Vale S.A. (VALE) Q4 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by and welcome to Vale’s conference call to discuss Fourth Quarter 2012 Results. If you do not have a copy of the relevant press release, it’s available at the Company’s website at www.vale.com at the Investors link. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded. To access the replay, please dial 5511-4688-6312; access code 4353110 pound key. The file will also be available at the Company's website at www.vale.com at Investors section. This conference call and the slide presentation are being transmitted via Internet as well. You can access the webcast by logging on to the Company's website www.vale.com, Investors section or at www.prnewswire.com.br. Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks, and other factors. With us today are; Mr. Murilo Ferreira, Chief Executive Officer; Mr. Luciano Siani, Executive Officer of Finance and Investor Relations; Mr. José Carlos Martins, Executive Officer of Ferrous & Strategy; Mr. Roger Downey, Executive Officer of Fertilizers and Coal Operations and Marketing; Ms. Vania Somavilla, Executive Officer of Human Resources, Health and Safety, Sustainability and Energy; Mr. Galib Chairman, Executive Officer of Capital Project Implementation; Mr. Humberto Freitas, Executive Officer of Logistic and Mineral Research; and Mr. Peter Poppinga, Executive Officer of Base Metals and Information Technology. First, Mr. Murilo Ferreira will proceed to the presentation and after that, we will open for question-and-answers. It’s now my pleasure to turn the call over to Mr. Murilo Ferreira. Sir, you may now begin.

Good morning. I will start my speech today by addressing one of the most important areas, respect people. This means that health and safety first, environmentally responsible and supporting the communities, where we operate. As you know, 2012 was a challenging year for the global economy and particularly for the mining industry. This low growth and uncertainty just fall on minerals and metal prices. Iron ore prices became much more volatile than before and showed a downstream in our first quarter of the year. Against this backdrop, our financial performance was impacted, and the main indicators show a larger drop against ’12, ’11, when Vale attained the best financial performance since its incorporation in 1942. Underlying earnings which exclude the non-cash non-recurring items was $11.2 billion and adjusted EBITDA reached $19.1 billion, the third highest in our history. We distributed $6.0 billion in dividends, the highest figure in 2012, among the biggest mining companies and for 2013, we announced last month a proposal to the Board of Directors to pay a minimum dividend of US$4 billion. Investment reached $18.7 billion, almost a $4 billion below, there is no budget already reflecting the great forecasts on discipline in capital allocation. Moreover, capital expenditures and dividends mostly in line with the expected cash flow with a minimum use of the balance sheet giving our firm commitment to preserve our credit ratings. The ramp up of Oman, Moatize and Bayóvar projects allows us for production record of pellets, coal, and phosphate. The performance of the iron ore operation in the last quarter of the year was very good. In addition, our marketing policy in iron ore is capturing more value in iron ore sales through higher prices. Our goal is to maximize shareholder returns through the cycles and there are so many ways…

Good afternoon. I am going to give some color on the performance of the company mainly in costs and expenses and talk a little bit about our balance sheet and then we’ll hand over to Mr. Martins to talk a little bit about our price realization. So in terms of cost of goods sold, I would like to highlight to you the trend in the fourth quarter of reduction in our bulk services and materials, you can refer to the table four of cost of goods sold and expenses in the press release. With a structural components of our costs and they have started to show a downward trend, although still early for the administration of our management to give you some guidance as to whether our objective in here. However, these are encouraging signs. I would like to clarify also something that I didn’t do in the previous conference, which is on acquisition of products. As you can see there is an increase also from the third quarter to the fourth quarter and it’s mainly concentrating acquisition of auto products from $32 million in the third quarter to $148 million. This is not a structural increase in costs, this relates to the sale of our excess energy, Vale has excess energy. Vale has surplus of energy in 2013, 2014, its sales of the excess energy in the sport market. So this is the result of the depressed practice in the beginning of the fourth quarter. But with the increasing spot practice of energy, the sale of excess energy moving Vale should give better results and this upward trend should be reversed. In terms of SG&A, R&D and other expenses, there has been for the first time in many years a decrease also in the full year numbers from 2011…

Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Mr. Felipe Hirai with Merrill Lynch. Felipe Hirai – Bank of America Merrill Lynch: Hi, good morning, good afternoon, everyone. So I have two questions; the first one is, regarding what you have been saying that cost might be more than expected, are you kind of sustaining the CapEx and some of the projects maybe (inaudible). I don’t know if I was surprised on the mere side, so you think that you might have higher than expected cash flow this year? So one you kind of reduced excess cash flow that you’re going to have, so can we expect to see a higher throughput or eventually the company to buyback again? And then the second question is related to your tax liabilities. Did you expect to see any kind of alternate negotiation with the government or that could be hedging negotiation with Government or are just – are going to have some rate or they ruling from the Supreme Court? And have you heard anything or you negotiate anything with the tax assessments after 2009, so those make few prices? Thank you.

Felipe, this is Luciano. In terms of the cash flow, the first priority is to keep leverage in check. The trend has been upwards in the past quarters, and we need to revert that and keep it in check. Bear in mind that CapEx program is still significant, especially for 2014 as well because that’s when the S11D project will be peaking its expenditures. And also the volatility in the markets lead us to believe in a very conservative way in terms of managing cash. Obviously, if things surprise even more in the upside, we can always consider returning more money back to shareholders, but at this particular moment the priority is first and foremost to keep revenue check within iron ore in 2013, but also in 2014.

Regarding the tax issue, I think that we must consider two different levels. The first one is the Supreme Court; we have a discussion there not just Vale, but even the CNI and I believe that in the next few weeks you will see this subject being discussed between the Minister of the Supreme Court, this is one thing. The second one is that, we have a team with people from different companies in discussion with the government regarding our new law. And having this discussed during many month, I believe that we cannot see a decision or at least the first minute, the first graph until the end of March. Thank you, Philip.

Excuse me, our next question comes from Mr. Carlos de Alba with Morgan Stanley. Carlos de Alba – Morgan Stanley: Yeah. Good afternoon, and good morning, everyone. Thank you for the opportunity. The first question is, just want to revisit the other operation on expenses Luciano that you had in the quarter, to me that was – that single, that was issue that single handedly explained the quarterly need, so I think is very important to focus on this. What can we expect in 2013? I mean, did you hear you correctly that all the pre-operational expenses in VNC and in Salobo will be gone in 2013 because that will be a drop of around probably 300 and change $1 million in that line which is going to be quite important. And then the second question is regarding the increased EBITDA per ton of iron ore that you get when you sell on a CFR basis versus FOB basis, in other words how much lower your internal freight cost would be versus when you have to buy into the market or you have to net back the spot trade prices that we see? Thank you.

Okay. So addressing the first question, first on the operating stoppage and start up expenses, we do have a trend towards significantly lower numbers, but it will all depend on the successful ramp cap especially of New Caledonia and on secondary basis of selling. If we are able to produce how much we have budgeted for this year, we can expect a drop on this line over – of around between $300 million and $400 million for New Caledonia alone. Additional improvements will come on the following yields as we progress on the ramp up. Salobo with the same start, so we have a $121 million of expenses with pre-operational expenses upside level if we can successful ramp up Salobo for issues that we should monitor, we can zero in those pre-operational expenses. However, there will be pre-operational expenses in the portfolio and the cost of capitalized projects in iron ore. So I would say there is room for additional improvement during the privatizing companies as we said. So we expect more this year than we expect to spend next year, but if – be to give you some guidance, I think the total for the company would be to reduce this line between lets say to be conservative $300 million to $500 million if everything goes well. On the other line, the other expenses, so as I mentioned we had about around $700 million of extraordinary expenses would supplement of tax disputes. But I would say that too early in addition to those $700 million that shouldn't repeat this year, too early to give you any guidance for reduction on the remaining amount. I will hand it over to Martinis to talk about the comparison between the EBITDA for ton on our CFR for basis when you take into account our own performance on trade cost other than the market. José Carlos Martins: As we already talked about it, our expectation is to – we’ll have the cost of [diverse] of $6 by selling CNS with our own big fleet of vessels. On top of it to sell CNS is not only about cost, but is also about the freight realization. When the sell FOB for instance, I have to sell 30 days before them, my competitors and that puts some pressure on price on us. So by selling ICMS is to sell at the same time as our competitors sell. And this is translating much more in price than in cost.

