Century Aluminum Co (CENX) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the third quarter, 2008 Earnings Conference Call. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Shelly Lair. Please go ahead.

Thank you, Sondra. 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 web site www.centuryaluminum.com Please note the 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 different 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.

And as a precaution not to place undue reliance on these forward-looking statements. For risk related to these forward-looking statements please review annex A and our periodic SEC filings including the risk factors and management's discussion and analysis sections of the annual report and quarterly report. In addition, throughout this conference call we'll 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. And now, I'd like to introduce Logan Kruger, Century Aluminum President and Chief Executive Officer.

Thank you, Shelly. Welcome to the third quarter conference call. Other participants include Wayne Hale, Mike Bless, and we have with us [Bob Nielson and Steve Schneider]. I wonder if you would turn to Slide Number Four. I will take a little bit more time than usual to do the overview today. We're obviously managing through some extraordinary and difficult times. As you would expect, our first priority is to protect our existing business. As I'll explain, we continue to believe the long-term fundamentals for the aluminum business are sound. So our focus is on preserving the value of our assets so that we will emerge from the dark with a strong platform on which to grow. We're confident we can achieve this objective.

Clearly the crisis in the global financial markets and the impending slide on the global economy have impacted all metal prices. These commodities, these trends have been exacerbated by investors using these assets as a source of liquidity. Many investors, of course, have had no choice but to do so. And, the strengthening of the US dollar has added to the pressure. I'll provide more detail in the market fundamentals in a few moments. At a high level, we see slowing of the worldwide demand and (inaudible) in the near term; however, the supply response from the industry, especially China, has already begun, not only (inaudible) and exerting capacities but delays on projects. And upper most (inaudible) to longer term, we believe the fundamentals will support a strong market. Maybe even increasing t(inaudible) the constraint and supply are now going to be even more severe than had been forecast before. (Inaudible) averaged $2,792 for the quarter, down from $2,940 the previous quarter.

Remember that most of our revenues are on the prime (inaudible). Mike, of course, will provide details. Cost increases remain evident as we predicted last quarter. This trend will obviously, see some relief in the quarters ahead. Our analysis (inaudible) in the US continue to perform very well. The teams at the operations are focused on producing as many tons as they can push out safely. We produced above capacity in the US and in Iceland. We are for certain the leadership teams at the (inaudible) focused hard on cash flow, as you would expect. We have an experienced group and they've been through this before.

We have an absolute hold on discretionary spending in US and at Grundartangi in Iceland. Mike will provide details on (inaudible) cash fund (inaudible) in the banking system in Iceland. We're obviously closely monitoring events, but the situation has improved over the last ten days. We are spending a significant amount of time and an effort to evaluate in the best way forward for the Helguvik project in Iceland. First and most importantly we continue to believe we have an excellent project in the long-term. The plot will be well class in operating metrics and the environmental safety performance. This coupled with a capital cost that we believe is competitive with any plot being built or considered outside China will provide and produce an attractive return for our shareholders. However, we are carefully assessing our course of action for the next year or so.

Before I comment on the plans for the project, let me provide an update on the situation in Iceland. I spent last week there meeting with our project team as well as our partners at the power companies. The municipalities in which the plot is being built and many officials of the government. I met with the Minister of Industry, the Minister of Trade, the Finance Minister. I also met with the Chairman and CEOs of all three power companies. That's in addition to all of the other members of the municipalities that I met with. They, obviously, as you would expect have tremendous amount of support and are committed to help make this project a reality. To the extent they exist a prudent course of action. It goes without saying the Helguvik project will be a significantly important part of the economic activity in Iceland during the coming years. We continue to believe that Iceland will be a great long-term place to do business in our industry and many others. The Icelanders will get through the\is very difficult period and emerge with the assets and qualities that have made the country an attractive place to do business. We want to be part of the efforts, if we can prudently do so. But, as you would expect, we will unemotionally assess our situation. The prudent financability of the project is, obviously, a key consideration.

While we are engaged in setting a variety of alternatives, it is still too early to tell and we don't want to make any hasty decisions. While speed is of the essence, we have some flexibility. As of a month ago, we stopped making any new commitments at this project. While we evaluate our course of action during the coming weeks, we have taken actions to reduce all spending of the project to a measured pace. Obviously, there is a catch-up effect as the (inaudible) spending in October, for example, is largely based on the actual activity at the site in September. Per normal terms of which we pay our suppliers. Thus, our expectation is the spending of Helguvik in the fourth quarter will be modestly higher than Grundartangi's free cash flow at current metal prices. Wayne and Mike will provide more detail. In summary, we continue to believe we have a world class project. In addition, we have faith and confidence in the future of Iceland society and our ability to do business there. Based upon the minimum level of spending we'll have until further notice, we have some time to asses the overall situation, the global economy, in commodities, in credit markets and, specifically, in Iceland.

When I say some time, I do not mean months and months. We will carefully and thoughtfully with input from all relevant parties complete this work expeditiously. If you'd mind turning to Slide Five. As you'll see from the slide, nearby profits have decreased significantly over the last few months. Just to give you an idea to illustrate the points, we had prices in excess of $3,200 in July, down to $2,600 by the end of August and less than $2,100 per ton today. We're seeing nearby downside pressure as a result of the (inaudible) of the demand from China and globally. In addition, uncertainty around the timing of production cuts is keeping the nearby price well below marginal cash costs. For example, at $2,200 per ton Alumina approximately 35% of global smelters are producing at a cost above the (inaudible) price.

Cash negative in other terms. Sales in China received the Shanghai price which is typically less than the (inaudible) price. At $2000 per ton, nearly all Chinese smelters are losing money pushing the global number of those not producing positive cash flow to 40%. Near some par contract expirations in western Europe will further increase the percentage if the aluminum prices do not recover. Smelters are beginning to reduce capacity and the project in the (inaudible) is expected to be delayed or canceled. But, the balance of the mark we're about to achieve and China will play an important role and we have direct evidence they're starting to do that. Can we turn to Slide Number Six. Over the longer term fall prices continue to indicate strong market fundamentals. Prices at the far end of the curve are supported by rise in operating costs and supply issues globally. Most notably in China where high par costs put the most smelters in the fourth quarter. In addition, Greenfield and Brownfield expansion costs have increased significantly, and outside of China, projects lead times of several years. Longer term,(inaudible) is expected to continue largely from China and the brick countries.

