Welcome to CSN's audio conference for the presentation of the Company's results concerning the third quarter of 2016. Here with us we have the Company's executives. [Operator Instructions]. Today's event is also being broadcast simultaneously over the Internet and media access at the following URL, www.CSN.com.br/ri. The respective slide deck can also be found at the same address. You will be able to control the slide presentation as well. A replay will be made available right after the closing. Before moving on, we'd like to make clear that possible forward-looking statements made during the conference call concerning the Company's business outlook, operating and financial projections and targets, are based on the Company's beliefs and assumptions and also on information currently available. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions because they refer to future events; and, therefore, also depend on circumstances that might or may not materialize. Investors should have in mind that economic conditions of the country, of the industry and other operating factors might affect the Company's future performance, thus leading to results that will differ materially from those expressed in these forward-looking statements. I'd like to turn the floor over now to Mr. David Moise Salama, IR Officer. He'll be making the presentation and talking about the Company's operating and financial highlights in the period. Please, Mr. Salama, you have the floor.

Good morning, everyone. Thank you for participating in our audio conference. Here with me today we have Mr. Benjamin Steinbruch, CEO and Chairman of the Board and other colleagues from the C suite. We would like to start on slide number 3. We will start today's call talking about the restatement of the financial statements of 2015. The need to restate the statements of 2015 and the ITR results for the first quarter of 2016 and second quarter of 2016 arose from a change in interpretation of the CPC 15 which is equivalent to the IFRS3 concerning the business combination. This interpretation was identified during recent discussions that we had with our independent auditors about questions that were made by the SEC about the accounting procedure for the presentation of the noncontrolling interest of the subsidiary Congonhas Minerios in the Company's consolidated financial statements. The new interpretation led to a need to restate the attribution to the noncontrolling and controlling interests and the gains coming from the restructuring of the logistics and mining operations which took place on November 30. More specifically, the combination of business through which the Asian Consortium acquired through primary issuance of shares -- acquired 12.48% of the shares and it got changed from the 40% interest that they had. In the presentation of the financial statements of 2015 the gains coming from those business combinations were attributed both for the Asian Consortium and for CSN proportionally which is respective share 12.48% for the Asian Consortium and 87.52% for CSN. According to the new representation, CSN is allocated everything without a 12.48% attributed to the Asian Consortium, where restatement of the financial statement for 2015 does not change the consolidated result for the Company; nor does it change its consolidated equity. It is an allocation between…

Good morning, everyone. Thank you. I'd like to start by saying -- making some comments that are deemed important for those of you who are honoring us with your presence here as we present our results for the third quarter 2016. First of all, I'd like to emphasize the Company's stability in terms of indebtedness. Despite an increase in working capital, in other words, we're now, with our full production and with our cement of a number two also in full views as well as all other production lines which are running at full capacity. And we have managed to maintain a good level of investment. As for the sales of assets, we're continue to sell some assets, but we will do it in a very intelligent, smart way. In other words, we won't be selling anything under pressure in a precipitated way. We're very aware of the value of those assets. We're talking about good assets which are generating EBITDA, so this has to be carried out in a very careful manner. Even though I emphasize our continued concern about bringing debt levels down, so a sale which will be actualized at the end of the month of metallic. We're considering the sale of other assets. But again, we will do it in a very cautious, intelligent manner, looking to maximize those amounts. I'd like also to emphasize that we're working to control our costs and our expenses. We're doing whatever we can, the possible and the impossible, to achieve production gains, all of them through an aggressive reduction in cost and a continued concern in bringing expenses down. So we have a very deep bay of control of everything and the idea is to also grant the Company a higher level of competitiveness. Also, the CapEx deserves a…

[Operator Instructions] Mr. Leonardo Correa from BTG Pactual has a question.

