Century Aluminum Co (CENX) 2007 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Century Aluminum third quarter 2007 earnings call.

(OPERATOR INSTRUCTIONS)

I would now like to run the conference over to our host, Ms. Shelly Lair. Please go ahead.

Thank you, Art. Good afternoon, everyone and welcome to the conference call. For those of you joining us by telephone, this presentation is being webcast on the Century Aluminum website, www.centuryaluminum.com. Please note that website participants have the ability to advance their own slides.

The following presentation, accompanying press release and comments include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Century's actual results or actions may differ materially from those projected in these forward-looking statements. These forward-looking statements are based on our current expectations and we assume no obligation to update these statements. Investors are cautioned not to place undue reliance on these forward-looking statements.

For risks related to these forward-looking statements, please review Annex A and our periodic SEC filings, including the risk factors in management's discussion and analysis sections of our latest annual report and quarterly reports.

In addition, throughout this conference call, we will use non-GAAP financial measures. Please refer to the appendix, which contains the reconciliation to the most directly comparable GAAP measures. This presentation, including the appendix, is available on our website.

I'd now like to introduce Logan Kruger, Century's President and Chief Executive Officer.

Thank you, Shelly. Welcome to the third quarter conference call. With me here today are Wayne Hale, Mike Bless and also Bob Nielson and Steve Schneider. So if we can move on to slide number four, we can start our program for the day.

We've had a successful third quarter and are well set up for our fourth quarter. Robust aluminum markets continue, the LME averaged some $2,550 per ton for the third quarter of this year. This is a decrease from quarter two. A couple of factors, seasonality, credit concerns, obviously, and market uneasiness, offset somewhat by the ongoing robust demand in the Far East, particularly China.

U.S. aluminum plants are operating well. Our production is at or above capacity at all of our facilities. We're particularly pleased about Grundartangi performing well. The expansion is on budget, on schedule to reach capacity by the year end. Some two-thirds of the phase five expansion capacity is already operating by the end of the quarter.This will give us some 10,000 to 12,000 tons from the latest expansion for this year of 2007.

Helguvik progress on the project, the environmental impact assessment, we've had a very positive impact from the National Planning Agency in Iceland. The transmission agreement has been signed. We continue to have strong community support and we'll begin preparing the site for construction early in 2008.

Project studies in Jamaica, the Republic of the Congo and China are progressing and showing some interesting developments. Early stages for these projects, but we remain positive about them. We'll obviously continue to pursue further growth opportunities, and in summary overall a good quarter. Can we go to slide five?

The aluminum market is well balanced for 2007. Forecasters are continuing to indicate that China will be a net importer of metal by 2009, and maybe sooner. Global aluminum demand was up some 9% year-to-date. Interestingly enough, 39% up in China. China's GDP growth is 11.5% year-to-date and industrial production growth is nearly 17.5% year-to-date. More interesting today, I think the news came out that for September IP growth in China was 18.9%.

India is very low per capita use of aluminum, but significant room for growth. IP growth in India is almost 11% year-to-date. Global supply increased by 12% year-to-date, 36% in China. Half of the supply comes from restocks. Capacity growth was only some 6%.

Efforts by the Chinese government to restrain aluminum production growth appeared to be having some impact. [Annual] exports are down from 57% year-to-date. You'll have noticed the latest action on the Chinese government and authority is to cancel electricity price discount for aluminum makers by the end of this year. And this can translate, in our estimate, to some $40 per ton for aluminum producers in some of the smelters.

Industry operating is at full utilization, we would assume, at 95%. And so we continue to believe that the supply side is constrained. The risk is on the down side and give one example is the recent power outages and turn-downs in South Africa.

September global production levels fell from all-time highs and we note that perhaps the rates of output growth seems to be slowing somewhat. We move on to slide six.

