Fitch Rates CVRD's Unsecured Guaranteed Notes 'BBB-'.

CHICAGO -- Fitch Ratings has assigned a 'BBB-' foreign currency rating to the following notes issued by Vale Overseas Limited (Vale Overseas):

--US$1.25 billion 6.25% unsecured guaranteed notes due January 2017;

--US$2.50 billion 6.875% unsecured guaranteed notes due 2036.

Vale Overseas is a wholly owned subsidiary of Companhia Vale do Rio Doce (CVRD). The notes benefit from a full and unconditional guarantee by CVRD. The right of payment on the guarantee ranks equally with CVRD's other unsecured debt obligations. The proceeds from these issuances will be used to repay a portion of a syndicated bridge loan used to finance the recent acquisition of 86.57% of the shares of Canadian nickel producer Inco Limited (Inco).

Fitch also maintains 'BBB-' foreign and local currency Issuer Default Ratings (IDRs) for CVRD. These ratings, along with the national scale rating of 'AA+(bra)', reflect the leveraging effects of the acquisition of Inco on CVRD's capital structure which result in pro forma credit statistics consistent with the lowest range of the investment grade category, given the robust current and near-term metals pricing environment.

In addition to the draw on the syndicated bridge loan of approximately US$14.6 billion, CVRD is expected to consolidate about US$1.9 billion of Inco's existing obligations. As a result, Fitch expects CVRD's leverage ratio, as measured by total debt-to-EBITDA to increase from 0.7 times (x) as of Sept. 30, 2006 to close to 2.0x on a combined proforma basis upon completing the process of acquiring 100% of Inco's shares for approximately US$17.8 billion. CVRD intends to pay off the acquisition loan using excess cash and the proceeds from several bank loans and capital markets issuances in the last quarter of 2006 and in 2007.

The ratings incorporate the expectation that CVRD will be able to reduce acquisition debt over the next two to three years and improve credit metrics closer to historical levels. Due to the strength in metals prices currently and the favorable near-term outlook, Fitch expects CVRD and Inco to generate significant cash flow in the remainder of 2006 and throughout 2007. In addition to the strong cash flow, CVRD could also tap into its large cash balances and sell non strategic assets, among other efforts, to more rapidly delever in 2007. As a result of such strategies, Fitch expects CVRD's credit metrics to strengthen, resulting in a total debt-to-EBITDA ratio of close to 1.0x by year-end 2007.

The current rating levels also reflect the benefits for CVRD's credit profile of increased geographic and product diversification as a result of the acquisition of Inco. On a pro forma basis, the acquisition of Inco decreases the proportion of CVRD's assets in South America to 60% and increases its asset base in North America to about 27%. CVRD will also be less reliant on iron ore, as about 20% of its pro forma sales will be nickel, while iron ore should account for about 56% of revenues.

CVRD's ratings are supported by the company's strong financial profile and dominant global position as the world's largest producer and exporter of iron ore. The company's leading industry position is primarily a result of its low-cost production capabilities, its high-quality iron ore, and an extensive and integrated transportation system consisting of railways and port facilities. The full integration of CVRD's operations from mine to port, its large reserves and the high iron content of the ore, result in a competitive cost structure that provides significant protection from price fluctuations in the cyclical metals markets.

CVRD stands to benefit from favorable industry conditions characterized by a strong price environment for iron ore and a positive outlook for demand over the near to medium term. CVRD is the leading producer in the iron ore industry, followed by BHP Billiton Ltd. and Rio Tinto with operations in Australia. Consumers of iron ore face an international market dominated by just a few large rivals that have significant influence in annual iron ore price negotiations. Iron ore prices rose by about 19% in 2006 and 72% in 2005. These price increases, along with those of several other commodities, have been driven by the confluence of a relatively strong global economy and China's surging demand for raw materials. Due to constraints in mining and logistics and continued strong demand by China for higher quality imported raw materials, iron ore prices are expected to remain higher in the future compared with historical levels.

As the world's largest producer and exporter of iron ore CVRD enjoys a market share of approximately 32% in the global seaborne trade. The company intends to maintain its market share in the future through a number of projects that are currently under way that will increase its production capacity of iron ore and pellets from 234 million tons in 2005 to more than 300 million in 2007. CVRD is also among the largest producers of bauxite and alumina in the world. Its presence will continue to increase in these products through 2010 as it expands Paragominas and Alunorte. In addition to the above mentioned products, CVRD has a significant presence in copper, potash and kaolin and is the largest provider of rail transportation services in Brazil.

With 221,000 tons produced in 2005, Inco is the second largest nickel mining company in the world and sells significant amounts of copper, cobalt and platinum as by-products. Inco's mines are located in Canada (Sudbury, Ontario; Thompson, Manitoba; and Voisey's Bay, Newfoundland) and Indonesia (PT Inco 61%). The company enjoys a competitive cost structure and has significant nickel reserves and is in the process of developing a large mine of approximately 60,000 tons called Goro in New Caledonia.

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