ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(82)171
Vol.1982/0054

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COMMISSION
OFTHE
EUROPEAN COMMUNITIES
GeneralSecretariatBrussels'1stApril1982
FOROFFICIAL USEONLY
REQUEST FORCOUNCILAPPROVAL ACCORDING TOARTICLE54PARAGRAPH
2OFTHEECSCTREATYFORTHECO-FINANCING OFTHEPROJECT IRON
OREMINECARAJASOFTHECOMPANHIA VALEDORIODOCE,RIODO
JANEIRO-BRAZIL(CVRD)
(Communication fromtheCommission totheCouncil)
t
COM(82)171 final

CCVl'IISSICIi CFTrIE
EU!?.0?EAtJ CO^.OJNIÏIES
Subject :fequest forCouncil a?froval according toArticle 5'»para^ra^h 2.
oftheECSC 'lr=aty fortheco-financing ofthecrojcct Iron
orenine *Carajas °oftheCor--naithi£ Vale ".o?.ioOoco ;:?.iodo
Janeiro ,Brazil (CVJ;)
Loanamount requested :US -5600million (approximately 590 ,Gmillion aCU)
Final borrower and
project sponsor : Conj-.auhia Vale doRioRoço ,?.io »JoJaneiro Brasil
(CVrj)
I.Le^al basis and funds ofCVRD
CV/..'wasfounded in1942 asacorporatior unricr Brazilian 1® .A?
acompany ofEconomia Hista ,acompany controlled bythe ,;ovcrn;.!^nt but
with private minority ownership ,CViiv isplaced under thodirect supervision
ofthei'inistry ofnines andEnergy which isresv-onsible for the
orientation andcontrol oftheConpany an4thecoordination ofCVi'.O 's
activities wi*ht'Overn?aer.t pro^ra ir.ief .and theoffical plicy tarp.ots .
Asa'Ecor.otaia iiista company controlled' bytheStatu is
subject tocontrols andguidelines issued by -SEST ,the 'Secretaria dc.
Controls tieErrpresas Estatais which isresponsible -for :
(i) Coordinating theactivities ofthestnte-owr.c.d co ..juries :
(ii) Based oninformation yiven byeach company ,elaborating aglobal
,-lancontaining instructions foreach .cornpnny astotheir investments ,
expenditures andfinancial and ,borrowing pl-ins :
(iii) Establishing priorities ,between projects devolop-jd bythese
coiVianies astoavailability ofresources anrraccess tofinancial .iarkots ,

CVRiy scapital stock ,subscribed andfully paid ,iscomprised of
2b'S'o950000 cor.nnon shares and 157J750000prsferrtu shares ,ata
parvalue ofCr$4-01 each (Cr$ 2.72 in1979 ).Thecomon shares as
well as560604586prafarrad shares reheld bytheBrazilian National
Treasury :thus theBrazilian Government holds 77%ofthecapital stock .
Preferred shares .(which maybenci'-inativa orbearer )are -available to
thegeneral public atstock exchanges :they have thesane rights as
the coix'ion stocks except for the ri>;ht tovoce intheelection ofthe
members oftheAdministrative Council :"they dohave ,however aprior
claim toanannual dividend of6%peryear .
II.Management
CVRI >ismanaged byanAdministrative Board ofDirectors and an
Executive Boa":!. All members ftust beBrazilian citizens and residents
ofBrazil .TheAdministrative Board ofDirectors iscomposed of :
ThePresident ,appointed bythePresident ofTheFederative Republic
ofBrazil .
SixVice Presidents ,elected bythegeneral shareholders each hivin *
aterra of3years .
TheVice Presidents andDirectors can bereelected .TheAdministrative
Board ofDirectors meet upon thecall ofthePresident' todetermine the .
general business policy oftheCompany .TheBoard isresponsible for :
(i)Detemining thegeneral orientation oftheCompany 'sbusiness
i
(ii)Theformation ofanynewsubsidiary
(iii)Eleccing anddismissing thedirectors ofthecompany aswell
asdetermining their attributions
(iv)Fiscalizing theadministration oftheDirectors
(vii)Appointing anddismissing independent auditors .
TheExecutive Board nauages theactivities ofthecx-wny and is
responsible fortheexecution o'ftheguidelines established bythe
Administrative Board ofDirectors .ItiscoinposuJ ofti»•save President
andfive Directors .TheDirectors areelected foraperiod of£hree years
andcanbereflected .TheExecutive hoard i;sresponsible for ;•Loposi n-;
general business policy fortheAdministrative Board 's _approval .Onan
annual basis ,theExecutive Board also prepares andsubmits tothe
Administrative Board theannual results of .the corroany ,andbudgets as
well asaproposal forthedistribution ofprofits .
2270 /clen

