of the quality of its products and its comparatively low costs of operation. Marcona's proven reserves of ore are in excess of 200 million tons, some of which is usable as direct shipping ore. The remainder can be processed to produce a merchantable concentrate. The overall iron content is relatively high, averaging better than 56%, and the ore lends itself easily to economical beneficiation. In 1963 Marcona is marking its first 10 years of operation with the effective completion of a 5-stage 50 million dollar expansion program. Begun in 1960 the expansion program was planned in stages which would enable early production while increasing plant capacity. The completion of this program, late this calendar year, will enable Marcona to process its large magnetic ore reserves and produce premium quality high grade sinter and pellet products. In addition to more than 1 million tons of direct shipping ore, the present annual plant capacity of Marcona is 3 million tons of beneficiated products. By year's end capacity for beneficiated products should approach 5 million tons and total capacity will be 6 million tons a year. Of this quantity 3 million tons will be of a quality unexcelled in any major mining operation known to us. This is an important factor in today's market, for the iron makers of the world have learned that low cost pig iron is produced from high grade blast furnace feed obtained from ores that have been upgraded in physical and chemical characteristics before they are fed to the blast furnace. As a mine, Marcona has many advantages ample reserves of high-quality ore economically mined and beneficiated, located in an ideal cli- 12 mate permitting 12 months operations. The iron ore business is in large measure the transportation business, for the cost of moving ore from mine to market often exceeds all other costs combined. Overland transportation is expensive compared to ocean transportation where large vessels specially designed for the iron ore trade can be employed. Not the least of Marcona's advantages is the proximity of the mine to tidewater and the depth of water at its loading docks. The mine is only some 10 miles from the ocean and the bulk of the ore moves part of the way by downhill conveyor over the most difficult terrain. This provides a comparative cost advantage over those mines that must move their ore greater distances by railroad or truck, and which are limited to the use of shallow draft vessels. Because of the depth of water at its dock, Marcona ore can be accommodated in the largest vessels employed in the trade today, and this factor has allowed Marcona's ore to compete successfully with mines which are located closer to market but whose output is forced to move in less economical vessels. Recognition of the importance of transportation costs caused us to enter into the field of ocean shipping to take the lead in design and construction of specialized vessels to lower our shipping costs. In the beginning all of the ore was moved in chartered vessels of the 10,500 DW ton class but today the ore is moved in ore carriers of much greater size and about one-half of it is carried in the ships of our affiliate, San Juan Carriers, Ltd., whose fleet of 8 ore carriers totals 390,000 DW tons. San Juan's latest acquisitions consist of 3 vessels of the 71,000 ton class, the largest dry cargo 13