Couple of statistics: growth in China continues to be strong, although we note that growth has slowed recently. Industrial production, 15% year-to-date, 11.4% for September. GDP 9.9% year-to-date and 9% for the third quarter of this year. The 2008 real global GDP growth is forecast to be some 3%. Can we move on to the next slide? Looking through the near (inaudible), we obviously have to look at what the potential for the future brings us and what the market may look like. In terms of requirements of new smelter capacity. We continue to believe the global constraints of supply will be support of the stronger prices over the medium and longer term. The chart shows the equivalent of 42 new 350,000 ton smelters required to meet the (inaudible) expectation. At a 7% compound demand growth through 2012. This is somewhat less than the 8% number of recent averages of analysts reports.

Obviously, this is a five- year average report, averaged and expectations for 2000 and demand are below this level. Producing this additional capacity will be a challenge. Especially at a time when projects are taking longer, costing more, and particularly long-term affordable (inaudible) are difficult to secure. Current prices are likely to attract new capital for expansion projects other than those of the top tier, world class projects. Expansions that are already under construction, especially in China, may be delayed or canceled altogether. We have direct knowledge of that in the projects that we have been working in China. At current prices we would expect to see significant amount of existing high cost capacity to come off. This capacity reduction has already begun with closures both in the US and China.

The unanswerable question is how long before we see project delays and capacity cuts, cut into the magnitude significant and sufficient to stabilize the market? Clearly, China and Grundartangi itself will have to have a significant impact on the market balance going forward. We'll move on to Slide Eight. We're seeing a significant increase in inventories recently. This is indicative of a weaker demand and also affects the current liquidity crunch as market participants are unloaded inventory to free up cash. There is inventory are now some 33 days of global demand. As you can see in the chart, the previous cycle was some 50 days of capacity or inventory. So we are still well below these levels. Although the numbers have increased significantly in the short term.

The US markets remain subdued and the midwest (inaudible) continues to be in the 4 to 4.5% range. This price is consistent with the historical averages. Overall we believe the medium and longer-term aluminum market fundamentals remain strong. I'll now hand it over to Wayne to discuss the operations.

Thank you very much, Logan. Let's turn to Slide Nine. I want to start out and say that all the smelters operated well during the quarter. And we are at or above right at capacity at all locations. As Logan discussed earlier, with the recent market developments, all plant overhead, GNA, and capital costs are being reviewed and reduced, stopped or deferred. Leadership at all plants have stepped to up to this task, and this quality of leadership is what differentiates Century from the rest. Progress continues with the Big Rivers unwind. As you recall this is to secure long-term cost-based power for the Hawesville plant until 2023.

Recently, several significant contractual elements have been concluded between Big Rivers and smelters and beyond. As a result, the unwind has, again, been submitted to the KPSC, Kentucky Public Service Commission, for review and public testimony and approval. We remain optimistic that the unwind will be concluded around year-end. In the sustainability area, this overarches health, environment, and safety, we see a continued trend year-on-year for improvement in reducing the total injuries and, also their severity across all our facilities. For example, Hawesville is well above two million man hours now, working without a lost time accident. And Grundartangi continues to improve and in this case, specifically, the number of incidents have been halved as compared to a year ago. More on to Slide 10, which is bauxite, alumina and sales. At St. Ann Bauxite, the mine and ship tons were impacted by poor weather and labor negotiations- related slowdowns.

In this case, negotiations with the UAWU continue and now have entered a binding arbitration stage. Looking at Gramercy Alumina, operations there were also affected by weather, specifically the hurricanes and some unexpected operational events. Production was impacted, however operations returned to capacity performance. Turning to sales and marketing, most product markets in which we participate have been impacted and are flat to decreasing. The demand for higher (inaudible) remains strong as well as the demand for the metal to produce rod and cable. We're rigorously and continuously monitoring all our customers and have experienced to date zero payment issues. Midwest premium has remained flat quarter-to-quarter. Our finished good inventories are low at all locations.

Turning to the next slide, I'll say a few words about Helguvik. As indicated by Logan, this project is under scrutiny and review and all areas bundled in cost, scope, schedule, are being reviewed and looked at. For example, in procurement, we're taking advantage of the decrease in commodity prices and reviewing all packages with the vendors. The project is on schedule and budget and it's projection will continue to be reviewed in light of the present circumstances. Just a point to note; however, the greenhouse gas allocations for Helguvik for 2008 through 2012 have been received; therefore, all approvals and licenses are now in place. In summary, our operations are performing well. We're making good progress on the Helguvik project. As one would expect in the turbulent times, we're reviewing all areas of the business to increase output, improve quality, and reduce expenditures. Now I'll turn it over to Mike who will discuss the financial results.

Thank you, Wayne. And if we could turn to Slide 12, please? As usual, if you could have the financial information that comes attached to the press release handy, it will make my comments easier to follow along with these.. I'll obviously be referring to those. So, on Slide 12, talk a little bit about the components of the change in net sales. Again, as usual, my comments will compare the second quarter to the third quarter. Sequentially. Sequential growth and sequential changes will be what I'll address.

First, the net sales line. As Logan referred to, the cash LME averaged Q3 over Q2 was down about 5.5%, 5.4% to be specific. On a one-month lag basis, it was down only.8% And as Logan referred, most of our revenues and costs are priced on that one- month lag bases. So. that's the relevant statistic to look at in terms of changes in the market, down just under 1%. On that basis our realized average price on global per ton basis was down about 1.4% Moving on to volumes, our shipment volumes both in the US and Iceland, up 3% as reported, and about 2% on a per day basis. There was one more shipping day in Q3 over Q2. As Wayne and Logan noted we're very pleased with the performance at all the plants. I would note in particular Grundartangi shipped at an average annual rate of 271,000 tons for the quarter.

So, putting together the pricing and shipment growth, net sales for the quarter were up just about 1%. Moving down the income statement, again, if you have the financial statements in front of you, gross profit was down $34 million quarter-to-quarter as we predicted last quarter. We did phase cost increases in a variety of areas. Let me detail those for you. First and foremost raw materials down $6 million quarter-to-quarter. That's exactly as we predicted. That's largely carbon-based products. US power prices, again, up $6 million quarter-to-quarter. Again, on our forecast. Half of that amount, or $3 million was due to an increase in the fuel surcharge at Mt. Holly.

We had a $10 million increase quarter-to-quarter in the delivered cost of Gramercy Alumina into Hawesville, obviously. Of that $10 million let me just break it out for you. About a third of it, about 30% of it was due to an increase in natural gas costs. The remainder of it was largely due to a decrease in volumes coming out of the Gramercy and thus an increase in cost. The volume decrease attributable to two factors: One the weather, the storms in the quarter. As you know, the Mississippi River, for example, was closed for a couple days in the middle of the quarter, that impacted volumes. And then some operational issues that we had during the quarter that are now behind us. The plant is producing at capacity as Wayne said.