Excuse me. Our next question comes from Chelsea Konsko, TIAA-CREF Chelsea Konsko – TIAA-CREF: Hi, I noticed that while, iron ore prices were going up quarter-over-quarter, pellet prices came down. Is the reason for that similar to the reason why the premium for our higher Fe content was also lower? And my second question would be you mentioned that you had poor results from your equity contributions from subsidiaries. And I was wondering if this is due to these lower pellet prices or other issues at subsidiary such as Samarco?

For this, I don’t know prices concern it. The premium for the iron ore content has not to do from the price of that amount in itself. It’s completely independent. So we have iron ore price as high as 180 and higher premium iron ore content. At the same time we had a very low iron ore price and a little bit different pattern for the iron ore content. The iron ore content price what we call (inaudible) is based mainly as I said before on CapEx utilization the blast furnace and the price of coal. So there is no link between both. If you think that higher price means higher capacity utilization, yes, the price of iron ore content could move up for the (inaudible) could move up. But that cannot have a different pattern as always. We see different patterns and we see different factors behind iron ore pricing being the price of the iron ore and in itself are being the price of the additional iron ore content. We see today this iron ore content price has lowered to $2.07, and the main reason is based on coal price and capacity utilization. So they are in independent sector, so we cannot make this relation so directly as you said.

With regards to equity income, you’re right Samarco mix of the book of equity income. So in 2012, the fortunate came from Samarco is $639 million, out of the service. It’s about almost a 100% of the $640 million that resulted in 2012, which means that all the other affiliates of Vale, we had a mix of positive or negative results that netted out almost zero, but some market itself came down from $878 million in 2011 to $639 million. Overall, we had lower performance across the Board not only some markets, but also in the smaller palletizing companies where have a stake and our four coal joint venture is in China. (inaudible) which is also a significant affiliate posted flat performance, but there are rooms for improvement especially we had a swing in hydro and aluminum from $99 million positive in 2011 to a negative $35 million, so it was accounted for a significant part of the decrease. I think there are some recurring items in this loss, so this should be – we shouldn’t go back to $99 million, but I am not forecasting hydro earnings, but I think the $35 million loss should be perhaps on the conservative side with forecast for the future. And also CSA, our stake in the equity income of CSA was responsible for our loss of $170 million in 2012, which was about the same as in 2011. However, there are some signs that we can do better this year as well, because now the plant is operating at more closer to full capacity and it’s being able to dilute its fixed costs. So these are the explanations for the drop and there are some directional indications that there can be better results in 2013, although I don’t give the numbers.

Excuse me. Our next question comes from Terry Ortslan, TSO & Associates. Terence S. Ortslan – TSO & Associates: Thank you. Good morning. Is there any other assets or infrastructure you can free up in terms of packaging in such a way that double tracking point since that Vale can get for your capital and have user fees instead and as a result you get some of your money back and as well as don't worry about the maintain number one. I'm trying to understand on the nickel front, the Long Harbour, the capital that you have $4.25 billion and with the output from there, how would that work out with respect to the nickel operations you have in Canada? How much (inaudible) (inaudible) will be done on versus Long Harbour being up and also the feed from the other operations in Manitoba? Thank you.

Well, thank you for your question. This is Luciano to address the freeing up of capital infrastructure. Currently, we have some leasing of loan stock and this is a model that we've been employing mostly in our general cargo operations, so this is already practicing within the company. There are no initiatives to, let's say, to stay a leaseback infrastructure for instance probably down minor warehouses and stock which is really small which is not material.

