WEBVTT - Vale CEO Gustavo Pimenta Talks  Global Metals Market

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, which.

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<v Speaker 2>It is one of the big narratives of the last year,

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<v Speaker 2>a signature policy of the second term of the Trump administration,

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<v Speaker 2>and that is shoring up supplies of critical minerals and commodities,

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<v Speaker 2>including iron ore pellets, copper, and nickel. It's become, tim though,

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<v Speaker 2>really a focus for countries and governments around the world

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<v Speaker 2>on that.

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<v Speaker 1>We're going to head to the Bloomberg News bureau in

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<v Speaker 1>Rio de Janio and to one of the co hosts

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<v Speaker 1>of Bloomberg Surveillance, Lisa Bramowitz, sitting down with the CEO

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<v Speaker 1>of one of the world's largest mining companies, Gustavo Pimenta,

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<v Speaker 1>the CEO of Valet. Lisa, take it away.

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<v Speaker 3>Thank you so much. Tim Carroll. I am here in

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<v Speaker 3>our beautiful Rio office with Gusavo Pimenta, the CEO of Valet,

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<v Speaker 3>the world's biggest iron ore miner and one of the

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<v Speaker 3>biggest o winers just in general around the world. At

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<v Speaker 3>this critical time, as Tim and Carroll were just talking about,

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<v Speaker 3>there has been this rush to any kind of critical

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<v Speaker 3>minerals cured for security reasons as well as the infrastructure

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<v Speaker 3>build out. How much more demand.

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<v Speaker 4>Have you seen just recently look the amount of demand?

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<v Speaker 4>First of all, good to see you LISTA. The amount

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<v Speaker 4>of demand is super constructive. It's historical for us. I

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<v Speaker 4>think across all the critical minerals, we are seeing and

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<v Speaker 4>a very strong support from clients all over the world

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<v Speaker 4>from countries in terms of looking for security of supply.

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<v Speaker 4>Iron ore continues to be strong. If you look at

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<v Speaker 4>copper nico, so across the board, we are seeing tremendous

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<v Speaker 4>amount of demand for all of the the mining that

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<v Speaker 4>we produce.

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<v Speaker 3>The bulk of your customers typically come from China. Have

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<v Speaker 3>you seen more interest recently from the United States?

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<v Speaker 4>We are China continues to be a strong market for US,

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<v Speaker 4>very relevant for everything we do. But we are seeing

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<v Speaker 4>growth outside China. We are seeing growth in Southeast Asia,

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<v Speaker 4>we are seeing growth in the US Europe. So there

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<v Speaker 4>is a diversification going on these days with other markets

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<v Speaker 4>looking to amplify their access to critical minerals.

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<v Speaker 3>People talk about the commodities recycle, iron ore hasn't participated

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<v Speaker 3>as much in terms of the price gains and there

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<v Speaker 3>has been a sort of plateauing and demand from China.

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<v Speaker 3>Where are the growth opportunities specifically when it comes to

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<v Speaker 3>iron ore.

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<v Speaker 4>So we continue to be very optimistic about iron ore.

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<v Speaker 4>If you step back and look at the overall demand,

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<v Speaker 4>we have population growth, we have industrialization, we have other

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<v Speaker 4>markets growing. Certainly, China probably has plateau and reached their

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<v Speaker 4>overall pick in terms of production. They are doing more

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<v Speaker 4>than a billion tons of crude still production annually. We

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<v Speaker 4>think they will continue to be at that level. But

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<v Speaker 4>we are seeing growth in Southeast Asia. India is growing substantially.

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<v Speaker 4>We're expecting India to double the crud still production in

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<v Speaker 4>the next ten years. Even the US is growing, so

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<v Speaker 4>we are seeing more demand outside China. Chan and will

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<v Speaker 4>continue to be the key market for all of US,

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<v Speaker 4>but we are seeing greater demand in other markets as well.

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<v Speaker 3>You've seen your copper production increase, I believe five to

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<v Speaker 3>ten percent of total revenues over the past five years.

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<v Speaker 3>You've talked about wanting to double it again over the

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<v Speaker 3>next ten or so years. What does that entail in

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<v Speaker 3>terms of investing in existing minds, in terms of acquiring

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<v Speaker 3>new assets, what exactly are you looking at?

