Flush with cash, Brazil's CVRD eyes expansion

By Todd Benson

RIO DE JANEIRO, Brazil (Reuters) - The chief executive of Brazilian mining giant CVRD (RIO.N: Quote, Profile, Research, Stock Buzz)(VALE5.SA: Quote, Profile, Research, Stock Buzz) said on Tuesday that the company plans to seize on high prices and strong demand for its products to further extend its reach at home and abroad.

Speaking at the Reuters Latin America Summit, Roger Agnelli said CVRD is investing heavily to boost iron ore output in Brazil and is aggressively seeking to branch out into other minerals in places like Africa and Australia.

"We are taking advantage of a very good moment in our market," Agnelli said. "The company's cash flow is healthy. And we're reinvesting that to guarantee that we can maximize our growth potential in the shortest amount of time possible."

Indeed, CVRD -- short for Companhia Vale do Rio Doce -- is not shy about spending money to get bigger. In the last five years it has invested some $10.5 billion in a variety of expansion projects around the globe. This year alone it plans to spend a record $4.63 billion, almost as much as its total net profit in 2005.

That money will be divvied up in 18 countries where CVRD operates, including Brazil, where it also holds important stakes in three major railways and four ports.

With a market value of more than $50 billion, CVRD is one of Latin America's most powerful corporations. That puts it on par with global mining giants BHP Billiton Ltd. (BHP.AX: Quote, Profile, Research, Stock Buzz)(BLT.L: Quote, Profile, Research, Stock Buzz) and Rio Tinto Plc (RIO.L: Quote, Profile, Research, Stock Buzz), which together with CVRD, account for more than 70 percent of the world's seaborne trade in iron ore.

Already the world's leading producer and exporter of iron ore, CVRD is seeking to diversify by investing in coal projects in Australia and Mozambique, where it is also eyeing natural gas deposits.

It is developing a potassium project in Argentina and coke and coal projects in China, where it may also invest in the construction of iron ore pellet plants. China is CVRD's largest market for iron ore, the main ingredient in steel.  Continued...