American Energy Production Inc. Completes Debt Conversion and Restructuring 8:51 AM ET 8/5/09 Market Wire


American Energy Production Inc. (OTCBB: AENP) announced today that it has successfully completed a debt conversion and restructuring eliminating its total debt and other obligations by approximately $7,060,000. This represents approximately $5,354,000 of debt elimination and approximately $1,706,000 of other obligations comprised of $1,026,000 of accrued interest, $315,000 of accounts payable, $293,000 of accrued payroll and $73,000 of accrued payroll taxes. Additionally, all previously outstanding preferred stock was converted into common stock. As a result of the restructuring and conversion, the Company will issue approximately 33,850,678 shares of Stock, 23,350,678 from the conversion of debt obligations and 10,500,000 from the conversion of preferred stock.

Charles Bitters, President of American Energy Production Inc., stated, "This will complete Phase II of the financial restructuring of AENP which complements the previous Phase I reverse stock split. Management believes that with very little debt on its books, the Company is now in a better position to grow and operate as a successful oil and gas company to enhance shareholders value."

Charles Bitters, President of American Energy Production Inc. and the sole previous holder of the Class A preferred shares believes that by having converted the Preferred shares, he has now better aligned himself with shareholders and leaves the Company with only one class of outstanding stock.

The debt holders of AMEP, including Charles Bitters, converted their debt into restricted Form 144 stock at a conversion price of $.25 per share. The conversion price premium represents an approximate 257% increase over the closing trading price of AENP as of today's close. These restricted 144 shares will be control shares and can only be traded under 144 rules and the applicable SEC Section 16 insider rules.

Statements contained in this release, which are not historical facts, may be considered "forward-looking statements" and are based on current expectations and the current economic environment. We caution the reader that such forward-looking statements are not guarantees of future performance. Unknown risk, uncertainties, as well as other uncontrollable or unknown factors could cause actual results to materially differ from the result, performance, or expectations expressed or implied by such forward-looking statements.

Contact:
American Energy Production Inc.
Charles Bitters
940-445-0698
http://www.americanenergyproduction.com
or
Oil America Group Inc.
Joe Christopher
972-386-0601
Jchristopher@oilamericagroup.com


SOURCE: American Energy Production Inc.

http://www.americanenergyproduction.com
mailto:Jchristopher@oilamericagroup.com

RIO News
http://www.shareholderz.com/vale.html
+
http://www.shareholderz.com/preciousmetals.html

I'll go for the buyback to install further shareholder confidence. Increase the Divi then chill. Let's let the market calm down.
glty

Vale Inco Nickel Plant Approved

By Canadian Press
26 Aug 2008 at 11:46 AM GMT-04:00

ST. JOHNS, Nfld. (CP) -- The government of Newfoundland and Labrador has cleared the way for Vale Inco's nickel-processing plant in Long Harbour, releasing the $2-billion project from further environmental assessment.

The mining giant wants to dispose of more than 400,000 tonnes of effluent annually — including nickel, copper and cobalt — in nearby Sandy Pond in eastern Newfoundland.

Vale Inco must meet 10 conditions as part of the province's decision, including developing an environment protection plan for approval by the environment minister before construction starts.

The company must also prepare a contingency plan for environmental emergencies.

Monitors must be hired to work at the site and serve as a first line of contact for the government.

A compensation program must also be developed for fishermen and aquaculture operators who suffer an economic loss as a result of the project.

CVRD signs port ore logistics cooperation contract with Dalian
2008-08-27 Shenyang

A cooperation agreement on the port ore logistics was signed between Brazil's Companhia Vale do Rio Doce (CVRD) and PDA Corporation in Dalian, a coastal city of northeastern China’s Liaoning Province, August 25, 2008. Port of Dalian will offer services including discharging, ore mixing, storage and redistribution before the end of year 2020 according to the contract. The cooperation of the two companies will also lower the production cost of steel for China.

DJ Brazil Govt To Study Impact Of Fertilizer Costs -Report (Dow Jones News Service)
Updated: Wednesday, July 23, 2008 01:18PM ET




SAO PAULO (Dow Jones)--Brazil will create a working group to study the impact high fertilizer costs are having on producers, and other alternatives to increasing fertilizer production in the country, the local Estado news agency reported Wednesday.

The decision to create a working group was made Wednesday during a meeting between Agriculture Minister Reinhold Stephanes and the Presidential Chief of Staff Dilma Roussef. Its first meeting is scheduled for next week.

The Agriculture Ministry has been studying the recent rise in fertilizer prices since last year, when prices rose by 40% or more, depending on the fertilizer type. The high costs are cutting into farmers' profit margins in rural Brazil.

The Agriculture Ministry last year blamed the major fertilizer companies, including Bunge Ltd. (BG) subsidiary Bunge Fertilizantes for not expanding its production capacity enough for fertilizer raw materials. Bunge has invested millions in new fertilizer capacity and mining over the last year.

Stephanes said he would like state-run oil and gas company Petrobras (PBR) to invest in nitrogen fertilizer, a derivative of natural gas. As the prices of natural gas rise, so does the cost of nitrogen fertilizer. Estado reported Stephanes as hopeful that Petrobras could help increase nitrogen supply in Brazil. Brazil imports 50% of its nitrogen fertilizer needs.

Stephanes said mining giant Companhia Vale do Rio Doce (RIO) was exploring a potassium mine in the northeastern state of Sergipe which could double or triple production, Estado reported.

Brazil is dependent on major fertilizer ingredients such as potassium and phosphates, and is second only to the U.S. in terms of world grain and soybean production. Fertilizer is used by farmers to plant everything from coffee to sugarcane, of which Brazil is the leading exporter.


-By Kenneth Rapoza, Dow Jones Newswires; 5511-6847-4541; kenneth.rapoza@dowjones.com


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Vale to build a 5 MTPA steel mill in Para state
Brazilian mining giant Vale has announced that it intends to build a 2.5 million tonne to 5 million tonne per year steel mill with partners in Para state in Brazil's north region.

Mr Tito Martins director of corporate affairs at Vale said that the mill would integrate Vale's development projects in Para, where its massive Carajas mine is located. Partners have not been defined yet. He added that "We have been talking with Brazilian Development Bank to begin the setting up of a steel mill project in Para."

Mr Martins further added that the location and logistic details of the project would be decided together with the strategic partner.

DJ Vale CEO Sees Strong Demand For Products Despite US Slowdown (Dow Jones News Service)
Updated: Monday, July 21, 2008 07:09AM ET




PARIS (Dow Jones)--Mining heavyweight Compania Vale do Rio Doce (RIO) expects continuing strong demand for its products thanks to solid growth in emerging countries, which it hopes will help it weather the slowdown in the U.S.

"Demand for our products is still very strong thanks to China and Latin America. I am confident we will overcome the situation in the U.S.", said Vale Chief Executive Roger Agnelli Monday, adding the world's second largest mining company was "not affected" by the U.S. downturn.

Rio de Janeiro-based Vale is the world's largest exporter of iron ore.

Agnelli was speaking at a presentation in Paris for the company's cross-listing on the European trading platform Euronext Paris, which is a part of global trading platform NYSE Euronext (NYX). Vale is already listed in Sao Paulo and on the NYSE. Vale's American Depositary Shares started trading in Paris Friday.

Agnelli said the mining group is listing in Paris in order to widen its investor base, and to be closer to its main client, Luxembourg-based steel giant ArcelorMittal (MT). The company is also currently completing the US$3.2 billion construction of Goro, one of the world's largest nickel mines under construction, located on the French Pacific territory of New Caledonia.

"Listing in Paris is a step forward in becoming a global company," Agnelli said.

Vale confirmed Monday Goro is on track to start production by the end of the year.

French Finance Minister Christine Lagarde, who was attending Vale's presentation, said; "We are making our best efforts to ensure that Paris can compete with London as an attractive market place. London is taking notice and is trying to prevent us (from attracting foreign companies). We will be up to the challenge."

The Brazilian mining group is the third NYSE-listed company to seek a cross-listing on NYSE Euronext in Europe. This fast-track procedure enables companies already listed in New York to gain access to the European stock market on the basis of a listing prospectus approved by the Securities and Exchange Commission and therefore to tap capital markets in euros.

-By Nathalie Boschat, Dow Jones Newswires; +33 (0) 1 40 17 17 40; nathalie.boschat@dowjones.com


Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=a5vGVuLsIGAVkKlM6fBhyw%3D%3D. You can use this link on the day this article is published and the following day.



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IBOX ABOVE: CITI on VALE CAPITAL RAISED

Vale Raised to `Buy' From `Neutral' by Goldman Sachs (Update1)
Vale Raised to `Buy' From `Neutral' by Goldman Sachs (Update1)

By Mark Herlihy

July 17 (Bloomberg) -- Cia. Vale do Rio Doce, the world's biggest iron-ore producer, was raised to ``buy'' from ``neutral'' by Goldman Sachs Group Inc. after the shares underperformed their peers.

``We see scope for Vale to outperform its peers in the short term due to its inexpensive relative valuation, higher exposure to bulk commodities and recent underperformance,'' Marcelo Aguiar, a Goldman analyst based in Sao Paulo, wrote today in a note to investors.

Goldman raised its six-month price estimate for Vale common shares to $42 and preferred shares to $36.

The company's common stock fell 2.1 percent to $30.65 in New York trading yesterday and its preferred shares dropped 1.6 percent to $26.77.

To contact the reporter on this story: Mark Herlihy in London at mherlihy1@bloomberg.net.

Last Updated: July 17, 2008 05:34 EDT

Brazil's Vale raises less than hoped in share offering
Wed Jul 16, 2008 6:13pm EDT
(Recasts, adds details throughout, background)

SAO PAULO, July 16 (Reuters) - Brazilian mining giant Vale (RIO.N: Quote, Profile, Research, Stock Buzz) raised about 19.43 billion reais ($12.17 billion) in a global share offering on Wednesday, building up a war chest to help finance expansion plans and potential acquisitions.

The company, the world's largest producer and exporter of iron ore, said it priced 189,063,218 preferred shares (VALE5.SA: Quote, Profile, Research, Stock Buzz) at 39.90 reais each and 256,926,766 voting shares (VALE3.SA: Quote, Profile, Research, Stock Buzz) at 46.28 reais each.

Vale, formerly known as CVRD, went ahead with the offering despite a recent slump in financial markets that pushed its share price sharply lower.

When Vale first announced its plans for the offering on June 10, its preferred shares were trading at 48.62 reais and its voting shares at 58.40 reais. On Wednesday, the preferred shares closed 2 percent lower at 42.60 reais and the voting shares fell 1.42 percent to 49.20 reais.

Vale, one of the world's top diversified mining companies, has said it would use the proceeds from the sale to finance growth in existing businesses and future acquisitions, as stipulated in its current $59 billion investment plan.

Brazilian media and several mining analysts have speculated that Vale is gearing up for a big overseas takeover. Company executives, however, have denied they are in takeover talks.

Since Roger Agnelli took over as chief executive in 2001, Vale has completed 14 acquisitions, including the $18 billion takeover of Canadian nickel producer Inco in 2006.

Earlier this year, it tried and failed to acquire Swiss rival Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) in a deal that some analysts valued as high as $90 billion, which would have made it one of the biggest

Vale's main shareholders -- the state-run pension fund Previ, the investment arm of Brazil's largest private-sector bank Bradesco (BBDC4.SA: Quote, Profile, Research, Stock Buzz)(BBD.N: Quote, Profile, Research, Stock Buzz), and Japanese trading house Mitsui & Co (8031.T: Quote, Profile, Research, Stock Buzz) -- all said they would participate in the offering so their stake in Vale was not diluted.

($1=1.597 reais)

(Reporting by Daniela Machado, Writing by Todd Benson, editing by Phil Berlowitz)

Could not resist
added a tad AH 29.88

The View From Rio Looks Good

Home > News & Commentary > Online Exclusives > Weekday Trader
TUESDAY, JULY 15, 2008
WEEKDAY TRADER




By TIERNAN RAY | MORE ARTICLES BY AUTHOR

Shares of Brazil's largest iron exporter are trading as if the world's building boom was slowly grinding to a halt. That's too glum an assessment for this stock

AS FEDERAL RESERVE CHAIRMAN Ben Bernanke observed in congressional testimony Tuesday, the cost of doing business throughout the world is going up, because the housing and financial crises are "compounded by rapid increases in the prices of energy and other commodities."