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<v Speaker 4>Look are very optimistic also about the copper demand. I

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<v Speaker 4>mean the electrification of everything, which is which is a

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<v Speaker 4>secular trend data centers all of AI. This will require

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<v Speaker 4>an enormous amount of supply from copper. We in Brazil

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<v Speaker 4>are city in a tremendous endowment. Valley has a great endowment,

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<v Speaker 4>especially in the north of Brazil, to produce more copper.

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<v Speaker 4>We've been doing Last year we did about three hundred

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<v Speaker 4>and eighty kilotones. We want to double this to about

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<v Speaker 4>seven hundred kilotones. There is an enormous opportunity for us

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<v Speaker 4>to accelerate the development of the minimal, the critical minerals

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<v Speaker 4>and the deposits that we have in the country.

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<v Speaker 3>Well, does that acquiring other companies? Is that require investing

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<v Speaker 3>large sums and existing minds.

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<v Speaker 4>So for us, it's more about brownfield because the unique

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<v Speaker 4>advantage of Valley is the fact that we operate with

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<v Speaker 4>very efficient capital intensity for the projects because I have

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<v Speaker 4>the rail, I have the port, I have the entire infrastructure.

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<v Speaker 4>So for us, it's more about developing near minds and

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<v Speaker 4>the brown field around our existing operations. So it's less

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<v Speaker 4>about M and A, but more about unlocking the potential

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<v Speaker 4>that we already have.

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<v Speaker 3>What about rare earths? Brazil sits on the biggest reserve

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<v Speaker 3>of rare earths behind China. Are you planning to expand

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<v Speaker 3>into that at all?

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<v Speaker 4>Look, we've been studying if this is something that would

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<v Speaker 4>make sense for Valley. We do have certain opportunities in

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<v Speaker 4>Brazil that we are assessing. For us, there are some

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<v Speaker 4>questions that we have to answer in terms of scale.

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<v Speaker 4>Can we compete with some of the international players like

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<v Speaker 4>the Chinese. So this is something that we are currently assessing.

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<v Speaker 4>I would say our biggest bet is to focus on

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<v Speaker 4>what we are good and have scale at this point,

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<v Speaker 4>I on our Copper and Nico, but we are keeping

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<v Speaker 4>an eye open for other opportunities.

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<v Speaker 3>Are there any countries or players in countries that will

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<v Speaker 3>be interested in assisting you to build that out Given

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<v Speaker 3>the fact that there has been this focus by the

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<v Speaker 3>US and developing national security and sort of get.

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<v Speaker 4>Reserves, certainly a lot of investors, international investors, local investors

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<v Speaker 4>that want to partner with us, and we have a

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<v Speaker 4>few examples here in Brazil and outside where we are

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<v Speaker 4>working together to unlocks. It's a lot about accelerating the

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<v Speaker 4>development of what we have, especially in the critical minerals agenda.

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<v Speaker 4>So we are certainly open to discussions with partners that

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<v Speaker 4>are willing to come and co invest with us.

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<v Speaker 3>What about the price of oil given the fact that

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<v Speaker 3>you have to move all of these very heavy materials

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<v Speaker 3>from one place to your major customer, which is over

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<v Speaker 3>in China, has that hampered demand at all?

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<v Speaker 4>No demand, no impact on demand, I think what we

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<v Speaker 4>had since we are more distant from our end user

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<v Speaker 4>or end client, which in this case continues to be China,

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<v Speaker 4>our most relevant consumer, especially for iron ore, we had

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<v Speaker 4>an impact in the overall cost for our transportation of

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<v Speaker 4>the iron ore. Now, but when we look at the

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<v Speaker 4>overall pricing for commodities and in particular case for iron

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<v Speaker 4>op price has increased more than the impact that we

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<v Speaker 4>had in our cost because the marginal producers have been

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<v Speaker 4>impacted more than Valley. Valley has long term afreightment for

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<v Speaker 4>our vessels. We are hedged on the fuel costs, so

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<v Speaker 4>the impact for us hasn't been negative. In fact, we

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<v Speaker 4>had a margin expansion as a result of the conflict,

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<v Speaker 4>but we continue to monitor that very closely.

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<v Speaker 3>Is there a limit to how much customers will accept

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<v Speaker 3>in terms of price increases.

