Reaping the fruits of the long cycle Rio de Janeiro, August 25, 2005 - - PowerPoint PPT Presentation

Companhia Vale do Rio Doce

Reaping the fruits of the long cycle

Rio de Janeiro, August 25, 2005

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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.”

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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.

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Agenda Agenda

Riding high Market fundamentals strengthen

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Riding high Riding high

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CVRD delivered the best quarterly results of its history CVRD delivered the best quarterly results of its history

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%

records

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ª Proforma data for 2002 and 2003. It includes Caemi data to facilitate comparison.

62.4 59.8 61.8 60.5 55.8 53.0 55.7 53.1 51.4 50.3 11.8% 14.7% 5.1% 2.6% 5.1% 5.2% 8.6% 14.0% 11.0% 12.9%

10 20 30 40 50 60 70

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 million tons

0% 5% 10% 15% 20% 25% 30%

% yoy growth

São Luís Carajás 70 Mtpy Capão Xavier

A strong global demand and investment in capacity expansion allowed CVRD to achieve a new all-time high in iron ore & pellets shipments A strong global demand and investment in capacity expansion allowed CVRD to achieve a new all-time high in iron ore & pellets shipments

Fábrica Nova

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The flip side of the long cycle: cost pressures. However, price pressures on cost are easing The flip side of the long cycle: cost pressures. However, price pressures on cost are easing

¹ COGS + SG&A ² US$ 625 million ³ US$ 283 million 41.3% 3.7% 13.5% 14.0% 27.5% 33.7% 10.7% 35.2% 0.0% 20.4% BRL appreciation Volumes Iron ore purchases Depreciation Prices

2T05 vs 2T04² 2T05 vs 1T05³

Contribution to cost increase¹

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Revenue growth was the main driver of yoy adjusted EBITDA increase Revenue growth was the main driver of yoy adjusted EBITDA increase

2,033

US$ million

2Q04 2Q05 BRL appreciation volumes prices

• thers

971 173 66 (44) dividends received 57 983 depreciation and amortization (173)

(1) (1)

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5.034 3.972 3.722 3.289 2.912 1.515 1.587 1.686 1.780 1.825 1.890 2.000 2.130 2.431

1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

Thirteen consecutive quarters of adjusted EBITDA growth Thirteen consecutive quarters of adjusted EBITDA growth

LTM adjusted EBITDA US$ billion

Others 1.1% Logistics 6.4% Non ferrous minerals 2.2% Aluminum 7.3% Ferrous minerals 83.0%

2Q05 adjusted EBITDA US$ 2.033 billion

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We believe CVRD cash generation will be more diversified in the future We believe CVRD cash generation will be more diversified in the future

Ferrous minerals 65% Aluminum 13% Non ferrous minerals 10% Logistics 9% Coal 3%

EBITDA composition estimated for 2010 EBITDA composition estimated for 2010

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Starting to benefit from the investment grade rating Starting to benefit from the investment grade rating

75 100 125 150 175

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• spreads in basis points

CVRD 2013 CVRD 2034¹

Source: JP Morgan ¹ Spreads between the Brazilian sovereign debt and bonds issued by CVRD with maturity in 2013 and 2034.

8-Jul => rating announcement 97 bp 172 bp 110 bp 151 bp Moody’s Baa3 DBRS BBB low

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Green light for Vermelho Green light for Vermelho

R&D US$ 71 million Projects US$ 1,018 million Stay-in- business US$ 303 million

1H05 Capex – US$ 1.4 billion Vermelho nickel project

Capex: US$ 1.2 billion Start up: 4Q08 Capacity: 46,000 tpy nickel 2,800 tpy cobalt Opex: US$ 1.67/lb Ni

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The new value creation platform: infrastructure improvement The new value creation platform: infrastructure improvement Ponta da Madeira

Fourth shiploader and third car dumper.