That's why it's good to be on the right side of things. That is, the side of things producing the raw materials the world needs.

Companhia Vale do Rio Doce (ADR ticker: RIO), headquartered in Rio de Janeiro, Brazil, is the world's largest producer of iron ore, the basic ingredient used to make steel.

The $150 billion market-cap company, also known as CVRD or Vale, (pronounced VA-hey), also produces copper and nickel, other ingredients that are the mortar for the global infrastructure boom.

After a 25% drop since mid-May, Vale is trading at about eight times the $4 or so an ADR share that analysts expect the company to earn next year -- or roughly half the value of the Standard & Poor's 500 index companies.

Vale has traded higher, and probably will again. As recently as December, the stock was valued at 12 times 2009 earnings of $3.44. Since then, the estimates have come up, but the stock has moved little.

If Vale is making more money but its price/earnings multiple is lower, it stands to reason the stock is cheap unless the bears can show real signs of a slowdown in the company's business.

At a Glance
Companhia Vale do Rio Doce (RIO)

Stock Price: $31.31
52-Wk High: $44.15
52-Wk Low: $17.00
Market Cap: $146 billion
Est. 2009 EPS: $4.09 per share
2009 P/E: 7.8x
Est. Long-Term EPS Growth:* 17%
Est. ('09/'08) EPS Growth: 31.5%
Revenue (trailing 12 months): $33 billion
Dividend Yield: 1.1%
CEO: Roger Agnelli
Headquarters: Rio de Janeiro, Brazil

* Based on analyst estimates looking ahead three to five years.
Source: Thomson ReutersThe shares reflect concerns the worst of the U.S. economic slowdown will be visited upon the rest of the world. That fear is evident in the 30% pullback in China's Hang Seng stock index since last November.

So far, however, the hunger for materials seems, if anything, underestimated.

"At the margin, it's better for China and the rest of the world to import iron ore [from Vale] than to process it themselves," says Scott Black, president of Delphi Management, who met recently with the company's chief executive, Roger Agnelli.

Delphi holds Vale shares that Black thinks are cheap relative to peers such as British firm Rio Tinto (RTP), trading at 11 times next year's earnings per share.

"It's costing China over $110 per ton to process iron ore," notes Black, a figure that is untenable to make money on an end product, he argues.

By contrast, Vale produces iron ore for $21 to $24 per metric ton, analysts estimate, and it can turn around and sell it for anywhere from $45 to $80 per ton -- still lower than the homegrown cost.

As a result, Vale's production volumes are expected to rise substantially in coming years.

CEO Agnelli expects that between 2008 and 2012, Vale will increase iron-ore production from 296 million metric tons to 422 million, a 9% increase, according to Black.

If Vale can sell anywhere close to that much iron ore, it could help offset falling prices. Gary Lampard, an analyst with Canaccord Adams, is expecting iron-ore prices to fall 39% over several years. Lampard has already reduced estimates for next year's earnings to $3.96 per share from $4.11 based on a drop in prices of nickel exports.

But it's also conceivable demand will put a floor under pricing. "The world is going from 1.34 billion metric tons of steel in 2007 to 1.69 billion metric tons in 2012, a 26% increase," notes Black, again citing figures from Vale's Agnelli.

That's a substantial increase in aggregate demand for any commodity, especially in a period of recession.

Indeed, global steel production grew 6.7% in May, noted Deutsche Bank analyst Jorge Beristain in a note to clients on June 29, which points to annual production this year of 1.4 billion metric tons -- slightly higher than Black's estimate.

"We forecast the iron-ore supply-demand balance to remain tight until 2011, as on the supply side the real push over the line to apparent surplus comes…when we see Vale delivering on its growth projects," wrote Beristain.

Still, as Black concedes, "the notion of decoupling the U.S. from the rest of the world has turned out not to work as people thought it would," meaning that the old rule about the U.S. catching a cold and the rest of the world getting pneumonia still rules peoples' psyches, even if it doesn't pan out in practice.

Such is the confidence of Mr. Agnelli that Vale will on Wednesday price about $15 billion worth of ordinary and preferred shares to raise funds that Black and others expect may be used for acquisition purposes. The resultant dilution is mostly priced into next year's earnings estimates, thinks Black,

The offering will be the largest a Brazilian company has ever made, noted Bloomberg Newswires in a story on Monday.

Delphi is not buying into this offering; Black is sticking with the 278,000 shares Delphi already holds of Vale.

But like most of the analysts on the Street, he thinks there's substantial upside: Price targets for the stock range from $44 to $50, for a potential 56% return.

How long it takes the U.S. to get humming again economically is an important question. Right now, however, shares of Vale are priced as if the developing world is going to give up on progress.

That seems unrealistic, and investors might do well to bet against such pessimism with shares of Vale.


--------------------------------------------------------------------------------

Full Disclosure

• Gary Lampard with Canaccord Adams has a Buy rating on shares of Vale and a price target of $44, according to a report put out by Canaccord Adams on July 14, 2008.

• Jorge Beristain with Deutsche Bank has a Buy rating on shares of Vale and a price target $52, according to a report put out by Deutsche Bank on June 29, 2008.

Companhia Vale do Rio Doce "buy," target price reduced
9:38a.m. - Canaccord Adams
NEW YORK, July 15 (newratings.com) - In a research note published yesterday, analysts at Canaccord Adams maintain their "buy" rating on Companhia Vale do Rio Doce (RIO). The 12-months target price has been reduced to $44.

http://www.newratings.com/en/main/company_headline.m?id=1775572

Companhia Vale do Rio Doce (RIO)

DJ BHP, Rio Decline To Comment On Europe Iron Ore Price Report (Dow Jones News Service)
Updated: Monday, July 14, 2008 10:21PM ET




MELBOURNE (Dow Jones)--BHP Billiton Ltd. (BHP) and Rio Tinto Ltd. (RTP) Tuesday declined to comment on a report that they have settled their European iron ore contracts at a price below those settled in Asia.

A spokeswoman for Rio Tinto confirmed the miner has settled its European contract prices, but declined to comment on the pricing.

Rio and BHP broke with tradition earlier this year when they refused to accept iron ore price increases of between 65% and 71% struck by Brazil's Companhia Vale do Rio Doce (RIO), pressing for higher prices and eventually winning price hikes of 79.88% for iron ore fines and a 96.5% increase for lump from Asian steel mills.

The Australian newspaper reported Tuesday that BHP has now agreed a price hike with its key European customer ArcelorMittal (MT) in line with the lower Vale settlement.

A spokeswoman for BHP declined to comment on the report.

If the report is true, it may help bolster the miner's push for regulatory approval of its US$170 billion takeover offer for Rio Tinto.

Iron ore is seen as the product most likely to attract the interest of the European Commission as it assesses the bid on competition grounds, and European steel makers have said a BHP takeover of Rio Tinto would give the enlarged group too much market power and lead to higher prices.

BHP argues that it is a price taker and not a price setter in Europe, and sells only about 1.4% of its 107 million metric tons of production into Europe.

The acceptance of the Vale settlement in Europe, rather than the higher Asian settlement, would likely be used by BHP to bolster its argument that it is not a price setter, and would also underline the changes underway in the pricing of iron ore.

Where previously iron ore miners negotiated one benchmark percentage change to be applied across products and regions, now miners are winning different increases for different products while the price hikes for Australian ore have been steeper in Asia than in Europe.

The Rio Tinto spokeswoman said only about 3% of the iron ore from the company's mines in the Pilbara region of Western Australia state is sold to Europe, and declined to comment on pricing of the recent settlement.

"While there have been settlements with European customers, the pricing tends to vary depending on the customer's freight arrangements," she said.

Unlike in Asia, where the buyers pay the cost of transporting the iron ore, both BHP and Rio sell their ore on a landed basis in Europe, meaning they pay the freight costs.


-By Alex Wilson, Dow Jones Newswires; 61-3-9671-4313; alex.wilson@dowjones.com


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"Anyone buying RIO here?"
It's a toss up. Already commited some to the cause and waiting to see if their is another leg down. Might add a little more if we see $30 but if things get real hairy in the market I would want to see the capitulation with volume to back it up before adding in the mid $20's.
GLTY

How about two big reasons to remain bullish on Brazillian equities.
Brazilian stocks if measured by the Bovespa index, has fallen 20% from its May 20 record, but that doesn’t mean it’s time to give up on Latin America. Brazil still has plenty to offer, and with stock valuations low, it’s a good time to go bargain hunting. In fact, a big reason why Brazilian stocks have dropped is because the country’s central bank has been forced to raise rates to curb inflation. Policymakers have raised the benchmark rate twice since April, to 12.25%. Of course, inflation isn’t a problem unique to Brazil.
Inflation in India has been at alarmingly high levels since the first week of June, when it jumped from 8.75% to 11%. And many analysts expect government data released today (Friday) will show wholesale prices soared to a 13-year high of 11.75% in the week ended June 28.
China’s consumer price index (CPI), the nation’s primary gauge of inflation, increased 7.7% in May, after hitting a near 12-year high of 8.7% in February, and is expected to rise 7.2% year-over-year in 2008.
The European Central Bank raised its key interest rate a quarter point last week, after inflation hit a 16-year high of 4% last month, and U.S. Federal Reserve Chairman Ben S. Bernanke has also struck a more hawkish tone with regards to tightening monetary policy.
Brazil, said yesterday that its benchmark IPCA inflation rate rose 6.06% in the past 12 months, higher than the central bank’s 4.5% target, but still below the spiraling rates of China and India, and only marginally higher than inflation in the European Union. Today’s inflation rate is also a marked improvement over the 12% Brazil clocked in 2002.
Also, unlike the United States and Europe, which are both grappling with sluggish growth as well as soaring inflation, the Brazilian economy is expected to expand by a bullish 4.8% this year. And there are two big reasons why.

By 2030 an additional 2 billion people will have joined the global middle class, according to research by Goldman Sachs Group Inc. (GS). That’s a third of the world’s population and enough to cause a “shift in spending power towards middle-income economies.” With its rapid growth and abundance of resources, Brazil figures to be a major focal point of that shift.
In the past two years, more than 23 million people have leapt from Brazil’s lower income classes into “Class C,” which is defined by households with incomes between $450 and $745 a month. Class C, Brazil’s middle class, now makes up about 46% of the country’s population.
The percentage of the population that makes up the lowest two classes, “Class D” and “Class E,” dropped from 51% to 39% from 2005 to 2007.
This shift has caused a boom in consumerism throughout the region. Household consumption rose 6.6% in the first quarter of this year, according to the nation’s statistics agency.
While the majority of incomes have traditionally been spent on staples such as food, an increase in household wealth has resulted in a surge in spending on luxury goods. Sales of big-ticket items, like cars, homes appliances and electronics, have jumped 80% since 2005. Brazil has also become the fifth largest cosmetics consumer in the world.
Domestic demand has also been fueled by an increase in credit. The number of credit cards in Brazil rose 91% between 2002 and 2006, to 79 million, or one for every 2.3 people. And consumer loans, excluding credit cards, are expected to grow by 25% this year after soaring 40% in the first quarter.
The surge in spending helped Brazil’s services industry, which accounts for about 60% of the economy, to grow 5% in the first quarter. Increased demand also boosted manufacturing by 6.9%, and agriculture, which now accounts for less than 10% of gross domestic product (GDP), grew 2.4%.
Brazilians don’t get scared by 6% inflation.Companies want to profit from the growing economy and they know that to do so they need to offer longer maturities at lower rates.