I would note that the controllable expenses at the plants, including power utilization and maintenance and other labor and other controllable expenses at all our plants were flat quarter-to-quarter. That's terrific performance in this kind of environment, especially. And we're proud of the team as Logan and Wayne said. Lastly,in gross profit FIFO expense of $9 million. for the quarter, again, not surprising, that's obviously, given the way the accounting works based on old cost on the balance sheet running through the income statement. Moving down the P&L, the SG&A expense $11 million for the quarter, that's obviously down from previous quarters. Net loss on forward contracts $79 million for the quarter. That's made up two components this quarter. Let me just detail them. First, obviously, we had to mark to market the liability from the end of last quarter, June 30, obviously, to the date of settlement. That was July 7, as you recall.

That was a $241 million charge. Offsetting that was the gain on the settlement itself of $162 million. The net of those two items is the $79 million you see on the face of the income statement. Moving on, effective tax rate for the quarter was 18% on as-reported basis. As you know the way we do that, calculate that number, is we pull out the mark to market charge, add it's effective tax rate of 36.2% That's the effective US tax rate 36.2% So on that basis, 18% effective tax rate. If you adjust for the $3.3 million dollar tax benefit, that we described in the earnings release, the release of reserves that, moves the effective tax rate up to 21%. Which is consistent with the mix of taxable income in the US versus Iceland as we have in our 2008 forecast. I'm going to ask you now if you can turn to Slide 18. Just for a moment?

When I talk a little bit about shares outstanding and the accounting for EPS. Let me just take a step backwards as you do that. The reason we want to do this for you, the reason you're going to see this presentation going forward, is the way the EPS accounting works for the preferred shares that we issued for the hedge unwind. In the middle of the summer, it is regrettably not quite as simple as we were hoping. So, as you recall we ended last quarter with about 41 million basic shares outstanding and issued a little over eight million over the summer in the public common stock offering that of course, included the excise of the Greenshoe and so, that's where you see the average shares outstanding for the quarter, 47.7 million basic and 50 million diluted shares outstanding. Those are the common shares outstanding. As you know also, we Issued 16 million preferred shares after the first week in July for the hedge unwind.

Just a detail note; 400,000 of those shares have converted from preferred stock to common stock. Based on the antidilution provisions in the preferred stock. Basically what the contract says is that any time the company takes an action that drivers the ownership of preferred stock holder, obviously Glencore, down below the ownership that they had before the hedge unwind, that was about 28.5% of the common stock, any time that happens, then contractually a number of preferred shares convert to common to get back to that 28. 5% ownership. Obviously the exercise of the overall allotment option are the Greenshoe and the public common stock offering triggered that event. So 400,000 shares are no longer preferred, they converted into common and their ownership is at the 28.5% level. So, when you add all of that up, the 50 million as you can see there on the right hand side of Slide 18, average diluted common shares for the quarter 14.5 million with the average preferred shares for the quarter, if you counted those preferred shares as common shares, they are basically common equivalents, as we talked about over the summer, and all their terms and rights and what not, 64.5 is the total share count, again treating the preferred as common.

Now, moving on to the EPS accounting. The way the GAAP, accounting works for it, if you looked at the front of the income statement and press release, is that we calculate per the accounting and show on the income statement only the EPS allocable to common share. The way you do that, obviously, is you take the 50 million common shares and the portion of the total net income, (inaudible) 37 million, the portion of the total income that is allocable to those common shares 28.4 million. That's basically based on the proportion of common versus preferred shares outstanding is the way you calculate that 28.4 million versus the 8.6 million for the preferred. We believe the way the investors will want to look at this, obviously, is total net income, as you see there the 37 million, the same amount the income statement divided by the total shares as if the preferred were common or as if the preferred had converted into common, or 64.5. This is the way we're preparing this adjusted EPS that you see here.

Do that math, you make the adjustments that we normally make, to pull out the mark to market loss, 50.4 after tax, and to pullout the $3.3 million tax gain, non-recurring, we get adjusted EPS as you see in the bottom right hand corner of the chart $1. 31. Okay. Enough of that. If we could move back, please, to Slide 13? Which is cash flow? Free cash flow for the quarter strong at $77 million. We're pleased with the result. As you know, the hedge unwind transaction contemplated the hedge volumes only through June so we had to make that last payment for July. That payment was $21 million or $13 after taxes. See on the chart on Slide 13. So, free cash flow would have been $90 million without the hedge payments. If you have a chance to look at the cash flow statement, so far, you saw this quarter, not surprisingly, another use of funds for working capital. That trend will start to reverse itself, obviously, assuming metal prices stay around the current levels as we go forward.

Couple more items on the cash flow statement, if you have it in front of you, CapEx for the quarter, this is excluding Helguvik, I'll get to that in a moment. CapEx for the quarter was $12 million. As Wayne detailed, that includes projects which we've, now, suspended. I'd remind you that the average sustaining or maintenance capital rail for the company on on annualized basis across the company, this includes the US facilities and Grundartangi, is about $20 million. On to Helguvik. As you can see on the cash flow statement, year-to-date, CapEx for Helguvik $53 million. And that works out to $21 million for Q3. If you take a step back, Logan, and Wayne made comments, obviously, about the actions that were we're taking in Iceland so I won't belabor those, but just to put numbers to them. If you took a step back and looked at Q4 forecast for Helguvik spending, what it would have been, before we took these actions, to seek new commitments and reduce the current spending, the forecast was for cash spending Q4 of $45 million.

That number, obviously, will be reduced. As Logan and Wayne both referred to, it is not in the immediate cessation in that spending because as Logan detailed, for example, in that $45 million, the numbers say that was in the number for November spending. It is largely based on October activity. You know, our vendors bill us, we pay them in 30 days. Same thing, October spending, based on September activities. So, that $45 million will go down. We're just not sure exactly how much at this point. But, it will be lower. One way to look at that Logan referred to, is versus the free cash flow coming out of Grundartangi a level on that at current metal prices, after- tax, free cash flow, from Grundartangi. Let me just put a level on that at current metal prices the after tax, free cash flow coming from Grundartangi is about $10 million per month.

Turn to Slide 14, please. A couple comments about the cash situation. Iceland and some other issues. Had a chance to look the the balance sheet total cash, at September 30, pardon me, was $169 million. That was split about 50/50 between the US and Nordural. In the US, the only change of note since then, was the final payment that we made on October 1, per terms, on the short- term note, the deferred settlement amount from hedge unwind that was the last payment under that note $25 million. So, we're done there. Nordural cash today is a bit higher than it was at September 30. Just quickly, cash held in the US, we hold at Banc of America and at Black Rock, Nordural cash there, to take a step back as we talked about in the press release we put out a couple weeks ago, cash held by Nordural always has been, and of course still is, held in the US dollars. Given the nature of our business there, we never held a lot. of krona. The way we work the business, obviously, had to make a payroll or krona based payment, we'd exchange dollars to krona the same day and make those payments. Obviously, the way we're continuing to do it.

