the fear of possible worldwide shortage, has increased more rapidly than demand and has put pressure on profit margins. The impact of this change has particularly been felt by those of us who are independent iron ore producer in contrast with the captive mining operations whose market is virtually assured. But Marcona's position has several advantages. It has tremendous high-grade reserves; its mines are very close to deepwater ports, with a minimum mine-to-port haul and with low-cost shipping in large carriers replacing higher-cost overland freight incurred by many of its competitors; and it is an early entrant into the promising market for pellets, having long since established a strong position with buyers for foreign steel mills. The Marcona deposit located near the seacoast in Peru has abundant reserves, rich in iron but having excess sulphur as the ore runs to depth. Until the last few years Marcona produced direct shipping ore which was sold largely for blast furnace use or as sinter feed with little in the way of processing. As the exportable reserves of direct shipping ore became deplete Marcona has invested an additional $50 million in facilities to expand capacity and to beneficiate the ore and make useable the vast reserves that do not qualify as direct shipping ore. Sales this year will be around five million tons, with Japan and Europe the major markets. Included in this capital improvement program is a pellet plant of one million ton capacity, the output of which is already substantially committed for the next six years. While we have had the usual start-up difficulties with the new plant, the Marcona pellet is high grade and commands a premium price. As a matter -7-