Another big reason investors should keep believing in Brazil is that it has made some powerful new friends abroad.
Brazil’s resources are highly coveted by other emerging markets, particularly fellow BRIC country China, who is desperately seeking fuel for its own economic expansion. Brazil sent 6.7% of its goods to China last year, double the level of 2001.
Trade volume between China and Brazil totaled $29.7 billion in 2007, jumping 46.4% year-over-year, according to the latest statistics of China’s Ministry of Commerce.
Perhaps that’s why the Brazilian government has launched its “China Agenda” program, which involves a series of coordinated measures by the government and private sectors to triple Brazil’s exports to China and encourage more Chinese investment in Brazil.
According to Xinhua, Brazil wants to triple its exports to China from $10.75 billion in 2007 to $30 billion by 2010. The Brazilian government has identified 619 products that are in high demand in China as priority export items to the country. Meanwhile, the government has also proposed to include more manufactured products in its exports to China, 74% of which now are low-value commodities such as soybeans and pig iron.
Brazil has also sought out stronger ties with Middle Eastern powers. Most recently, plans were made to establish a permanent commercial center in the United Arab Emirates to promote investment between the regions. The U.A.E. is home to the Abu Dhabi Investment Authority, or ADIA, a sovereign wealth fund with an estimated $875 billion in assets. Brazil is the world’s sixth-largest economy and home to an internal market of approximately 190 million consumers.
The new center will serve as a permanent exhibition of products from Brazil and Latin America, and tap developing investment and marketing opportunities between the regions.
It will also enhance Arab-Brazilian relations through the presence of future Gulf investments in Brazil, Ahmed Yassine, president of the Trade Exterior Chamber of Brazilian-Arabian Gulf and North Africa, told the Emirates News Agency. Yassine led a delegation of Brazilian businessmen on a tour of the region.
An estimated 20 million people of Arab origin live in Latin America and 7 million of them are in Brazil.In 2007, Gulf countries imported $4.6 billion in goods from Brazil, an increase of 4.8% from 2006.
Trade between Brazil and the Arab countries reached $9.4 billion in the first half of 2008 – 60.1% more than in the same period in 2007. June’s figures were also the highest ever for that month, with Brazilian exports totaling $966.15 million.

With low valuations scaring off the fair-weather investors there are plenty of Brazilian stocks to profit from the country’s strong growth prospects. There are more than 30 Brazilian companies with full American Depository Receipt (ADR) listings on the New York Stock Exchange, plus 40 to 50 more that are traded in the over-the-counter market. Here are a few attractive examples to consider:
–Banco Itau Holding Financeira SA, referred to usually as Banco Itau (ADR: ITU), has a forward P/E ratio of 12.94 and dividend yield of 0.45%. Brazilian banks earn very high returns, primarily from domestic market lending in reals. Including Banco Itau, there are three large ones listed on the Big Board in New York; the other two are Banco Bradesco SA (ADR: BBD) and Uniao Bancos Brasile SA (Unibanco) (ADR: UBB). However, Itau is the cheapest of the three, though only slightly.

–Companhia Vale do Rio Doce, now referred to only as Vale (ADR: RIO), is one of the true global blue chips, with a market capitalization of almost $200 billion. An iron-ore company with ancillary operations in gold, nickel, copper and other metals, its shares trade at a reasonably valued at about 12 times forward earnings, though its dividend yield is only 0.74%.

–Petrobras (ADR: PBR) is one of the few emerging market oil companies with access to modern technology - and the willingness to work with the oil majors. Its shares are up 90% in the past year, but the stock’s forward P/E still is only 9.20. It has a 0.5% yield. The possible upside: It finds another gigantic offshore oilfield. The possible downside: Oil drops back to $50 a barrel. If the world’s monetary authorities get serious about imposing higher interest rates to fight inflation, PBR and RIO would probably suffer as commodities prices fall back to earth.

–Companhia de Saneamento Basico (Sabesp) (ADR: SBS) is the water and sewage system provider for Sao Paulo. Now that’s a growth business, and not dependent on commodity prices. With a P/E of only 8.67 this is one stock I have to say I love.

–TNE (ADR: TNE) There are a bunch of Brazilian cell phone companies, but TNE appears to be the cheapest. It’s concentrated in the populous southeast and northeast regions of Brazil, with a forward P/E ratio of only 9.43 and yield of 2.17%.

DJ Brazil Real Opens Stronger On Increased Investor Inflows (Dow Jones News Service)
Updated: Friday, July 11, 2008 09:50AM ET



By Jeff Fick
Of DOW JONES NEWSWIRES


RIO DE JANEIRO (Dow Jones)--The Brazilian real opened stronger against the U.S. dollar Friday amid strong investor inflows and higher international oil prices.

The real opened at BRL1.6080 in trading on the Brazilian Mercantile & Futures Exchange, or BM&F, stronger from Thursday's close at BRL1.6100.

Investor inflows picked up after local inflation concerns eased with the release of June's IPCA consumer price index showed prices growing at a softer pace, analysts said. The IPCA rose 0.74% in June versus a 0.79% clip in May.

The June figure and tough words about inflation from government officials, who vowed to keep prices under control, soothed concerns that inflation was spiraling upward in Brazil. It also reaffirmed expectations that the Brazilian Central Bank will continue to raise interest rates.

The benchmark Selic base rate currently stands at 12.25%, one of the highest interest rates in the world. The Selic makes Brazil a favored destination for fixed-income investors and carry trade players.

Traders also pointed to inflows from overseas companies investing in the local energy sector, as well as entries aimed at buying shares of miner Companhia Vale do Rio Doce (RIO), or Vale.

Vale was planning a share offer that could raise nearly $14 billion, and investors were bringing in funds to snap up the heavily sought after shares of the world's largest iron ore producer.

A surge in international oil prices, however, could undermine the real, analysts said. Oil prices have jumped the past two days after falling from record highs, with tensions in the Middle East and supply concerns driving the gains.

At about 1330 GMT, the front-month August contract on the New York Mercantile Exchange was trading $5.00 higher at $146.66 a barrel after earlier hitting a record high above $147.00 a barrel.

Inflation concerns could raise expectations that interest rates in developed economies such as the U.S. and European Union could move higher. Higher interest rates abroad typically sap investment from emerging markets such as Brazil, thereby undermining the real.

Meanwhile, the risk to investing in Brazil as measured by the JP Morgan Emerging Markets Bond Index Plus, or EMBI+, widened to a spread of 249 basis points over U.S. Treasurys. Brazil's benchmark Global 40 bond was flat at a bid of 132 1/16.


-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; Jeff.Fick@dowjones.com


Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=drIHRBj%2B6VfZ9WYRcX%2F%2B1A%3D%3D. You can use this link on the day this article is published and the following day.



(END) Dow Jones Newswires

07-11-08 0950ET

Copyright (c) 2008 Dow Jones & Company, Inc.

Mining Turf Wars
July 10, 2008
Author: Lee Hudson Teslik




Coal is among a number of commodities fueling a mining boom. (AP/ Anupam Nath)
For the normally staid mining sector, these are heady times. Sector indices have easily outpaced the Dow Jones Industrial Average for five years running (see chart below). Now some industry watchers see signs of a bubble (FT). At the same time, one industry giant, the British-Australian firm BHP Billiton, is attempting a hostile takeover of another British-Australian conglomerate, Rio Tinto. Whether or not the bid goes through—it initially met a sharp response from Rio's board and is currently under EU scrutiny (AFP)—some analysts say it could spawn a period of consolidation that will have geopolitical consequences for years to come.

The reason for the mining boom is simple—rising commodity prices—but the underlying pressures causing prices to rise are numerous and complex. New demand from emerging markets certainly plays a role. Chinese demand for aluminum (MarketWatch), coal (NPR), gold (Bloomberg), and other mined commodities has spiked. So too has demand from India, Russia, Brazil, and a host of other emerging economies. Beyond demand, market speculation also affects prices. As institutional investors have increasingly sought alternatives to equity investments, they have competed for purchases on commodities futures markets, pushing up prices. Michael W. Masters, a prominent hedge fund manager, explains this dynamic in recent congressional testimony (PDF).

The price jump has meant a bonanza for certain well-placed mining regions. Australia and New Zealand, for instance, have profited handily from commodity exports to China, particularly coal and aluminum exports. The Economist notes several firms riding this wave. Rio Tinto's share price roughly doubled in 2007. The Brazilian mining firm Vale has seen its quarterly earnings rise nearly tenfold since 2002. Some Central Asian countries—Kazakhstan is a good example—have seen similar booms, and firms have rushed to forge relationships with African countries flush with commodities. A Reuters analysis notes that a banner year for mining firms has also led to a spike in demand for mining services firms in the United States and Canada.

Yet some analysts see risks to the commodities boom. For starters, mining firms haven't been able to find enough skilled personnel (NYT) to actually increase output, despite growing demand. Moreover, rising commodity prices may prove a double-edged sword, as some parts of the mining industry are highly energy intensive. A recent report from PricewaterhouseCoopers shows that profits for the top forty mining firms rose 32 percent in 2007, but that the firms' costs rose 38 percent in the same year.

Perhaps the most dramatic aspect of mining sector's wild ride has been the push toward consolidation it has ushered. A Financial Times article says BHP's bid for Rio Tinto sparked a turf war that could lead to a major sector consolidation in the coming years (a fair amount has already happened—"the volume of mining deals in recent years has actually been staggering," says the CEO of the Swiss firm Xstrata in a recent interview with Reuters). The FT article says Rio may seek to buy up smaller firms, or team up with Vale, to make the firm too large for BHP to buy a controlling stake. But Vale, if it wants to protect itself, might seek a similar strategy, possibly teaming with Xstrata or the U.S.-headquartered Alcoa. Indeed, dozens of global players—even those not directly related to the BHP-Rio deal—might seek similar moves in the next few years.

The impact of such a shake-up would be felt globally. Several smaller U.S. firms could emerge as takeover targets, particularly given the weakness of the dollar. Depending which buyers are interested, such moves could prompt the kind of protectionist reaction seen in 2006 when a Dubai-based company tried to buy a company that ran U.S. ports. Other analysts question whether resource nationalism could increasingly grip the sector, adding unknown geopolitical twists to the rush for access to materials. Even putting these concerns aside, a major sector consolidation would have ramifications for the mining business itself. Investors Chronicle notes that a period of rapid acquisitions isn't necessarily the best way for the sector to boost growth at a time of rapidly rising global demand.

Cautious outlook for commodities in second half

Wednesday July 9, 2008

By HANIM ADNAN, YEOW POOI LING and LAALITHA HUNT


DESPITE most major commodities posting their best performance in the first half with repeated record highs in prices, analysts are cautious about the second half's performance.

They anticipate slower world economic growth that will affect demand.

Many are particularly concerned over the slower US growth that can, to a certain extent, impact economic activities in emerging markets.

Even George Soros, the famous billionaire investor, has talked of “a bubble in the making” in crude oil and some other commodities in the coming months.

Of late, the interest in commodities has been intense among big institutions and pension funds worldwide, which hold about US$250bil in commodities compared with a mere US$10bil in 2000.


Steel coils

Analysts generally attributed the record commodity prices to the robust demand from China, India and Brazil as well as new policies on biofuels.

This happened on the back of sluggish supply given years of under investment, particularly in mining and agriculture-based commodities used for both food and biofuels.

So far this year, crude oil price had risen by 50%, gold (36%), base metals like aluminium, steel and copper (30% each) and tin (almost 40%). However, nickel, zinc and lead had each fallen 20% to 40%.

Agriculture-based crude palm oil (CPO), which closely tracked the performance of soybean, were both up by over 30%, while corn rose by 26%, wheat firmed 30% and rice escalated by 31% year-to-date.

Crude oil

There are two different views on the second half's performance for crude oil.

The commodity, which hit an all-time high of US$145.85 per barrel last Thursday, is believed to have “peaked,” according to some market players.

Polar Pacific managing director David Bensimon told Bloomberg yesterday that crude oil price could decline to US$123 by August, US$109 by December and US$98 by April next year.

On the other hand, investors are betting that the oil price can surge to US$300 a barrel by year-end, based on data provided by the New York Mercantile Exchange, the world’s largest energy market.

Goldman Sachs, in a recent report, stated that oil prices would average US$141 a barrel in the second half of 2008 and recommended that its clients buy long-term oil contracts.

The International Energy Agency had warned that the oil market would remain tight during the next five years as production from non-Opec countries could stall and demand growth relatively strong.

It said annual non-Opec growth would slow to 0.5% between 2008 and 2013, against demand growth of 1.6% per year.


Gold

Gold experienced a strong rally in the past six months, trading between US$857.79 and US$946.40 per ounce. Analysts continued to remain bullish on the precious metal, given the bearish views on the US dollar and economy.

Many expect the central banks in emerging markets to further diversify in gold, with investors continuing to perceive gold as an inflationary hedge.


The concern over inflation and the US dollar will also help to support gold to hit over US$1,030 this year.