About the Base Metal, maybe I will ask Peter Poppinga, please question for you.

Yes, thanks for your question. So we have $4.25 billion, that’s the CapEx for Long Harbour. And Buenos is on track with 80% to 85% of completion. But if I understand your question well, you are worried about what if this has an influence on the other operations? So there is not much influence because Long Harbour is being fed by the (inaudible) ore body. And then will be fed by other all parties around. So our capacity when we ramp up in 2014 may be mainly on Long Harbour which will produce 60% plating moderate nickel. We will have, this will have more influence on whatever we are producing in our refineries in February, because there is no national connection in terms of feed. The feed which will build to probably from the railway mine is now going to be more and more used in Iowa. Regarding (inaudible), we have – that is the only all pending question we have. We have announced some time ago that the refinery and (inaudible) would shut down mainly because of the new asset tool regulations and from sustaining CapEx we have to invest there. But we are revising that and the outcome could be that we continue one or two years more finally in and we are also looking for some major improvements in the mine, so that import of the nickel output from the basement business will, for sure not decrease, it’s likely that it will actually increase in terms of frac refinery output.

Excuse me. Our next question comes from Mr. Gary Lampard, Canaccord. Gary Lampard – Canaccord Capital: My two questions; the first one is on iron ore cost and the second one is on nickel business costs. The iron ore question first, I’m trying to calculate a like-for-like Q4 iron ore cost comparison to the $36 of ton that you can calculate from Q3 financials. And this is obviously difficult. It’s not just the FOB to cost in freight accounting conversion. It’s also the new segmentation of R&D cost and then having the back Q4 out of the full year. And so, far I’m getting a Q4 cost of $48 a ton suggesting that on a like-for-like basis including R&D, iron ore unit costs have gone from $36 of ton in Q3 to $48 of ton in Q4. So my first question is, is that number, right?

Well, the straight forward answer is no. However, I’m trying to back it up with some numbers here. Okay, here I guess.

So what we have here is, if you adjust for the freight on the fourth quarter of 2011 and adjust the freight for the fourth quarter of 2012, you have a net increase – sorry regarding fourth quarter of 2011, I guess that – let me suggest one thing. Let me move on to the next question and then I’ll get to that. I found the numbers. No, we don’t have the numbers.

Well, you need to get back later on this conference to get the precise numbers here on the pile of materials. I'll get back to the question, but the answer is straightforward is no. I'll try to back up the numbers. And the nickel question…

And the second question.

Is the line open? The second question on nickel cost.

The nickel cost.

Okay, the second question on nickel cost.

Okay, on nickel costs, they were stable. Actually they have fallen a little bit from the third quarter to the fourth quarter, for base metals. I'm sorry base metals which is the segment that we reported. The base metals total cost they have fallen some brilliant $569 million in the third quarter of 2012 to $1,538 billion on the fourth quarter. And that was not to be unexpected because there was a fall in the volume, actually in copper from the third to the fourth quarter. So part of the variation is actually explained by the fallen volumes in copper. Actually there were some items that increased the costs that offset this decrease which were the increase in depreciation which by the way, it affected across all the business segments that depreciation costs are increasing. But there were also some royalties in voice to me that impacted more in the first quarter than in the third quarter, but overall, base metal costs were flat and slightly 2% downwards from the third to the fourth quarter.

Honorable back it to the first estimates.