My first question has to do with iron ore. Clearly, we're going through a much more optimistic scenario in terms of prices. If you could talk a little bit about your volume projection going forward for the next two years, if you may. And if you see anything differently, given the new scenario, it wouldn't make sense to buy from third parties, for example. So how does that volume equation play out in the steel pricing scenario? Are you thinking about increasing exports, for example? And a second question for Mr. Martinez. Many things changing recently in the world; coal prices going through the roof. Of course, many variables are also changing; currency and so on. And so my question is if you could tell us where negotiations stand with the automotive industry. I know those are complex negotiations, but if you could give us some color. We know that there is a 30% to 40% disconnect in prices. So what can you tell us about the automotive industry, such an important segment for you? And also if you could estimate the necessary adjustment level to offset that strong uptrend in coal. So, those questions. First one about coal, volumes in coal; and, secondly, price negotiations with the automotive industry; and also a third question about the necessary price increase to offset that inflationary pressure that we're seeing now. Thank you.

I will give the floor over to Daniel, who will be talking about mining. And then Martinez will address the question about steel.

As for volume for the next two years as you asked, for next year we have plans which are completed. We're now discussing the final phase of the budget plan. So for next year we allocate 35.5 million for railways, 3.5 million coming from this trading with third parties in Minas Gerais and 32 million from our own production. We will sell 5.5 million internally, domestically, basically for [indiscernible] and we should be shipping around 30 million tonnes or slightly above for the next years, depending on how the scenario consolidates, especially by starting the second quarter of next year. If we continue to reinvest, we will be able to reach level of 37 million in the second year.

Actually we had an increase of 10% in April, 10% in May, 10% in June. And now on November 1, we had a 5% increase. We expect another increase for January. We might have to anticipate part of that to December at around 10% for distribution. And for the automotive industry specifically, we're now asking for 25%. It's not 30% to 40% of disconnect, as you mentioned, because we have more stable prices in that segment. Today, the premium that we have when we compare to imported products, starting from a Chinese price of $460, we're talking about a range of 5% to 11%. But we cannot forget that to make a tonne of Gouza it takes 600 tonnes of coal and 1.5 million tonnes of iron ore. So a slab for our competitors would cost something close to 500. So that increase of international prices is favorable to us. So increasingly we will be more competitive, especially internationally because of that increase in prices abroad.

Mr. Ivano Westin from Credit Suisse has a question.

I have a question for you first. If you could comment on demand for 2017 in terms of volume. And also if you could talk a little bit about a breakdown of demand, first segment, so we could understand where that demand is coming from for 2017. So, where we could expect a better sales delta for next year. And a second question would be if you could comment on that debt rollout which you mentioned the beginning of the call. You mentioned that you have started negotiations. So what would be the amount of that you are considering rolling at this time? And also, what would be the strategy for increased investment? In the past you have gone to the table, possible divestments from Tecon. That's basically on hold at the moment, so I would like to have a better picture of your position. So you wouldn't be divesting Tecon. Would that makes sense today? That's the bottom-line question.

Martinez will answer the first one and then I'll ask Mr. Benjamin to tackle the second question.

As for demand, our volume guidance for next year shows 6.3 million tonnes for the domestic market. We're estimating 3.9 million tonnes; 1.7 million tonnes abroad for control companies; 0.3 million tonnes direct exports; and long steel, 0.3 million tons as well. So the apparent consumption for next year will probably show a growth of 3.4, 3.5. As Benjamin mentioned, we're very optimistic and also realistic. But I think I'm even more optimistic. Why? Because inventories in the value chain are very favorable. And I'm talking about our intermediary clients' inventories. So, it would take us at least three months to replace those inventories. Now, as for where demand is coming from, I'd like to emphasize two sectors. Automakers, last year we read that if a couple of carmakers expect to grow 10% next year, especially the second half of the year; that is at minimum. I'm talking about GM which is a company that's lost the least this year. And also civil construction, we see a few measures being introduced. 1,100 works will be resumed and that will probably help us. And the so-called reforma card or a renovation card which will stimulate that industry. So, confidence level is better; demand is expected to grow in this civil construction segment. And that's what I could share with you in terms of demand for now.

