Tokyo, July 8, 2003 - JFE Steel Corporation announced today that it and Companhia Vale do Rio Doce (CVRD) signed on July 4 an agreement restructuring the shareholding composition of Minas da Serra Geral S/A (MSG), a joint venture in Brazil's Minas Gerais state. The agreement also gives JFE Steel a role in new iron ore mine development planned by CVRD in the state.

MSG was established by CVRD, JFE Steel and six other Japanese companies and jointly developed Capanema mine in the state of Minas Gerais that has been in production since 1982. MSG also marked the beginning of a close relationship between JFE Steel and CVRD, and the two have gone on to participate in the other joint projects.

Capanema mine is one of the main iron ore mines in CVRD's Iron Ore Southern System. At its height, it produced 14 million tons a year contributing significantly to the company's development. Today, after 21 years of operation, the mine's ore reserves are going to be mined out.

JFE Steel and CVRD have studied the development of new projects that would help them to maintain and expand their long-term relationship, and have agreed to the following.

1. Outline for a new project

The new project will develop CVRD-owned Fabrica Nova mine, located in the central region of Minas Gerais Iron Ore Quadrangle, about 25km east of Capanema mine. Its ore reserves are estimated at 450 million tons, of which more than 150 million tons is high-grade hematite ore. CVRD sees this as a core mine in its Southern System and plans to begin producing 10 million tons or more a year beginning in early 2005. Its ultimate goal is 15 million tons a year, making this an extremely large operation.

MSG will transfer its heavy equipment and facilities from Capanema to Fabrica Nova mine, and will lease these to CVRD. Capanema mine will be closed by the end of 2003, and the heavy equipment, mine facilities such as crushers, screens, long-distance belt conveyor, and other machinery will be transferred to Fabrica Nova mine by the end of 2004. The long-distance belt conveyor will be installed between Fabrica Nova mine and Timbopeba mine, where there is a beneficiation plant for Capanema iron ore.

2. Development cost

MSG's initial investment in the project will be approximately US$47 million (estimate).

3. Capital and reserves

R$82 million (approximately ¥3.2 billion) (estimate)

4. Capital structure

JFE Steel's share of MSG will be raised from the current 24.5% to 50%, and JFE Steel and CVRD will equally share investment in the project.

5. Long-term purchasing contract for CVRD iron ore

In conjunction with the project, JFE Steel signed a long-term (12 year) contract to purchase iron ore from CVRD's Southern System. CVRD will supply 2 million tons of iron ore annually for the use of Philippine Sinter Corporation (PSC), a wholly-owned JFE Steel subsidiary.

In the first medium-term business plan, which will last up to March 2006, JFE Steel set an investment line of ¥5.0 billion for raw materials. The project will be pursued within this allocation framework. With the demand for iron ore rising sharply in China and other countries, JFE Steel sees this project as a way to support CVRD's new mine developments and to provide long-term, stable supplies of iron ore to JFE Steel's sintering plant in the Philippines.

Contract signing