Status Update

Aug 24, 2021

Ladies and gentlemen, thank you for waiting, and welcome to Cosan's conference call. With us today, Mr. Luis Enrique de Marais, Cosan's CEO Mr. Marcelo Eduardo Martins, Cosan's CFO Mr. Juarez de Leyba, CEO of JV Menera San and Giulio Fontaine, Senior Advisor and JV Menera San Consultant. We would like to inform that this event is being recorded and during the company's presentation, participants will be in listen only mode. After that, we will start the Q and A session and further instructions will be given. Marin. Now I would like to turn the floor to Mr. Luis Enrique. Please, Mr. Luiz Enriquez, the floor is yours. Good morning, everyone. Actually, This is Marcelo Martins. Luis will be addressing you shortly. Thank you all for joining us at Such short notice, our objective today is to talk about yesterday's announcement, which is this mining JV, which was set up by Cazan and the Paulo Richo Group with immediate announcements of the acquisition of the San Luis Port, which is a key asset for this announcement and its timing. First of all, I'd like to speak briefly about the transaction itself, and then I will turn it over to our other conference call participants. After Cosan's corporate realization and rising Adeo and Compass' private placement announcements. As I had told you during our last Today, we have been looking for investment alternatives that make sense in our portfolio. Our historical goal has been to bring in assets that give us strategic operating leverage based on our knowledge and on our portfolio so far. However, at the moment considering a different investment horizon to the other companies in our portfolio. By difference, I mean, We now have a permanent portfolio as we have told the market, and we also want to find other alternatives through partners by establishing partnerships with investors as well as strategic partners that see value in what we're doing, who can help us to add value to our projects looking forward. So This is the first of a series of events that we should be announcing over the next foreseeable future, and it is very relevant. The timing for this investment and for starting this business happened because we found an extremely relevant asset for this kind of business, which is the port asset. As you know, Shipping is key, and it can be a very important entry barrier to this business. So our objective, after talking to Paulo for a few months and his group was to find a logistic asset that would justify our going into this business. We have found this asset recently. The Saudi Port was for sale by CCC and the minority shareholders in a corporate and governance structure that was very appealing to us. And that was why we have announced position from the minority shareholders and from then on started talking to CCC, which will hold 1% of board. They will come back to us after they've signed our letter of proposal. They will also be providing us With the EPC, we are discussing the terms of the EPC so that we can announce that in the future. What I'd like to make clear to you before I turn it over to Luis is that The timing was determined by our finding of this asset. This is a key asset. It is the only relevant asset to the region that was available. In fact, this is the last asset of such importance in that region. And it was crucial to our strategic view for this business looking forward. I will now turn it over to Luis Enrique because he's going to talk about our decision to put this portfolio together. And then we'll turn it over to Juarez, who will be talking about the project itself. Luis? Thank you. Thank you, Marcelo. Good morning, everyone. Thank you for joining us today. We will have a Q and A session and then you can ask any questions about anything that wasn't made clear to you. So this is an integrated plan including mining and logistics. You know how we think in our other business. We always want to have a broad complete view of our supply chain. And what Belo said was we found an opportunity to bring together our partners existing mining assets. Our partner has a great deal of knowledge with 4 assets with very efficient logistics. So this would only make sense it would only make sense for us to go into this project if these conditions could be met. So world class assets in a strategic position that are extremely hard to be replicated. Also, as you know, Marcelo and I have been consistently telling you that we want to diversify our portfolio. We have moved an international company. Raizen has been growing its trading and building a hard currency position, and we want to diversify our portfolio in terms of currency. So we have this asset coupled with our knowledge about Brazil and our ability to navigate all the regulatory and land issues in Brazil. Brazil has a competitive advantage in mining as has been proven by excellent companies such as Vale. As always, it's always good to do these things with partners. So it was crucial to find the right partner for it. We wouldn't have gone into the business if we hadn't found the right partner. We are a partner company. We like partners. We learn from them and we can also add value to our partners. And what we're bringing to this project is our expertise in management and logistics. And we're also bringing to the table elements that are key to an integrated project. As Marcelo has said, and I'd like to reiterate and Juarez will be talking about this, support enables our entry into a segment with an important entry barrier, which is the shipments of the production. The challenge in this business has always been to find an exit for the