-3-
Thecompany isrequired tohave aFiscal Council .,consisting ofthroe
timbers andtheir deputies who raust beBrazilians .Their term ofoffice
is1year .Onenember andhisdeputy areelected bypreferred shareholders .
Theother -:eniiersareelected bythecommon shareholders .They canbe
reelected .Atleast every 3raonths 5theFiscal Council exarsin.es tho
accounts anddocuments ofthe coi-tpany and itscash anainvestment Position .
Itdelivers areport tothegeneral shareholder 'sn^etini ..
III .CVK'j stasks and activ ities
CVPX wasfounded primrily -fortha *»ur?oso ofcovelopinstheiron ore
cepositu inTabira intheState ofi'inas Gerais .Theconcauy 'sactivities
have diversified since andtouay thecoraar.y anditssubsidiaries are
mainly engaged inprospecting ,exploration $exploitation ofiron oredeposits ,
transports shipping andmarketing ofiron ores todories ticandinternational
iron--and stee 1works .
Atpresenti CV~.D operates 5open pitiron ore v-in^s inthe .Itn.bira
area .,arailway transportation system between itsidnes and theh'trbour
ofVitoria intheState ofEspirito Santo ,theTubarao :.Paul and
Atalaia SeaTerminals inVitoria atiJ 6pelletizing plants including
4plants owned byi'ibrascO ;Itabrasco andiiisp.mobras ;allassociated
companies ofCVRL -. !toreover ,CVHD isactive through 'subsidiaries and
14associated companies insuch fields asshipping .lir.ital prospection .
reforestation ,paper pul -;,bauxite raining phosphates andfertilizers .
Ithasestablished joint ventures' which will produce alumina ,aluniniui "
andwood chips .Inaddition ,CVi'l :states that itisindependently dt-.vel opine
aproject which will produce niobiurc andtitanium .
InlSTO ,CVRD sales anour.ted toCr$fl.2 billion .Itisoneof
brazil 'slargest companies aswell asoneofthe :;.ostirrortant foreign
exchange earners ,with export sales in19;'p ofr'S.$791 .7.u11ion .
Measured intonnage produced (1930 :£/..2million r^ifric tons ).O'.'fv isthe
largest sin ;.1-3iron or-2producer inth .worl-i .
CVRD sales ofiron ore ·-nillio ηtons–
19761/
f9 1977c·197 .:/
•1) l?7.±/O 11-..0 »ο
Asia 1^.3 3* 17.3 15.4 JO 1r'.' 31 2-ï.l
'"'estern Europi . ii).140 · 'yj 1ΊΜ 3r ιΛ 2·) l'i.I 2'.
Eastern iijroye 4.0 £. 3,7 4.'.1c ir
•I 7.0 11
Airier ica 4.9 10 7 4.2 ,AΛλ
Hiddle East-*
r0.1 OS 1Λ "*
'.·■^ 1
Total exports ¿7-3 s?" 41 .wM •'7.:. 7G 1/-..571
;)onestic LiarkotsΛJ. Cr.o
-» ks13 9-"> 19 15.2 24 ι/.: 29
Total Sales 50.5 100 ·. t>>.-) 1/N.1
J'i 5ii1O0 (·.!/. ¡!»» 62,3 10.'
2270 /01en

