That’s important to continue to improve that. And so, for example, maybe pushing some material from Onça Puma up through long harbor and looking at other innovative options to improve our realized prices as part of our strategy. And then third, we’ve got the nickel assets, Manitoba, Onça Puma, more specifically, and I’ve talked a little bit about Onça Puma already, we’ve obviously got work to do at Manitoba. And if we look at the asset review, we see in the next two to three years a 20% to 30% productivity improvement potential across the assets. If I translate that into an operating cost reduction, that’s about 15%. So the question for us is, how quickly can we get those assets down that cost curve? How do we make sure we don’t do anything that would hinder our travel toward those costs?
But at the same time, let’s pull our belts in tight to see if we can make sure that we don’t lose any cash on the way through. So that’s the process that we’re going through. And we’ll answer each of those questions at the mid year when we give you the asset review update, because they all connect and are really important. But the most important point is the asset review is taking us in the right direction. We’ve just got to get there as quick as we can.
Operator: Next question from Rafael Barcellos with Bradesco BBI. You can activate your microphone.
Rafael Barcellos: Hello, good morning, and thanks for taking my questions. I have two quick follow ups here. I mean, firstly, could you please elaborate further on quality premiums for 2024? I think it would be interesting to hear about that more. And my second question is about costs. Could you please comment a bit more about C1 cost trends for 2024, I mean, particularly on what you are seeing now in the beginning of the year. Other than that in 2023 you delivered costs slightly below the guidance. So I – just to understand if you see any upside risks in C1 cost for 2024. Thanks.
Marcello Spinelli: Thank you, Rafael. Spinelli here. Thank you for a question. So regarding premiums, let’s remind you the main contributors for higher premium. So the cost of energy, that’s the cost of coal, that is in a low level comparing to the past [ph], the necessity to improve the efficiency of the production that they are in a full operation, but on the other hand, the margins and the cost mode – mood that they are now facing. So we don’t see any major change in the first half regarding the premiums. As we have this low margin in the industry in China. We can have an upside risk for the second half. As I mentioned, due to all the macro actions, the main effects from the stimulus and infrastructure. Infrastructure is leading an important growth for this year.
So we can have some extra or an upside risk for that. But we see this level of premiums flat in this moment. Premiums for pellets, we – on the other hand, we are really bullish for that. Direct production is really under pressure. Production in the Middle East and the U.S. is going really well. So it’s supporting a high level of premiums. And for blast furnaces, we also see a rebound as ex-China, in Asia like Japan or in Europe are now demanding more the blast furnace pellets. And as we have a possibility of narrow discount for high silica ores, we take advantage of that and we can use our supply chain, our flexibility in our portfolio to maximize the margin if you keep this scenario of low margin in the steel making in China.
Gustavo Pimenta: So Rafael, Gustavo here, just to compliment on the cost question. Yes, look, we finished on a very strong note. Our Q4, as I mentioned in my prepared remarks, C1 was at $20.8 per ton. Getting closer to that mark of $20 that we’ve been going after in the medium term. For this year, I think we’re going to have everything is looking to be another solid year in terms of cost performance. A lot of the efficiency initiatives that we’ve launched a year ago or so are bearing fruits now and we’ve seen some improvements in Q4 and we should continue to see some improvements this year. And one thing that is also very helpful is the operational performance, right. Medeiros highlighted we finished quite strong Q4. We started the year very strong as well.
So that higher production level is also very helpful in terms of diluting our unit cost. And that’s what we’re expecting. Keeping in mind that Q1 is usually a quarter where we have higher costs given the lower production level. But we are trending in the right direction and super confident with the numbers that we had highlighted before.
Operator: Next question from Myles Allsop with UBS. You can activate your microphone.
Myles Allsop: Great, thanks. Can you hear me?
Eduardo De Salles Bartolomeo: Yes.
Myles Allsop: Excellent. So maybe just first, Eduardo, the kind of – certainly, the data supports you’ve been doing a great job from a safety perspective, from a production perspective simplicity. But then there is this debate around whether your contract will be renewed in May. So I mean, I guess it’s the Board’s decision ultimately. But from your own perspective, do you think there’s another five years in you to kind of take Vale to the next level? Are you keen to stay if the Board will keep you?
Eduardo De Salles Bartolomeo: Okay. Thanks, Myles. Of course, as you already mentioned, it’s not up to me to comment that even the sea level, it’s a Board decision. And we’re really confident that the Board is taking it very professionally on the right way. Specifically about the business, I think this is the most important question that you asked me because we are really focused, irrespective of decisions being made to take Vale and run Vale safely, focused towards the strategy goals that we set, and we are – that’s what we are doing now. And really focus on that. Okay, thanks for the question.
Operator: Next question from Carlos De Alba with Morgan Stanley. You can activate your microphone.
Carlos De Alba: All right. Yes. Good morning, everyone. Thank you. A couple of questions. One, Eduardo, I just wanted to get your views as to what is going to happen with the Vale Base Metals CEO position. I know Mark is the Chairman of the Board and he’s very engaged. Is he going to have an expanded role and act also as or remain also a CEO or the company is still looking – the Board of Base Metals is looking for a CEO. Yes, just some clarification there would be great given the relevance of executing in that business. And my second question is around the JV with Anglo American, very interesting for sure. Is there any timing for the Serpentina development and expected CapEx potentially that you can at this point highlight to us?