Excuse me. Our next question comes from Mr. Jon Brandt with HSBC. Jonathan Brandt – HSBC: Hi, good morning and good afternoon, and thanks for taking my questions. I just wanted to go back and just talk about the debt levels and the debt ratios that we’ve seen rise. I think like you said there is good reasons, you expect them to fall. But could you give us some indication as to what the maximum debt levels you are comfortable with and please use whatever metric you feel is appropriate if it’s net debt or gross debt? And then if you could sort of walk us through sort of the line of thinking if you are able to increase cash flow this year on whether it comes from more non-core asset sales or higher iron ore prices, is there a preference for returning capital to shareholders, is it via cash dividends or share buybacks is a preferred method. And the second question is on Rio Colorado and I know you side there is a Board of Directors meeting in the next couple of weeks, is that your deadline for making a decision whether the project fully goes ahead or is it just something that you are going to discuss at the Board of Directors meetings? Thank you.

What I can tell you about our approach in Argentina is that, we will present at both level, regarding several alternatives that most of you considered, as you will know, today we have a gap in Argentina regarding the costs, the cost of material, the cost of human resources, and the exchange rate is one of the key issues. The second big issue is regarding some investments, some demand from the five provinces, we have in our railroads that will cross five province and they are demanding some help, some projects that is not related to our projects. We will present to the Board in order to serve the final reconciliation.

Okay, as regard to that indicators, as you may know, we have a different rating perspectives from S&P, Moody’s. Moody’s being much more conservative, one of the reason is being because of the volatility of our business and our CapEx commitments. That is to say that in order to continue to have good ratings and access to the capital markets ratings, we need to consider those aspects like the CapEx commitments for the future and the point volatility of the market. That tends to put us in a position to be more conservative in terms of ratio. I would say the current ratio of that long-term EBITDA of 1.6, which is in the presentation, is something that we are still confident with, we would like to see it evolving further given the timing of those cycle of our investment produce. Having said that, as I mentioned, the priority is to keep leverage in check and it’s still too early to talk about additional dividends and then returning back money to shareholders. We still need to go through a longer periods of higher iron ore prices, we still need to go through our divestment program in order to say something around that. Just going back quickly to the question on of bulk materials, I pretty sure if you look at the personal material gas, energy acquisition accounts for bulk materials, and that includes iron ore and coal that the increase that you see is 100% expanded by higher volumes, which means that cost per ton on these lines should be stable or lower. The only outsourced service is falling as we mentioned on absolute terms for bulk materials as well. Materials have falling on an absolute terms of bulk materials as well. The only line that has increased substantially was the freight one, and so we need to then offline do some calculations that you can do with our Investor Relations team to take out the effect of the freight from the third to the fourth quarter. And not only the effect on the freight in terms of the accounting adjustment, but also the increase, the de facto increase in freights from the third to the fourth quarter, and which we have out in the press release. So while we can – it won’t be difficult to demonstrate and we can do it offline that cost per ton of bulk materials have been remained stable from the third to the fourth quarter.

Excuse me. Our next question comes from Mr. Daniel Rohr with Morningstar. Daniel Rohr – Morningstar: Thanks for taking my question. I hope if you could talk a little bit about the sustainability of the SG&A decline we saw, especially with much of the decline from Q4 2011 to Q4 2012 concentrated in the others and services categories, it looks in those two categories alone costs were down $228 million?

It is quite sustainable. Actually, we believe that this decrease you saw from the fourth quarter of 2012 to fourth quarter of 2011 will be maintained in the quarter-by-quarter the same period of the year comparison going forward. So that's why we’re so optimistic that we can reduce the full-year numbers by at least 20% in 2013 as compared to 2012. Daniel Rohr – Morningstar: So could offer little bit more color on, so what of that $228 million that was being spent a year ago, but not spent now? What sort of stuff are we talking about now you’ve mentioned airfare, anything else?

I would say consulting fees support services in a general way that do not relate directly to the operations are personal because we’re reducing, simplifying the overall corporate structure. So it's pretty much across-the-board. Daniel Rohr – Morningstar: All right. Thanks a lot.

Excuse me. Our next question comes from Mr. Rodolfo De Angele with JP Morgan. Rodolfo De Angele – JP Morgan Chase: Hi, my question is on iron ore. First of all, we saw Labrador seems to be a bit delayed. Could you share with us your thoughts on the outlook for growth especially trying to meet the under licensing for S11D, and I would also like to hear from Martins, his views on iron ore, which has been quite strong surprising most, I guess. So just wanted to hear your thoughts on the market overall? Thank you.