If we look at the intensity of aluminum use, the per capita usage remains low in the BRIC countries. Significant increase in China's usage since 1990, but this is still one-third of what is used per capita in the USA today. If we assume the midpoint between the current Chinese usage and where the U.S. is, you would need some 10 million tons of aluminum per year in extra production. There remains significant room for growth in aluminum usage in Brazil, Russia and most notably India.

We move on to slide seven, looking at the forward curves. There's been significant upward shift and flattening of the forward curve. Forward pricing is indicative of stronger markets over the longer term. If you take today's price of near $2,500 per ton, the same price is available in 2012.

Capital and operating costs are up globally, energy costs continue to rise, China's high-cost energy structure remains. Greenfield and brownfield expansion costs are increasing and the time taken for new projects continues to grow.

We move to slide eight, global days of aluminum inventory. You note that we have actually looked now at global days, not just Western world. You'll note that the global inventory days are less than 30 days of global demand. The U.S. market remains subdued. The Midwest premium strengthened to $0.035 per pound recently but remains below historical averages.

Spot alumina prices continue to soften somewhat, in the range of $350 to $375 per ton of alumina. Some support is being provided by the recent supply disruptions, mainly in Jamaica. Overall aluminum market fundamentals remain strong, as indicated by current prices and the forward screen.

And now I'd like to hand over to Wayne Hale.

Thanks, Logan. Turning to slide nine, all of our smelter operations had a good quarter in the area of environment, health and safety. In particular, Hawesville established a new level of performance, working 1.5 million person hours without a lost-time injury. This, compared to any benchmark in any industry, is a significant achievement. Domestic smelter operational performance remains consistent, with no significant exceptions. Both Hawesville and Mt. Holly are surpassing production performance benchmarks.

In regards to the power supply at Hawesville, over the last three years stepwise progress has been made by Big Rivers Electrical Corporation and LG&E to bring to conclusion the unwinding of their present business arrangement. In a recent press release of 19 October, another step was taken as part of the normal unwind process.

The companies notified the Kentucky Public Service Commission that they will be ready to present the bulk of the necessary lease-ending documentation to the Kentucky PSC for review in about 30 days. Though much work is required in the areas of related agreements, transactions and contract review, including documentation of the power contracts for the smelters. Indications are that the transactions should be approved by the KPSC during the first half of 2008. When completed, this should secure a power contract for Hawesville until 2023.

The Nordural plant at Grundartangi continued to improve in all aspects of operation throughout the quarter and is operating very well. As discussed by Logan earlier, two-thirds of the phase five cells have been energized and we now expect to produce 10,000 to 12,000 tons of metal from this expansion in 2007 versus the 5,000 to 7,000 tons we anticipated earlier this year.

All cells are expected to be online by the end of the year and on the following slide is an aerial view of the Grundartangi smelter, including the phase five addition. Grundartangi has been a tremendous success for us, increasing the capacity of the plant by nearly three times over the course of about two years, on time, on budget. It's a significant accomplishment by any measure.

The plant has additional improvement capacity, the organization is engaged in the concept of continuous improvement and we work in harmony with the people and the regional requirements, all elements for continuous success at the community.

Turning to the next slide, I'll say a few words about our bauxite and alumina operations. St. Ann Bauxite continued throughout the quarter with a very low injury level. Mined and shipped volumes continued to trend toward record levels, with all customer requirements being met.

Gramercy Alumina's safety performance was stable throughout the quarter and operations were at full capacity. Quarter three was the best of this year in terms of performance and consistency of operations.

Looking at the sales and marketing, negotiation of the Alcan metal supply agreement with Ravenswood has been completed and a contract is in the process of being signed. In the interim, both parties are working to the terms and conditions of the new agreement.

Midwest premium for the third quarter averaged $0.03 and the U.S. markets remained sluggish. We continued to see sustained demand for high purity in the P0404 and the P0303 grades from Hawesville, with the command of good premiums. Finished goods inventories at all facilities remain at minimum levels.

I'll now turn it over to Mike to discuss the financial results.