In terms of the total Nordural cash about 60% of it is held at BMP [Paraba] and Banc of America in Europe and the US respectively. We were able to get the funds out of Iceland before the situation started to deteriorate seriously last month. The remainder of Nordural's funds are held in Iceland at Lans Banci (inaudible). Let me talk about those. We continue to believe the funds in Iceland are secure. As you know, the government effectively owns both of those banking institutions and has guaranteed those deposits. Those funds have been and continue to be available for use to make local -- to pay local expenses which are mainly power. Our power bills in Iceland and payroll and our foreign exchange obligations. I'll get to that in just a moment. The government has been exchanging krona, in effect is the market for conversions at this point in time. Update from the slide to current rate as of today 114 krona per dollar.

At present, we have all of our customers paying us into those accounts at Paraba and Banc of America in Europe and in New York respectively. No new funds into Iceland at this point. We're, also, largely making payments non-Iceland payments to vendors and Europe and other places from those accounts. Our preference, obviously, would be to return to normal banking operations in Iceland as quickly as possible, i.e., . to receive payments and make payments in Iceland and we'll continue to assess the situation, closely, obviously it's changing day to day. Let me talk about the foreign exchange obligation. The counter party there, as you know, is essential the government. The same banking institutions that hold our cash deposits. As we talked about earlier in the year, earlier this year, did, indeed, buy forward krona. The contracts go out through September of 2009. The average forward price is 85. At which we bought forward.

Late breaking agreement here, literally, as of earlier today, we have preliminary confirmation from both banks that they have agreed to settle those liabilities. At the current exchange rate of 114. And that's a combined payment to both banks. An aggregate payment of about $28 million U.S. dollars. It obviously removes the risk of further devaluation once the settlement with the IMF has reached in Iceland or other solution to stabilize the economic and banking situation there. We'll obviously simply offset that payment versus the cash balances that we hold in Iceland. Of course, this payment that we're making today and decreasing risk, we believe by doing it, will be offset by the lower dollar value of the Icelandic krona payments we'll make obviously over the coming year just to fund our business. Couple of other comments, as you would expect we've been reviewing very carefully our supplier and customer base. Both Wayne and Logan made reference to this. No issues in the supplier base. On the credit side, we've been looking at customers for over a year, as the business began to soften in the US.

We have two things going for us here. One is a small group of customers as you know, three customers in Iceland, two in the US, an aggregate makeup about 80% of our sales. We have about 2.5 dozen total customers. So, it's not a long list to review. We have a-- in addition, we have a very experienced credit manager who works underneath Shelly. He had a long career at US Steel before he joined us earlier this decade. He's been through this kind of thing before. We're lucky to have him. He started ratcheting down credit terms on many of our smaller customers earlier this year. So we have no customer issues now as Wayne detailed, but we talk to them literally on a daily basis.

Lastly, just a couple comments on liquidity. I talked already about the cash balances in both the US and at Nordural. As you know, we don't have any maturities until 2014. Which is when the senior notes mature. The converge don't mature for another 10 years, in 2024. Although, I would note that the converge contain a par put, in August 2011, it becomes exercisable. The conversion price is about $30.50. Something we obviously have to consider as we think about the next couple of years. And lastly, our revolver is undrawn. That's $100 million revolver, all available based on the borrowing base. Other than about $10 million that is used to backstop normal, that's a credit. That is with a group of very strong banks and it matures in September 2010. With that, I'll turn it back to

Thanks, Mike. To wrap up my remarks before we take questions. The coming months will provide more clarity as it relates both to the near- term demand and industry's action on supply, especially of course on the most disadvantaged part of the (inaudible) We subscribe to the view that over the longer term, demand growth and developing regions of the world will resume to healthier levels. The supply situation, which looked challenging before the financial market crisis began, (inaudible) will only be exacerbated.

Our plants are performing very well and we're very pleased with that. We have an experienced and talented group of people who know how to run these operations during this climate. As I was describing detailed, in addition to the company's cash management activities, we're focusing our efforts and energy on the full analysis of the feasibility of the project at Helguvik, over the near term. We're keeping investors updated as we reach any conclusions. I'd like, now, to invite questions. All right, Sondra, we can go to questions.

Absolutely. (OPERATOR INSTRUCTIONS) Our first question from Kuni Chen, Banc of America please go ahead.

Hi. Good afternoon, everyone.

Hi, Kuni.

Hi, Kuni.

I guess, first question, on Iceland's-- you mentioned earlier in the comments you met with the ministers over there and you met with the heads of municipalities. Are there any kind of red flags that stand out in your mind that could impair your ability to operate, going forward, longer term. Just given any kind of power availability issues, raw material access? You know, anything like that? Just looking for color on kind of what concerns you at this point, operationally?

Thanks, very much, Kuni, obviously very good question. At Grundartangi we don't see any red flags. We (inaudible) enough of the power companies and producing units continue to do well and we get supply of power, in fact we've got (inaudible) power to take us beyond 260,000 tons you see. Mike mentioned capacity at Grundartangi is rates over 271,000. Obviously, most activities are in dollars. We've also, been very careful about our staffing. We are concerned of the impacts to them, had a favorable response and made some adjustments on a short- term basis to some salaries. I think all in all, the country is undergoing a phenomenal impact but being a very pragmatic, sensible way.

The ministers I met with three of them, were obviously in support of any of our activities. They see us as one of the fundamentals for the country's economy going forward. and the commissioners are very well supportive as well. It is the difficult time, currency risk, obviously, Mike has explained, and we've, obviously, got out of the hedge position, exposing us to a potentially deteriorating currency. We'll see. I think the IMF solution, we don't know the details of that, and we'll wait that. Mike comments as well?

Address the two specific items and they're good ones, Kuni, obviously, that you raised. On the power side of Grundartangi, obviously those assets have long been in the ground. The operating expenses for the power companies to run that apparatus is very low. They need our dollars now. Those will continue to run. There's no operational issues there, no problem at all. As it relates to raw materials, all the raw materials come from outside Iceland anyway. There's really no-- have been no, and don't foresee any, interruptions or issues there.

We get delivery right to the dock at the site, as you know.

Right, right, understood. Okay. And, then, as a follow- up, can you just talk a bit about the US plant system, with metal prices at or below $2,100. You know, how are the US smelters holding up? And, kind of what's - - what's your - - your ability to arguably sustain some operating loss there is over the next - - or over the near term?