As a complement to what was said by Martinez, we business leaders are all expecting an improvement and we're more optimistic than the government, I think. But economic activity is at a very minimum level right now. There were cuts across the board. I'm talking about small, mid-sized and large-sized companies. There was a reputation effort across the board; cuts were made. And we're now working at a very, very low of activity, from hand to mouth, if you will. The idea is to survive the moment. So what we see now is that the credit sector are already seeing an improvement in the economic scenario. It is not positioning itself in a more favorable light. We're doing our share of that. We're, of course, still waiting for the government's next steps. As I said, we expect that to happen in the form of a drop in interest rates, a recovery of credit lines which will of course to better employment and in more balanced fiscal situation. But all in all, we've already seen the economy -- so, gradual steps forward. So it is a recovery which we do believe might turn out to be better than anticipated. But that happens, as I said, because we're now going through a very low level of activity. We see no intermediary inventories, just to give you an example. So, we're -- this is a realistic point of view; but at the same time, very optimistic, with an eye to a more positive future in terms of employment specifically. That is fundamental for the country's recovery. As for the sales of assets, I have mentioned that, but I will reemphasize that. We have not given up on any of our assets. We're analyzing all possibilities. We're talking about potential buyers, but we're being…

Just one final question, if I may, Benjamin. Could you give us some guidance in terms of estimates for the total amount of divestments you are thinking about by the end of next year?

Yes. Yes, I can. We'd like to have something around BRL8 billion. That's the number or the figure we're focusing on or aiming at, if you will, in terms of deleveraging, BRL8 billion. Of course, as I also said, we're also at the same time assessing an important improvement in the Company's margins. If we have a drop in interest rates starting next year, we believe that at least that reduction could sit at around 0.5%. If you have a sequence of those drops, that would be also a way for us to bring that leverage and level down in terms of what we pay. Now, we have this constant concern in terms of bringing the debt levels down. We do have, as I said, good peripheral assets which could be negotiated, just as we also consider a possible sale of 20% to 30% of our mining operations, should that uptrend in commodities persist. The Casa de Pedra mine is an excellent business, for example, so there are companies interested. So if those commodity prices remain at a favorable level, I'm sure other interested parties will emerge. So we're paying close attention; but again, we want to maximize those values. People have this idea that I do not like to sell; I don't. Our tradition is to buy, not to sell. But we have broken that assumption when we sold some of our assets. And we're paying attention to other opportunities with an eye to reducing our debt levels.

[Operator Instructions]. Mr. Thiago Ojea from Citibank has a question.

I'd like to confirm with Martinez about the premium. You said 5% to 11%; are you factoring in this new 10% increase for the distribution segment, Martinez? That's the first question. And a second question about the U.S. with their new president, a few measures are already being negotiated. There seems to be some protectionist measures in the horizon. What does that mean for you? We know that anti-dumping measures were being considered. Is that positive or negative for the Company, if you found those protectionist measures in the horizon with a new president in the U.S.?

The premium does not include that 10% increase -- does not. Then on the U.S. dollar, there is also at BRL3.20, so you need to do the math. As for the U.S., 80% of what we sell to them -- 80% -- is basically coated products. There is no dumping today and we do not expect any protectionist measures in this market because the U.S. is a net importer for that product. The products we send or we ship to the U.S. are specific products. So I do not believe and I do not see any type of retaliation, if you will, to Brazilian coated products or galvanized products. So the scenario remains the same. And our plan is to maintain an export level of 300,000 directly and 1.7 for noncontrolling company, including 500,000 from ALLC.

Mr. Carlos de Alba from Morgan Stanley has a question.

A question on [indiscernible] you could mention again the guidance for raw steel volumes next year. And also what are the prospects of the -- or have you already -- at what stage is the Company in the renegotiation of the debt that is maturing in 2019 and -- 2017, sorry and -- sorry, 2019 and 2018? And also in the event that the Company does sell a stake in the mining business, if you tried to expect that CSN will remain a controlling shareholder or remain or treat the majority of the equity in that business. And also if you could be a little bit more precise and tell us what is -- up to what size of the Wallis stake will be Company be divesting in the mining business? Thank you.

I will start by the second question and I will give the floor over to Martinez to address your other concerns. As I said, we have already started the renegotiation of debt for 2018 and 2019. They are ongoing as we speak. As we move ahead, we will be updating the market. As for the mining operation and we're talking about a minority sale, we're going to keep control. Casa de Pedra is one of the best mining assets in Brazil, so again, we will sell a minority stake. We will remain as majority controllers.

The number is 6.2 million total for guidance; 3.9 million domestically; 300,000 tonnes in long steel and the remaining in the external market, 1.7 for the foreign market and 0.34 direct exports.

