CVRD capex costs below market averages

Brazilian mining and metals giant CVRD (NYSE: RIO) pays some of the lowest investment costs for new projects coming on line, Roberto Castello Branco, the company's head of investor relations, told BNamericas. "Our average rate of return on new investments is 40% in dollar terms," he said. The company's four iron ore expansion projects' (costs) are lower than the US$22/t that London-based mining house Rio Tinto (LSE: RIO) is investing to develop a new iron ore deposit in Australia, Branco said. Two of CVRD's iron ore greenfield projects, Brucutu and Fabrica Nova cost US$12.22/t and US$5.67t/, respectively, to develop. And the Carajas and Gongo Soco/Itabira brownfield projects are forecast to cost US$10.29/t and US$7.14/t, respectively. At the Paragominas bauxite mine, which will have capacity of 4.5Mt/y when it comes on line in 1Q06, CVRD now forecasts costs at US$60/t. The amount is higher than previous estimates of US$49/t released in March this year. The bauxite will be transported by a 210km slurry pipe from the mine to CVRD-controlled alumina producer Alunorte. "The cost of the slurry pipe will be relatively cheaper because it will be built alongside an existing slurry pipe," Branco said. The cost of constructing no. 4 and 5 production lines at Alunorte, boosting installed capacity by 1.8Mt/y to 4.2Mt/y in 1Q06, is put at US$324/t. "The world average for alumina projects is US$450/t," the CVRD official said. In March, CVRD estimated the expansion project would cost US$364/t. The Sossego copper project, designed to produce 140,000t/y, has capex of US$2,434/t and is expected to be completed in the second quarter of 2004. And Taquari Vassouras underground potassium mine expansion to produce 250,000t in 3Q05 is slated to cost US$191/t. Rio de Janeiro-based CVRD, the world's largest iron ore producer, has a market value of over US$14bn.