I think it's, again, will be a good question. Let me give you sort of an overview and I'll ask Wayne to comment. Obviously, over a month ago, took immediate action because of the deteriorating market. Obviously, stopped all discretion recap and spending of any form. The challenging plans are probably the Ravenswood, which is on the higher end of the cost curve. And Wayne and the team are working very diligently to, at these prices, have Ravenswood at be at least cash-neutral position.

We're not quite there yet, as you would expect. But we do have some favorable reactions. You'll also see prices off on Alumina, percentage of (inaudible) and guiding to next year, Alumina supply contracts are slightly more favorable than they were this year, as well as what we think will be favorable impacts on freight. The challenges not only, and more so obviously, under the number in terms of producing operating cash flow, we are pleased about the challenges, whether we get to (inaudible) within the short term. Any comments?

I think you hit the major points, Logan. To emphasize, we have been in contact with all of suppliers insofar as price reductions. They certainly come to us when they want price increases. Their experiences change. So we've had some favorable conversations with those groups of people to date. And as I said earlier, all of the leadership is certainly focused in reducing all costs and all areas across the facilities. And the goal has been set and they're certainly stepping up to the mark.

Okay. One last question. I'll turn it over. Assuming-- assuming Helguvik stays on hold, let's say for all of 2009, can you give us a CapEx range for next year?

I think, obviously, you are making a proposal of the hopeful next year. I think just to repeat what we said and make sure that you - - everyone's got it. We have slowed and reduced expenditure at Helguvik project dramatically and now under review process, which we know will take some weeks, not months to, complete. Year-to-date, $53 million has been spent and I think there's another $45 million which Mike has mentioned, including the back $15 million in October. We think we can do better than at $45 million because that's expenditure to come again before (inaudible) I think that really gives you, in a nutshell what, we see as the expenditures.

The next step, Kuni, I think, open another part to your question, really, what do you do if you put the project on hold for a period of time? That's, obviously, one of the options. You, then have, to look at your supply and your longer lead items and you have to go into negotiations with a number of people. I think, maybe, that's a best point to leave it. We know we have a good idea of what additional exposure we have on this project, including that, before you have negotiations to extend terms, delay, et cetera, there's a whole lot of parameters that you have to go through. Probably expanded to date to that point of about $100 million or less. Mike?

Yes. I mean, Kuni, to answer your question, that, obviously, is - - Logan talked about the project and the status of the analysis. If we did stop spending on the project, the answer is back to that $20 million maintenance CapEx. There's one or two small projects in the US,that for safety reasons, will be completed. We're talking about, maybe, $1 million over that. Wayne is nodding yes. So you go back to that maintenance level. Absolutely.

Okay.

Much too much detail. I think it covers the area. We'll see in follow up questions.

All right. Great, thanks, I'll turn it over.

Thank you.

Your next question comes from David Lipschitz, Merrill Lynch please go ahead.

Thank you. Hey, everyone.

Hey, David.

David?

In terms of-- , did you a great job, I thought, last quarter, going quarter over quarter, in terms of cost, can you talk about, in terms of the change on the downside, fourth quarter from the third quarter? In terms of $6 million up or something like that? Any type of break down you can give us into fourth quarter or next year, if prices were to average where we are right

No, David. We don't have that right now. I mean, we usually - - we're looking at it, Wayne said, we're going supplier by supplier. We usually, don't like to guess forward but last quarter we knew these cost increases were coming and we felt since we knew it, you should know it. That's why we detailed all of them.

Right now, we don't know,we're going through it, obviously, some of the have quarter or two lag before you catch up and you start to see the things reverse the other way, obviously, anodes, coal, pitch, our reference to oil, there are some lag effects. We'll start to see some of that, Logan said. Alumina two respects, one just simply as the LNE comes down and the lag effect goes away and two based on foot call range for the contracts next year. Little bit unknowable at this point in time. It will come down, how much we don't know. So, when we have it, we'll certainly have an estimate that's good enough to give you, in, the next call. In late January. Right now we don't have it it for ourselves.

Would - - if, Ravenswood were to be not cash neutral, would you just shut it down?

I think that's a question, David, in the future we'll see that. I think we got on to answer that. Our work is to keep our operations in a cash neutral positive situation. It is a question we haven't come to. The team at Ravenswood are doing a good job. We have to address that in the coming months.

Okay. Thanks.

Sure.

Your next question comes from Tim Hayes, Davenport and Company. Please go ahead.

Good afternoon.

Hi, Tim.

Hi, Tim.

Question on the anode cost, and the shipping, given that, oil has been all over the place, and shipping rates are come down, what roughly are you paying for spot anodes? How much does to cost to deliver them?

We don't purchase spot anodes. All our anodes are on long- term contract bases. Remember now, when we talk about anodes, it's only for Iceland. In the US we make all our own anodes. OWe have our own anode manufacturing facilities. We buy the coke and pitch and bake it and combine it and make a block.

In Iceland, we buy from Europe and from China. Those are long- term contracts with reference to, obviously, petroleum products. So again, they have some reference, as I said, they will come down. But over time, same with freight. We're starting to see some alleviation right now. I think the freight rates are going to go down. Nothing, priced in, certainly for the quarter just ended.

Yes. On the long- term contracts, then, is there a date in the near term that starts to get renewed? Or? How - - how long term are we talking?

Yes. I mean, those get reuped every quarter as far as the pricing on the contracts. To come to conclusion of those European ones. Now you remember we have the ownership of BHH in China, that's an ownership issue. So, right now we see the pricing mitigating a bit due to input cost and Mike indicated, freight.

Okay. Thanks. Again, appreciate all of the detail on the sequential costs that you do.

Thank you, Tim.

Thanks, Tim.

Our next question from David Gagliano. Credit Suisse. Please go ahead.

Hi. I just wanted to focus in on the cost a little bit more. On the - - first of all, the $10 million cost increase in Q3. Now, is it fair coming from Gramercy, is it fair, given that 30% of that was gas- related, 70% volumes that are now back up and running. Is it fair we should not expect to see a similar issue in Q4?

Yes, it is fair to assume that. Correct.

Okay. The second question, on the krona, I just want to make sure I have it right. What was it sort of the average krona that flowed through operating - - average X fact rate that flowed through Q3 in terms of the krona?

I don't have what the average rate was , David, I can calculate it. Easy to do. I don't know. I'd have to go - - [ OVERLAPPING SPEAKERS

Any hedges in place?

Yes. There were hedges, absolutely.

Gentleman.

Absolutely. Yes. Absolutely. [ OVERLAPPING SPEAKERS ]

Closing out the hedges, is that right?

