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MMX Mineração e Metálicos S.A. (Bovespa: MMXM3) announced today its income statements for the first quarter of 2010. The financial and operational information that follows is presented on a consolidated basis, in accordance with Brazilian Corporate Legislation and stated in thousands of Reais, except where implied otherwise.
1Q10 saw the confirmation that global markets have been recovering from the economic and financial crisis. The increasing flow of capital to emerging markets, in addition to the credit expansion in the most crisisstricken countries, attested the recovery not only of capital markets, but of the industry as well. This investment retake allowed the global GDP to grow in excess of 5% over 1Q10.

As in the two previous quarters, recovery in the iron ore market was pulled by China's consumption increase, and the resume of production at blast furnaces in Europe and Japan. Although the production capacity has not yet equalized the pre-crisis capacity, this resume impacted strongly the iron ore demand, which exceeded supply and changed sharply ore’s value perception in the market.

The market dynamics during and after the international crisis led to the pricing change mechanism. The strong demand for ore affecting directly prices in spot markets, and the recent difficulties to confirm the amounts contracted during 2009 created a much clearer need to establish a new pricing mechanism for iron ore. This led to the new quarter-based price standard based on daily-accessed rates, which will reflect more clearly the real prices in the market.

Even though new prices have not been yet defined (this was confirmed just near the end of the 1st quarter), Brazilian iron ore exports returned to the pre-crisis figures, and the internal market resumed the pre-crisis rates. Outcomes of these new prices will only appear as of 2Q10.

By considering the current iron ore consumption trends in the internal and external markets and the worldwide supply of the product, the price is still expected to have additions over the next quarters, as mining companies cannot meet the whole demand on the short and long terms. This robust demand will be mainly supported by the increase of internal consumption in emerging countries such as China, India and Brazil. In this scenario, MMX is well positioned to benefit from the new market reality.
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