Selective base metals

Tin, which used to be one of the most illiquid contracts on the London Metal Exchange, has shot up by 40% so far this year on potential drop in production and supply disruptions from Indonesia, which is clamping down on illegal tin mining.

The commodity hit an all-time high of US$24,040 per tonne on the Kuala Lumpur Tin Market in May but has since stabilised to about US$22,800. Traders expect the commodity to be traded above US$20,000 in the second half.

Copper, used in the power and construction sectors, touched a record of US$8,940 per tonne (US$4 per pound) last Wednesday. Citi group, in its latest report, expected copper to average at US$4 per pound in the second half against its previous forecast of US$3.50.

The investment bank is sharply increasing its copper price forecasts to average US$5 per pound in 2009 and US$5.50 in 2010 versus an earlier forecast of US$3. “We expect copper mine production to be about 900,000 tonnes below capacity in 2009,” it added.

Steel prices will continue to be traded on a higher note, at least until the third quarter. Goldman Sachs, in its report, said the strength in steel prices would be driven by low volume traded and inventory levels, as well as continued demand.

It noted that news on the collapse in steel prices was exaggerated as “we believe they should not fall much from its US$1,075-per-tonne level with cost of production by marginal producers in Asia at about US$900 per tonne”.

Agriculture commodities

The phenomenal first-half rally in agriculture commodities like CPO, soybean and corn is closely related to the food and biofuels agenda as well as the supply shortage.

In the second half, however, both corn and soybean are expected to trade about US$7 and below US$15 per bushel respectively, given the latest US Department of Agriculture report on improved crop conditions in the Midwest, which was hit by major floods last month.

Soybean on the Chicago Board of Trade hit a new high of US$16.36 last Thursday while corn rose to a record US$7.9925 on June 27 as global reserves were forecast to fall to a 24-year low by end-August.

Wheat, which closely tracked corn, will likely trade below US$8 per bushel in the second half. “Lower corn price can cut the demand for wheat as an alternative livestock feed,” an analyst said.

Rice shortage in recent months has created a state of panic in most Asian nations, with prices soaring by nearly 35%.

In the first five months of the year, Thailand’s rice price increased by US$610 to US$730 per tonne, while Vietnam’s rice rose US$580 to US$640 per tonne compared with the previous corresponding period.

Though both major producers are now harvesting crops, the export prices Thailand is offering are still US$445 to US$523 per tonne higher, while Vietnam’s prices are US$613 to US$648 higher than previously.

The Food and Agriculture Organisation said the total rice output was 445.3 million tonnes for the 2008-2009 crop, an increase of 2.3% over the previous crop, while consumption is expected to reach 444.9 million tonnes, an increase of 1.8%.

Crude oil

THE huge spike in crude oil prices has created a major inflationary pressure on goods and services. Last year, it was already worrisome when crude oil doubled in value, and the rising trend has continued to gain strength this year.

It broke one price record after another. Two weeks ago, it crossed the mark of US$140 per barrel, raising expectation that oil exporters should play a greater role in controlling prices to ensure the sustainability of economies.

Some have blamed the hedge funds and speculators for pushing up prices but most believe that strong demand growth driven by China, India and Brazil, coupled with shortages of supply and refining capacity, is the main cause.

Furthermore, the weakening of the US dollar amid the slower economy and the shift of funds from equities to commodities has contributed to the surge.

Gold

THE concerns over economic growth in the US, the spillover effect of the subprime woes on worldwide financial institutions and the raging crude oil prices have driven investors to flee from the equities market.

Gold, traditionally viewed as a good investment, becomes the alternative investment, given its sustainable value during difficult times.

The price of gold spiked up significantly last year when the subprime woes started to emerge and it continued to gain momentum this year.

Year to date, it has appreciated by some 12% and analysts expect the price to breach the US$1,000 level, especially if the US economy goes into recession.

Crude palm oil

PRICES of crude palm oil (CPO) has seen a whopping increase in value this year, in tandem with crude oil price.

Last year, plantation analysts who forecast CPO price to average about RM2,800 a tonne this year were seen as bullish.

Now, however, this estimate has become conservative, given that CPO price has managed to stay above the RM3,300 level throughout the first six months of this year.

The demand for CPO is dependent on the supply of corn and soybean as CPO is the substitute for these grains. Corn and soybean are usually used as oils in food as well as feed for biofuel.


A man piles holding oil palm fruits.
The anticipated worldwide shortage of food, coupled with the unpredictable weather, has driven prices of corn and soybean in the US to record highs, and the price of CPO has moved up as well.

Rubber

THE price of rubber has steadily increased as rising oil prices boosted the cost of alternative products made from oil.


Man tapping rubber

In April, the price of Standard Malaysian Rubber 20 touched an all-time high of 976.5 sen per kg in line with the 28-year-high rubber futures on the Tokyo Commodity Exchange due to concerns over a shortage of world supply.


China, the biggest consumer of rubber, was seeing a decline in stockpile, raising expectation that it will increase demand substantially.

The Chinese need more of the raw material to support the burgeoning auto industry. Meanwhile, Thailand, which is the largest rubber producer, is facing slower production in lieu of weather conditions.

The last couple of weeks, however, commodity prices, including rubber prices, have come off their highs.

Aluminium

ALUMINIUM price rose to a high of US$3,227 per tonne in early March from a low of US$2,410 in January this year.

The trigger for the rise was power disruptions in China, the world's biggest producer and consumer of the energy-intensive metal, due to severe snowstorms.

That focused the market's attention on how reliant aluminium production was on electricity, whose price was being pushed up by record high oil prices.

According to commodities analysts, rising energy prices would be the single most important factor influencing aluminium prices, as producers look to covering their costs.

Copper

International copper price has been increasing rapidly since the beginning of 2008. Copper price pushed to a high of US$8,730 per tonne in April from a low of US$6,870 beginning this year.

Copper price has been supported by booming demand from Asian countries as well as the weak US dollar.

Dwindling supplies from one of the world’s largest producers, Chile, has also been attributed to recent skyrocketing prices.

Besides that, the instability on the international financial market has made such block trading products as copper more attractive as investment instruments, spurring the climb in prices.

Tin

TIN price has enjoyed a bull run this year, rising to a high of US$25,300 per tonne in May from a low of US$16,025 in January this year.


The key reason behind the price rally was the uneven production from Indonesia and erratic exports from China.

Growth in the Asian electronics industry and replacement of lead-based solders were also key triggers for tin consumption worldwide.


Woman making peweter articles.

Meanwhile, hedge funds have also played a key role in pushing the price of tin to all-time highs. Following the US subprime loan crisis and a series of rate cuts by the Federal Reserve, the flow of funds to the commodity market rose sharply, as commodities were considered a safe haven against the weakening dollar. So tin is among the commodities that have gained from the flow of new money.

Steel

RAW material costs are said to be the primary contributor to the sharp rise in steel prices. The 65% rise in iron ore cost year on year, tripling of coking coal costs, rising scrap prices, high energy costs and increased freight fuel charges had resulted in the price of steel bars jumping about 45% in the last six months and trading at about RM3,000 per tonne.

Strong global demand and the weak US dollar also played pivotal roles in the sharp hike of steel prices in the first half of 2008.

Brazil after the upgrade ( A previous article revisted)

Published: May 28 2008 14:03 | Last updated: June 2 2008 15:03




Brazil offers attractive growth rates and access to a range of dynamic markets, which have been boosted since its debt was lifted to investment grade by Standard & Poor’s in early May, and then by Fitch just a few weeks later.

The Latin American nation’s natural resources, including oil and iron ore, have helped it develop and its large agricultural sector leaves it well placed to benefit from rising food prices.

As it continues to outperform, which sectors are likely to offer the best returns and what are the strongest indicators to provide clear insight into Brazil’s medium and long term prospects?

Marc Chandler, global head of currencies at Brown Brothers Harriman answers readers questions now.

---------------------------------------------------------------------------------------------------------------------

If it’s time to get into Brazil, what are the best current ways for US-taxed retail investors to play?
SJ, New York

Marc Chandler: There are several ways for US retail investors to invest in Brazilian equities. There are of course various mutual funds, where you defer to a mutual funds manager’s discretion.

Alternatively, there is the I-Share exchange traded fund for Brazil. The symbol is EWZ. Year to date it has returned about 23 per cent and over the past year is up nearly 70 per cent.

One could broaden out the strategy and invest in the Latin American I-Shares (ILF). Year to date it is up almost 21 per cent and over the past year up almost 45 per cent . Its holdings are heavily concentrated in Brazil’s oil company and largest iron ore producer.

One could just invest in individual Brazilian companies through American Depository Receipts. That is what my family has done. We own some Petrobras, the oil company, which is up about 22 per cent year-to-date and split early last month.

Valuation in the Brazilian stock market has become stretched as price/earnings ratios are near 4-year highs and some investment banks have expressed caution.

---------------------------------------------------------------------------------------------------------------------

How much stronger can the Brazilian real get before it begins to impact upon the country’s exports, particularly in manufacturing, and what long term effects is this trend likely to have on the economy?
Nick Rawdon-Jones, London

MC: Many Brazilian exporters are already feeling the bite from the currency’s appreciation. The Brazilian real is up about 9.5 per cent against the dollar thus far this year and has gained about 17 per cent over the past 12-months.

Brazil, though, is benefiting from a positive-terms-of-trade shock. It is the top exporter of soy, sugar, orange juice, coffee, beef, poultry and a growing producer of rice and corn.

Last year it exported $58bn of farm products (a little less than 20 per cent was soy). It is also an important iron ore exporter. At the same, time it is nearly self sufficient in meeting its own energy needs.

Its appreciating currency is allowing some Brazilian companies to invest abroad more cheaply and forces local manufacturers to boost competitiveness rather than rely on currency weakness to make their goods competitive.

--------------------------------------------------------------------------------------------------------------------

Will Brazil’s growth continue with the real as strong as it is against the dollar and with a possible fall in commodity prices?
Andrew Ireland, Campina Verde, Brazil

MC Brazil’s challenge, it seems to me, is to take advantage of this positive-terms-of- trade shock to finance investment and diversification. Brazil’s productivity is about a fifth of the US. For the last 20-years Brazil’s purchase of business equipment and machinery has grown on average by about 2 per cent to 3 per cent a year. Investment was growing around 10 per cent for the previous quarter of a century.

It seems as if the scars of the over investment and poor productivity has made Brazilian businesses more cautious. High real interest rates also deters investment. Why invest when one can garner double digit returns by lending to the government?

---------------------------------------------------------------------------------------------------------------------

Can Brazil stifle inflation given the rising price of energy and its increasing internal consumer demand?
Graham Smith

MC: Brazil’s central bank hiked rates earlier this year and most likely will do so again this week.

The overnight rate is currently set at 11.75 per cent and a 50 basis point rate hike is the most likely scenario, though a largest 75 basis point move cannot be entirely ruled out.

Inflation is running near 5 per cent, but inflation expectations are creeping up. The central banks’ weekly survey showed inflation is expected to rise 5.48 per cent this year up from 5.24 per cent last week.

By contrast, the other BRIC nations (Brazil, Russia, India and China) have higher inflation.

China is at 8.5 per cent. Russia is at a 5-year high of 14.3 per cent and India’s inflation is just below 8 per cent. It is not clear the extent to which higher energy is fuelling Brazilian inflation.

I would suggest another culprit is the subdued investment, which means that the economy runs into capacity constraints earlier on in the business cycle.

---------------------------------------------------------------------------------------------------------------------The Brazilian real looks good, and I noticed the Mexican peso is rising strongly in tandem. What is your long term outlook for the Mexican peso, is it as favourable as the real?
MW Illia

MC: The Brazilian real has been among the world’s strongest currencies for the last few years while Mexican peso has only recently been strengthening - It lost 1 per cent last year against the US and was one of the weakest currencies. In contrast, the real appreciated 20 per cent against the dollar.

With the Federal Reserve cutting US interest rates in the first four months of the year and Mexico’s central bank hiking rates in Oct 07 the peso has strengthened, with further upside from expectations of further Mexican rate rises.

You are right the peso is off to a good start this year, rising about 1.1 per cent a month on average this year. But I am concerned it has seen its better days for a while.

There has been a backing-up in US rates amid a greater conviction that the Fed is done cutting rates.

Oil prices, which did not seem to help the peso last year, also appear to be have begun a correction of unknown duration. I have more confidence in the real than I do the peso at current levels.