Closing out the hedges. So, just to repeat, hedges that remain, and absolutely, we had, three months worth settle in the quarter per their terms. They settled once a month, as you know. And, so, everything that we have left, is we believe, has been closed out. This literally is breaking news as of today. We've been working on it for the past couple of days, led by our team in Iceland, of course, who's done a terrific job. We've got-- not written yet, but confirmation with draft writing, I guess I should say, to be confirmed later today or tomorrow. that those contracts are settled and closed.

So we'll have no remaining forward krona purchases. And the way we look at it-- two- fold, to repeat the reason we were anxious to settle them, was two- fold. One is because, as I'm sure everybody has read, once the situation really deteriorated in Iceland, basically the market for foreign exchange between the krona and any other currency broke down. And the private quotes that were being made were all over the map. Some of them were quite, quite high. You know? We saw - - you've seen them too, anecdotal evidence in 200 and 300s even per dollar. In that respect the government has come in, they did try to peg a rate for a day, but they backed off on that. But they, as really the only market maker today, have been exchanging krona. Have been very consistent and good about it. At the rate of-- it's been between 110 and 114 over the last couple of weeks. Once the settlement is made, again whether with the IMF-- we don't know.

We, obviously, have some insight given Logan's meetings there and such, but we're reading the same stuff that you're reading. But once there's a settlement reached with the IMF and or other parties, the supposition is if you have followed other IMF settlements, one of the conditions is currency is allowed to freely float again. We did not want to take the risk that happens. This could get away from us. So, we settled it.

A lot of supposition about pegging or changing to the Euros, I think is very difficult to predict what will happen, on that basis in the next couple of months.

Okay. But, just - - I want to make sure I'm think about it correctly. Is it right, then, the way I'm thinking about it, 85 goes to 114. 25% reduction in your---

Got it.

Okay. All right. Wanted to make sure.

That's right. That's why I said, David, we make it one- time payment, obviously, we offset it against our deposits that are in iceland and then we move on. Every month as we make krona based payments, whether it's payroll or other local expenses, we're, now, exchanging those at 114, or frankly, if things go the way I think most people expect them to go, currency, probably, should devalue. That's not a prediction, just an observation based on sort of where the world was before things broke down and the way past IMF settlements have worked.

We'll enjoy that upside as well.. So, we basically the way I look at it, for those volumes we bought at 85, we gave up the upside between 85 and where we settled at 114. But if it does devalue, which, of course for Iceland, we hope it does not, because it's in our interest there to have a strong economy, but we would enjoy, the upside above 114. Okay.

Then, then, just last question, how much of your operating costs at Grundartangi are krona based, is it 100%?

Krona based?

Oh, no - - About 12 to 15 percent I think a good number.

Okay.

Little higher than that. [ OVERLAPPING SPEAKERS ] 20s - - [Indiscernible] - - maybe 15 to 20.

You know, I mean, just to take a step back, where those numbers are coming from, usually in a typical smelter, as we say, payroll is - - and all employee- based costs on the order of say 15%. In Iceland, of course, because you don't have Alumina in the cost of sales, you have to kind of gross that up at least by a third. It is, maybe, the 20 to even 25%, David, range.

Okay. Then, how much of the capital costs at Helguvik? Is krona based? And what was the exchange rate that was assumed when developing capital cost estimates?

Good question.

Day, I think Helguvik, take a step back, I think for the project phase I particularly, 70 to for $1.2 million up to the end of 2010, about 40% was krona- based.

Okay.

And we used in exchange rates around about 70.

75.

Yep.

So, you understand what our review is going to be. Obviously, looking forward, can we take advantage on the Helguvik project now? And we've got the prudent thing for us to do? and on what basis? Considering the whole load of other options. Not only the local costs, but also the material costs. I'll give you one that you've seen in the last while, it's obviously steel come off $1,000 a ton to $600 a ton. We are fortunate or one point in time that we haven't committed all of our expenditures to a particular set of prices or materials. Obviously, had the opportunity to go back and relook at these for some of our contracts.

Just one other comment, if I may? Another major factors or many factors we have to look at, during this assessment over the very near term, I think, David, I have a sense of where you're heading. You're right on. The only counter - - not the only, but a counter vailing force of course, I think your point rightly so, a big chunk - - on a big chunk of project spending were we to proceed, we'll enjoy benefit there. The counter vailing force, of course, is inflation. Anybody familiar with the situation like this, and I've seen them, in my past in South and Latin America, those economies as we all know were burdened by pretty ugly inflation after a corrective or during a corrective period like this. That, is not a straight savings. You've got to recalculate sort of what all of the local krona based rates are going to be based on where you think prices are going.

Okay. Fair enough. Appreciate the additional info. Thanks.

Sure, David.

Thank you, David.

Next question comes from (inaudible) of Long Acre Please go ahead.

Hey, guys, how you do'in?

Hi.

Hi. Good.

You expenses Ravenswood on Mt. Holly and Hawesville, how much lower do aluminum prices need to go for those facilities to sort of hit cash- breakeven?

I think it is, you know, we don't give guidance on individual costs.

Uh- huh.

Our rate is right at the top end. It's well- known. And that's the one that, obviously, is the first exposed. So we don't give that. We know we're better than the (inaudible) and things can be improved. I think the best we can help you. I don't know Mike is going to--

No, they're obviously, cash flow positive today. We can confirm that. And, as Logan said, we really for a whole host of reasons haven't gotten down to the plant level in terms of talking about OPEX cash OPEX, OPEX, but they are cash break even today. As Logan said, Ravenswood is close and we think that we have, Wayne and the team have some reasonably achievable buckets of ways that we cana get it even at today's metal price within striking distance at least. We're going after those hard.

Okay. That was it. That was my question.

Okay. Thank you.

Thank you.

Now we have a question from [Wayne Atwell (inaudible) Capital Management]. Please go ahead.

Thank you. Sorry for belaboring this point. When you closed out your krona exchange forward, contracts, you took a $28 million charge; is that correct?

We haven't taken it yet. Again, this is late breaking. This is if we have, indeed, done it as we believe. And the only reason I'm hedging there, no pun intended, haven't seen the piece of paper yet. Our attorneys in Iceland, who are present at the meetings with the banks tell us it's done. So assuming that's true, we will take the charge and, obviously, that will be reflected in our fourth quarter financial statements. Absolutely, Wayne.

Did you say there was an offsetting $28 million- something?

Of course. You get that back as you - - I mean, you'll see it roll through the P&L as you go forward, because now you're unhedged, and as your taking dollars to exchange them into krona to make your payroll and make the other Iceland- based expenses, you're exchanging it 114 or wherever the currency goes, so we'll, to the extent the currency stays 114 or devalues, we'll get it back, quite frankly, or more, if the currency devalues as the business grinds forward over the next nine months.

