CVRD Boosts Its Planned 2007 Capital Spending to $7.35 Billion

CVRD increased its 2007 capital-spending budget by about $1 billion to $7.351 billion as of late April 2007, up from a planned $6.334 billion announced in January (E&MJ, March 2007, p. 18). CVRD Inco’s Goro laterite nickel project in New Caledonia is the largest beneficiary of the increase, with 2007 spending on the project now planned at $938 million, up from an earlier total of $680 million. Goro will produce 60,000 mt/y of finished nickel and 4,600 mt/y of cobalt. Production is scheduled to start in 2009.

CVRD Inco’s Onça Puma laterite nickel project in Brazil also is targeted for a substantial spending increase during 2007, up from $615 million announced in January to $658 million currently. Onça Puma will have capacity to produce 58,000 mt/y of nickel. Construction began in July 2006, and startup is scheduled for the second half of 2008.

In other news, CVRD reported in early May that it has entered into a 25- year shipping contract with BW Shipping that includes provision for construction of four iron-ore carriers, each having a capacity of 388,000 dwt, which will be the largest in the world. The first of the new ore carriers is scheduled to come into service in 2011, delivering economies of scale and contributing significantly toward a reduction in the volatility of landed costs of CVRD iron ores in China.

Additionally, CVRD has entered into a separate contract with BW Shipping for conversion of a very large crude oil carrier to a very large ore carrier. The converted vessel will be placed in Brazil-China shuttle service in 2008.

CVRD noted that China, with a 22.3% increase, was the main driver of rapidly growing steel demand. China’s imports of iron ore during the quarter climbed to 417.8 million mt, a 28% increase from 326.3 million mt imported a year earlier. CVRD’s shipments of iron ore to China during the quarter totaled 21.7 million mt, accounting for 32.5% of the company’s shipments, up from 26.9% a year earlier.