Thanks a lot, Wayne. If you could turn to slide 12, please, as usual, my comments will reference this slide, as well as the slides in the appendix and the slide deck here and also importantly the financial information that's attached to the earnings release. So if you'd have that handy, I think it will make my comments easier to follow along with.

Starting on slide 10, you can see that sequentially, from Q2 to Q3, our sales were down about $10 million, and let me talk about the factors that drove that performance. First, stepping back, Logan made some comments about the market price in the quarter. The average cash LME price on a one-month lag basis dropped about 5% on average Q2 to Q3.

If you go to the earnings information or the operating data, which is at the end of the financial information attached to the press release, you'll see that our average direct realized price dropped about 5% as well.

Our average toll realized price dropped about 6%. The difference there is the reduction in the EU duty from 6% to 3%. As you remember, the EU reduced that duty in the middle of May, so obviously we saw that impact only for half of the second quarter but the entire third quarter.

Staying on that operating data, you'll see our direct and toll volumes. Our direct volumes were up about 1.5% sequentially. I'd note that there was one more day in this quarter in Q3 versus Q2, so if you adjust that our direct sales volumes were up just slightly less than 0.5% on a day's equivalent basis quarter-to-quarter. As Wayne said, the plants are operating well and with plants at full capacity we think that's very good performance.

Toll volumes were up just shy of 9% quarter-to-quarter, 7.5% on a days equivalent basis, and as both Wayne and Logan discussed, Grundartangi produced during the third quarter at an average annual rate of 242,000 tons a year, terrific performance. We're quite pleased with it.

So going back to slide 12, again, you'll see sales down $10 million quarter-to-quarter. Of that, the price impact of the LME decrease dropped sales $25 million and we got an additional $15 million back from the increased volume.

Going back to the financial information, if you turn to the beginning of it, the income statement data, you'll see gross profit dropped $24 million quarter-to-quarter. $25 million of that obviously was the price impact that I just discussed. Obviously, the price drops right to the bottom line from the revenue line.

Going the other way, we got $5 million of that $25 million back from those cost elements that are pegged to the LME price. As you know, we pay for our alumina on a contract basis from Mt. Holly and Ravenswood as a percentage of the LME, and our electric power in Iceland is priced as a direct percentage of the LME. So $5 million in decreased costs will obviously increase gross profit going the other way.

A couple other items to note, big items in gross profit across the sales, our domestic power costs, as we alluded to in the earnings release itself, were up this quarter-over-quarter, up $6 million. Divide that into two buckets. First, $3 million from Mt. Holly, increased fuel surcharges, as you remember. Over the last couple of quarters, we've reported sequentially improving or decreasing, if you will, fuel surcharges at Mt. Holly. This quarter went the other way and that cost us $3 million for the quarter.

Another $3 million was from slightly increased costs in each of Ravenswood and Hawesville. And, lastly, costs at Gramercy were up just a bit quarter-to-quarter, mostly due to a couple one-time items.

Moving down the income statement, SG&A expense, as you can see, fell $1 million, favorable Q3 to Q2, and Helguvik spending -- as you remember, the project spending for Helguvik continues to be expensed in G&A until the project reaches significant commencement early next year and that spending was $3 million this year, about the same as it was in the second quarter.

Moving down the income statement, as you'll see, the mark-to-market loss, the loss on forward contracts, $75 million pretax. Logan spoke, again, about the movement in the market price over the quarter. As you know, this liability is calculated at the end of each quarter, and if you look at the movement in both the cash and three-month price, end of June to end of September, they were each down about $200.

But if you look at the far end of the forward screen, the 2011 or 2012 strip, those were each up between $175 and $230 per ton at the end of Q3 over the end of Q2, therefore increasing the mark-to-market liability and resulting in the charge of $75 million that you see.

Logan spoke about this, but I think it's really interesting to just step back for a minute and look at the movement in that forward screen over the quarter. At the beginning of the quarter, the cash to three-month spread was about a $50 per ton contango and it ended the quarter about the same dollar amount. It moved around during the quarter, but it was consistent June 30 to September 30.

