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Vale to Outperform on Iron Growth, Credit Suisse Says

October 17, 2008

Cia. Vale do Rio Doce, the world's biggest iron-ore producer, was reiterated ``outperform'' by Credit Suisse Group AG analysts today after the mining company said it will invest $14.2 billion in its business next year.

``Vale (VALE5) has shown the market it's ready to grow and is carrying forward its several growth opportunities with a disciplined approach,'' Roger Downey, ranked the top Latin American metals analyst last year by Institutional Investor magazine, said today in a report. ``Furthermore, Vale confirmed its bullish view on the long-term fundamentals of the industry.''

Vale, based in Rio de Janeiro, plans to develop its own projects rather than make acquisitions, and that market conditions will influence investment decisions, analysts at Credit Suisse and Deutsche Bank AG said.

``Project development is the priority of our growth strategy,'' Vale said in a statement last night. Growth at new and existing projects will take $11.6 billion, or 82 percent of the 2009 capital-spending budget, and $2.6 billion will be spent on maintaining operations, the company said.

Vale rose 1.363 reais, or 6.1 percent, to 23.71 reais at 4:35 p.m. in Sao Paulo trading. The shares still are down 53 percent this year on concern the slowing global economy will curb demand for iron ore, the main raw material in steel.

Carry-Over Spending

Deutsche Bank said in a report today that Vale's capital- spending plan for next year is 26 percent higher than it expected. Some of the investment may be carried over from 2008, because Vale's first-half spending was only $4 billion of the $11 billion it had planned for the whole year, said Deutsche Bank analysts led by Jorge Beristain.

The new program expands Vale's previous iron-ore, copper and coal production targets and decreases its goal for nickel, which has plunged 66 percent in price during the past year. In May, Chief Executive Officer Roger Agnelli said Vale's annual production capacity in 2012 will reach 450 million tons of iron ore, 592,000 tons of copper, 15 million tons of coal and 507,000 tons of nickel.

``In a span of five to seven years, our iron-ore production may surpass the 500 million-metric-ton mark, nickel output to reach 450,000 metric tons, copper 1 million metric tons, alumina 8.2 million metric tons, coal 40 million metric tons and the fertilizer business -- potash and phosphate -- may take a major boost,'' Vale said in yesterday's release.

To contact the reporter on this story: Diana Kinch in Rio de Janeiro

To contact the editor responsible for this story: Steve Stroth at

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