Right, so essentially you're saying your local costs, wages and power and such will be less? Of course, because - -

Not power. We pay power in US dollars. As you know it's pegged to the LME. So that's in dollars.

Right.

Payroll and others. As Shelly pointed out, in the 20 to 25% maybe of the total op ex at Grundartangi category.

Okay. Now, are we also done to mark to market since that's been closed out? We won't see that anymore?

That's correct.

That's correct.

Yes.

Yes.

Great. And, I think you covered this, but there's been no discontinuation of services in Iceland? Everything is operating as expected? And deliveries are arriving as expected? And things are fairly smooth in that respect?

I spent a week there, last week, came back Saturday, Wayne, things are continuing quite normally. Obviously, we've checked and - - but our Grundartangi facility has deliveries direct to the harbor at the site and those are continuing. Our supplies for the aluminum particularly are, BHB and Glen core renowned supplies and got lots of supply and take the metal away. The others come in containers and we can deal with it. I think that overall, just payroll continued Things are amazingly, can I say that, normal - - if I can say that normal. Although pretty un-normal arrangement. Banks operate although there's some difficulty in dealing with some of the currencies, but we've had positive results as Mike has described. You know? Including the unwinding of currency.

We've had, I mind add, great cooperation from the Icelanders in the banking community at the Central Bank in helping us. I say "we" I'm sure I speak with our peers through US and other non-Icelandic companies that do business there as well in trying to make our business operations as quote, unquote as normal as possible. They're bending over backwards and doing everything within their power to help keep our business operate normally. Number one, right thing to do, and two it's in their best interest to do so. We're a major employer on the island. We provide good, high- paying jobs.and all that. And, over the next couple of years that's going to be an important engine in that economy. So, we've had just phenomenal cooperation.

And complete access at any time. So. Obviously, we're watching it very closely. I think Mike said we managed this, conditions in the banking system are now in Iceland and we'll continue to monitor it as we go forward.

Great, thank you very much.

Thanks, Mike.

Thanks.

We have a question from [Mark Liamani of Morgan Stanley] please go ahead.

Good evening. I'm pretty sure that's me.

I think that's you, Mark!

I gave up after the second word there, Mark. How you doing?

Could you comment as far as the cost goes in the United States, would you be able to give any color and how much North American capacity operates above Ravenswood?

Oh. Good. I think it's a good question. I would suggest you go and look at something like CRU, Brookhunt.

But, it's not the high- cost facility in North America?

No.

No, it's not. It would be inappropriate for me to run out a list of names, even if I did know them off the top of my head, I'm sure Michael, certainly, Wayne would have some ideas. There are some properties as you know in the northwest that operate on half terms, so you can work it out pretty easy. (inaudible) are a number. I don't want the people to over analyze why I used Ravenswood, but just for us as a company we have to set benchmarks and important for us to aim at them.. Ravenswood is the one we have to deal with up front and would be remiss for us not to deal with us in our discussions with you today in the particular circumstances.

Yes. Certainly understandable. I don't want to get everybody upset there, I'm sure they'll make good progress getting costs under control. Would be interested, though, in hearing some commentary-- how big a decision is it to shut something down? Not specifically Ravenswood, but in the industry? If you shut it down today, how long does it take, how much does it cost? And how easy is it to take back up again when market conditions return? I think there's some, maybe, some benefit to managing high cost facilities to maximize profit rather than minimize costs at these points in the cycle. Any commentary there would be appreciated.

Yes. Presume you're talking market by operating smelters facilities or refineries.

Sure.

Make it generic on that base us. Quite difficult to shut down. And then you got to look at ongoing maintenance cost for whatever period and so you go one time (inaudible) you do liberate the working capital, as you know, from what you got in the plot. But, I think the real trick, and this is the one that everyone has got to sit and think about, is where are you going to get the power from? How long can you preserve that power option? And what's the pricing going to be, if and when you want to startup? Hypothetical question, it got interesting connotations that you have to think about.

So, the up front impacts are fairly easy to measure. The ongoing impacts are pretty reasonable. I think the real test which is the one that goes to the supply constraints, is are you able to preserve a power contractual arrangement that you can turn on at terms that you can understand later on.

Do you think there's risk at all if the economic situation hangs around for a bit that we create an overhang that takes multi- years to get over? Or?

You know, I could just turn to Wayne to comment. Let me give you some thoughts. There was a northwest USA overhang, which in reality, didn't turn out to be there for a number of circumstances. I think you, obviously, one of the questions, which I alluded to in my discussion around the market, is how quickly do you work through this? I think more importantly, is it is a supply side, particularly not only existing operations, but future expansions, growth and particularly looking at perhaps China as an example. Don't go ahead. Any growth beyond that, quickly evaporates, inventory numbers. And the ability to immediately bring response to that is very difficult. Do you want to add anything?

I think you make a good reference in former times in the Pacific Northwest. And those specific circumstances, there was a bit of overhang. Because people who own those facilities don't immediately shut them down because of the cost and circumstances that prevail as a as a result of the shutdowns. Basically, owners and operators look at the marketplace and try to predict how long is this going to go on before they take the option to shut down? So it is a wait and see scenario, basically. And because it is a serious decision to take.

I think we have no intentions at this point in time to do any of this. Obviously, we'd be remiss not to be able to talk about this. I just - - you know, China, shutting down is quicker, obviously, for a lot of reasons. The cost there - - (inaudible) but then the question would be, would there be power available to continue to go up. Some of the people, obviously, would face power increases.

We're certainly, Mark, aware of, at least, a couple places that have closed up, cutoff production. In fact, we have a list of up- to some 6 to 800,000 tons of capacity that coming or been talked about coming, some already happened. We do have a - - one expansion projects we know quite well hasn't started up and no intention to start for another three to five months. So I think that response is happening. So, obviously, I've given you some food for thought on looking at this.

Yes. Very good. Thanks, and good luck with everything.

Thanks, Mark.

Thanks, Mark.

Next question comes from Tony Rizzuto, Dahlman Rose Please go ahead.

Thank you very much. Gentlemen, thank you very much for the level of detail. I've got a couple of questions here, and the first one is, as you evaluate Helguvik, could you share with us what the price deck for aluminum is as you look at that?

Funny, a question we don't share that.. I think if you had a look at how we looked at this project and felt it had a very good positive return for our shareholders, in the date that we made the decision on this project, the returns were good at prices that, perhaps, a bit lower than you seen today. That gives you an idea of how somewhat conservative approach to prep some of the price decks that we used. It is difficult for us to predict or to show price deck for obvious reasons, you think going up and down, everyday.