But if you look at the spread from three months to the 2012 strip, it started the quarter at a $500 backwardation and ended at a $70 backwardation and closed today at a $20 backwardation, as Logan said, virtually a flat forward screen. So a quite interesting movement in the market over the quarter.

Lastly, a couple of comments at the bottom of the income statement. The effective tax rate was down this quarter to about 26%. That amount is if you pull out the loss on the forward contracts and the associated tax benefit that we provide on that and calculate the effective tax rate on the adjusted income, that was 26%. Two major items moving that.

The one in particular that moved it is the percentage of Iceland income in the mix. Obviously the higher the amount of Icelandic income in our pretax income drives down the effective tax rate as we only pay 18% in Iceland, and that amount obviously increased this quarter. In addition, our U.S. effective tax rate did decrease this quarter, so tax rate down a little bit.

Shares outstanding, you've obviously seen they're up. Obviously, the equity offering, which closed in the middle of June, those shares were in for the entire third quarter, versus just a couple of weeks in the second quarter.

Diluted shares, about 2.5 million shares higher average than basic shares, same delta as in Q2. And as you know, the vast majority of that amount is made up from the accounting for the convertible notes. The driver for the accounting on the convertible notes, just to remind you, is the average stock price during the quarter. And that average price Q3 to Q2 was just about consistent.

Going back to the bottom of slide 10, you'll see the adjusted EPS. The GAAP numbers on slide 12 and the adjusted numbers in the related appendix in the back of the slide deck, obviously adding back the after-tax mark-to-market charge. Those numbers, $1.31 basic and $1.23 diluted.

Just turning to slide 13, just going to make a couple of quick comments on cash flow and the balance sheet. Free cash flow, as you'll see here, quite strong, $204 million for the nine-month period in 2007. Just to remind you, we define free cash flow and again the reconciliation is in the appendix, as before spending on the Grundartangi expansion. So $204 million through nine months, the number for the third quarter in isolation was $69 million. Those two numbers represent about 111% and 128% of adjusted net income. We feel that's quite good performance.

I'll remind you if you had a second to take a look at the cash flow information in the back of the press release. If you go to the cash flow data itself and look up above cash flow from operations, you need to add back that $259 million increase in short-term investments to calculate free cash flow.

Those are the purchase of cash-like investments. You'll see them on the balance sheet but GAAP requires us to account for them as such, so just need to make that adjustment as you're looking down the cash flow statement.

A couple other items to note on the cash flow statement. We're at $80 million of capital spending for the phase five expansion of Grundartangi. That's the 40,000 expansion to 260,000 tons through nine months. That budget remains at $95 million and as Wayne and Logan said, we remain on schedule and on budget for that project.

Maintenance CapEx, as you saw, $14 million through nine months. The budget remains $20 million, plus, again, any additional that we spend on high-ROI projects, as we've discussed with you before. And, lastly, on the cash flow statement we spent $23 million this quarter on the settlement of our derivative forward sale contracts.

A couple of comments on the balance sheet quickly if you turn to that. I'll note cash at $324 million. That's up from the end of Q2, despite the $20 million phase five Grundartangi spending and a reduction in the pay down of our Nordural debt of an additional $35 million.

As you'll see, that debt now stands at $20 million at the end of September and we continue to expect that to be paid off in full by the end of the year. Now I'll turn it back to Logan.

Thanks, Mike. We're looking at slide 14. We've had a very good quarter in 2007 in our third quarter and it continues to look well set up for our fourth quarter. Plants are performing well. We're on target to reach 785,000 tons of capacity by this year end. We will be closing on 1 million tons of metal production capacity when Helguvik comes online.

We continue to build up our global pipeline in both the Congo and Jamaica, as well as in China. I'd now like to take this opportunity to invite questions from you.

Art, can we take questions?

(OPERATOR INSTRUCTIONS)

Our first question comes from the line of Terence Ortslan with TSO & Associates. Please go ahead.