---------------------------------------------------------------------------------------------------------------------

Brazil’s government continues to be saddled with a costly pension system that remains in deficit despite reforms by Cardoso and Lula. Should investors, regardless of sector, worry about the size or the balance of the government’s social sector budget when making investment decisions in Brazil?
Sarah Brooks, Ohio, USA

MC: You are right Brazil’s pension programme is in desperate need to reform and Cardoso and Lula had limited if any real success here.

However, that assessment is likely to be true of many countries and it has not prevented Brazil from: 1) increasing its growth to 5.4 per cent last year and nearer 5 per cent this year; 2) from having one of the world’s strongest currencies and strongest bourses in recent years, including this one, and 3) enjoying investment grade status by Fitch, S&P and DBRS.

Brazil has a number of challenges pension reform being one and an important one.

One that may be even more important, and perhaps even related to the pension problem ,is the informal economy, according to recent estimates from McKinsey, may be as large as 40 per cent of economic activity.

The judicial system also needs reform as part of the deepening the rule of law and transparency.

---------------------------------------------------------------------------------------------------------------------

What is your forecast for the economy growth rate in the BRIC countries during the next decade?
Viktor O. Ledenyov, Ukraine

MC: Frankly, I don’t know what I am eating for dinner tonight let alone the growth rate of the BRICs a decade from now! I wouldn’t have much confidence in such forecasts in any event.

That said, the technology gap between the US and India and China seems to be larger than with Brazil. Therefore it seems to me that India and China can grow significantly faster than Brazil in the coming years.

Russia is a different story. It is riding the waves of rising energy prices. A more compelling argument; of the downfall of the Soviet Union, rather than the arms race with the US; was the precipitous decline in oil prices.

The opposite is true now, with rising oil energy prices (but also grain prices) helping give rise to Russian nationalism.

Brazil may grow slower, but the trade off also seems to be a more stable situation and one that generates lower inflation, which has been historically one of Brazils’ key challenges.

---------------------------------------------------------------------------------------------------------------------

Are any other Latin or South American countries with rich natural resources like Brazil going to enjoy upgrades and potential growth? What are the major risks Brazil faces in its economic growth and capital markets?
Will, Shenzhen, China

MC: Latin American equity markets are among the best performers globally this year. In addition to Brazil, Chile also has investment grade status by a majority of the major rating agencies.

Peru’s rating is split, with Fitch giving it credit rating status. Colombia also enjoys investment grade status by S&P.

Typically institutional fund managers do like split rating.

Brazil faces the usual set of risks to its economy, like a drop shift in the terms of trade and the threat that higher rates chokes off the growth momentum as it was just building.

The appreciation of Brazil’s equities in recent years leave the market stretched on valuation grounds.

The initial public offering market is slowing down. Roughly two-thirds of last year’s IPOs have down poorly (lost money as of May 21) according to Bloomberg data. Almost two dozen companies have postponed or withdrew IPOs this year. Three Brazilian companies have issued IPOs this year and raised about R$780 mln ($473 mln or GBP241 mln).

---------------------------------------------------------------------------------------------------------------------

What is your general opinion on the Brazil’s economic reform strategy, which led to the transition from the resource based economy to the hi-tech economy?
Viktor Ledenyov, Ukraine

MC: I am not convinced Brazil has truly transitioned to a high-tech economy.

While there has been some progress, I think the record shows that Brazil has remained a primary goods producer and has benefited from the high price of these commodities and as well as monetary policy and debt management policies that were aimed to putting the country on better footing that inherited from the former president Cardoso.

That said, Brazil’s commodity production appears highly capital intensive and technologically savvy. In the past century, if not longer, those countries that relied on primary goods exports, did not fare as well as those with a diversified economy or producers of manufactured goods.

How a country produces is arguably just as important as what it produces. The economy of scale achieved in agriculture for example, meant consolidation and concentration of land ownership, which helped create landless peasants who do not necessarily have the skills to get one of the limited manufacturing jobs.

Brazil may be doing a good job marshalling its physical resources, like land and energy, but it is doing a relatively poor job developing its human capital.

---------------------------------------------------------------------------------------------------------------------

Brazil has continued to outperform other emerging markets this year. Has this been because of speculative investing or are there strong fundamentals behind this?
Calum Austin, Madrid

MC: Speculators do not simply flip a coin to decide if they should buy Brazil or not.

Speculators and investors have been attracted to Brazil’s fundamentals.

High nominal interest rates attracts flows into its bond market. Strong and well positioned commodity companies attract foreign portfolio investment. Momentum traders have also benefited from and help fuel the equity market and currency gains.

---------------------------------------------------------------------------------------------------------------------

While Brazil is experiencing exceptional performance as a result of high global commodity prices and globalisation Is it correct to have concerns about company reporting and transparency by Brazilian companies ? There have been reports of a tendency for Brazilian based companies to adopt local practices which would not be acceptable in investment grade first world countries.
Andrew Brown, New York

MC: I am not fully aware of the different regulatory and reporting practices for Brazilian companies. I must admit to being shocked at times with corporate reporting that takes place in ostensibly open and transparent economies, like the US.

That said, investors who share your concerns may be best served by investing in Brazilian shares through American Depository Receipts that trade on the US exchanges. For example, Petroleo Brasileiro (Petrobras) trades as an ADR on the New York Stock Exchange.

---------------------------------------------------------------------------------------------------------------------I notice Argentina’s government next door seem to have snatched defeat from the jaws of victory by putting a high tax on agricultural exports and causing farmers to strike. Can the Brazilian’s be relied on not to do something similar?
Paul Howarth, Leeds

MC: The government in Argentina and the government in Brazil are two radically different animals.

President Lula of Brazil may head up the main left-of-center political party but he has been extremely good for Brazilian business and investors. He may be critical of the Washington consensus, but he has more or less adopted it in practice.

For all the clamor of the threat that Lula presented before getting elected--remember George Soros’ claim that a vote for Lula was a vote to bankrupt the country--Brazil has prospered under his administration, perhaps not as much as it could, but more than it did before.

Brazil was a country of the future before Lula and it will remain so after him. His legacy of adopting neo-liberal policies is to illustrate the general consensus in Brazilian politics. The political elite sees little alternative.

Hey ginchinchili,
Thanks. I could due more but for a moment I didn't think there was any life out there. I know there are quite a few lurkers but are to shy to post. Right now I'm also in RIO, accumilating a large position. To be honest, I've traded it and now I am looking to core it up for the long haul. I don't know if were at the end but anymore downside I'll just keep nailing some more at some critical retracement lines.
GLTY

DJ Brazil 3Q Stock Outlook: Inflation Worries Set Tone (Dow Jones News Service)
Updated: Wednesday, July 02, 2008 12:49PM ET



By Rogerio Jelmayer
Of DOW JONES NEWSWIRES


SAO PAULO (Dow Jones)--Global inflation concerns and rising interest rates, at home and abroad, will be the dominant factors for investors in Brazilian stocks during the third quarter of 2008.

"Investors will be highly attentive to inflationary pressures and, especially, to the response by central banks," said Alvaro Bandeira, director of Brazil's largest stock brokerage, Agora Senior.

Provisionally, Bandeira is still predicting gains for Brazilian stocks, with a standing forecast of 82,000 points for the benchmark Ibovespa stocks index by the end of the year. The index closed the second quarter at 65,018 points, for a quarter-on-quarter gain of 6.6%.

However, Bandeira said he may revise his forecast following second-quarter earnings releases, due in July.

Brazilian inflation has been on the rise, along with interest rates.

The official IPCA inflation rate reached 5.89% as of mid-June, up from 4.46% in 2007 and more than a full percentage point above the government's 2008 inflation target of 4.5%. As a response to the inflationary pressure, the central bank in June raised its Selic base interest rate by 50 basis points to a towering 12.25%. It was the second 50-point hike in a row.

"Inflation is a problem across the globe," said Pedro Paulo Silveira, chief economist at Sao Paulo's Gradual Brokerage. "Brazilian commodities prices themselves have had an impact on worldwide inflation. We have to be very attentive to the way central banks handle this problem."

Like Bandeira, Silveira is also expecting a rise in the Ibovespa index, to 80,000 points by the end of the year.

More hikes in the Selic rate have already been largely priced in to stocks, according to Jason Vieira, an analyst at local consulting group Uptrend. "This will not have much of an impact on market performance," he said. Vieira is predicting a modest rise in the Ibovespa index to 70,000 points by the end of the year.

Similarly, Brazil's recent elevation to an investment grade credit rating by Standard & Poor's and Fitch Ratings has also been fully absorbed by the market.

Said Bandeira, "The investment grade rating was, of course, a positive for Brazil. It will bring more investment money in from outside. But even that has been priced in."

Although overall market performance is expected to be positive, some companies will do better than others.

State-run oil company Petroleo Brasileiro SA (PBR), or Petrobras, remains a top pick thanks to rising international oil prices and massive oil finds announced in recent months.

Mining giant Companhia Vale do Rio Doce (RIO), or Vale, is another solid pick on the back of continued heavy demand for iron ore and other minerals.

Rising interest rates, meanwhile, could pump up earnings among Brazilian banks from gains on their treasury bond portfolios, said Vieira.

On the other hand, export-oriented industries could suffer because of the continued strength of the Brazilian real against the U.S. dollar. "Footwear and textiles could be hurt," said Bandeira.

Other industries, however, have managed to gradually shift from exports to domestic sales. Steel and auto parts are good examples, according to analysts.

Table of Recent Trends


At End At End At End At End At End
2Q08 1Q08 4Q07 3Q07 2Q07
Index 65,018 60,968 63,886 60,465 54,392
Qtr-to-Qtr Change


+6.6% -4.6% +5.7% +11.2% +18.7%
Currency: Real


At End At End At End At End At End
2Q08 1Q08 4Q07 3Q07 2Q07
Real vs Dlr


1.597 1.753 1.777 1.834 1.930
Qtr-to-Qtr Change


+9.76% +1.4% +3.2% +5.2% +6.8%
2Q Bovespa Index High: 73,920 (5/29)
2Q Bovespa Index Low: 60,965 (4/1)
Latest Close: 63,396 (7/1)
Latest Close vs 2Q High: -14.2%
Latest Close vs 2Q Low: +4.0%
Latest Close vs 2Q Close: -2.5%


(This is the first in a series of six stories on the prospects for Latin America's six major stock markets in the third quarter.)


-By Rogerio Jelmayer, Dow Jones Newswires; 5511-6847-4519; brazil®dowjones.com


Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=LW9whl%2BCMpgGy0CJvqg%2FuA%3D%3D. You can use this link on the day this article is published and the following day.



(END) Dow Jones Newswires

07-02-08 1249ET

Copyright (c) 2008 Dow Jones & Company, Inc.

Brazil Miner Vale In Talks To Acquire Paranapanema -Estado
DJ (Dow Jones News Service)
Updated: Monday, June 30, 2008 04:40PM ET




RIO DE JANEIRO (Dow Jones)--Brazilian mining giant Companhia Vale do Rio Doce (RIO), or Vale, is in talks to acquire local metals holding company Paranapanema (PMAM4.BR), the local Estado news agency reported Monday.

Vale's interest was piqued after Paranapanema recently restructured its debt load, Estado said. Paranapanema is a holding company that controls four separate metals companies: Copper companies Eluma and Caraiba, fertilizer unit Cibrafertil, and Taboca-Mamore, which handles tin and industrial minerals.

Vale declined to comment on the report.

Paranapanema is controlled by Previ, the pension fund for workers of state-owned Banco do Brasil. Previ is also a member of Vale's controlling block of shareholders, with Previ President Sergio Rosa serving as Vale's board chairman.

Last week, a Previ official admitted that the pension fund was interested in selling off Paranapanema.

Paranapanema shares jumped in trade Monday on the Sao Paulo Stock Exchange, ending 5.7% higher at 7.40 Brazilian reals ($4.63).


-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; jeff.fick@dowjones.com


Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=3lGBWWahUFfXD%2FiXfjAf1g%3D%3D. You can use this link on the day this article is published and the following day.



(END) Dow Jones Newswires

06-30-08 1640ET

Copyright (c) 2008 Dow Jones & Company, Inc

Back to $135 before $170.