Understood. And I wondered, regarding Ravenswood and correct me if I'm wrong, but my understanding of Ravenswood and you have a pretty good situation there, you guys supply the hot metal to the rolling mill,.

Correct. Folks, although a challenge there, there's also some positives as you pointed out. The hot metal goes into a good running facility which is supplying the aircraft industry which is reasonably, I wouldn't say buoyant, but is certainly got some (inaudible). It's a pretty specialized business, you can't (inaudible) anyway.

Now, we've been hearing from some of our trade sources that Alcan is in the process of reviewing the mix there. And might be looking to exit some of the different product categories. I'm wondering, if they were to get out of, maybe some of the more standard products or common alloy products, would you guys have an alternate outlet, if you will, for that material?

Yes, I think, Tony, my colleagues could comment on this (inaudible) We don't send all our metal across the fence anyway. That's first thing to remember. We do sell metal into the market to various sources already. And we have the capacity to adjust that and have on occasions when they've had some operational difficulties. I don't know, we we don't want to comment on what they do in terms of their operations. Think that's really to apply that question to them, Wayne?

I think the point, Logan, because of the association with of two facilities, there's a very symbiotic relationship there. So, we have certainly sold more metal than required and they've taken less metal and we've been able to cast it and dispose of it and sell it appropriately when they couldn't take the metal. So, when they decide what they're going to be able to produce and take, we'll have a (inaudible) cast in place, which will allow us to easily cast out for placement on the market and so we'll be able to move that metal as, if and when required.

All right. Wouldn't have, Wayne, wouldn't have a meaningful change or impact on your overall cost structure or overall price? To get that product to customer?

Yes. You got face - - element, Tony, that's the different. Losing something in cost, not a huge cost, and then you've got freight on top of that.

Thank you very much, gentlemen.

Thanks, Tony.

Thanks, Tony.

The next question from the line of [Tony Robson, BML Capital Markets],please go ahead.

Gentlemen, good afternoon, thanks for taking my call.

Thanks, Tony.

Wayne, actually stole most of my questions. One remaining, two remaining questions. Did I hear correctly that Helguvik CapEx 2008 was $53 million to date and another 45 to go?

Yes. Let me try to get this simplistically correct and the colleagues don't correct me too much. $53 million spent so far. Mike mentioned already that for the balance of the year, 45 of commitments. including 15 in October. We believe we can improve on that 45 because we are able to apply pressure on reducing that. We, obviously, will look at all options with Helguvik, how do we proceed forward? But while we are considering that, in the short term, we don't want to incur any more value in Helguvik and spend more capital.

But I do note that anything that we've done at Helguvik is not loss of value. In other words, you've got plots, you've got design that is years above, but not any design or process that will change overnight. So, you don't have that risk. Going right forth, I don't know (inaudible) maybe answer the question of whether or not what would you look at if you had applied a full stop to this? But the answer is we haven't come to that decision. We really wish to look at the project. It's a very good project, it's well classed. And we want to take the time to look at it.

Okay. Assuming you go ahead with the Helguvik (inaudible) that you would access the dead markets in whatever form current bonds or bank facilities, are you talking to your bankers in the dead markets at the movement? How receptive are they in terms of credit freeze? Aluminum priced at $0.94

Yes. This is Mike. Tony, the answer to your question, and I'll elaborate. It is absolutely, talking to a number of people right now, as you would expect about a variety of potential structures. You used the correct word "freeze". Right now, if you had to close and fund a loan, you wouldn't be very happy because there is no credit available other than for those borrowers, as you probably know better than we, that are truly, I don't like to use desperate, but that truly need to fund a refinancing or whatnot. The markets are, as we all know, not effectively - - they're closed, period.

We're looking at a variety of potential structures. You named two of them. And quite appropriately, there are others out that that could be available to us. There's some, I would call it, not even expectation at this point. Again, you guys talked to more people in this world than we do. But at least, a hope if not verging on an expectation that, perhaps, toward the end of this year, more likely in the first quarter of '09, there will be some credit being extended. But at this point in time, we've got a lot of work to do and this is part of what will go into the ultimate decision we make about how to proceed with the project and at what pace. And to your point, running metal prices, we--- I think this was to Tony, your question as well. There were really two issues or two parts as it relates to the price expectation. One is long term, (inaudible) good IRR based on that long- term price expectation?

As Logan correctly pointed out we did use a price right around where we are today for the feasibility study and go to the board of directors and decide to proceed. Second, is in the very short term, you've got to make some pretty hard hearted assumptions about what metal could be over the next two years, as you're developing the project, if, if we were to proceed, and make sure that you got the down side covered, because you certainly don't want to start or to - - I should say certainty don't with a to go in earnest with a - - outside risk that you might have to stop down the road.

Mark, maybe you should come north of the Border. I think the Canadian banks have plenty of cash.

Sorry - - What did he say?

I said come north of the Boarder, the Canadian banks - -

You got an invite? I'll be there tomorrow. Bring our partners?

Yes. All right. That's all my questions. Thank you for your time.

Thank you.

Thanks for the question.

Missed that.

The next question from the line of [Dan Waylan with (inaudible) go ahead.

Hi, this question is really related to the question Mark was asking earlier, you addressed a lot of it when you were talking about the US industry structure. But, you also mentioned earlier about, hearing first hand of curtailments in China, as well as that region being able to shut down and restart a bit quicker. But given that that is a much higher cost region, much dyer situation, do you think they try to weather the storm for a few months? Does it take a few quarters before we really begin to see significant curtailments over in that part?

I think the answer to that is your guess is as good as mine. But, we are aware of curtailments, already. We're aware of slowdowns. We're also aware of expansions that have not started. In other words, nearing completion and not started and don't intend to start. I think it depends on the individual circumstances. You know? In the case of refineries, those with imported Bauxite are (inaudible) shutdowns and things. (Inaudible) depend on location, freight cost, power cost, aluminum cost and back to obviously freight and all of that. Some, obviously, do it quicker than others. And others will do what you think is, perhaps, hang on a bit longer.

I mean, have what you heard, has it been rough order magnitude? Four or five hundred thousand tons that have been delayed?

I think the number is a lot higher. Numbers, 800 perhaps to a million. It is quite surprising when you get a look and actually go check some of these things and actually go by name of smelter and go and send someone to go and confirm one way or the other. And just (inaudible) sense of efforts not detailed leading up to one million pounds.

Thank you very much.

Thank you.

There are no further questions. Please continue.

Thank you, everyone, this is Logan. We appreciate your time. That you spent today. We're, obviously, well- focused on the challenges ahead of us and look to speak again with you in the near future. Thank you.

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