Gee, my name, Terence Ortslan, how are you?

Hi, Terry, how are you?

Thank you. So Grundartangi next year, are we expecting 260,000 tons? Are we going to get a pleasant surprise better than that?

I think at this point in time we'll be very pleased to be at fully capacity, Terry. And like all things with our business, Wayne and the team will be pushing for some creep. We haven't got any thoughts on that at this point in time but you can be very assured that we will be pushing for some creep as well.

I think you can take note of what we've done in this quarter that in fact we ran it at 242,000 tons already and saw our commissioning program for phase five is a little bit ahead of program and obviously as soon as we can get the rest of the cells on we'll go for the extra tonnage.

Excellent. Since you're talking about capacity, can you circle what number do you think is for Gramercy after all those upgrades and changes and much better knowing exactly how it should operate and also St. Ann's Bauxite capacity you envisage?

Sure. I think I understand the question. You want to know what do we think our capacity in design and plant in Gramercy, as well as the output of bauxite out of St. Ann's, is that correct?

Yes.

Wayne, should best answer that?

Sure. We have, as we've discussed in previous discussions via the conference call, we have some programs in place at Gramercy to not only improve capacity but also improve energy efficiency and those programs are continuing on. Insofar as production capacity at St. Ann's, we have production in hand and as I indicated, it was going to be on track for record performance this year.

As far as additional capacity over and above that, at this moment in time we have no specific plans.

I think just to put some numbers to it, I think with Wayne, as well, Terry, Gramercy is right at around about 1.2 million tons of alumina a year. Wayne can interrupt if I get this wrong. And St. Ann's Bauxite operation, we're trending towards 5 million tons annual now, which is way above where it was maybe two years ago.

Obviously, you know we export to third parties as well as supplier-owned facilities at Gramercy. And just a reminder, I think, Terry, this is a JV with our partners in [Noranda], which is owned by Poland.

Yes, thanks. Could we with the changes in the world picture -- could you actually today categorize which quartile Gramercy, the cost curve is?

I'll take a shot at it. We don't talk about our costs, but if you look at CRU or [Brocante] or these people that do this sort of work, you would probably put Gramercy in the third quartile. People are talking about the midpoint of cost per ton of alumina produced somewhere around $250 to $270 a ton. That's in the public domain.So Gramercy is in the third quartile and I would say perhaps in the early third quartile.

Okay, great, guys. Thanks so much for a great presentation again. Thank you.

Thanks, Terry.

And our next question comes from the line of Timothy Hayes with Davenport & Company. Please go ahead.

Good afternoon.

Hi, Tim.

I just have a couple questions. First, on the Alcan metal contract, would there be any significant changes to how that's going to be structured going forward, versus how it's been structured in the past?

No, there's no significant change in how that's constructed nor how it will operate in the future.

Okay, and then on the domestic costs that you cited, that was a $6 million sequential increase.

Right, Tim, in electric power costs.

I was a little surprised to hear that the power went up at Ravenswood. That I thought had a base price for electricity, plus a portion tied to aluminum, which I though that price had gone down sequentially, the price of aluminum, therefore the power at Ravenswood would have actually gone down maybe a couple hundred -- $2 million sequentially.

I think Mike wants to take this one. I'll chip in a bit as well.

I think, Tim, everything you just said is true. What you're forgetting is what we disclosed in June, is the rate case that they filed that became public and got implemented on July 1, which, as we said, was a low single-digit increase on the base tariff. So everything being equal, aluminum price wise, the tariff went up, again, low single digits, however you -- pardon me, low double digits. Did I say single? Low double digits, however you estimate that.

Okay, thanks on that. And then lastly, in terms of costs at Grundartangi, I know you don't give any numbers or whatnot, but just any qualitative remarks on how costs may have changed from Q2 to Q3.