ore at competitive conditions and Management itself, so we are making that possible, and that's why we're so excited about that. And when we look globally at the requirements Of the clients, we also see a huge advantage in this project because all of our operations will be greenfield, so we have the possibility to do what's best in environmental terms, management terms, efficiency terms, allowing for a smaller cost for resin compared to other projects. And this is a niche project, so we will allow us to have products that will set us apart. So we'll be talking about it And considering players will also have the opportunity to create what we'll call Mining 2 dot O. So all these characteristics and these opportunities, so the assets with excellent mining asset partners who focus on the subject matter, coupled with our management and logistics expertise and resources during our internal discussions were what made us decide to invest in this new segment, as explained by Marcelo. So I'll turn it over to Ruiz now to talk a little bit more about the project as the CEO Thank you. Thank you, Luis Enrique. Good morning, everyone. You probably don't know me, but I have 35 years experience in mining. I have devoted my life to mine iron ore. Obviously, I've done other things, but I've main other things, mined other things, but mainly iron ore. So I've learned a great deal, I've been privileged because I have started a few projects from scratch, probably the biggest mining projects in Brazil. I graduated in mining engineering and I was hired by Vale to work at Carajas when Carajas was built. So I went to Carajas At the beginning of the 1980s, I worked as a director and I was there for 17 years. I got there as GTMI, and I was the superintendent for all iron ore Operations at Carajas. So I started off as a trainee, and I moved all the way to becoming the Director of operations, including rail, the port. I had other positions at Vale. I left Vale in 2002. I was invited by Benjamin Steinberg to develop and implement CSN's iron ore project. I set up a new company at CSM called Mameza. So we started buying iron ore assets to do something similar to what we'll be doing here. Just have the possibility to turn our coal importing port into all exporting coal 4th, we started buying assets and I was responsible for everything that happened during that period. I was responsible for the partnering of the Japanese with CSM, and that was my 2nd biggest opportunity to start an iron ore project practically from scratch. More recently, I went back to Vale. I'd say that for 3 years, I left Vale about a year ago. And A year ago, Paulo Grieco reached out to me. He's a dear friend of mine. We've known each other for close to a decade. And at Looking at the last decade, Paulo reached out to me because Paulo has started 2 gold production companies, Yamana Gold and Ara Mererals. And he had different mining projects, especially in iron ore. So he talked to me to see if we could do something in iron ore like he's done with Naya Mana and Ara. I said, I'd love to help you. I'd love to be a part of projects, but there's a problem. We can't do anything without a port. There is no possibility to have relevant iron ore project with the port. And I remember that in 2014, when we had this talk, We looked at the summary report, but the summary report at the time was undergoing a licensing process. So The distance and shareholders decided not to discuss it at the time. Now some time has gone by, Paolo came back to me and I said to him again, Paolo, we need a port. And so Luis is the only port that can be used for that kind of thing. And he said, well, I have a partner and they're interested in looking into it with us. He told me about Colza. And then we said we have all the jigsaw puzzle piece to have an iron ore project. So we have very relevant iron ore assets. There's a great deal going on. We know other potential of these areas. And we have the port and our heavy company such as Cosan backing this project with their management and logistics expertise. We'll have everything we need to do a great iron ore project. I said, I'm definitely in line with you. So, Fozan came to an agreement with San Luis for shareholders. And now, We have a huge potential to ship iron ore. I can guarantee you that the port can drill over 50,000,000 tonnes a year, and it's flexible enough to go well beyond 50,000,000 tonnes. So the main restriction we had at the end, which was the port, has now been solved. We're working on probing and characterizing all the ore that is in the area that Paulo Britto had. All the way, with all due respect, there is one of the best railroads In the world, Carajas, it's fantastic. It's fantastically managed, practically entirely duplicated and probably the best place to transport iron ore that Right away, it's fantastic. Obviously, we'll still be talked about it, but the regulatory environment in railway in Brazil at the moment is really good. And the renewal of the concession fees, that one has been renewed already, and it's the perfect scenario for us to have great regulation in terms of contracts, in terms of amounts and in terms of cost of transportation. So Everything is lined up. And I had already spoken to other major company, but they didn't know anything about railway regulations in Brazil. Cosan is well aware of that. We have Giulio Fontana, who is an expert on the subject. It was easy to talk to Cosan because Cosan knows what we're talking about. Cosan knows the potential of railroad transportation of Carajas railway. So we have an Excellent business to be developed, and we have another