Long-term salescontracts in19G1ar>;intended tocovernearly100%
ofCVRJJ'Soreexportsanditstotalsales.Someofthosecontracts are
for3to3years,but,atpresent,mostareforperiodsof10to15
years.Contracts specifyannualdeliveries offixedquantities byproduct
typo.Attheoptionofthecompanyand/orthebuyer,scheduler !annual
quantities forallcontracts aresubjecttovariations ofnonorethan
10%inanyyear.Therearenoprovisions forareduction indevliery
orfortheearlytermination ofcontracts ,withth.oneexceotior of
'forcemajeure*.Anydisputesarisingunderthecontract whichcannot
biddisposecofbymutualagrcuraent ar-2subjecttonegotiation inaccordance
withtherulesoftheInternational Chamber ofComaere;:.
AllofCV'ID'ssalesbothforeignanddomestic ,,aripricedinUS-lollnrs.
CVRDstatesthatatypicallcn;;~terr "contract fixesaF.O.B,pricefor
theproductorproducts tobedelivered andthatthis?pric^:L.?»usually
validforaperiodoftwelvelaonthsfromthesigningofthecontract .
Thereafter ,CV^.Danditscustomers negotiate annuellyonth*priceor
pricestoineffectduringtheensuinj 12monthsofthelifeofthe
contract .Further,theseannualnegotiations takeintolccountprevailing
conditions intheinternational ironoremarketaswell .is..Li.:velorr^:nt ;:
intheinternational economy andinternational financial marketsas
theserelatetothevalueofthecontract .
IVSubsidiaries anaAssociated Co.apanie s
Pursuing apolicyofinternal growthaswellasexpansion through
vertical andhorizontal integration ,CVRDhasdiv^rsifi<«ithroughinves.tner.ts
insubsidiaries andjoint,ventures withbothBrazilian .in-..foreigncon>.ani.es.
Asofy^ar-end 19S0;CVRDwasengagedinvariousactivities ,besidest--e
production andsalesofironore,suchasship?>in;;furtili*rs..reforms .tatior -,
woodpulp ,geological serviceaswellasexploitation processing of
bailxite .Several ,ventures havebeensetup6rarebein.corn;redtoproduce
aluuina ,iluniinium .titanium andniobiui...
Thefollowing tablesu&iarizes theownership and£uumc-ml statements
ofwhatCVivO-indicates tobeitsmostiiuporcaiit subsidiaries andaffiliated
companies asofyear-end 19V0:
19KO CV-ID
Principal business rounded -:..nv.loy-Ownership
Subsidiaries • t(-s 2
" -IronGroï.niriin;;
4>0C;1.>J£'). yrrospcctiin ..-;
DPCE;.A.y£ • .shippin ,?,
Navegacao elioL'ocaLtdaShippin^
SearaxShipping Slvit^uiSj ,
FlorestasRioDoceS/ARel'orsstation
Valervorta •.aolriinfhiibin 4:7') S·.*.'}?
7/7/71131:.99.9'·
10/22/'2ΐη·,£ 96.(·">
9/uni- 50.ο;»
')!V,t'.t- G.ü'j
1.Ί/2':/#"■7;.üij 94,61
1■:.'/1/73 A.Ì y;.99
2270/Men

191>0 CVRD
Principal business Founded Err.plev-O.vnjr ;
ees A
Associated coroanies
ALßiiAj Aluiuiniui .: 10/3/742:9 51-V')
ALUÍJIF.TE Alι-.iva (■/22/7213 6»,JO
Cßi.'Ib.'lA•Pulp 9/lì/7311C35Ì.G5
FLONIüRA Wocachip 10/11/7491"Î49.30
FOSFEklIL Fertilizers 2/1'»/η2442 34.12
iilSPAhOBilAS IronPellets efu/!i> ?.A5\o9
ITAl-Vu/iSCO IronPallets 4/27/"/3'26 5'5.Q0
Minasdel<u.y Ironoremining 11/10/76 113).71
iikiM' Bauxitemining C/10/741530 4i.00
'ISO Ironoremining 2/14/77 1"Ί Γ}Λr'-/I·«.ηI
NIi3;iAl>C0 Ironpellets i/11/74 3C>5i.,00
PORTOCEL Pulpport 4/1.:/76 71.).34
Urucu·- Ironore/Manganese ■4/7/76204 3<.33
fining
Valesul AluTßiniun 11/22/''·'.-2.49 6-'.51
Duringitssuccessful activities CVRDobtoi-ned vidafinineiilandMann7/ìri-il
resources ,whichtheBrazilian ¿joverraaent isinereaáingly usinnasa
baseforthestate'sroleinanuniberofkay.basicindustri .-1projects
V.TheProy^ct-IronOreMineCarajas
1.«Jarajasrtpion
"TheC-jrradosCarajascrsaislocated'lr.the'EasternArnzo:;P.e,'jionof
iJJirazilinthesouthorxi partofthySt^teofParaintheMunicipalities of
MarabaaridoaoFelixdoXingu.Itisanareaofaoproxinat ^1/4000Un2
boundedroughlybytheItacaiunas and?arauapebas ^ivevs.Thei.;arajas
IronOreProject' *(theProject )referstothecor.,;:.erciateq>loication
oftheSerradosCaracasironoredeposits .Tb£>Projectwil.'!>eeoiw.iercLally
administratively andoperationally integrated withCogr-anlii .*Valedo»io
Hoce.
22"O/olen