I think obviously Mike highlighted the power element, and as you well know it's linked to the alumina at Grundartangi. I think the second part, and Wayne may like to comment, is the operation stabilizing very nicely now. We grew from 90,000 tons to nearly at 242,000 tons now. And with new crew we have settled down very nicely and I think we've got nice, stable operations and obviously we're looking forward to the operating costs improving as we go forth.

And just to add to that, Logan, for those that are interested in some of the technical detail insofar as terms of current efficiency, power efficiency, quality of metal, all that is quarter-on-quarter much better improved in third quarter than it was second quarter, and we continue to see improvements. So it's a great story to tell.

Very good, thank you.

Thanks, Tim.

Thanks, Tim.

And our next question comes from the line of Kuni Chen with Banc of America Securities. Please go ahead.

Hi, good afternoon, everyone.

Hi, Kuni.

Good to see you all in Iceland last month.

Yes, it was nice and the weather treated us kindly.

Not too bad, not too bad. I guess just first off, on the operational side, U.S. was good in the quarter. Is 135 tons a quarter sort of the new run rate, or is there any reason why that may or may not be sustainable?

I think just a qualitative answer for myself is, and Wayne or Mike can chip in, is putting in the operations already at or above the operating levels and they're all running well and we will set up for the next quarter. We can't see into the future. We'd like to, but we will set up and the guys are doing the great job at the operations way.

I had nothing to add. It's just everything is running well and we'll just to continue to incrementally improve across the business.

Kuni, it's Mike. The only other thing I'd watch out for is, as I said, given that as you well know, these plants run 24 hours a day, one extra day in a quarter, just in terms of the way the months lay out, can make a reasonably big difference when you get down to it. And so that's why I wanted to make sure everybody realized that there were 92 days this past quarter, versus 91 in Q2.

Thanks, Mike, that's a good point.

And number of days on the fourth quarter?

Oh, gosh.

92.

92 says Steve.

That's Steve Schneider, confirming it's 92.

All right, all right. And I guess just lastly, as far as Helguvik goes, I know you guys have a Board meeting coming up. When is that scheduled for?

Kuni, we don't really talk about Board meetings. The process for the approval of Helguvik is well in hand. We're still saying that we want to be doing the project and starting it up by early next year. And so I don't think there's any other news to say. The feasibility study is well in hand. The permissions are well in hand.

You have met, I think, people on the ground in the local communities who support the project. No change in what we're saying. We're looking forward to breaking ground and beginning the project early next year.

All right, sounds good. Talk to you guys later.

Thanks, Kuni..

Thanks, Kuni.

And our next question comes from the line of Mark Liinamaa with Morgan Stanley. Please go ahead.

Good day, all.

Hi, Mark.

Hi, Mark.

Slide five was interesting that looked at the number of smelters that are required to meet trend growth. There's a view by some that are more cautious on aluminum that there are more than enough willing investors in these regions of low-cost power to ultimately dwarf any strength in demand.

Are you seeing when you look at these various regions -- are you seeing any change in the various regulatory bodies' view on how much they want to see the aluminum industry capitalized in the industry?

I don't see it. I think it's well publicized. There's low-cost regions, Middle East, South Africa. As I remarked, South Africa's having power outages. Obviously Iceland, and then I exclude the discussion to China and say that's a separate debate. I think there's a lot of pressure by the Chinese government to increase the smelting capacity in China. Some of it we're starting to see.

But I think the real question on the supply side, Mark, is the fact that how quickly can you build these things? Can you get the crews, can you get the design? Can you get the environmental permission?

And perhaps if we look at I think it's Norsk Hydro's project of [Pataloon], they're only now talking about starting to break ground. If you'd gone back a year ago, that was going to happen at last year's sort of thing.

So all of these seem to take a bit longer. The margin project in [Saki] has been around for a long time. Will it happen? We believe that this will happen. But I think, again, the timing gets pushed out.

And I think what the slide's trying to say is the supply sign is going to be a large channel, and the building and commissioning and obtaining low-cost, long-life power contracts are not that easy. And I don't see any change of in the world that's making it any easier to get on.