fantastic advantage because as Luis Enrique said, the new company has no legacy. And when I say legacy, I mean none of the liabilities that other companies It's very hard to turn a company that was built based on a consumption model Using diesel, using sea freight, bunkers and it is completely installed. It's too difficult to change that because you'd have to give up on all the investments you've made to start something new. This is completely different. This company will be ESG oriented from the word BO. Every time I talk to Luis, he tells me that Covalent's main concern and all of our main concern is to build a company that in addition to having Great governance has the best coal footprint in the industry. We want to be the best company in this industry in terms of coal and carbon footprint in the world, and we can do that. So reducing diesel by natural gas, LNG, 50% of the carbon that of the Vessel fleets that use LNG and not bunker, thereby reducing emissions by 50%. And the mining company in Brazil, sea freight emissions only will be cut by half. If we can cut that by half, on comparative terms, we'll be reducing 40% of emissions of a conventional iron ore mining company in Brazil in sea transportation. So moving from the scope 2 and going into scope 3 of the environmental issues with the effect of our products on our clients. Our industry is going through a challenge at the moment. It's one of the most polluting segments in the world that needs to reduce CO2 emissions and he doesn't know how. So we want to have a pellet feed product. Practically 100% of our production will be based on rich pellet fees that will help integrated steel mills to reduce emissions because they will consume less coal because the iron content in our product will be Very happy. We can see what Vale is doing. We're not reinventing the wheel. We're just doing what we see that is being well done in the market We know that Vale does a great job, and we want to follow along the same lines and to generate a product that will grow a great deal in the world and especially in China, because they do they use electric furnaces to produce steel. So they recycle steel scrap and use that to improve the quality of the steel that is produced. So the products that will be produced will be ideal and great because there's scarcity and there's a shortage of it in the market. So I've said enough, everybody is already looking at their watches, time is short. That's it for me. We'll have the chance to speak more later today. So we'll open for questions and answers. I just want to reiterate something that Paolo Brito asked me too because it's very important. Even though this is very recent, there's been some confusion about our partner in this project. Ara is not our partner. Our RAS is not involved in this project. This project is being conducted with Paulo Brito. So Brito is our partner and not their invested companies. And Ara is a listed company and our partner in this project. So we'll open up Q and A and Judith is here as well to help us out. Marin. Our first question is from Mr. Thiago Duarte from BTG Pactual. Please, Mr. Thiago? Good morning, everyone. Thank you very much for this opportunity. I have Two questions. The first one, I think it's for Marcelo. It's about portfolio management and like you said in the beginning and also going back to a discussion that we had in the last Cosan Day. I had asked about the risk of Cosan being seen or is still being seen as a holding company as priced on top of a possible holding discount. And you mentioned then and today again about the difference between a new portfolio and a permanent portfolio and the new one that you would start bringing in opportunities to gain capital. And the way that you said it today, It looks like this new area that you're creating with this new project is The very beginning of those projects that you would be having out of the scope of what we would be calling that prior portfolio. First, does that make sense the way I understood it? And can we sees that investment initiative, as you mentioned, will be generating other, I mean, other projects in addition to this mining JV, could we see any other projects there to address this new approach? And my second question is for Juarez. And I think that one of the discussions that the market have been having for a while and will have today is difficulty to price the project, to think about the potential size of this project. You mentioned something about a reasonable size, but I don't know if we can already, even superficially quantify or size it in terms of production and or reserve something along those lines that could help us try to add a figure to this picture. Thank you very much. Thank you, Thiago. Yes, I thank you. You mentioned something that is very relevant. We are a portfolio management, but we are a portfolio management for businesses where we have a strategic footprint and also value adding on top of competences that we have developed over time. I don't think you are going to see a situation in which Cosan is going to be a passive partner, because there is just a financial opportunity and we will not be adding operating value on our side. That's not something that we do. And there are others that do it much better than ourselves. So I believe that we can be competitors where our competence is exposed. So when we finished our corporate restructuring, and we started looking at these other possibilities. This project was one of the first ones that came up back then. And we thought it was very attractive because as Luis Andres mentioned, we have a number of competencies that are important for us that is we can make a difference in this project. 