Howdy NS

Vale Started At Overweight By Lehman Brothers >RIO More Data
Brazil Vale Started At Overweight By Lehman Brothers
Last update: 6/26/2008 7:48:13 AM
SAO PAULO (Dow Jones)--Lehman Brothers initiated the coverage of shares of Brazilian mining giant Companhia Vale do Rio Doce's (RIO) with an overweight recommendation, the investment house said Thursday in a research report for its clients.
"Vale is very well-positioned to benefit from the ongoing mining super-cycle, and we recommend that investors purchase Vale common shares at current levels," said Lehman Brothers.
In addition, the investment house set a 12-month price target for Vale's American Depositary Receipts, or ADRs, at $45. On Wednesday, the company's share closed quoted at $36.68 in New York.
Lehman Brothers said it is expecting that Vale will earn $3.02 per share in 2008 and $3.96 per share in 2009. By comparison, last year the company reported a profit of $2.41 per share.
"Vale should have significant earnings growth from 2007 to 2008 due to iron ore contract price increases (starting April 1, 2008) of 65% for its medium quality standard fines, 71% for its high quality Carajas fines, and 86.7% for its direct reduction and blast furnace pellets," said the investment house.
-By Rogerio Jelmayer, Dow Jones Newswires; 5511-6847-4521; rogerio.jelmayer@dowjones.com
(END) Dow Jones Newswires
June 26, 2008 07:48 ET (11:48 GMT)

Vale May Revive Offer for `Best Fit' Xstrata, Lehman Says

By Mark Herlihy

June 26 (Bloomberg) -- Vale do Rio Doce, the world's largest iron-ore producer, may revive its takeover offer for Xstrata Plc because it is the ``best fit'' for the Brazilian company, Lehman Brothers Holdings Inc. said.

Vale said June 10 it planned to sell as much as $15 billion of stock to fund expansion and possible acquisitions. The Rio de Janeiro-based company abandoned a $90 billion bid for Xstrata in March that would have made it the world's biggest miner.

``We would not be surprised if Vale is issuing equity now to build a war chest to attempt to acquire Xstrata when credit markets improve,'' Lehman analyst Christopher LaFemina wrote today in a note to investors. ``We would expect the market to have a positive view on this combined company.''

Lehman rated Vale ``overweight'' in initial coverage today. It set a price estimate for Vale's depositary receipts at $45, compared with a close yesterday of $36.68.

``Of the most frequently mentioned possible targets for Vale, Xstrata would be the best fit,'' LaFemina wrote.

Zug, Switzerland-based Xstrata is the world's fourth- largest copper producer.

To contact the reporter on this story: Mark Herlihy in London at mherlihy1@bloomberg.net.

Last Updated: June 26, 2008 04:15 EDT

Vale: Low cost producer of iron ore and nickel with high leverage to global growth

Analysts: Chris LaFemina, CFA (+44 20 7102 9080), Abhishek Shukla, CFA (+44 20 7102 9123)

Investment conclusion: As detailed in the attached 29 page note, we have launched coverage on Vale with a 1-Overweight rating and a $45 price target for the Vale common ADS (versus its most recent closing price of $36.68, and based on the average of 11x its 09E EPS of $3.96 and 13x its estimated normalized EPS of $3.55). We maintain our positive view on the mining sector and consider the recent weakness in some of the names (Vale and the European listed miners in particular) to be an excellent buying opportunity. Vale's commodity exposure is mostly iron ore (~70% of EBITDA) and nickel (~20% of EBITDA). Although, based on our detailed analysis, the bottleneck in the steel supply chain has shifted from iron ore to coking coal and spot iron ore prices have downside risk in 2H08 as a result, we expect iron ore contract prices to continue to increase (+15% in 2009E). We also expect nickel prices to recover as the current price ($9.90 per pound) is below our estimate of marginal cost of production (between $11 and $12 per pound). Vale should also benefit from its industry leading organic growth pipeline (guiding to volume growth of almost 11% per year over the next five years) and its position as a very low cost producer with lower operating risk than most other miners. As we discuss in the attached note, we believe high freight rates (up tenfold this cycle) have created a significant competitive disadvantage for Vale's iron ore business (in Brazil) versus that of Rio Tinto and BHP Billiton (in Australia). However, with 40%+ freight capacity growth by 2010, we expect freight rates to fall and Vale's primary competitive disadvantage to dissipate. Is this possible with oil prices as high as they are? Yes. We estimate the fuel cost is just 15% of the current Brazil to China freight rate. Another factor to consider is Vale's growth plans. We expect this company to pursue its stated goal of becoming the world's biggest miner through a combination of organic growth and large-scale, value-creating M&A. Will it be Anglo? Xstrata? Freeport? Alcoa? None of the above? We evaluate each in some detail in the attached note and conclude that Anglo or Freeport would be the most likely potential target in the near-term. Either way, we believe market concerns that Vale may make a large, dilutive deal are overblown, and an acquisition of any one of these companies other than Alcoa could be earnings accretive for Vale. With all of these factors in mind, we recommend that investors buy shares of Vale at current levels.

The iron giant: Vale has lower iron ore mining costs than either Rio Tinto or BHP Billiton. The company has a 37% market share in the seaborne iron ore market and has the organic growth potential to maintain this market share despite strong global demand growth. Based on our analysis, iron ore contract prices for Vale have very little downside risk over the next five years unless freight rates surprisingly remain at today's ultra-high levels.

The pride of Brazil to grow via M&A: Vale has announced that it may issue up to $15bn of common and preferred shares, the proceeds of which could be used for strategic acquisitions. Of course, Vale did come close to acquiring Xstrata earlier this year. Based on our analysis, an acquisition of Anglo American, Xstrata, or Freeport would likely be earnings accretive for Vale. However, each of these potential acquisitions would face some obstacles, in our view. See the attached note for our analysis.

Prefer Vale to Vedanta: For hedge fund investors worried about emerging market exposure, we recommend using a short position in Vedanta as a hedge against a long position in Vale. Vedanta has exposure to zinc (price today is >20% below consensus, and market surplus is likely to persist) and spot iron ore (has more downside risk and less upside potential than contract iron ore prices, based on our analysis). Furthermore, many investors had been using Reliance Power (Bloomberg ticker RPWR IN) as a comp to Vedanta's Indian power business. The Reliance Power stock price is down 45% since 21 May.

Inexpensive valuation: On our estimates, Vale is trading at a 2009E P/E of 9x, which is inline with the sector, but at a 10% premium to the market cap-weighted average of BHP Billiton and Rio Tinto. In light of Vale's industry leading growth, relatively low operating risk, high exposure to steel-intensive growth in emerging economies, and exposure to commodities with limited downside risk to price, we believe that Vale shares should trade at a premium to the sector.

DJ Brazil Vale Speeds Up Projects Linked To Fertilizers ; )
(Dow Jones News Service)
Updated: Wednesday, June 25, 2008 07:04PM ET




SAO PAULO (Dow Jones)--Brazilian mining giant Companhia Vale do Rio Doce (RIO), or Vale, is speeding up existing projects related to supplying raw materials for the fertilizer industry, a Vale press officer confirmed on Wednesday.

However, the company said that this wasn't due to political pressure from the Brazilian government, which is worried that the high costs of fertilizer is contributing to rising food prices.

"These projects have been under way for a long time," the press officer told Dow Jones Newswires, without giving details of the acceleration program.

According to the Vale press officer, the mining company has already committed $479 million to complete an open cast phosphate mine in Peru, with a capacity of 3.9 million metric tons.

Vale also pumped $223 million into its Taquari-Vassouras potassium mine in the northeastern state of Sergipe. The mine has a capacity to produce 850,000 tons of potassium.

Moreover, Vale is undertaking a feasibility study to mine potassium in the Neuquen province in Argentina.

Other companies such as Fosfertil, Bunge, Yara, Copebras and Galvani, have announced some $4 billion in investments over the next four years, Valor said.

Brazil's fertilizer prices have risen between 100% and 150% in the last 12 months, depending on the location, the National Association of Fertilizer Distributors, or Anda, said recently.

High fertilizer prices have become a major concern for the agricultural lobby, with the National Confederation of Agriculture, or CNA, complaining that high costs are eating into farmers' profits.

Brazil is a leading global agricultural producer of products such as soy, coffee, sugar and orange juice.


By Tony Danby; Dow Jones Newswires; 55-11-6847-4523; brazil@dowjones.com


(END) Dow Jones Newswires

06-25-08 1904ET

Copyright (c) 2008 Dow Jones & Company, Inc.

ML Input today on Aussie settlement and recommends RIO....


�� Australian iron ore price settlement is a positive catalyst

Australian miner iron ore price settlement with Baosteel at +80% for fines and at

+97% for lumps is a positive catalyst for Vale. We believe investors should

become more positive on Vale, given: 1) the average increase of 85% is a strong

sign of the tightness in the iron ore market, 2) 2008 iron ore price negotiations

clearly prized high quality products, 3) M&A overhang risk is already priced in, and

4) iron ore should represent 63% of consolidated EBITDA in 2008.

Quality rules; Higher settlement for lumps is positive

The higher price settlement for lumps is also positive, as it is a sign that clients

are paying more for quality. Australian lump price settlement at 97% was even

higher than Vale’s pellets at 87%. Vale’s high quality products should be a key

differential if/when the market turns into an oversupply. Despite the benchmark,

lower quality ores used to be sold at a discount to Vale in oversupplied markets.

Valuation is attractive; M&A overhang is already priced in

Vale ON is trading at 5.6x EV/EBITDA in 2009E and 7.6x P/E (4.8x and 6.5x

respectively for Vale PNA), very attractive in our view. After the recent 16%

underperformance to peers, we believe the M&A overhang risk is already priced

in. We also see limited risk of Vale overpaying in an acquisition, given the current

constricted level of valuations in the industry (4.5-5.0x EV/EBITDA 7.0-8.0x P/E).

Reiterate BUY; 46% upside potential for RIO, 75% for RIO/P

We reiterate our BUY rating on Vale and PO of US$51/ADR. The iron ore price

settlement was a clear sign of the current tightness in the market and could be an

inflection point on news flow for the stock. We maintain our +20% estimate for ’09.

�� Estimates(Dec)

(US$) 2006A 2007A 2008E 2009E 2010E

EPS 1.35 2.39 3.18 4.78 5.59

GAAP EPS 1.49 2.55 3.19 4.78 5.59

EPS Change (YoY) 29.8% 77.0% 33.1% 50.3% 16.9%

Consensus EPS (Bloomberg) 3.15 4.33 4.74

Dividend Rate 0.27 0.34 0.51 0.61 0.61

ADR EPS (US$) 1.35 2.39 3.18 4.78 5.59

ADR Dividend Rate (US$) 0.27 0.34 0.51 0.61 0.61

Valuation (Dec)

2006A 2007A 2008E 2009E 2010E

P/E 21.6x 12.2x 9.2x 6.1x 5.2x

GAAP P/E 19.6x 11.5x 9.2x 6.1x 5.2x

Dividend Yield 0.9% 1.1% 1.7% 2.1% 2.1%

EV / EBITDA* 18.5x 10.4x 6.5x 4.5x 4.1x

Free Cash Flow Yield* -9.0% 1.2% 3.0

Citigroup Inc. recommended buying


Cia. Vale do Rio Doce (VALE5 BS) rose 1.6 percent to 48.24 reais. Citigroup Inc. recommended buying shares of the world's biggest iron-ore producer after Rio Tinto Group yesterday agreed to increase iron-ore contract prices with Baosteel Steel Corp., China's largest steelmaker, by up to 97 percent. The agreement shows ``the strong market for iron ore,'' analyst Alexander Hacking wrote in a note to clients

http://www.bloomberg.com/apps/news?pid=20601086&sid=a1je1wsUxxJw&refer=news

DJ Brazil Vale CEO: Rio Tinto Hike Shows Demand Strong -Estado (Dow Jones News Service)
Updated: Tuesday, June 24, 2008 02:12PM ET




RIO DE JANEIRO (Dow Jones)--The recent iron ore price hike negotiated by Rio Tinto (RTP) showed that the global market for the key steelmaking ingredient remained tight, the CEO of Brazilian mining giant Companhia Vale do Rio Doce (RIO), or Vale, said Tuesday.

"The prices of minerals and principal global commodities remain elevated. Demand continues to be very strong, primarily in Asia," Vale Chief Executive Officer Roger Agnelli told the local Estado news agency. Agnelli made the comments on the sidelines of a seminar in Sao Paulo.