-6-
2.ProjectOrigin
Discovery ofCarajasironorewasnadein1967whenaUSSteel
subsidiary inBrazil,Ccaaanhia Meridional ,wasexploring intheareafor
manganese .Ii1970,USSteelandCVl.JfoundedAmazonia IlineracaoS.A.
(AI'ZA)asajointventurecoupany(43.1ZauJ50.2*stockownership
respectively )todetermine thefeasibility ofaevelc;r.entandexploitation
ofthedeposit ,andtoorganize andcqnstruct operations .Anintensive
surveyprogran^e wascarriedoutfrom1969-72 .Ultimately ,asystem
consisting ofaportsiteatSaoLuis:andarailroad linefromnineto
port;,wasfoundjustified dueriainlytothesingletransshipment ofor.j
required andthedeepwater,stableaccesschannelcharacteristics ofthe
port. . ;.
In1977,USsteel,inviewofthelarpescaleofinvestments required
bytheprojectandGovernment expectation forIJSSteelparticipation withdrew
fromtheproject,allowing CVRDtopurchasefullstockownership .InApril
19cl.AHZAwasformally mergedwithC^RDtoensuro controloverthe
Carajasdevelopment .
Theoriginal -projectconceptinvolved production of50milliontpy
ofironore.Afterthedissolution ofCVRB'spartnership withUSSteel
theproject'splannedoutputwasreducedto33milliontonsperyear:
becauseofthelar^einvestment iraiaediatsly required andthere-evaluation
ofironoremarkettrends,start-upisscheduled for1985:ironore
exportsforthefirstyearofoperation willbe15milliontonswithan
annualincrease of10Milliontons,achieving ar:outputof35iiillion
tonsin19C7.
3.ProjectDescription
TheProjectconsists'ottheintegrated development ofCarajasiron
oredepositsintheStateofPara,a'eepwaterportontheislandof
SaoLuisintheStateofMara-nfcao andanint&retirailroad line.
Technically ,tlaeprojectcomponents areforthewost-partstraightfctvard
andwith&utraj-ordifficulties
Thepropos-edninewillbeac^iwentional open-pit oneratior.-M.tpJoying
twolarf>u-]iolerotarydrills.,9;.16and12cufcicyardelectric ,shovelsanc
154tonsofr-highway dwiup .trucks .Initialrainingwillbe;©•£thtwAft
deposit,oneo£tiie;r«aiftirono>rnbodiesinthear-e;-.,SL>lect <dduetoits
relativelv low©verbarcieia ratio*easyaccesstotherailroad ,•jn';'leas'^rsd
reserves o'f-.1200milliontonsofIiii'.h£radeore.Tketwornaiijproduces
atthe35..•dilio-yitp,y production capacitywill.besinterfee;(9!.3/)
andnaturalpe-ll^t*(9.1%).'Dupdt&ing or.r.arketconditions theportionof
naturalpelletsecu1dbeincreased to"laxii'.u:' -26%by':Voit.irv' :.crushing ,at
the$ort}andoellet'feedcouldreclaii.ee frcnthetaili.igs darc.
2270/81an