2nd, because once again, we are talking about a transformation moment of an industry. And we would not be going in if that was not a transformation moment to bring and what we believe is our elevating such as ESG. We are not going to go away from the fact that we are and for logistics, sports, a railroad operator. This is our call. If we go away from that confidence, probably we're not going to be working as well. I think we are a good portfolio allocator. We are known for that because we can leverage all these competencies. But we would not go into an industry if we did not think our operating standards would not meet the ESG areas, because we are going into an area that's important in the world and Brazil has a huge Guimaraes, competitive advantages. So here we want to leverage our skills at this moment in this industry, and that's an amazing reference in Brazil, which is Vale. All of that helps us even it raised the bar even more than what is placed today, and we do believe that we have very good skills and a great team to work on that. Now in terms of our portfolio, as I mentioned, this is an area this is an arm that we consider a little bit shorter than our permanent portfolio. And this notion of permanent portfolio is something that we discussed in here and we came into an agreement that these businesses that are part of Cozana participated in the maturity process. I think We need to have partners that is going to be very difficult not to have partners from now on. And the best way to bring in new competencies is bringing them in. And we now also have a possibility of bringing in financial partners as well, so that we can have a funding diversification that is also interesting. We have a That is also interesting. We have a huge financial discipline. We are not going to change that. Our leverage goals will not change. This project will be paid out over time. We have a number of hurdles to overcome. And as they are overcome, They will allow us to be safe in terms of return of the project, therefore, allocating more capital. In terms of time allocation mine and Luis' time, we have a very well defined governance structure and a very skilled, a very competent team to run this operation. We have a strategic view. We will be in the business management not good amount of time, and we'll be participating on the future decisions, but also in the business operations decisions. And I'll turn the floor to Suarez for his operation remarks and then we'll come back. Very well. This is What you asked about the size of the project, the first production, so we do have some important assumptions. First, you need to know I don't want to use the word reserves because that might I'm going to use the word mineral resources. The mineral resources that we have in this project. On top of the surveys that we have carried out so far, around 50,000 meters of surveys. And in a year, we would like to know 80,000 meters more of surveys. And today, we can already say that we have over 2,000,000,000 from 2,000,000,000 to 3,000,000,000 tonnes of mineral resources to turn into mines. And with this additional survey that we will carry out in the next few years, we expect that this figure goes up much more. It is very difficult to precise because geology is not a precise science, but we do believe and also external consultants that we have been talking to also believe that we will have additional figures here on top of the size of these resources that we already have, which is very significant. As I said before, The port can be over 50,000,000 tonnes of capacity a year. So we have a lot of mineral resources. We have a port with a limited capacity in terms of what we want to do, but I'm sure that our first production will be happening only by 2025, 2026. And why is that? Because we need to develop the first area and the first area, which is already more developed, technically is close to Carajas mine. And also because we need to build the port. So we can't tell you 2022, 2023 because even if we could have the production, I would not have the port. So the first production is going to be 25, 26. And we would like to start producing 10,000,000 tons a year by 2025, ramping up 2025 and 2026. And possibly, the other projects will be developed. And We believe that by the end of the decade, we will have a production size very significant. And today, it's impossible to say which one it's going to be. But there's something else that's very important. We will be working because we will have a very high quality product with I run a content of over 67%, and we will have high premiums and we will be working with the right discipline so that we can perpetuate these premiums in the long term. This is our goal. I'm sure that by 2025, 2026, we'll be producing 10,000,000 tonnes a year and will be delivering capacity over the next 5 years. That is our target. Next question from Mr. Andre Hachidi. Itau, please, Mr. Andre? Good morning. Thank you for taking my questions. I would like to go into the ports project and better understand a few areas. We have some recent news about this project that the prior owner had said that he wanted to do the port. So I would like to know if these are valid. And my second question is about the port itself. And the original project that the port was going to ship ore and grains. Do you still have this idea of having a port operating with a white flag or going to be 100% to cater to mining? And another question is about financing. I understood that the project did have problems with financing. Having