Rio Tinto announced Monday it had agreed to an average 85% increase to 2008 iron ore contracts with Chinese steel titan Baosteel. The accord surpassed Vale's deal with global steelmakers reached earlier this year, which achieved price increases of between 65% and 71%.

Agnelli, however, said that the higher prices garnered by Rio Tinto meant an end to the traditional benchmarking system.

"It needs to be seen whether other Chinese steelmakers will follow this price hike deal with Baosteel, as well as whether Japanese steelmakers will also go along with the increase," Agnelli said. "But the market tends to have a single price. For now, we're content to observe this development."

The executive said that future iron ore price negotiations would likely be affected by Rio Tinto's deal with Baosteel, adding that Vale's deals with steelmakers were done with an eye on the future rather than for short-term gains.

"More important to Vale is the relationship with its clients. What's important is the long term," Agnelli said.

Agnelli also said that Vale would maintain its position as a key player in the iron ore market, despite the recent breakdown in the benchmark pricing system and Rio Tinto's possible tie-up with BHP Billiton (BHP).

"Vale, alone, is bigger in iron ore than Rio Tinto and BHP together. So we have a very strong position in the international market," Agnelli said. "It's practically impossible to ignore the size and strength of Vale in this market."

Vale's locally traded shares were up sharply Tuesday amid sideways trade in the broader market, jumping 2.5% to 48.70 Brazilian reals ($30.36). The benchmark Ibovespa stock index was 0.1% higher at 64,703 points.


-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; jeff.fick@dowjones.com


(END) Dow Jones Newswires

06-24-08 1412ET

Copyright (c) 2008 Dow Jones & Company

Second-largest miner, RP firm to explore for minerals in Masbate
GMANews.TV - 1 hour 58 minutes ago
MANILA, Philippines - Publicly-listed Geograce Resources Philippines Inc. said it forged an exploration agreement with Brazil-based Companhia Vale do Rio Doce (CVRD), the largest iron ore producer and the world’s second-largest mining company

In a disclosure to the Philippine Stock Exchange, Geograce said it agreed to explore seven mining claims in Masbate province with Vale Exploration Philippines, Inc., CVRD’s domestic subsidiary.

Under the agreement, Vale has committed $6 million to explore copper, silver, and gold while its Philippine partner will secure all necessary government permits to facilitate operations.

For the first twelve months, Vale is expected to conduct the preliminary exploration activities in the mining site such as geochemical and geological sampling, and drilling. The second phase will involve actual exploration, which may last up to two years after the first phase.

After the exploration, the companies will have the option to form a joint venture to own, develop, and operate the Masbate mining claims over an area of about 84,046 hectares. The JV company will also be the vehicle to conduct feasibility studies for the mining project’s implementation. Other details of the JV will be mutually agreed upon by the two parties later, the disclosure added.

Geograce Resources and Vale may also forge a services agreement where the former will provide services to the latter.

Geograce Resources has mining permits in more than 44,000 hectares in the province of Masbate. - Veronica C. Silva, GMANews.TV

You can find this story link here: http://www.shareholderz.com/vale.html

Recs: 0 Iron-Ore Deal To Lift China's Steel Costs (Dow Jones News Service
WSJA(6/24) )
Updated: Monday, June 23, 2008 05:31PM ET


(From THE WALL STREET JOURNAL ASIA)
By Robert Guy Matthews

After months of negotiating with China's top steelmakers, miners Rio Tinto PLC and BHP Billiton Ltd. won an 85% increase in the benchmark price for iron ore, a major ingredient of steel, indicating that steel prices world-wide are likely to stay high and fanning concerns about inflation.

The price increase, which tops the amount that Brazilian rival Cia. Vale Do Rio Doce received, is retroactive to April, meaning steelmakers that purchased iron ore from BHP and Rio Tinto will have to write a check for the difference, which is likely to be in the billions of U.S. dollars. The deal was settled between the miners and Baosteel Group Co., China's largest steelmaker, but it generally applies to all steelmakers that buy iron ore from the two.

For Rio Tinto, the hard line in negotiations was important not only to boost profits but also to help it either fend off BHP's takeover offer or force BHP to boost the offer beyond its current 3.4 shares of BHP stock for one share of Rio Tinto. The value of the offer is $171.02 billion, making it the world's largest pending takeover.

Nearly 30% of Rio Tinto's earnings come from iron-ore operations, compared with about 15% for BHP. "We are much larger than BHP in terms of iron ore," said Sam Walsh, chief executive officer of Rio Tinto's iron-ore division. The price rise "will provide a sizable uplift in our earnings."

Marius Kloppers, chief executive of BHP, said the negotiations' outcome validates arguments about the value of Australian iron ore, but he refused to discuss any further implications. "I wouldn't care to speculate on the knock-on effects," he said.

Rio Tinto and BHP broke from the tradition of allowing one miner and one steelmaker to negotiate on a price that would be applied to all miners and steelmakers.

This year, Vale reached an agreement that raised iron-ore prices by between 65% and 71%. BHP and Rio Tinto rejected that settlement, arguing that they deserved a freight premium because their iron ore, coming from Australia, was closer than Vale's iron ore from Brazil.

Part of the reason that BHP and Rio Tinto may have done better than Vale in negotiations is because the spot price for iron ore has remained quite strong all year, hovering around $185 a metric ton. That may have pressured Baosteel to relent. The new increase would see contract prices for iron ore range around $140 a metric ton.

Analysts said the difference between the prices in the deal announced Monday and in Vale's deal is worth nearly $2 billion for Rio Tinto and about half that amount for BHP. Rio Tinto is trying to widen the spread by increasing its iron-ore output in 2008 by 14%, or 30 million metric tons, from 2007.

For steelmakers, the news -- while not entirely unexpected -- isn't good. The mining companies are bigger, and steelmakers have virtually no negotiating leverage.

Baosteel said its steel prices will certainly rise as a result but gave no estimates. "Baosteel's product prices will be decided based on the costs and market demand," a spokeswoman said. With the latest price increase, Baosteel said, iron ore accounts for 65% of its raw-material costs.

Prices for steel across the globe have been rising dramatically, doubling in some cases, as costs of iron ore, coal and other raw materials have increased. A backlash by steel buyers, especially those in construction materials, is getting stronger. Some countries are increasing export taxes to encourage local cheap steel to stay at home, while other countries, such as Turkey, Italy, India and Russia are staging protests and work stoppages and passing legislation that freezes steel prices.

At least one steelmaker remains happy despite the negotiations' outcome. ArcelorMittal, the world's largest steelmaker, settled early with Vale on long-term contracts at the 65%-to-71% price rise.

---

Ellen Zhu and Dana Cimilluca contributed to this article.


(END) Dow Jones Newswires

06-23-08 1731ET

Copyright (c) 2008 Dow Jones & Company, Inc.

ANALYSIS-Iron ore heads toward exchange as price talks stall
Mon Jun 23, 2008 10:25am IST
By Nick Trevethan

SINGAPORE, June 23 (Reuters) - The annual battle to settle iron ore prices appears headed towards deadlock, but exchanges are quietly looking at developing contracts that could change the way the industry sets prices.

Analysts tipped the Singapore Exchange (SGXL.SI: Quote, Profile, Research) as most likely to be first to carry an over the counter iron ore contract, which would create a more transparent pricing mechanism for the more than $200 billion industry and let some of the heat out of what some see as over-inflated spot prices.

"The dynamic in the iron ore market is changing from one dominated by long-term supply contracts, to the point today where rampant demand has created a viable spot market," ANZ's senior commodities analyst Mark Pervan said. "What has accentuated the need for a contract, especially in Asia, is the increase in freight spreads for iron ore from producers in different parts of the world," he added. Earlier this year, Chinese steelmills settled annual contracts with Brazilian miner Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) at levels 67 to 71 percent up from last year.

But they are yet to settle with Australian miners who argue that the lower cost of freight from Australia to China, versus Brazil to China, should be reflected in higher prices for Australian material, a sticking point for the Chinese.

The freight differential has always been there, but has been given extra prominence by an 1,100 percent rise in the Baltic Dry Cargo Index .BADI in the past six years.

Last month Deutsche Bank launched an over-the-counter iron ore contract and the bank said exchanges were looking at developing their own.

"A number of exchanges will be looking into some form of iron ore contract. There is a lot of demand for this kind of product, which we are already seeing in our newly launched OTC iron ore product," Raymond Key, Global Head of Metals Trading at Deutsche Bank said.

SINGAPORE A HOT PICK

Traders in London, Sydney, Singapore and Hong Kong report talk that an Asian exchange may announce something late in the third quarter, and although there is no definite word, Singapore is the hot pick to be first.

"Singapore seems like a viable centre. It's the gateway between Asia and the Pacific basin. The Australians will want a stable and well-developed exchange and importantly, Singapore is also BHP's big marketing hub in Asia," a trader in Sydney said. Other exchanges mentioned that might be interested in iron ore contracts included Hong Kong and Mumbai.

"Hong Kong may be sniffing at iron ore, but it's Singapore that I think is probably furthest along," a source at an international trading house based in the city-state said.

"They already offer a freight contract and it wouldn't be too hard to develop iron ore, and even coal contracts along similar lines," he added.

A spokesman at the Singapore Exchange would not confirm that the organisation was considering iron ore.

"As and when we have new products, we will make the announcements," he said

India's National Commodity and Derivatives Exchange seemed to rule itself out.

"Launching iron ore contracts in India may not be fruitful. The iron ore exported from India has different specifications so standardising a contract for futures trade is very difficult," said Ramesh Iyer, vice president, metals at the Mumbai exchange,

And the London Metal Exchange also seemed an unlikely winner.

Deutsche's Key said: "I don't think the LME is in the running. The system they use with its physical warehouse delivery points isn't well suited. This product will need to be cash settled."

He also noted a contract in Sydney would receive a lukewarm response from Chinese buyers, already worried about Australia's dominance in iron ore production.

FUNDS KEEN, STEELMAKERS LESS SO

Irrespective of who wins, a contract is likely to find broad interest from hedge funds, who want to try and cash in on the spectacular run up in iron ore prices, as well as producers.

"In principle, we support transparent market pricing mechanisms and we will evaluate their use as they are developed," BHP Billiton spokeswoman Samantha Evans said.

The steel industry has show little interest in exchange traded contracts. The LME's recently-launched steel contracts have seen turnover stall at around 10 lots a day for the three-month benchmark Mediterranean and Far East contracts.

ANZ's Pervan said that an exchange contract would benefit Chinese steelmakers, who worry that the dominance of the iron ore market by three players, Vale, BHP Billiton (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research) and Rio Tinto (RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research), gives miners an unfair advantage.

"A contract would quickly narrow the spread between the spot and long term prices and that would benefit the Chinese and result in more sensible prices," Pervan said.

But an official at China's number one steel maker, Baosteel, said the company was not interested.

"Baosteel will not trade there, especially in the early stages. But small mills might consider it," he said. (Additional reporting by Alfred Cang in Shanghai and Sourav Mishra in Mumbai; Editing by Michael Urquhart)

Vale could sell stake in California Steel - Mr Pessoa
June 23, 2008

BNamericas quoted Mr James Pessoa head of Vale's steel department as saying that Brazilian mining company Vale could sell its stake in California Steel, which it shares with Japan's JFE Steel Corporation.

But Mr Pessoa did not want to provide dates for when the asset might be sold, but said that as Vale does not want to be a steel firm the deal does not make sense in terms of growth plans. He added that Vale's steel stakes are all minority at under 20% and are aimed at obtaining higher consumption of its iron ore.

Vale currently has a minority stake in three Brazilian steel projects and has announced it will build a steel mill in the sate of Pará with or without partners. The units are expected to raise steel production by 15 million tonne and guarantee the supply of around 24 million tonne of iron ore.

DJ GETTING PERSONAL:Convertible Funds Offer Defense In Rocky Mkt (Dow Jones News Service)
Monday, June 23, 2008 07:36AM ET



By Daisy Maxey
Of DOW JONES NEWSWIRES


(This article was originally published Friday)


NEW YORK (Dow Jones)--The market's stomach-churning gyrations are heightening the calming appeal of mutual funds holding convertible securities.