Aimorés

Full operation in October. 85 85 Mtpy Mtpy capacity capacity more flexibility more flexibility Meeting the Southern Meeting the Southern System energy needs System energy needs

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The new value creation platform: production capacity expansion The new value creation platform: production capacity expansion

Potash

• Taquari–Vassouras: ramp up to increase the

mine to 850,000 tpy. Alumina

• Alunorte stages 4&5: additional capacity of 1.8

Mtpy, ramp up will start in 1Q06. 710,000 t in 2005 and 850,000 t in 2006 710,000 t in 2005 and 850,000 t in 2006 3.8 Mt in 2006 and 4.3 Mt in 2007 3.8 Mt in 2006 and 4.3 Mt in 2007

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100 200 300 400 500 600 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 US$ per ton 0% 5% 10% 15% 20% 25% 30% % Alumina spot prices % of LME 3 month aluminum price

CVRD alumina expansion, a low cost project in a high price environment: global alumina shortage is not expected to be corrected in 2006 CVRD alumina expansion, a low cost project in a high price environment: global alumina shortage is not expected to be corrected in 2006

Sources: Metal Bulletin, LME and Bloomberg

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Iron ore capacity expansion, supported by LT contracts, will allow CVRD production to reach 275 Mt in 2007 Iron ore capacity expansion, supported by LT contracts, will allow CVRD production to reach 275 Mt in 2007

2004 2007E

Carajás Brucutu Fábrica Nova Fazendão Fábrica Itabira 30 211 24 15 11 5 3 275

Estimated production increase

million tons

Depletion Ramp up (10) (14)

1H05 output: 112.1 Mt

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38.2 35.2 30.1 31.4 24.9 2001 2002 2003 2004 2005¹

1,5 2 2,5 3 3,5 4

BRL/USD

CVRD ROIC remains high, despite the strong BRL appreciation CVRD ROIC remains high, despite the strong BRL appreciation

ROIC %

¹ LTM ended at June 30, 2005

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Shaping the future – CVRD is starting to develop a global portfolio of mineral exploration projects Shaping the future – CVRD is starting to develop a global portfolio of mineral exploration projects

Bayóvar phosphates² Australia Peru Franceville manganese² Belvedere coal² Gabon Rio Colorado potash¹ Argentina Moatize coal³ Mozambique Piauí – SJ Piauí nickel¹ Carajás – Cristalino copper³ Pará – bauxite¹ Pará – copper¹ Goiás – Agua Branca nickel¹ Minas Gerais – iron ore³ Brazil legend 1 - conceptual study 2 - pre-feasibility study 3 - feasibility study

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Market fundamentals strengthen Market fundamentals strengthen

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40 45 50 55 60 65 2002 2003 2004 2005

index

USA Japan Euroland Global

Leading indicators are signaling a synchronized acceleration of global IP growth, supporting a strong demand for mineral products Leading indicators are signaling a synchronized acceleration of global IP growth, supporting a strong demand for mineral products

Sources: JPMorgan and ISM

manufacturing PMIs

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10 20 30 40 2000 2001 2002 2003 2004 2005 million tons 10 20 30 40 50 60 70 YoY %

Apparent steel consumption Fixed asset investments (FAI)

Chinese GDP is growing above 9% for the eighth consecutive quarter. FAI high growth anticipates domestic steel consumption to remain stronger for longer Chinese GDP is growing above 9% for the eighth consecutive quarter. FAI high growth anticipates domestic steel consumption to remain stronger for longer

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million tons

net imports

Chinese steel exports are loosing strength, reflecting the internal consumption increase Chinese steel exports are loosing strength, reflecting the internal consumption increase

net imports = imports - exports

net exports

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Iron ore spot prices continue to stay above benchmark

• prices. Lower freight rates are offsetting the effect of

iron ore price increases for 2005 Iron ore spot prices continue to stay above benchmark

• prices. Lower freight rates are offsetting the effect of

iron ore price increases for 2005

20 40 60 80 100 120

June/04 July/04 Aug/04 Sept/04 Oct/04 Nov/04 Dec/04 Jan/05 Feb/05 March/05 Apr/05 May/05 Jun/05 Jul-05