Icosan as a partner with a contract signed, How do you see this project being financed? And the Poets project also, There are some topics related to the area of the port. I would like to understand how limited how limiting are the problems that you find there? This is Giulio here. Well, our project is very different from what was conceived before. We will be targeting iron ore. It will be focused on iron ore. In the future, considering we have a large area, we might even consider if there is any other possibility or anything else feasible. But right now, it's just iron ore. So all that initial project that needed a very relevant CapEx. That's not what we are planning right now. And there are no problems of the appropriation of having to like a part of the land. We have 2 families living in that area, and we are negotiating with them. And But that two areas have no impact in the ports project and the construction area that we are going to be using for the port. Now about funding, I'll turn to Marcelo. Now first, we are first now starting with a process for the acquisition. Then we'll be preparing ourselves for the remaining acquisition, the acquisition of the remaining part and then we'll be working on the EPC and the EPP. So we will have some time to address the funding equation. We have some other possibilities we are looking for. We are starting to work within this model, of course, in this funding scenario, but that's not going to be a challenge. To be honest, We are talking about the acquisition of 100 percent of the port by BRL720 1,000,000. After defining the APC, we'll bring you more detailed information on the the information on the funding. But funding is not a concern for us because we do have funding available. But what is important for you is that we do have a financial discipline that is permanent and we will bring in other financial investors to the project if that is needed. Eventually, we even do have that possibility even if we have all financial resources for the financing. It's important to say that once again, this is an investment project, of course, and out of our permanent portfolio. And it allows us to leverage more our investments, so that we can optimize our return and that is our objective at the end. Okay? Our next question is Mr. Luis Carvalho from UBS. Hi. This is Marcelo. Thanks for taking my questions. I have a few. The first one is to Marcelo. What is the rationale to allocate this investment in this new fund? This one is created for this project. Are there any plans To have a future IPO or transactions in the capital market to bring in more funds Because you're talking about BRL3.5 billion in investments in the port alone. So I'd like to hear more about this allocation. The second question is about trying to quantify. And I'll be honest, I know nothing about the mining industry. What is the competitiveness of this size compared to other global competitors and also in terms of the iron ore price. And could you talk about the bottleneck Of shipping that production by rail, I know that You do have the port, but there may be a bottleneck prior to that owing to Vale's production. Hi, Luis. Thank you. Well, first of all, this fund structure was the best way for us to be able to bring in investors and for these investors to have liquidity over time. So That was the only reason why we set up this fund. In terms of governance, we will continue following our standards, what we do in the Board, appointing executives and our ability to manage the business so that we can provide the right levels of return to our shareholders. Thirdly, we wanted to have more currency diversification. We know that Brazil is very competitive in this industry. We have a clear competitive advantage. And this is a hard currency business. So that was very, very important to us. And it was one of the main drivers behind our decision. We had to have a very, very well positioned 4 assets. That was the main challenge in this project. This asset was available, and it wasn't necessarily Easy to acquire. There were other players that were interested in it. We were able to come to an agreement to buy the assets so that we could have an integrated project for this business. In time, our goal, like in all other companies in our portfolio, is to generate liquidity and so that investors can invest in the business when it makes sense, when it's mature enough, whether it be through an IPO or a private placement or however it might be to generate liquidity both to COSN, our partners up here and all COSN investors as we have always done in all of our companies in our portfolio. So we want to continue with the same rationale. We will continue to manage the portfolio to be the capital allocator and to provide our shareholders with the option to invest in the business when it's mature enough and able to justify the return we'd like to get from this business. I'll turn it over In terms of competitiveness, We are in Brazil. We need to be aware of that. And So we are at a disadvantage when compared to Australia in terms of sea freight. And the reason for that is that Brazil is not very well positioned when it comes to Asia, which is our main iron ore consumer, especially China. But despite that advantage, we have another considerable Advantage. Australia is the biggest iron ore producer in the world, and there's been a reduction in quality in Australian mines. So we're producing more at lower quality in Australia. The problem is that the steel mill industry cannot accept that for technical reasons and due to CO2 emission. The steel industry really needs high quality iron