-7-
Apilot plant hasbeen constructed atthenine site andtrial
beneficiation -tests commenced inMarch 19C1 .Atthis point intime about
50,000 tons oforehave been tested and thefinal processing flowsheet
hasbeen defined .Beneficiation facilities will consist ofthree st^jes
ofcrushing /bcreening ,onestage ofrodrr.il line ,asolias recovery stage
with screw classifiers andcyclones andafinal dewatering stage ofthe
products .Tailings will bepuuped toatailings dam .Due tothemoisture
content andother characteristics oftherunofmine ore ,wetscreening has
tcbeapplied inorder toprevent clogging ofthescreen decks .Ea'Lt
conveyors will transport thebeneficiated ore tothe 1.6million tons
storage yard where bucket wheel reclaimers andbelt conveyors will
reclaim thadifferent ore types (natural pallets orsintftrfaed )to
train loading station .Support facilities ^such asnaintenancsj workshops >
warehouses anaoffices will becorns® tiforthemine anatheprocessing
plant .
TheCarajas railroad will haul theorefrom thenine toPont a<;>e
Madeira ,ontheisland ofSaoLuis ,over 9H0knofpredominantly fl.it
terrain wih850 isiiinimun curve radius .Theonly exception isav.id-
section area ofhilly terrain inwhich track grades reach .4/,.However /
ingeneral theroute ischaracterized byease ofconstruction .The
engineering components comprise :390kmofmain single -track line .
11.1 kmofbridges including one large (2.?4 km)bridge over theTocantins
River ,8small yards along the line ,twoterminals (port a?.d rhinc )and
35crossing loops ,and atrain operation system suynortin ^,facilities ami
services .
Theproposed port will be.located inasheltered bayabout 10km
from SaoLuis ^na1kmnorth oftheexisting port ofItaqui .Adequate
natural depth ofwater for2s0000dwtships isavsildble alongside the
proposed berth ,inthewaiting anchorage andintheaccess channel to
thesea .However ;,duo tcthelarge tiual range (7*.vspring tid>s )the
ebbandflood tide cur-rents areexcessive forship handling ,an-!rock
moles will berequired toreduce thasa currents alongside theberths
Thestockpile area will have acapacity of3.Cmillion tons of
ore (10.3% oftheprojected annual production )atthe 3!]trillion ton
peryear production rate .Theorewill beunloaded frot'th>.rail-cars
bytworotary "cardampers each designed toetspty twocars simul taneous ly.
Thestockpile area will beprovided with twobuckcfcwhecl reclaistirs and
twostackers .VThen accessary ,rescreenir.g aneblendim *canb«>carried out
attheteraisal toclassify products inaccordance with sales specifications
Asampling sta-tian andtwohigh precisior scales will hi:installed
between thestockpil.a area ant !theshij lcaciinj :facilities toensure
reliable q>uaaldty an-dquantity control ofshipped oa?«inor'uar to
maintarn pro.duct credijj'i 1i/ty.Beth facilities will beca":ab ]<;orworking
.yith ,either 8i<ra,t,erf.-a>e ;dornatural pc-llnt .Chemical grainsize are
moisture anal>y-se.s w,ill .b..£p^rformcci atthesampling scation
2270 /01en

Finally,theprojectincludes oneprincipal townsiteatthemine
toaccommodate aninitialpopulation of11thousand .Alongtherailroad
route,newhousingandsupporting facilities willbeintegrated wherever
possibleintoexistingtownsites atFarauapebas ,Maraba,Pequia,Calu,
SantaInes,Vitoria doKearim,RosarioandSaoLuis.
4.StatusofConstruction
Todata,detailed engineering hasbeenvirtually completed forthe
project,andconstruction isunderwayforthe888kmofraili-oadsubgrade
(46"jocompletion )andforbreakwaters attheport.Atthenines-ite,
.excavation andcivilengineering works.forthesupportfacilities aswell
astheprimarycrusherstationstartedinHay1981.Alaboratory was
completed inAugust1981.Aworkshop andwarehouse forthepreoperation
phase(remova1.of^.2milliontonsofoverburden startinginearly19^2)
areundererection .Construction ofapilotbeneficiation plantatthe
minehasbeencompleted .
Theprojectcostsexpended throughDecember 1981total
US®63Omillion..
5.ProjectCosts .
Thecostestimate oftheprojectinUSdollartermsvaries
significantly depending uponassumptions regarding thedevaluation ofthe
cruzeiro againstthedollar.
Inthemostconservative caseitisassumedthatthecruzeiro
willbedevalued inlinewiththeinternational index ^ofinflation andthat
anydifferences betweendomestic andinternational inflation from
February 1981,whenthebasecostestimates weremade,willbetakencare
ofbytheexchangerateadjustments (thatmeans,'thecruzeirowillremain
perpstually overvalued ).*Basedonthisthecostestimateoftheproject
isUS-S4,7t'.llionincluding physical ,andpricecontingencies ,working
capitalandinterest duringconstruction .
Thebreakdown ofprojectcostandtotalfinancing requiredis
shownasfollows ?
2270/81en