Eduardo De Salles Bartolomeo: Okay. Thanks, Carlos. [Indiscernible] Yes, yes, you’re right. We are looking for the CEO, for sure. We have a final list by the way. Very soon we’re going to be able to announce it. And I think Mark can help me by the way, we are team here. I think Mark came us and we’re very grateful and thankful that he accepted to join us to bring his 40-plus years of experience. I think he wants to mentor people. He wants to translate, and I think or how could I say that in English? Take to somebody, to other people his knowledge, so I think we are very well designed on who is who in the organization. For sure we are looking for a strong all-rounded CEO, but I have zero doubt that Mark will be of great help on mentoring and teaching this guy. Okay, and if Mark, you want to add something?
Mark Cutifani: I think managing the transition is something that we’re planning very carefully. We’ve got myself and a couple of other very experienced people that can help mentor and support people through the transition. So we think the transition will be managed very carefully, but we shouldn’t be far off making announcement. Very important to get the right person in the role and managing the transition well and we’re planning for that and we’ll all probably do a little bit more in that process.
Carlos De Alba: Okay, thanks Mark. And I’ll ask Gustavo to give you some more colour on the JV and expectations of investments in Minas-Rio?
Gustavo Pimenta: So Carlos, good morning. So there is work to be done on the pre-fees and the feasibility works leading to the preliminary license that we expected to happen within the next call it five years – up to five years. So we are really seeing this development to be early-30s to mid-30s in terms of reaching commercial operations. That’s what we’re going to work towards and support Anglo on that. In terms of total project costs, I think it’s early to say the team needs to work on the specifics. Certainly it should be a very accretive development for both companies, right, because we do, as Eduardo highlighted it’s highly synergistic for both companies. I mean we have a lot of infrastructure that we can share. That’s one of the beauties of this deal and we should see that as we take it to the next level. So we’ll keep you guys posted as the project evolves.
Operator: Next question from Marcio Farid with Goldman Sachs. You can activate your microphone.
Marcio Farid: Hi everyone. Good morning. Thank you. Thanks for the time. Quick follow ups from me. The first one, obviously as we look into the overall third party sales for Vale, I think it was just over 25 billion tons this year. There is obviously strong competition on the trading business as well with mostly traffic good and CSN within Brazil. So just trying to understand how should we think about sustainability and obviously profitability of this business going forward should expect further growth? Are we getting close to the peak here? And obviously in case we see an iron ore price adjustment, where do you think most of these suppliers, right? The third party suppliers would continue to run, right? I mean, in other words, what is the breakeven for most of those around 50 million tons volumes coming out of Brazil being sold with no own logistics, right, that would be great to understand, please?
And secondly, I know Gustavo; you just talked about Minas-Rio JV, so just a quick follow up here. I think the idea, obviously you talked about potential partnership but is there anything else that you are progressing towards getting closer to a finalization? I know Mark has mentioned before potential partnership with Glencore in Canada as well? And then on Minas-Rio specifically, obviously in our legacy business and a project that was supposed to be close to a 90 million tons capacity at the conception, right. So just trying to understand here, can we see Minas-Rio stepping up and doubling or tripling capacity in the mid- to long-term here? And what would be the main bottlenecks and if this partnership unlocks some of these bottlenecks as well?
Please. Those are my questions. Thank you.
Marcello Spinelli: Thank you, Marcio. Thank you for your questions, Spinelli here. Let me go through the third party’s purchase. So the level purchase of 25 million tons is quite similar, slightly higher this year. This is based mainly today in a transaction of purchase. A small part today is based on what we call minimines or now a rename of partnerships. You ask Gustavo about other deals. We have small deals with small miners in Brazil that we can bring our assets like mineral rights that we can develop together. That’s the kind of relationship we’ve been evolving and developing inside Brazil. So we are open this market that we can reach another 5 million, even more. It is based on quality. So remember our strategy it’s not about bringing volume to the market, but bring quality to the market.
It is about optimization of logistics that implies in cost, reduction of cost and the impact that you have in the community. So we want to move from roads to railroads and also evolve together as an ecosystem. So this is obviously depends on the market conditions, the level of price we can generate value today. In average we have $20, $25 per ton the level of price we have today. I’m talking about margins. And as we can improve this partnership, rather than keep this old way to have transactions of purchase. We can improve the value for Vale and the value for the partners. So, we see a sustainable business in a certain level of price if you have demand for that.
Gustavo Pimenta: Marcello, if I can add maybe just a few bullets on your question? Look, we are looking for, as Eduardo said, smart M&A or smart partnerships. I think one of the unique characteristics of Vale, both in iron ore is in based models. And one of our key competitive advantages is that we have a very extended flexible infrastructure, right? And that’s so we see a lot of value, opportunity to work with others. And the one that Spinelli is highlighting is an example of us leveraging our existing and utilized infrastructure to capture incremental margins. And there will be others. And sometimes through partnerships, sometimes through M&A. We are keeping our minds very open to it. The same applies for base metals. Right.
On your question on Anglo and the $90 million and so on. Look, this is a very mature operation today. And Serpentina is contiguous to Minas-Rio operations and highly accretive, highly synergetic, as I mentioned before to their operations. So, we feel good about the ability to expand and take the business and help Anglo take the business to the next level.
Operator: Our next question comes from Timna Tanners with Wolfe Research. You can activate your microphone?
Timna Tanners: Yes, great. Thanks very much. Two quick ones for me I think, one is just backing up to the discussion of the parasite situation. And obviously I’ve addressed the Sossego and Onça Puma. But any indication that it could extend to Salobo? It’s my first question. My second question is just if you could discuss any implications for yourselves or for other competitors or customers of some of the blockages in freight globally and how you’re dealing with that or how it’s impacting your business, that’d be great. Thanks very much.