ore, and that comes from Brazil. And Vale is the only supplier of that with all their competence and their ability to meet demands of this market. So that's one thing. The other thing is that there's a change taking place in the steel industry in China. China, If we go back 20 years, China used to produce 50,000,000 tons of scrap a year. Now China is producing close to 200,000,000 to 250,000,000 tons of scrap a year. Can you imagine Fighting up 250,000,000 tons of scrap per year, it doesn't make any sense. So what you do is you melt the scrap in electric furnaces. So once that's melted, the quality of the steel that comes from scrap isn't good enough to produce high quality steel. So they need high quality corrective iron ore. And there's a product for that called HBI. And to make that, you need fine material pellet feed. So you make the pellet from that. And then you can produce HBI or DRI to mix with the scrap and produce high quality steel. So electric furnaces are already producing high grade steel even for the automotive industry. China has been consuming lots of steel over the past few years and will continue to do so. So they will continues to generate huge amounts of scrap. Over 500,000,000 tonnes of scrap a year in the near future. So they will be using electric furnace to be able to use that scrap. So With the product that we will be producing, we will be really well positioned to make the most of this niche, So that translates into premium, premium, premium, premium for quality, premium for reducing CO2 emissions. So we're going to have an a pricing position based on that. We have a breakeven number In terms of tons, where is this project at in terms of global cost curves? Well, let me give you a ballpark because we're still going to implement all that work over the next few years. What I can tell you is that our projects according to our estimates will provide excellent return of about $60 per breakeven point using $62 iron ore. The VAT will probably be above that. Everybody thinks the price will be above that and we'll also have all the premiums that will increase the return on this project. About the rail bottleneck, I'm sure you've been monitoring the renewal of the concession of the Carajas Rail. They're only missing 100 kilometers and there's a bridge being built already. That's the only thing that's being missed That's me. So that's an obligation of Carajas renewal to Vale. And whenever you get to 90% physical capacity in a rail in Brazil, you are required to invest in Capacity increases. This is a new measure. So we know that during the time We still have to get to the volumes we're talking about. Vale will be fully qualified, and we'll be talking about that openly to them considering all the AMTT regulation standards. If we come to an agreement, which will ANTT will be arbitrating the issue. Okay, great. Thanks. Next question is from Lucas Ferreira from JPMorgan. Hi, everyone. Good morning. I have a couple of questions about risks on the project. The first is about environmental risks. That's a complex area with some environmental risks. Do you foresee any risks In terms of getting all the licenses, when would you start this process? How long do you think it will take you to get the licenses you require? And my follow-up question to what Giulio just said is The rail will require more investment because Vale will also be coming in with Cimangu close to your stock up. So how will that work? Will you need more investments in the rail considering the increase in volumes both from you And the markets, thank you. This is Juarez, Luis. Actually, Cimandu is not a ballet project, and it's not in that region. So Simandu will not be competing. Simandu is in Guinea, in Africa. So Simandu has Nothing to do with that. It will not be creating any real bottoms for us. What was your first question about licenses, right? Yes. We've already started talking to the Para state government about that. And areas that will have longer licensing process We'll go into production at the end of this decade. So we had enough time. There is no native vegetation in these areas. So we don't foresee any problem Unless something unexpected on the fab, we don't foresee any licensing problems. We have enough time to license it because we know how they work, but Shouldn't be any problem. As for the rolling stock, that's a matter of negotiating with Vale, Obviously, if you have rolling stock, you'll have your discounts And then you do the math when you decide how you're going to transport the ore from the mine to Carajah, but we're not concerned about that. That's easily solved. And the port is already licensed. No pending issues there. Sorry, Maurice. I was talking about the expansion of Carajas, not Simondu. I thought about Simondu. Sorry, I got things. I want to hear about prices when that extension comes into the market. Do you think that may pose the risk. Well, so it's an important factor in terms of price. So when I said that the breakeven point for this project is about $3 that already considers Semendu coming. But more importantly, we want to have a product that will be different to that of Simonshu's. Simranzhu has high quality, much of that of Australia for sure, but It's nowhere near the kind of quality that we will be providing, which is over 67% iron content with excellent quality product feed. And we will be catering to different market niche. Considering volumes as a whole, Cielandu is relevant. They will have a significant volume, but our market pricing has taken that into consideration, and we're looking at about $60 Thank you. Next question is from