[Indiscernible] from Barclays has a question.

First, I was wondering, given the rally in iron ore, Min sold $78 today, are you guys thinking on putting some hedges? Or what are your thought process on that?

Ladies and gentlemen, please hold. CSN's conference call will be resumed momentarily. Thank you. You may carry on, gentlemen.

We had a technical glitch, but we're now back with the call. I will give the floor over to Geraldo from our mining commercial department, who will address your questions. Thank you, Peter.

As Benjamin mentioned before, we're exposed to an index that changed at the end of the year, in the beginning of this year. So we will capture, if you will, that price trend on a timely basis. So we will -- just in terms of the physical part. But in terms of financial parts, we're considering the possibility of working with derivatives and explore that moment of uptrend in the market.

[Operator Instructions]. Mr. Ivano Westin from Credit Suisse has a question.

Still about mining, Daniel, if you could comment on what you expect in terms of the evolution of the cash cost for 2017, 2018, I'd appreciate that and once again, congratulations on good third-quarter results. And as for cement, if you could talk about the outlook for volume and profitability. Thank you.

We made the significant effort in bringing cost down, starting in June 2014, when we realized that the crisis would be more serious than was anticipated. So we implemented a plan which started with the change in our operating model, trying to maximize the production at Casa de Pedra without risking the operation's sustainability in the long run. And with that, we started the process right after that -- a process of renegotiating contracts, reducing inventories; discussing with all suppliers at all levels. And we're now maintaining those actions. They are part of the Company's everyday procedures and we hope to be able to maintain that cost levels we have achieved. And our objective will always be to rank among the industry's third lowest costs. So our aim is to be close to our main competitors, thus maintaining our competitive level. Casa de Pedra is an asset which allows us a considerable flexibility. So the idea is to, as I said, to be among the companies with the lowest cost level. As for cement, the Brazilian market reached close to 75 million. Today we're talking about 54 million. CSN, with the new oven in Arcos, will be operating at levels of 4.2 million tonnes. In other words, we will become an important player in the industry since we're localized in the southeastern region of Brazil -- Sao Paulo, Rio and Minas. Basically the industry saw a total drop in the year of 13%, where we grew 20%. As for profitability, I believe that with the price increases, we increased prices in August by 8%. There is a new increase scheduled for December, so this is the moment to recover profitability in the cement segment. We were in the ramp-up of operations, so we had -- we incurred higher costs. But…

Thank you. There are no more questions. I will give the floor over to Mr. Salama, IRO, for his closing remarks.

Before I close, I'd like to give the floor over to Mr. Benjamin, who will start by making final remarks.

Thank you all for participating in our call. I'd like to thank our personnel for the great effort they've been making so that the Company can show better results. As I said, we're being very fortunate in this effort, since every quarter we see things improving and they have been improving at significant levels. We have high expectations for this final quarter of the year. We do believe it stands to be the best quarter in the year and we're ready to produce more. We're working hard towards a positive future, but we maintain our feet on the ground very cautiously. Nothing is easy; but that's the time where we can show the quality of our people and the quality of the essence that we have in the Company. I do hope that all the work which was carried out in terms of reducing costs, of reducing capital, of reducing investment -- all of that, with an eye at preserving liquidity, improving results, reducing indebtedness and being able to resume a more positive situation which we have enjoyed historically. So, whatever could be done internally, was done. If we enjoy improvement in the market, we will see our results multiplying by 2 because of the very high capacity we have to respond to those variations in the market. As for the broader economic scenario, of course we depend on our internal market. We're also working hard to gain market share in all segments. And with the recovery of prices in commodities, we're encouraged -- we feel encouraged to improve our margins internally as well. I'm sure we will have more positive numbers going forward. Once again, thank you very much for participating in the call. Your participation shows the level of confidence that you have in our Company, in our people and I'm very happy about that. I'm sure the fourth quarter will be a very positive surprise to everyone. We're working hard to make that happen. And as I said before, we're quite committed to reducing leverage with divesting some assets. Thank you all.

Okay. Thank you all for participating. Our IR team remains available for any questions or comments you may have. Have a nice afternoon. Thank you again.

Thank you. This concludes today's CSN's earnings conference call. You make disconnect your lines at this time and have a nice day.