-9-
CARAJAS IRONOREPRQJil'CT
CAPITAL COSTESTIMATE
Category Local
Mine 379«3
Railroad 1,185.2 -
Port 174.6
Townsites 115»3
Engineering 135»^
^Technical Assistance
CVRDSupervision lo9»4
Project Management 191.2
Inspection Services 46.6
Insurance 3-9
Pre-opExpenses 22.2
Training 22s9
BaseCost
Estimatea)
<.Physical Contin­
gency^Escalation '
Installed Cost
WorkingCapital
..Interest during
Construction
TotalPmancmg
Requircd2.472.1
280.0
314.1
3.066.2
==*======
128.7
'249-9
3,444.8241.73SMillion)
Foreign Total %
I37.4 517.2 15.7
558.2 1,743.4 53.1
40.1 214.7 6.5
45.I I6O.4 4-9
I8.6 I54.2 4-7
3-4 8.8 0.3
- I89.4 5«0s
– 191.2 5'8
- 46.6 ].4
Λ 3-9 0.1
9.3 32.O 1.0
- 22.9; 0.7
ft
8l2„63,284.7 100.0
r
95.8 375-8
111.4 425.5
1,019.8 4,086.0
1.261.5128.7
'491-'
4,706.3
a)Thebasecostestimate wascalculated attheFebruary 19"]exchange
rateofCrS71.67=US?.l'.OO
u)Price.escalation asfollows:O,jforI98I53*5$f°r1982,7■•5/"for
1983-85 ,and6/3for1986-8).
Theec«nomic andfinancial returnsoftheprojectinthiscaseare
13.T/jand10.6$ >respectively basedonabuild-upinproduction froM
35ratpyin1987 "to50ntpyin1993,whichisconsonant withmrkrl
expectations .Theeconomicreturnassumesshadow-pricing offor-igr
exchange by1.2.

-10-
Thecalculations donottake into account theessentially immeasurable
butimportant benefits ofopening uptheCarajas region topotential
manganese ,copper ,bauxite ,gold andother mineral developments ,through
installation ofbasic infrastructure .
6.Market
Ananalysis ofiron oreavailability l?35/r?90 prepared bythe
services oftheCommission confirms "that theiron oresupply isnot {guaranteed
andthat shortages .*nust besuspected -from 1985 on.
Even ifthepossibility ofcontinuing oversupply inthemid-eighties
cannot beexcluded inthelight ofuncertainties regarding world economic
and steel demand growth ,theCarajas project appears tobeattractive to
potential purchasers oring tc;
-thehigh cjuality ofiron ore
-thelong term supply prospects ofthemine
-theimportance ofdiversified sources ofsupply
-thereliability inlabour input ,.
Thevolume ofiron orealready contracted forbyCVRD more than covers
theplanned rutput during production build-up in1935 and1986 (production
will reach 35million tons in1937 )andreduces therelative risk tothe
project during theyears :when market oversupply could still belikely .
Ontheother hand areduction inprice of6%onthelast 50%of.
annual quantities effectively delivered hasbeen offered tothose
•companies who have.agre.ed tosign iron .ore dfil-ivery contracts atthis
early stage .