Regis Cardoso from Credit Suisse. Hello, everyone. Good morning. Thank you for answering my question. My first question is to Marcelo And maybe Luis. So I'll start with that and then I'll ask the second question, if I may. What are the Implications of this fund. You have different participations. So What kind of investments will that allow you to have? Will it allow you to raise 3rd party funds. And will that help you to have more liquidity? Will it give you any tax incentives, leverage incentives? So that's my first question. And still On the funds, I'd like to hear more about what you mean by mid- to long term. You talked about a different investment, Jorge. What exactly does that mean? Does that mean you can invest and divest more frequently because it's not part of the permanent portfolio? Could you give a bit more color about the fund and then ask the second question? Thank you. Thank you, Regis. Well, the idea of the fund It does have to do with the investment profile. So first, our ability to be much more agile in terms of bringing in financial investors so that they can invest faster directly and to have more liquidity to go out And to be able to go out directly and to decide on listing the company, we can have intermediate liquidity to do that. And it also has a different investment horizon, so that is our permanent portfolio. So we believe there is an opportunity to have partial monetization through other investors coming in, through listing the company. So we want to have a simpler and easier structure to do that if we choose to do that. But liquidity is an important driver for us. That's why we chose the fund. No tax incentives. Obviously, these are uncertain times. We don't know what the potential tax implications might be to different investment vehicles. But obviously, we want to have a flexible auction so that we can adapt more easily. So that was an additional benefit, even though it wasn't an original driver. As for the funding, we definitely want to have a flexible alternative. So Colosseum will be investing its own capital and make sense, and I will be bringing in 3rd party debt and equity when it makes sense. So we do want to have that flexibility, yes. Again, we are managers, and we focus on specific industries and our competencies. That will not be changing, and we need the market to see this vehicle as the best vehicle to go into these new investments with Cosan. We hope other investments will come up. We're looking at other alternatives. We hope they can be turned into real opportunities that we can announce to the market. For the time being, this is it. As others come up, we will create other vehicles always under investments on. So that is clear to the market that this is the portfolio to be invested in and divested out of considering the different investment horizons that is very different to the permanent portfolio. The second question is more specific. We've already touched on a few points such as capacity. So you'll be starting in 2025, 26 with about 10,000,000 tons, but that is not the end capacity for the product. So you're planning to ramp that up? In terms of high quality iron ore, So that will allow for dry processing. We won't have any dam problems. And another point You will be using the car as rail. Won't you be able to use Vale Sport? Is it a different regulatory framework? Or is it a matter of capacity only? And still on the 4th, I understand that everything's been arranged, but is there any risk you might not be able to buy the 4th? And what would happen in that case? I'll start by the 4th, and then I'll turn it over to Jorge. Well, everything Completely agreed on. We signed an FDA. Minority rights are very relevant. It's a complex due diligence, as you can imagine, and we needed to have that kind of safety. So the agreement is very favorable for the minority shareholders, and that was very important to us. The 14% entails many requirements, but they will be next over the next few months. And then this CCC may sell their share all the time. We do believe that will happen. In the meantime, we'll be conducting EPC agreement and that will culminate in buying 100 plants of the port, which was our original objective and continues to be. All sellers have signed the agreement. As I've said, they're all familiar with the terms. As we said yesterday, BRL720 1,000,000, 400 in the port. I'll turn it over to Joaoise. About Vale's port, Ponce de Amadeira is a private port. And because it's private, it belongs to Vale. Vale is not required to work with 3rd party cargo at all. So And also, even if I was interested, And I don't think they are. They almost reached full capacity at Poldameras. So I don't think we'll be using pilot for at all. That's not an option. We need to use our own to have control Of our production system, you asked another question about water use. We will be using water because you need water to have the type of quality products we want to have, but we will be building it. Even at Vale and other major mining companies around the world, everybody is doing drydock. Basically, you filter the material that would go to them, so you separate the water, recycle the water in your process. And after you filter the material, either of those 2 stack or it's mixed in with the sterile material, which is the material that comes out of the mine, which is already dry, so that can be stacked. So everything gets stacked. Nobody is using dams anymore, and that's the technology we'll be using Lots of forward. And based on the technological advances that have taken place over the last few years, Dry stacking is very expensive