There was an announcement by BHP about Inga 3 in the Republic of DRC, the Democratic Republic of the Congo. That's been on the drawing boards for a long time but it's a hydro scheme in a difficult terrain.

So all of these things -- I think seven, eight years before you see some of these projects get off the ground, although I think there's a high likelihood of a lot of them getting off the ground.

Thanks, and I would also be interested in any comments you have about developments in the global alumina market.

Yes, interestingly balance of demand, but we saw some softening and we think that, again, we've had quite an interesting change in pricing on the spot market from a year ago, but I think they got up to almost $600 a ton in China. It's back down to $390, $400 I think, maybe $450 on some spot cargoes in China.

I think the market has probably been a bit pressurized towards the outside buyer, the impact of the hurricane in Jamaica. But we see it finely balanced, maybe slightly soft on the alumina side.

Great, thanks very much.

Thanks, Mark, thanks for the call.

And our next question comes from the line of Wayne Atwell with North Street Capital. Please go ahead.

Thank you. Could you give us an update on the capital cost for Helguvik, please?

Wayne, hi, it's Logan. We have announced our final capital cost on it, but we said indicatively for a full 360,000 ton smelter, you would look at about $4,500 to $5,000 per ton, and that's the statistic that most people are using, per annual ton of production, excluding an [anode plot, so you have to be specific on that.

But, again, the cost pressures remain and we are working through that and we haven't got the final number to take to the market yet. But that is for the full plant.

Right, and you're going to build -- phase one is what size, again?

It's somewhere in the order of 150, maybe a bit larger. And then we'll go to 250, and that's by 2013. And we'll also go to 360 soon after that, power dependent, but as you know there are power developments in Iceland on an ongoing basis, so that's our proposal.

Right. And how much should we subtract for the lack of an anode plant?

I think you've got to add it to it, Wayne, it's the other way around.

I'm sorry.

-- without the anode plant. And the numbers that people talk around is somewhere around 500, 600, maybe a bit more per ton, per annual ton of capacity of anode.

And when will you have a final estimate of capital cost for us.

That's coming to an end towards the end of this year and we'll then take it to the market when we're ready.

Okay, thank you.

Thanks, Wayne.

And our next question comes from the line of Justine Fischer, Goldman Sachs. Please go ahead.

Hi, how are you.

We're well, thank you.

Good. I have a question about the bauxite market, actually. And I know that everyone, we always look at alumina prices and where they're going, and it seems as though alumina supply is increasing, but on the flip side, it seems like bauxite supply is tightening. And maybe I'm wrong, I'm wondering if you guys can just comment on where you see that going and how you see that possibly overflowing into the alumina market dynamics in '08 and '09.

I'll give you some color. I'm not sure anyone really knows as yet. There obviously was a lot of bauxite coming into China from Indonesia that was going into mostly the independent producers, but some into [Chaca] as well. There has been some reduction in that for a number of reasons. The mining approvals weren't there, amongst other things. In China, obviously, local bauxite production has gone up, as they've commissioned more alumina refineries.

On the world scale, obviously there's some growth in Brazil on alumina production, as well as bauxite production, so I think the equation is quite well balanced. But there is certainly some discussion about tightening of bauxite supplies for the longer term and how do you express it? I'm not sure, three, five years?

The major areas are obviously Guinea and that has its challenges, as you're well aware, Brazil, Western Australia, and then you're into Jamaica, Vietnam and other places. And China has reserves but not good quality and not large reserves.

So I think there's a question that's unanswered, Justine. I'm not answering your question completely but it's as good as we can give you.

Okay, thanks a lot.

Thank you.

(OPERATOR INSTRUCTIONS)

And, speakers, no one else has queued up. Please continue with any remarks.

Well, thank you, everyone, for taking part in the quarterly third quarter call for Century. We're pleased to have you on the call and we look forward to meeting and speaking with you again soon. Thank you very much.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and thank you for using AT&T Executive Teleconference Service. You may now disconnect.