-11-
Carajasironoreagreements alreadysigned
(Situation atDecanter 1981)
Country
Gemany
Italy
France
Luxembourg
European_Conimunity
SouthKorea
JapanCoiroany Quantity
(tons000)
Dilliuger Huttenwerke AG 250
Klockne'r-Werke AZ 500
Korf-Stahl AG 500
Stahlwerke Feine-Salzgitter AG 500
KruppStahlAG ■ ■ 1000
Mannesmann AGHuttenwerke 000
Thyssen AG 2400
Itàlsider SpA ' 25'M
Usinor 1700
Solmer 1500 .
ArbedGroup
(SidraarW.V.,Stahlwerke
Röchling-Bürbach GmbH,
ArbedS.A.) 20005950
2500
320"!
2000
13650
Pohang -1000 ,■»
Japanese SteelHills 10000
Totalsigned 24650
UnderDiscussion
Belgiurc
TaiwanGroupement desHautFourneaux 1000/2000
500
Conclusions
"-■■■■- -–■■--• / *
1.Brazil'snajorobjective istoitaprovoitsbalanceofpayments
through,aniongotherflings„continued rapidexpansion ofexports.The:
development andexportofironorefromthevastdepositsatCarajas
fornapartoftheGovernment strategyforachieving this_ndbyincreasing
foreignexchangeearningsforthecountryoverthelon<-:t^rru
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TheBrazilian Government viewstheCarajasprojectalsoasavital
meansofstimulating development oftheAmazonregion.Undoubtedly there
willbeamajorimpactonopeningtheareatofuturedevelopment through
theestablishment ofabasictransport system.
* «
Forthesereasons,onOctober 1519oOstheBrazilian Government save
prioritystatustothedevelopment oftheCarajasironoreminesbyCV'*Dand
committed itselftoprovideprcause-tobeprovidedallresources needed
tocomplettheprojectontime.
2. Fromatechnical pointofview,theprojectsconcaridi>:ple.>;r.tatior
schedulearesatisfactory .Tlieimportance ofexpediting projectpreparation
totheextentpossibleisindicated bythehiphdegreecfprojectcost
sensitivity totime.Freliuiinary analysis bytheWorldtankhasshown
thatatvjo-yardelayintheprojectand103capitalcostoverrunwoul
increase thetotalprojectcostbyUS$1.2billion .
3. Thequalityofprojectpreparation andtheprojectmanagement
arrangements areofahighstandard andsee^ntobeadequate ,takinginto
accountthedegreeofcomplexity involved andthevolumeofinvestments
required .
A. Theprojectiseconomically justifecs ,withaneconomicreturn
ofabout13Z(whichdoesnotincludethebenefits resulting fromother
developments whichtheprojectwouldmakepossible).However ,aless
favourable -butnotveryprobable-marketsituation .characterised by
simultaneous oversupply ofironoreandaslowworldsteelindustry .
recovery bytheendoftheoO'Sj,wouldleadtoadariinanirii }inironore
pricesandareduction insalesvolumes .inindividual years.Thiswould
strainCVRO'scashavailability and7>osefinancial risktotheproject .
Ontheotherhrnd,CV!0;believesthatvithabour25ir?tpyrnlor.;;-torn
salescontracts alreadysignedorcorauittec.T ,and;.iventhesuperior
characteristics ofCarajasore,itwouldhavenodifficulty mobtaining
commitments fortheregaining 10nstpyby1917.
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ι

5.Asregards expansion inBrazil 'ssouthern system thevolume aswsll
asthequality ofreserves which could bedeveloped arenotimportant
inrelation toCarajas andnotsufficient toneet both internal demarj
andpotential exports .Asregards other possible projects ,forexample
inWestern Africa ,there isnoproject which iscomparable with Carajas
astomanagement ,,construction status ,financial planning andvolume of
deliveries alreacy cor.ni.it ted .
6. Animprovement ofthesupply situation appears particularly
necessary inthelight ofan'iron oremarket which isexp^ctad tob2
moving atleast towards equilibrium :this forecast isconfirmed byth^
European steel' industry ,which requested theCci'imission oftheEuropean
Communities tocontribute tothefinancing ofthe .'Jarajas iron oreproject
inorder to .ivoid aserious shortfall fro*.i 19^5 onward .The Europi-ar st;il
industry 'sinterest lies also inthefact that 13enterprises from
5Community countries have already concluded long-term contracts with
CVRD .Iithese contracts thenuye^s areentitled toreceive areduction in
price of6C/:onthelast ^Of .ofquantities effectively del'ivered .
Cnthebasis .ofthese considerations ,theloan application istc
beviewed inapositive light ,since theinvestment programme contributes
oirectly andprincipally totherealization oftheobjectives laitl dovn
inthesecond paragraph ofArticle 5'ioftheECSC Treaty .
PneCommission hasdecided inprinciple toapprove the -present
application .Therefore ,inaccordance with thesecond paragraph ofArticle
oftheECSC Treaty ,itrequests theCouncil 'sassent tothegranting .ifr.
loan tothevalue ofUS$600million toCo">panhia Valt do ;_oce ,"'io
doJaneiro ,Brazil .
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