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<v Speaker 4>Look, certainly, we have to see. I think at this

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<v Speaker 4>point there is no impact in demand destruction we are

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<v Speaker 4>not seeing the markets continue to be solid. Strong clients

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<v Speaker 4>continue to produce who have to continue to see to

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<v Speaker 4>what extent they can absorb the price increase, but at

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<v Speaker 4>this point we are not seeing impact in the overall demand.

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<v Speaker 3>You have a pellet manufacturing place in Oman and it

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<v Speaker 3>has been taken offline as a result of simply not

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<v Speaker 3>being able to ship the pellets out from the area

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<v Speaker 3>due to the conflict there. What is your plan in

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<v Speaker 3>terms of reopening that Look.

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<v Speaker 4>We are ready to reopen, certainly, we are monitoring the

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<v Speaker 4>conflict and we want to make sure our people are

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<v Speaker 4>safe and that's the most important thing for us. It

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<v Speaker 4>is very well located. Oman has a special strategic location

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<v Speaker 4>even within the Middle East. We have a great asset.

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<v Speaker 4>It's a paletizing facility which is very important for the

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<v Speaker 4>carbonization for a lot of the energy transition discussions that

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<v Speaker 4>we have. We are in fact, as we speak, doubling

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<v Speaker 4>the capacity of that facility. At this point, we're waiting

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<v Speaker 4>for the conflict to end or to reduce in terms

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<v Speaker 4>of the potential impact for us to resume our operations.

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<v Speaker 4>We continue to be very optimistic about the Omanian operations

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<v Speaker 4>that we have and we think that could be a

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<v Speaker 4>hub for a lot of the clients that we have

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<v Speaker 4>in the region.

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<v Speaker 3>So this hasn't pushed out your ambitions at all for

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<v Speaker 3>the region or curtailed them in any way. The fact

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<v Speaker 3>that the conflict has.

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<v Speaker 4>Not, particularly with Oman. We continue to be very committed

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<v Speaker 4>and we think it's a great market for us to

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<v Speaker 4>have to serve India, to serve other markets, even Southeast Asia,

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<v Speaker 4>so it's a very strategic asset that we have.

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<v Speaker 3>Are you still confident about your full year forecast for costs?

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<v Speaker 3>Do you expect that to stay where it is?

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<v Speaker 4>So, as we mentioned before, and the overall expectation for

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<v Speaker 4>the year is great. Actually. I mean, we had a

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<v Speaker 4>very strong first quarter production across the board, and all

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<v Speaker 4>commodities are trending very nicely. We had the record production

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<v Speaker 4>in copper, niko and arnor in the Q one, so

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<v Speaker 4>I'm very optimistic about the full year performance. We did

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<v Speaker 4>have an impact in the overall cost base given the

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<v Speaker 4>few costs, but overall margin has expanded, so I'm going

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<v Speaker 4>to continue to expect a great year for us.

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<v Speaker 3>You've been in the business a long time in terms

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<v Speaker 3>of commodities and energy production in general, do you have

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<v Speaker 3>any analog to this period in terms of the super

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<v Speaker 3>cycle that you're seeing and the demand level that you're

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<v Speaker 3>seeing from clients.

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<v Speaker 4>Okay, I think what we've seen for Ironora back in

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<v Speaker 4>you know, twenty ten, twenty fourteen, that period with the

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<v Speaker 4>super cycle is what we're seeing in the critical minerals.

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<v Speaker 4>But I you know, the more I look into, the

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<v Speaker 4>more we discuss with clients, I think the opportunity this

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<v Speaker 4>time around is even greater. So I think we are

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<v Speaker 4>in an unique moment of our historic valley, particularly because look,

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<v Speaker 4>we are located in a country that has an enormous endowment,

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<v Speaker 4>very well positioned from an a geopolitical standpoint. I mean,

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<v Speaker 4>we do businesses with the US, with Europe, with China.

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<v Speaker 4>We have an enormous endowment. We have the infrastructure all

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<v Speaker 4>in place, and the demand is growing across the board

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<v Speaker 4>on all critical minerals. Even our in our continues to

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<v Speaker 4>be very strong. So we are very optimistic. I think

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<v Speaker 4>it's a unique. It's great to be a minor these days,

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<v Speaker 4>so we are very excited with that.

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<v Speaker 3>Crista Wolfamnza, thank you so much for being with us.

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<v Speaker 3>That is the CEO of Vali