Fitch Ratings Upgrades Samarco's Ratings.

NEW YORK -- Fitch Ratings has upgraded the foreign currency rating of Samarco Mineracao S. A. (Samarco) to 'BB' from 'BB-'. The Rating Outlook remains Positive. Fitch has also upgraded Samarco's local currency rating to 'BBB' and Rating Outlook Stable from 'BBB-' as well as the company's national scale rating to 'AA+'(bra), Rating Outlook Stable from 'AA'(bra).

These upgrades are the result of an improvement in Samarco's credit profile, the favorable outlook for the iron ore industry over the intermediate term, and the company's solid ownership structure. As of Sept. 30, 2005, the Samarco's credit ratios were strong with leverage, as measured by total debt to operating EBITDA, of 0.3 times (x), compared with 0.6x, and 0.8x in 2004 and in 2003, respectively. In 2005, Samarco is expected to generate operating EBITDA of approximately $700 million and to end the year with total debt of about $200 million. Credit ratios are healthy for the rating category and reflect Samarco's free cash flow generation as a result of an 86% increase in iron ore pellet prices in 2005 and a 19% increase in 2004, as well as steady debt reduction.

Over the next two years, Samarco plans to construct a second pipeline, with a capacity of 7.5 million tons, and a third pelletizing plant, which is due to begin operations in early 2008. Credit ratios are expected to remain strong, as about one-half of the $1.2 billion investment will be funded with free cash flow. As a result of the expansion plans, Samarco is expected to have total debt at the peak of the investment project in 2007 of about US$750 million. Due to constraints in mining and logistics and continued strong demand by China for imported iron ore, pellet prices are expected to remain high in 2006 and 2007 compared with historical levels. As a result of such industry conditions, Fitch expects Samarco to generate operating EBITDA in 2006 and 2007 of at least $700 million. Thus, the company would maintain throughout the capacity expansion period a total debt to operating EBITDA ratio of about 1.0x.

Fitch's upgrade of Samarco's foreign currency rating above the 'BB-' rating of the Brazilian government reflects the company's strong ownership profile. Companhia Vale do Rio Doce (CVRD), the world's largest iron ore producer and exporter, jointly controls Samarco with BHP Billiton Ltd. (BHP Billiton) in Brazil. CVRD's foreign currency rating is also 'BB', Rating Outlook Positive. CVRD, dominates the iron ore industry, along with BHP Billiton and Rio Tinto. Fitch believes Samarco's two shareholders, with combined operating EBITDA in 2005 of more than $15 billion, would support Samarco in the event of a sovereign-related liquidity crisis. Historically, shareholders have allowed Samarco to adjust dividends payments in accordance with the company's cash needs. In addition, Samarco exports essentially all of its production and therefore generates significant U.S.-dollar denominated revenue of about $1.0 billion in 2005. Exports sales, which can be captured offshore for a limited period of approximately 180 days, should be able to cover future debt service by a multiple more than 2.0x.

The ratings for Samarco are further supported by the company's low-cost production capability due, in part, to the ownership of a slurry pipeline that is used to transport iron ore concentrate from Samarco's mines to its pelletizing plants near its Atlantic port facility. This pipeline eliminates the need for higher cost transportation by railroad. Samarco's ratings also incorporate the potential volatility of its revenue stream, primarily due to the company's exposure to conditions in the world steel industry and its location in Brazil, which limits its financial flexibility and exposes the company to sovereign risks. Relative to the major iron ore producers, the company lacks diversity in its product mix. During troughs in the industry cycle, pellets become susceptible to the supplies of substitute products such as steel scrap and lower grade iron ore.

Samarco mines relatively low-grade itabirite iron ore in the State of Minas Gerais in southeastern Brazil. Iron ore is processed into concentrate and transported from Samarco's mines via a 396-km slurry pipeline to the company's pelletizing plants near its Atlantic port facility. The concentrate is then processed into pellets and pellet feed. Iron ore pellets are a high-margin product used in the blast furnace and minimill segments of the steel production market. Essentially all of Samarco's pellet and pellet feed sales of 16.3 million natural metric tons in 2004 were exported to Asia (50%), the Middle East/Africa (22%), Europe (20%), and North and South America (8%). In 2004, Samarco captured a 30% share of the Brazilian pellet export market of 46.2 million tons and a 17% share of the global seaborne iron ore pellet trade of approximately 81.2 million tons.

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