Companhia Vale do Rio Doce Reaping the fruits of the long cycle Rio de Janeiro, August 25, 2005
Disclaimer Disclaimer ”This presentation may contain statements that express management’s expectations about future events or results rather than historical facts. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in forward- looking statements, and CVRD cannot give assurance that such statements will prove correct. These risks and uncertainties include factors: relating to the Brazilian economy and securities markets, which exhibit volatility and can be adversely affected by developments in other countries; relating to the iron ore business and its dependence on the global steel industry, which is cyclical in nature; and relating to the highly competitive industries in which CVRD operates. For additional information on factors that could cause CVRD’s actual results to differ from expectations reflected in forward-looking statements, please see CVRD’s reports filed with the Brazilian Comissão de Valores Mobiliários and the U.S. Securities and Exchange Commission.” 2
CVRD launches dividend reinvestment plan CVRD launches dividend reinvestment plan � Automatic purchase of CVRD shares with dividends received by shareholders. � Mechanism designed for retail investors. � Stimulates savings at low costs. � Purchase of small number of shares with transaction costs equivalent of large operations. 3
Agenda Agenda � Riding high � Market fundamentals strengthen 4
Riding high Riding high 5
CVRD delivered the best quarterly results of CVRD delivered the best quarterly results of its history its history records YoY � Iron ore production 60.7 Mt 17.8% � Iron ore & pellets sales 62.4 Mt 11.8% � Gross revenues US$ 3.7 billion 83.0% � Adjusted EBIT US$ 1.8 billion 112.9% � Adjusted EBITDA US$ 2.0 billion 109.4% � Net earnings US$ 1.6 billion 223.4% 6
A strong global demand and investment in capacity A strong global demand and investment in capacity expansion allowed CVRD to achieve a new all-time expansion allowed CVRD to achieve a new all-time high in iron ore & pellets shipments high in iron ore & pellets shipments Capão Fábrica Xavier Nova Carajás 70 Mtpy São Luís 70 30% 62.4 61.8 60.5 59.8 60 55.7 55.8 25% 53.1 53.0 51.4 50.3 50 20% % yoy growth million tons 40 14.7% 14.0% 12.9% 15% 11.8% 30 11.0% 8.6% 10% 20 5.1% 5.2% 5.1% 2.6% 5% 10 0 0% 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 ª Proforma data for 2002 and 2003. It includes Caemi data to facilitate comparison. 7
The flip side of the long cycle: cost pressures. The flip side of the long cycle: cost pressures. However, price pressures on cost are easing However, price pressures on cost are easing Contribution to cost increase¹ 2T05 vs 2T04² 2T05 vs 1T05³ 41.3% 35.2% 33.7% 27.5% 20.4% 14.0% 13.5% 10.7% 3.7% 0.0% BRL appreciation Volumes Iron ore purchases Depreciation Prices ¹ COGS + SG&A ² US$ 625 million ³ US$ 283 million 8
Revenue growth was the main driver of yoy Revenue growth was the main driver of yoy (1) (1) adjusted EBITDA increase adjusted EBITDA increase US$ million (44) 57 (173) 66 173 depreciation others 2,033 983 dividends and BRL received amortization volumes appreciation 971 prices 2Q04 2Q05 9
Thirteen consecutive quarters of adjusted Thirteen consecutive quarters of adjusted EBITDA growth EBITDA growth 2Q05 adjusted EBITDA LTM adjusted EBITDA US$ 2.033 billion US$ billion Others 1.1% Logistics 6.4% Non ferrous Ferrous minerals minerals 2.2% 83.0% Aluminum 7.3% 5.034 3.972 3.722 3.289 2.912 2.431 2.130 2.000 1.890 1.780 1.825 1.686 1.587 1.515 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 10
We believe CVRD cash generation will be more We believe CVRD cash generation will be more diversified in the future diversified in the future EBITDA composition estimated for 2010 EBITDA composition estimated for 2010 Coal 3% Logistics Ferrous 9% minerals 65% Non ferrous minerals 10% Aluminum 13% 11
Starting to benefit from the investment Starting to benefit from the investment grade rating grade rating CVRD 2013 CVRD 2034¹ 172 bp 175 8-Jul => rating announcement spreads in basis points 150 110 bp 151 bp 125 Moody’s Baa3 100 97 bp DBRS BBB low 75 l l l l l l l l l o o o o o o u u u u u u u u u g g g g g g J J J J J J J J J - - - - - - - - - A A A A A A 7 0 3 6 9 2 5 8 1 - - - - - - 0 1 1 1 1 2 2 2 3 3 6 9 2 5 8 0 0 0 1 1 1 Source: JP Morgan ¹ Spreads between the Brazilian sovereign debt and bonds issued by CVRD with maturity in 2013 and 2034. 12