when compared to dams. If you do a good job, it may be even cheaper than a dam. Our next question from Mr. Gabriel Baja from Citibank. Please, the floor is yours. Thank you very much for taking my question. I think some of my questions have been addressed already, and most of them for Juarez, but I have one for Marcelo. Just to make it clear about the dry processing, it's not going to be dry stack. Are you using dry stack or not? I would like to understand how you're going to work with it. If it's going to be if you're going to use a dry stack or not? The second topic about the capacity of the sport and the initial project of around $10,000,000 and the capacity of $50,000,000 so you would have an idle capacity there. How can you use this idle capacity in the project? And my third question, maybe now a question for Marcelo. And I'm sorry if it's not clear. The fund structure that would be used only for this specific project or potential new project, And you could have no structures under Cosam or this new fund structure is going to be used for all new potential acquisitions or future projects in the group? These are my three questions. Thank you. Gabriel, let me start by the last question. Well, on what we call permanent portfolio, obviously, already have the known structure. What we consider as a portfolio with a shorter horizon, we will use the fund structure. So Cosan Investments will have a fund for mining or mining JV. And then we are going to have a Fund Y, Fund Z. Each fund is going to be used for direct investment within this portfolio under the investment arm. So the difference is that it's going to be very clear to the market as we make this investment what is under this portfolio and what is a business vertical that we consider to be the long term, which are the 4 ones that you already know. That's it. Now about the port's capacity, what I said was This port will have the capacity over R50 $1,000,000. The R50 $1,000,000 is the base that we are working on. So but if we are able to develop competitive mining projects over R50 $1,000,000 will do it because the port has that capacity. Now first, any future decisions about Other types of loads in the sport will depend a lot on coming into a conclusion that the limit for iron ore production is X. And yes, if we have enough room for other loads, we will bring it in. Appear is not a problem because the port has been already built it will be built with a structure to have at least 4 berths. So that will allow us to have a high capacity for iron ore. And we are not going to build 50,000,000 capacity. We are going to build capacity in the ports as we develop our mining capacity. This is a matter of Capital Discipline. I'm not going to build a port for $50,000,000 capacity unless someone is willing to buy that remaining capacities. So when I have planned already the additional production in our mines, we will be increasing the port capacity so that we will be always catering to what we are producing. Finally, you asked about our iron ore processing method. This is not a dry processing, this Wet processing, what is dry is how we are going to store our tailing products. So the waste comes out after the filtering process. We sent that to a filtering station, then we remove the water, the water goes back to the process so that we reduce the use of new water. And the tailing already filtered then is stored. That's how it's being done all over the world in the dams. That's very clear, Rosales. Just one more thing, please, and correct me if I'm wrong, but With this pilot feed coming from China and the possibility of installing a machine to work with pellet feed. Is that a possibility? Yes, your rationale is right, but the problem is that in the pelletization, Brazil is not competitive today for pilot production in Brazil. Vale produces it because it already has old installations. But you do not see Vale talking about concession for new palletizations. So today, just to give you an idea, to produced a pallet of $6,000,000 in Brazil. That costs $1,000,000,000 The same $6,000,000 in China is much less. And the cost for that in Brazil And now it's very high. There is a downward trend, but the LGN cost now for Brazil is very high in Brazil right now. So in addition to having a very high investment, the operating cost is extremely high as well. So Duplalization in Brazil right now is not a possibility. No one else is doing it. And today, we have much better places to do that in China because of very low CapEx and mainly in the U. S. Also and Gulf of Mexico, because in the United States today, 70% of The steel production in the U. S. Is already electric, oven and they need a lot of ACDI, which needs a lot of pellets and CapEx over OpEx and LGN there in Gulf of Mexico, all of that is very cheap there. So it's much better to produce pellet feed. It's not better. It's only feasible to produce pellet feed in Brazil and to produce pellets at the destination. Okay? Thank you very much. We end right now the Q and A session. I would like to turn the floor back to Mr. Marcelo Martins for his final remarks. Thank you very much for being in this call with us. This was a short notice call, but opportunities come up regardless our time management. As we move forward in the project, we'll bring you more information. I think we are right now in the moment where we have to wait for the contract and the EPC discussion. And as we move forward, we will bring to you more details. And we will have other calls. Thank you very much once again. Cosan's conference call has ended. Thank you very much for your participation and have a nice day.