US$/ton

SSF C&F Beilun prices Hebei spot prices

$52.7 $18.4 $30.5 $26.0 $20.5 Sources: CVRD, Clarksons and mysteel.com

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25 50 75 100 125 150 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E 2007E

million DWT

• 5%
• 3%

0% 3% 5% 8% 10% 13% 15% 18% 20% Capesize bulkcarrier fleet YoY % chg

The downturn trend in freight rates is mainly determined by the expansion of the global shipping fleet The downturn trend in freight rates is mainly determined by the expansion of the global shipping fleet

CAGR 1996 – 2003 = 3.7% CAGR 2003 – 2007E = 10.2%

Source: Clarksons

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5 10 15 20 25 30 Jan-02 Abr-02 Jul-02 Out-02 Jan-03 Abr-03 Jul-03 Out-03 Jan-04 Abr-04 Jul-04 Out-04 Jan-05 Abr-05 Jul-05 million tons

• 50%
• 25%

0% 25% 50% 75% 100% 125% 150% Chinese iron ore imports YoY % chg

Chinese iron ore imports are growing at a very fast pace Chinese iron ore imports are growing at a very fast pace

Source: CEIC

Jan/Jul 2005 = 150.0 Mt (+29.4%)

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The long term outlook: steel consumption in China has a long way to grow before peaking The long term outlook: steel consumption in China has a long way to grow before peaking

Taiwan 1993 Korea 2003 Japan 1973 Germany 1974 USA 1973 France 1973 UK 1970 China 2004 200 400 600 800 1000 1200 5 10 15 20 25 Per capita income² 000' US$ Kg / capita¹ ¹ per capita steel consumption ² PPP Sources: IISI, World Bank and CVRD

Steel consumption peaks and incomes

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Bulk ferroalloy prices - Europe

Source: CRU

The upward trend in Mn alloys prices was reversed due to excess capacity buildup The upward trend in Mn alloys prices was reversed due to excess capacity buildup

300 600 900 1200 1500 1800 2100 2003 2004 2005 US$/ton MCFeMn HCFeMn SiFeMn

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10,382 9,077 8,132 7,398 2001 2002 2003 2004

Global Mn alloys output overreacted to demand

• stimulus. 60% of the increase between 2001 and 2004

was due to China. CVRD is shutting down temporarily

• ne third of its capacity

Global Mn alloys output overreacted to demand

• stimulus. 60% of the increase between 2001 and 2004

was due to China. CVRD is shutting down temporarily

• ne third of its capacity

Global Mn alloys production in ‘000 tons

CAGR 12%

Source: International Manganese Institute

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Copper prices are tracking higher due to a strong Chinese demand, concentrate bottlenecks and all-time low inventories Copper prices are tracking higher due to a strong Chinese demand, concentrate bottlenecks and all-time low inventories

Sources: LME, Comex, SFE and Bloomberg 200 400 600 800 1000 1200 1400 1600

1999 2000 2001 2002 2003 2004 2005 '000 of tons

1000 1400 1800 2200 2600 3000 3400 3800

USD/ton

Total stocks - LME, Comex and SHFE Copper prices LME-3 month

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500 1000 1500 2000 Jul-99 Apr-00 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 '000 of tons 1000 1200 1400 1600 1800 2000 US$ / ton Inventories (LME + Comex + SHFE) Aluminum prices LME 3 month

Global IP growth acceleration and high power costs in the US and Europe may keep aluminum prices at relatively high levels Global IP growth acceleration and high power costs in the US and Europe may keep aluminum prices at relatively high levels

Sources: LME, Comex and Bloomberg

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CVRD A global leader

www.cvrd.com.br E-mail: rio@cvrd.com.br

Companhia Vale do Rio Doce

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Appendix Appendix

Reconciliation of non-GAAP information and comparable GAAP information

(1) adjusted EBITDA (US$ million) Reconciliation between adjusted EBITDA vs. operating cash flow 1Q05 2Q05 2Q04 Operating cash flow 700 431 1,426 Income tax 41 160 330 Monetary and foreign exchange losses (46) (25) (6) Financial expenses 60 65 (14) Net working capital 221 341 153 Unrealized losses with derivatives 22 5 85 Others (27) 16 59 adjusted EBITDA 971 993 2,033