´ 04E ´ 05E ´ 10E

World Steel Production

World Pig I ron Production

Seaborne I ron Ore Demand

Iron Ore seaborne demand should maintain a higher growth rate than steel and pig iron production

Sources: Pig Iron/Steel Production: IISI; IO seaborne: Fearnleys(f) Forecasts: CRU and CVRD

19

92

= 1

00

19

92

= 1

00

Seaborne Iron Ore DemandSeaborne Iron Ore Demand

...

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Ferrous Minerals

Source: CVRD

Seaborne Iron Ore DemandSeaborne Iron Ore Demand

Between 2003 and 2010, seaborne iron ore demand will grow 5% p.a. and China will account for 90% of this growth.

411454 452

484

537

740

CAGR 99-10

+5.5%

+17.6%

+1.3%Rest of the

World

China

World

(Mt)

China´s share in world seaborne trade

China´s share in world seaborne trade

...

575

´0223%´0223%

´0328%´0328%

´04E31%´04E31%

´10E45%´10E45%

...

347

605

´05E34%´05E34%

......

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Ferrous MineralsBrazilian SBrazilian Steel Market Trendsteel Market Trends

Brazilian steel sector is on course to lift its crude steel capacity to 40 Mtpa by 2007 from the current 34 Mtpa.

Source: Credit Suisse First Boston, Aug2004

Source: IBS (Instituto Brasileiro de Siderurgia)

0

10

20

30

40

50

94 96 98 ´ 00 ´ 02 ´ 04E ´ 06E ´ 08E

Production CapacityProductionApparent Consumption

Crude SteelCrude SteelMtMt

CVRD is investing to comply with the need of

the steel industry

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Ferrous MineralsInvestment Capability is Key Investment Capability is Key

From 2000 to 2003, CVRD total investment reached US$ 6 billion. US$ 3.8 billion, representing 63% of the total amount, were dedicated to the iron ore business.

E - Budgeted

Source: CVRD

CVRD CapexCVRD CapexUS$ millionUS$ million

850 870

426

380 386

328

473

360

2000 2001 2002 2003 2004E

1,602 1,537

898

1,9881,815

Iron Ore Capex = Acquisitions + Organic growth

1,230 1,256899

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Ferrous Minerals

from to start-up Capex US$ per ton

million tons per yearmillion tons per year

CVRD is investing in iron ore capacity expansion to meet growing Brazilian and global seaborne demand

Iron Ore Capacity Expansion Iron Ore Capacity Expansion

Carajás 56 70 2004

10.28

Carajás 70 85 2006

12.30

Itabira 43 46 2006

18.70

Brucutu I - 12 2006

12.22

Brucutu II 12 24 2008

n.a.

Fábrica Nova I - 10 2005

5.67

Fábrica Nova II 10 15 2007

5.67

Fazendão - 14 2006

6.35

Total Capex* : US$ 706 millionTotal Capex* : US$ 706 million

* Excludes Brucutu II Capex

n.a.: not available

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Ferrous MineralsConclusionConclusion

CVRDCVRD’’s strategy is aligned with markets strategy is aligned with market needs needs

Investing to meet increasing demand;

Able to produce and to load iron ore products according to

clients´ needs, focusing on value-in-use to customers;

Stability of supply of high quality iron ore in a changing

resource base;

Long term contracts maximizing CVRD´s potential to

optmize the steel industry value chain.

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Ferrous Minerals

CVRDCVRDThe Iron Ore CompanyThe Iron Ore Company