Rodolfo just briefly on the outlook for growth, there are still – we’re still betting on the iron ore curve that we made public to you on the Vale day. That’s still our best forecast of how the iron ore production will evolve?

Well, I don’t know the price is concerned. What we are learning is that, we manage much better when the price is going after when the price is going down, okay. There is – because of the distance between Brazil and Asia, and we compete people that are nearby, so that translate being better price realization and the prices are moving up then the prices is going down. As you will see that our price realization in the beginning of the year perhaps was going down. We had much more difficult in getting better price realization. By this year end, next year end – last year end sorry, at the end of 2012, the price was moving up, so we have a better position to get the price. So I think that will activity affect us much more when the price is moving down and affect us positively when the price is most happened, that’s what I can tell you. Another point is that we are improving. We are a company used to sell on a yearly basis, okay, our staff in (inaudible) has to have a big change when we our people to seeing up more the development you would SKUs to work in this new product development and that takes time. So I think we were improving day after day.

Our next question comes from Paul Massoud with Stifel Nicolaus. Paul Massoud – Stifel Nicolaus: Hi, thanks for taking my questions. My first question is on the Coal business and the second one is on Fertilizers. But on the Coal business, obviously you’ve highlighted some of the logistic constraints that have impacted costs in getting some of the more cheaper products to market. But when you look back over the history of the Coal business, I mean generally speaking, you’ve been running it at an operating loss. And so, if we’re looking ahead, given what prices have done, can we expect any kind of an operating profit before the Colorado expansion is complete or should we just expect – should we be expecting significantly higher cost until that’s gone? On the Fertilizer side, so my second question, what I’m curious about is with Rio Colorado being guidelines or at least under review right now the Canadian assets in sidelines, with that in mind in the past fairly recently you’ve said that your goal is to grow in phosphate and potash fertilizers. So the main projects for potash are not being executed on them and should we be thinking about M&A as a more reasonable way for you to grow, or you going to be putting fertilizers on the sideline until you get some of the other restructuring done? Thanks.

Okay, starting with coal in Mozambique, obviously the – our hurdle – there has been the Sena-Beira railway and we’ve had a very bad start to the year this year. So we know the challenge is on. However, we have grown our outlook there considerably. If you look at our ramp up at Mozambique, the mine itself has been very well and we shipped everything we can that the railroads can carry. I think the relationship with the CFM, which is the railraod operator in Mozambique is good. This is a learning curve we’re on. And we are making progress, right. So it is not a case that we have to wait until that [color] to happen in order to have a viable and economically attractive business in Mozambique. We will make, I think and I’m sure actually. We will make a lot of progress during the course of this year. Then you have to remember that is a well where there hasn’t been really anything for 30 years. So there is a learning curve and there is a ramp up that has to take place. In Australia, our coal assets are underplaying turnarounds and turnaround is well advanced. We have grown our volumes there by 20%. Obviously that filters down to the economics of the business. So we are seeing some improvements there. There’s a lot of work that is being done both on the operational side and on the cost side. We will see certain improvements as there’s certainly going to be improvement in 2013 on those businesses. So the message is very clear. The coal business has to stand on its own two feet. So we will have to make those hurdles. Regarding our strategy for the fertilizer industry, for the fertilizer business we – and you’re absolutely right. We want to grow in both phosphate and potash. We have options we’re exploring. You mentioned Rio Colorado. Murilo had mentioned earlier in this call that by 11th of March, we will come back to the markets with more increase, but we have alternatives. Canada is one of them. We also have good alternatives in Brazil, up in the Northeast and that what we have do now is manage this portfolio of excellent options that we have.

Excuse me. Our next question comes from Mr. (inaudible).