Over the past five years, these overlooked hybrid investments have returned only slightly less on average than the broader market - yet with much less risk. Volatility serves to increase the value of the downside protection offered by funds that invest in convertible securities, for which issuance has been strong lately.

Such funds invest in convertible bonds, debt instruments that pay a fixed yield but can be converted to common stock when they hit a predetermined price. While the interest rate convertible bonds pay is generally a few percentage points lower than that paid by regular bonds, investors also have the potential for appreciation in the price of the issuer's stock. The bonds are typically issued for amounts about 15% to 25% higher than current stock values.

Larry Keele, manager of the $992 million Vanguard Convertible Securities Fund, says that over a full market cycle, say 10 years or so, his fund has had about 70% of the volatility of stocks.

In addition, most convertible bonds offer call protection, a period during which the security's issuer cannot recall it.

Investors seeking reduced volatility and income often head to higher-quality value funds, says David King, manager of the $778 million Putnam Convertible Income-Growth Trust. In recent months, however, such investors may have ended up with substantial allocations to big banks. Convertibles offer an alternative, King says, adding, "You don't have to be value on top of value on top of value."

As of May 31, there were 21 funds with about $10.9 billion in assets in fund tracker Morningstar Inc.'s convertibles category.

While convertible bonds are more volatile than high-yield bonds, they tend to be less volatile than stocks because the bond component supports their price when stock prices are falling, says Miriam Sjoblom, a mutual fund analyst at Morningstar. She says that when stocks are on a tear, however, convertibles can also capture a good portion of the upside.

Things don't always happen that way because the convertible market is fairly small, Sjoblom adds, which means it can be quirky and subject to supply and demand.

Convertible funds may also invest in convertible preferred stock, equity that can be converted into common stock. In addition, some funds may invest in common stock.

The average convertible fund is down about 1.8% this year and 1.7% in the 12 months through June 19, according to Morningstar. Meanwhile, the Standard & Poor's 500 index is down 7.6% this year and about 10.7% in the 12 months through June 19, according to Morningstar.

Considering the funds' defensive qualities, they also look attractive on a longer-term basis. In the 15 years through May 31, convertible funds have gained an average of 8.6% each year, while the S&P 500 has gained 9.9%, according to Morningstar.

Vanguard Convertible Securities and Franklin Convertible Securities are examples of pure convertible funds, Sjoblom says. The funds have slipped 0.1% and 0.3%, respectively, this year through Thursday, much less than the 1.8% their peers have lost on average, according to Morningstar. The Vanguard fund is offers a package "experienced management, good expenses and a solid approach," Sjoblom says.

Financial Firms Dominate Issuance


Fidelity Convertible Securities, which is managed by Thomas Soviero, offers a more aggressive option, she says. The fund may hold a good amount of common stock, as well as more convertibles that have equity-like risk profiles than its peers.

That aggressive stance has benefited shareholders; Fidelity Convertible Securities is the top-performing convertibles fund so far this year, up about 6.1% through Thursday, according to Morningstar.

Increased volatility and an undervalued market make convertibles particularly attractive now, says King, who manages the Putnam fund. In addition, growth stocks have been outperforming value stocks, and convertibles are skewed toward the growth area, he says.

With financial firms moving to raise cash due to the credit crisis, new issuance has been vibrant this year, although not as diversified as some would like.

Fifth Third Bancorp. (FITB) announced this week that it's raising $1 billion in convertible preferred stock. Also among convertible issuers this year were Lehman Brothers (LEH), American International Group Inc. (AIG), Bank of America Corp. (BAC) and Citigroup Inc. (C).

In addition, conversion premiums have been low to moderate, Keele said. The conversion premium is the amount by which the price of the convertible security exceeds the value of the stock into which it may be converted.

Bank of America's $6.9 billion issuance of converted preferreds in January, for example, offered a 7.25% yield, a 25% conversion rate and an extended period of call protection.

Vanguard Convertible Securities de-emphasizes convertible preferreds, which are more volatile and structurally more risky than convertible bonds, Keele said. While they make up about 24% of the $350 billion U.S. convertible market, they currently make up only about 13% of the fund, part of its lower risk approach, said Keele.

However, the fund holds Bank of America's convertible preferreds since it doesn't have convertible bonds in the market.

Vanguard Convertible Securities Fund is currently overweight in the energy sector, slightly overweight in materials and underweight in financials, which has helped the fund both last year and this year, said Keele.

Putnam Convertible Income-Growth Trust invests a small percentage of its assets in common stocks, said King, usually when the stock yields more than the convertibles into the same issuer.

The fund currently holds convertible preferreds into Companhia Vale do Rio Doce (RIO), which have been good contributors to performance last year and this year, said King, and it recently bought Virgin Media Inc. (VMED) convertible bonds.

In addition, it currently owns Countrywide Financial Corp. (CFC) convertible bonds. The fund's average cost was around $84, the bond now trades close to $95 and he should be able to sell it back to the to the company at $100 in mid-October if the lender's merger with Bank of America closes this summer as anticipated, King said.

Putnam Convertible Income-Growth Trust's A shares are up 0.1% this year through June 19, according to Morningstar.

(Daisy Maxey is a Getting Personal columnist who writes about personal finance; she covers topics including hedge funds, annuities, closed-end funds and new trends in mutual funds.)

By Daisy Maxey, Dow Jones Newswires; 201-938-4048; daisy.maxey@dowjones.com


(END) Dow Jones Newswires

06-23-08 0736ET

Copyright (c) 2008 Dow Jones & Company, Inc.

DJ Brazil Vale Chairman: No Urgent Need For Acquisition - Report (Dow Jones News Service)
Updated: Friday, June 20, 2008 03:44PM ET




RIO DE JANEIRO (Dow Jones)--Brazilian mining giant Companhia Vale do Rio Doce (RIO), or Vale, doesn't need to participate in the mining industry's current round of consolidation to remain relevant, the company's chairman said Friday.

"Vale's position in the global market today does not depend on finding someone to buy," Vale Chairman Sergio Rosa told the local Estado news agency. Rosa is chairman of Vale's board of directors and president of pension fund Previ.

Previ is the pension fund for state-owned Banco do Brasil workers and one of Vale's leading shareholders. Previ and BradesPar, the investment unit of Brazilian bank Bradesco (BBD), make up Vale's controlling bloc of shareholders.

Vale's investment budget the next four years was equal to buying a miner valued at $60 billion, Rosa said. Vale plans to spend $59 billion to boost iron ore production to 450 million metric tons a year by 2012.

"What the company has said is that it doesn't need acquisitions as much as other companies. Vale can really wait for good opportunities and take advantage of those that fit perfectly with its portfolio," Rosa said.

According to Rosa, other major mining companies were looking for acquisitions - such as BHP Billiton's (BHP) bid for rival Rio Tinto (RTP) - that would allow them to compete with Vale in the future.

"None of the other mining companies have a portfolio close to what Vale has with its own investments. Even if they merge, they're putting together existing assets and will not be growing. The only miner that has growth guaranteed and assured is Vale," Rosa said.

Vale executives such as Rosa and President Roger Agnelli have gone on the offensive to dismiss rampant press reports that the world's largest iron ore miner was on the acquisition trail.

On Thursday, a local newspaper reported that Vale had lined up a consortium of banks to fund a possible purchase. The report also said that Vale had dispatched a technical team to eye the assets of possible target Anglo American (AAUK). U.S. aluminum producer Alcoa Inc. (AA) and Freeport-McMoRan Copper & Gold Inc. (FCX) have also been rumored targets.

Vale said in a regulatory filing Thursday that it had not lined up any financing and was not in talks with any company, a statement that Agnelli later reiterated to journalists.

The merger speculation increased after Vale last week said it would raise as much as $14 billion through a share offer.

Vale's locally traded shares were down sharply Friday amid a broader market selloff, sinking 3.4% to 47.01 Brazilian reals ($29.29). The benchmark Ibovespa stocks index was 2.7% lower at 64,804 points.


-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; jeff.fick@dowjones.com


(END) Dow Jones Newswires

06-20-08 1544ET

Copyright (c) 2008 Dow Jones & Company, Inc.

=DJ MARKET COMMENT: London Share Lower As Bank Worries Continue (Dow Jones News Service)
Updated: Friday, June 20, 2008 08:49AM ET




By Sarah Turner


DOW JONES (London)--Retreating shares in the banking and mining sectors dragged on London in Friday's trading, although home builders surged as a report sparked hopes that the sector may not have to resort to issuing equity.


The FTSE 100 index slipped 0.4% to 5,686.10.


Investors remain worried about how banks will cope with a slowing economy. HBOS , Britain's leading mortgage lender, on Thursday warned that house prices would drop 9% and warned of further write-downs.


"We expect negative newsflow and sentiment toward the domestic mortgage groups to be a focus of the market in the second half of the current year," said analysts at Lehman Brothers.


HBOS shares fell 2.7% to close out the week, with Royal Bank of Scotland declining 1.7% and Barclays (BCS) wiping out early gains to trade down 1.1%.


Barclays was in the spotlight on newspaper reports that it's near finalizing a 100 billion yen ($926 million) cash injection from Japan's Sumitomo Mitsui Banking Corp.


Shares of miners under pressure include Anglo American , down 2.7%, and BHP Billiton (BHP), down 2.1%.


Anglo American shares had climbed Thursday on speculation of an imminent bid from Brazil's Vale (RIO), which on Friday said that it hasn't built up its credit facility.


However, Chile-based copper miner Antofagasta managed to buck London's lower trend, its shares rising 3.9%.


The company said Friday that the environmental impact assessment for the Esperanza project, submitted last August, has been approved. It was also upgraded to neutral from underperform at Merrill Lynch, with the broker citing a 23% drop in Antofagasta shares from their peak in April.


But Merrill is still cautious on the group because of a lackluster outlook for copper prices, noting the discount between Shanghai and LME copper.


Home builders up, Wolseley down


Rallying, shares of Barratt Developments shot up 14.1% after Building Magazine reported that the firm has agreed a waiver on debt covenants with its lending banks.


The firm has also fended off "numerous approaches" from private-equity funds in the last 10 days, according to the magazine report.


Barratt and the home-building sector have been under pressure in the last few weeks as investors worried that they will have to issue equity to shore up balance sheets in the event that they have to write down land values.


Also moving higher, shares of Redrow climbed 6.5%, while Bellway rose 7.3% and Taylor Wimpey climbed 8.7%.


However, there wasn't any relief to be had for building-materials supplier Wolseley , shares of which fell 5.1%.


Morgan Stanley downgraded Wolseley to underweight from equal-weight, saying it now has more of a negative outlook on the firm's Nordic business as well as a more bearish view on U.S. housing starts. Accordingly, it's estimating no organic revenue growth for the group until 2011 and said that Wolseley's balance sheet needs to be addressed.


"Asset disposals and further cost cutting may prevent covenants being broken, but we think this would be at the expense of growth and may not be sufficient. Dividend cuts and rights issues are other options," the broker said.


-Sarah Turner; 415-439-6400; AskNewswires@dowjones.com


(END) Dow Jones Newswires

06-20-08 0849ET

Copyright (c) 2008 Dow Jones & Company, Inc.

DJ Brazil Vale CEO: Cost Pressures Increase Investments -Estado (Dow Jones News Service)
Updated: Thursday, June 19, 2008 05:18PM ET




RIO DE JANEIRO (Dow Jones)--Cost pressures are making Brazilian mining giant Companhia Vale do Rio Doce's (RIO) investment plans more expensive, the company's CEO told the local Estado news agency Thursday.

Vale, as the world's largest iron ore miner is also known, planned to invest $59 billion over the next four years to increase iron ore production capacity to 450 million metric tons a year in 2012. But rising costs could push that figure into the neighborhood of $63 billion, Roger Agnelli said.

Agnelli made the comments during a seminar in northeast Brazil's Bahia state sponsored by Previ, the pension fund for workers of state-owned Banco do Brasil. Previ is one of Vale's leading shareholders.

The executive said that production costs were escalating because of equipment shortages, higher steel prices and rising labor costs.

The cost increases were more severe in new projects under development rather than current mines undergoing expansion, where increasing output was considered easier to implement, Agnelli noted.

-By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; jeff.fick@dowjones.com


(END) Dow Jones Newswires

06-19-08 1718ET

Copyright (c) 2008 Dow Jones & Company, Inc.