CVRD Budgets $6.334 Billion for 2007 Capital Expenditures

- CVRD has budgeted $6.334 billion for capital spending on organic growth and maintenance The budget consolidates planned capital expenditures for CVRD Inco, which the company acquired in late 2006, and is the largest capex budget in the company’s history. During 2006, CVRD invested $4.5 billion for organic growth and maintenance of existing operations. The company also made four acquisitions during 2006 at a total cost of $21.5 billion: Inco ($19 billion), Caemi ($2.4 billion), Rio Verde Mineração ($47 million), and Valesul ($27.5 million).

Maintenance of existing CVRD operations during 2007 is budgeted at $1.698 billion. Of this total, $477 million is allotted to former Inco nickel operations in Ontario and Manitoba. A total of $4.64 billion is to be invested in organic growth, including $4.23 billion for project development and $406 million for research and development.

A partial listing of major CVRD projects now in the development stage in Brazil (with total estimated capital expenditure) includes the 15.8 million mt/y Fazendão iron ore mine ($129 million), scheduled for completion during the first quarter of 2008; the 7 million mt/y Itabiritos iron ore concentrator and pellet plant ($759 million), scheduled for startup during the second half of 2008; the 36,000 mt/y 118 copper mine and SX/EW operation ($232 million), scheduled for startup during the first half of 2009; the 58,000 mt/y Onça Puma nickel mine ($1.44 billion), scheduled for startup during the second half of 2008; and the 46,000 mt/y Vermelho nickel mine ($1.45 billion), which is currently in the permitting process.

The CVRD budget announcement does not comment specifically on estimated costs for the Goro laterite nickel project in New Caledonia, which is under review, or the processing plant for Voisey’s Bay nickel concentrates, which is being studied for possible development in Newfoundland.

In a press release announcing its 2007 capex budget, CVRD noted that, “Th resumption in investment by the mining and metals industry, rising raw material prices, and the appreciation of mineral exporting countries’ currencies against the U.S. dollar–such as the Brazilian real and the Canadian dollar–have all contributed to a sharp increase in the cost of mining projects. The price of equipment and engineering services has risen substantially since 2003, which has contributed to a major increase in the unit cost of mining projects throughout the world.