Good afternoon. Thank you for taking the follow-up. And the question goes on the S11D project. Just want to get an update of when you expect to get the installation license for this project? And also this is one in all the hurdle, so you can bring this to the Board’s appreciation. That’s my question. Thank you.

We are very confident that we are going to have all this license by the end of April of S11D.

Our next question comes from Mr. Ivano Westin with Credit Suisse. Ivano Westin – Credit Suisse: Good day, everyone, and thank you very much for the questions. My first one is first your main approved projects. You have consistent (inaudible) if you include depreciation ratio, what is the expected net growth you expect from those operations or especially from the (inaudible) in the next four years? Then the second question first due to pellets. These decrease in price “by 10%” raised the question on pellets premium. I wonder what is your assumption for a premium, a long-term basis and whether this premium will remain above the cost of conversion? Thank you.

As far as the first question, we expect from this project to have an additional production of 20 tons for the year.

Yes.

And now the second question, we expect the premium for Paris to stay around $30 per ton, which is the hopefully the conversion costs. It will depend very much on the markets, okay, the price of pellets is very much relating to variable of Vale as far as market is concerned. But looking in the short-term, medium-term, we believe that $30 premium based on the conversion cost is a fair assumption.

Our next question comes from Mr. Marcelo Aguiar with Goldman Sachs. Marcelo Aguiar – Goldman Sachs: Hi, thank you for taking my follow up. Some of my question was being answered, but I would like hear Martinis' views on the iron ore production growth in China. I mean there is a lot of iron ore run-off mine to come on line in the next 2, 3 years in China, I mean there are some numbers running around $450 million tons of run-off mine production. So I would like to hear what your Vale’s – I mean what’s Vale view on the iron ore production growth in China and in terms of Fe content and costs, this is the first question? José Carlos Martins: As far as iron ore in China, we do not believe local production, we will have a huge impact on the market, because although they are increasing the run off mine of production, the content is decreasing. So at the end, we do not expect any big increase in their local production base in the iron ore content. So we see on the other hand that as time goes by, this is becoming – their course is becoming higher and higher and main of those mine is we will not support proper regulations based on the environment, okay. So we see China more and more concerned about the environment and those mine generate a lot of ways and they are a burden for the environment and looking forward we do not see their production increasing in terms of iron ore content. At most you would say in the same range as they are today. Marcelo Aguiar – Goldman Sachs: They content exploration that Peter gave to the long harbor. Second, I repeat that and add a little bit on the core in terms of volumes to expect from Long Harbour this year and next year?

Peter?

Yes, the volumes this year will be small. It will be a startup in the fourth quarter like I said. And next year, we are planning to ramp up and probably we will be around like we are following (inaudible) number two for those who don’t know that it means, it’s in the first year of ramp up that means then something around 40% of the nominal capacity. But I would like to propose you, just follow-up on what we talked about Base Metals and the nickel sales regarding to Long Harbour and affecting the other operations. I have this – we have mainly two strategic drivers here in Canada in the Base Metals and Nickel business in general; one is, the self-funding. So we are now standing on our own feet. You saw this through the gold transaction, and also we will have some smaller divestment of non-core operations, And of course, the ramp ups, which are now delivering. : This will significantly reduce our sustaining investment in the following two years to come, including this year. And you may ask that where is the feed for the refineries going to come from since Long Harbour is starting up? Well, the refineries will and since the furnaces are going to produce less material, the answer is that, this material for the refineries will come from Indonesia, where we are improving our production, you saw the fourth quarter this year was significantly higher since we constructed the new fronts and we will do another one next year. So this feed, intermediate feed of Indonesia will then fill our refineries here in Canada to the extent that there will be no shortage of feed, actually there will be an increase of nickel production. I hope this explains a little better the flows of the business.

Thank you very much for you time. I think that we can trust as you continue with this discipline in capital allocation, looking permanently to reduce costs and working forecast in world-class assets. Thank you very much.

That concludes Vale’s fourth quarter 2012 results conference call for today. Thank you very much for your participation. You may now disconnect.