Green light for Vermelho Green light for Vermelho 1H05 Capex – US$ 1.4 billion Projects US$ 1,018 Stay-in- million business US$ 303 million Vermelho nickel project Capex: US$ 1.2 billion R&D Start up: 4Q08 US$ 71 million Capacity: 46,000 tpy nickel 2,800 tpy cobalt Opex: US$ 1.67/lb Ni 13
The new value creation platform: infrastructure The new value creation platform: infrastructure improvement improvement � Ponta da Madeira Fourth shiploader and third car dumper. 85 Mtpy Mtpy capacity capacity 85 more flexibility more flexibility � Aimorés Full operation in October. Meeting the Southern Meeting the Southern System energy needs System energy needs 14
The new value creation platform: production The new value creation platform: production capacity expansion capacity expansion � Potash - Taquari–Vassouras: ramp up to increase the mine to 850,000 tpy. 710,000 t in 2005 and 850,000 t in 2006 710,000 t in 2005 and 850,000 t in 2006 � Alumina - Alunorte stages 4&5: additional capacity of 1.8 Mtpy, ramp up will start in 1Q06. 3.8 Mt in 2006 and 4.3 Mt in 2007 3.8 Mt in 2006 and 4.3 Mt in 2007 15
CVRD alumina expansion, a low cost project in a high CVRD alumina expansion, a low cost project in a high price environment: global alumina shortage is not price environment: global alumina shortage is not expected to be corrected in 2006 expected to be corrected in 2006 Alumina spot prices % of LME 3 month aluminum price 600 30% 500 25% 400 20% US$ per ton % 300 15% 200 10% 100 5% 0 0% Jan-98 Aug-98 Mar-99 Oct-99 May-00 Dec-00 Jul-01 Feb-02 Sep-02 Apr-03 Nov-03 Jun-04 Jan-05 Aug-05 Sources: Metal Bulletin, LME and Bloomberg 16
Iron ore capacity expansion, supported by LT Iron ore capacity expansion, supported by LT contracts, will allow CVRD production to contracts, will allow CVRD production to reach 275 Mt in 2007 reach 275 Mt in 2007 Estimated production increase million tons (10) 5 3 11 (14) 15 275 24 Itabira Fábrica Fazendão Depletion 30 Fábrica Ramp up 211 Brucutu Nova Carajás 1H05 output: 112.1 Mt 2004 2007E 17
CVRD ROIC remains high, despite the strong CVRD ROIC remains high, despite the strong BRL appreciation BRL appreciation ROIC 1,5 % BRL/USD 38.2 2 35.2 31.4 30.1 2,5 24.9 3 3,5 4 2001 2002 2003 2004 2005¹ ¹ LTM ended at June 30, 2005 18
Shaping the future – CVRD is starting to develop a Shaping the future – CVRD is starting to develop a global portfolio of mineral exploration projects global portfolio of mineral exploration projects legend 1 - conceptual study 2 - pre-feasibility study 3 - feasibility study Peru Brazil Bayóvar Piauí – SJ Piauí nickel¹ phosphates² Gabon Carajás – Cristalino copper³ Franceville Pará – bauxite¹ Australia manganese² Belvedere coal² Pará – copper¹ Argentina Goiás – Agua Branca nickel¹ Mozambique Rio Colorado potash¹ Minas Gerais – iron ore³ Moatize coal³ 19
Market fundamentals strengthen Market fundamentals strengthen 20
Leading indicators are signaling a synchronized Leading indicators are signaling a synchronized acceleration of global IP growth, supporting a acceleration of global IP growth, supporting a strong demand for mineral products strong demand for mineral products manufacturing PMIs 65 USA Japan Euroland Global 60 55 index 50 45 40 2002 2003 2004 2005 Sources: JPMorgan and ISM 21
Chinese GDP is growing above 9% for the eighth Chinese GDP is growing above 9% for the eighth consecutive quarter. FAI high growth anticipates consecutive quarter. FAI high growth anticipates domestic steel consumption to remain stronger for domestic steel consumption to remain stronger for longer longer 40 70 Apparent steel consumption 60 Fixed asset investments (FAI) 30 50 million tons 40 YoY % 20 30 20 10 10 0 0 2000 2001 2002 2003 2004 2005 22
Chinese steel exports are loosing strength, Chinese steel exports are loosing strength, reflecting the internal consumption increase reflecting the internal consumption increase net imports 5 4 3 million tons 2 net exports 1 0 -1 -2 4 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 4 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - - - - - - - - - - - y v y n b r r n l g p t c n b r r n l a u c a u p e p a e a u u e o a e a u J O J M A M A F M A S N D F M J J J J net imports = imports - exports 23
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