CVRD says delay in eco-licenses is shelving projects

Unclear environmental legislation subject is hampering the investments of Brazilian mining and metals giant CVRD (NYSE: RIO), Roger Agnelli, the company's president, told journalists on Thursday. "No one will want to invest in Brazil if all the groundwork and preparation is laid out for the investment but when it's time to start operations, the environmental license is held up," he said. CVRD might have to shut down its Urucum iron ore and manganese mine in Mato Grosso do Sul state - operation since 1908 - due to difficulties in obtaining further environmental permitting, CVRD executives said. "There are two issues involved," Armando Santos, VP of CVRD's ferrous division, told BNamericas. First, the company needs a license to clear vegetation and continue drilling to determine in what direction the mine's expansion will go, he said. Second, the environment ministry is using the license renewal as a pretext to charge a new environmental compensation tax amounting to 3.5% of the value of the investment, Santos said. "We are fighting the tax in court," the VP said. Urucum has a production capacity of 1Mt/y of iron ore, shipped to clients in Argentina and Paraguay, as well as manganese that is sent to a ferroalloy division in Corumba, Brazil. PARAGOMINAS CVRD has shelved the planned Paragominas bauxite mine and slurry pipe because of delays in receiving an environmental license from authorities in Para state. Instead, the bauxite supplies for alumina subsidiary Alunorte will come from Guyana and increased supplies from subsidiary MRN, Agnelli said. "We decided against the mine because we ended up missing the timing of the deal," Agnelli said, adding that Guyana's supplies will amount to 500,000t-2Mt of bauxite. Para state officials allegedly delayed the license to pressure CVRD into investing in a steel mill in their state instead of neighboring Maranhao. CVRD'S SOCIAL AND ECO-INVESTMENTS CVRD executives stressed the company's investments in social projects and the environment. Annual investments in social projects reach US$12mn and at the company's new copper projects in Carajas, Para, an additional US$13mn was invested in a hospital, school, day care, a road and a police station, among other things. Annual capex in environmental protection averages US$40mn. In 2003, CVRD planted 7.5 million tree saplings - making it the country's largest tree nursery. It also recovered 200ha of exhausted mining lands in 2002-2003 for which US$81mn has been set aside. Rio de Janeiro-based CVRD is Latin America's largest diversified mining company.