Century Aluminum Co (CENX) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank your for standing by. Welcome to the second quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions being given at that time. (Operator Instructions). I would now like to turn the conference over to Shelly Lair. Please go ahead.

Thank you, Rocko. Good afternoon everyone and welcome to the conference call. Before we begin, I would like to remind you that today's discussion will contain forward-looking statements related to future events and expectations, including our expected future financial performance results of operations and financial conditions. These forward-looking statements involve important known and unknown risks and uncertainties which could cause our actual results to differ materially from those expressed in our forward-looking statements. Please review the forward-looking statements disclosure in today's slides and press release for a full discussion of these risks and uncertainties. In addition, we have included some non-GAAP financial measures in our discussion. Reconciliation to the most comparable GAAP financial measures can be found in the Appendix to today's presentation and on our web site at www.centuryaluminum.com. I would now like to introduce Logan Kruger, Century's President and Chief Executive Officer.

Thank you Shelly. Good afternoon everyone, and thank you for joining us. We welcome the opportunity to report on our progress. Let's move on to slide number four. I would like to make some brief introductory comments at this point and then turn to an update on the market. We will get in to this in more detail in just a moment. But [at a ] high level, we would characterize the market as somewhat sentiment-driven at this point in time. [Physical] activity is reasonably good across the globe, and I think this is a positive indicator. Demand is exhibiting healthy growth in most of the developing regions. At worst, it is [adjusting] sideways in [diverse] economies that seem to have the most persistent structural issues. Supply growth is constrained, and just as important, we believe there is a fair amount of existing capacity that is cash flow negative at and around current metal prices. Underlying all of this, of course, is the fact that aluminum, like all commodities, is subject to often violent [swings] produced by changes in investor sentiment. I'm sure you have seen it, as we have, in the last couple of months.

I'm pleased to report that the teams have at Grundartangi and Hawesville have maintained their excellent performance. As Wayne will detail, the team at Hawesville is very focused on pulling every cost lever it can identify as we prepare for the step-up in power prices in the year 2011. He will also report on the operating issues at Mt. Holly. As you are aware, we continue to negotiate with the local unit at Hawesville for a new labor agreement. There are clearly some issues pending, but we are hopeful that the process can conclude in the near future. Most importantly, during this entire period, the plant has operated in a safe and efficient manner. And this, I believe, is a real testament to all of the employees. We have continued to spend significant time and effort on the completion of the tasks required for a restart of major construction at the Helguvik project. I will provide some additional detail at the end of our presentation. Shall we move on to slide number five?

The LME cash price averaged approximately $2,100 per ton for the second quarter of this year. Aluminum prices fell from their peak in 2010 of some $2,450 per ton in April to $1,830 in June. Since then, prices have recovered and are currently in the $2,000 per ton. LME prices have moved lower over the past months to currency standard about $325 per ton. LME's spot activity is variable in the wake of declining aluminum prices and the uncertain outlook for the second half of this coming year. Global aluminum demand was reasonably stronger in the second quarter, mostly, as you would know, driven by China's year-to-date increase of approximately 35%, due in part to the government stimulus measures. When you look at China. the economic growth slowed in the second quarter of 2010 to only 10.3%. This moderation [still] reflects impressive growth and follows on a very strong first quarter growth of some 11.9%.

It was recently noted by an economist that the Chinese economy has grown at an average of more than 9% for over 30 years. It is also noted this can't go on forever, only another decade at the most. I'm sure you will agree these are massive numbers, and even moderate growth rates in China will have a significant impact on all areas of global demand. Additionally, another significant area of growth is India, with an 8.6% year-on-year rise on the first quarter GDP and industrial production growth of 11.5% year-over-year in May. Let's take a look at slide number six. [LME] stocks declined again in the second quarter, and are down approximately 220,000 tons year-to-date. This is a meaningful improvement for significant additions to the warehouses that we saw in the first three quarters of 2009. That being said, there is still some concern that metal is being delivered [at the warehouses and placed in new warehousing deals on an [off warrant] basis which involves less expensive rents. Nearby availability of physical metal units remains tight, and premiums are holding in the $0.065 range for the Midwest. The European [duty paid] premium is currently $180 to $190 per ton, and the premium in Japan is in the low $120s. All of these represent multi-year highs, highlighting the shortage of accessible metal from warehouses and stockpiles.

Let's move on to slide number seven. With the [LME] off some $1,925 per ton at the end of the quarter and inventories of about 56 days of global demand, as you can see the relationship between price and days inventory is moving more toward normal levels, but still appears to be out of sync based on historical correlation between these two data points. Only time will tell, but this could be indicative of a structural shift in pricing as global cost pressures increase. As I mentioned in my opening remarks, we see this market as somewhat sentiment driven, as evidenced by a significant market volatility without any meaningful fundamental drivers. Outside of China and perhaps India, the [market] growth continues to lack conviction. And large global inventory levels remain a concern. We as a Company will continue to focus on running the business prudently in this uncertain environment. Now I would like to pass it on to Wayne.

Thanks Logan, I have a bit of a cold today so please bear with me. Let's move on to slide eight. When we spoke to you last quarter, you may recall we were close to finalizing a new multi-year labor agreement at the Grundartangi smelter in Iceland. I'm pleased to say that the five-year agreement, which includes a one-year wage re-opener, was ratified with a majority vote by the represented employees. Kudos to all employees at the plant for the excellent safety and operational performance during these extended negotiations. As [recalled] from our discussions last quarter, I gave you an update on the problem and repair timeline for one of the rectifier transformers supplying Grundartangi Line One. the rectifier was delivered back to Iceland this month, ahead of schedule. Regrettably, the internal windings had been damaged during transport as a result of rough seas. We have returned it for additional repair, which is expected to take four to five months. The original impact to the plant output, as we relayed last quarter, 2,000 tons This additional repair will impact production another 2,000 tons. We anticipate that a significant portion of this additional loss will be covered by our transport insurance.

Logan discussed the labor contract negotiations at Hawesville in his opening remarks, so I will not provide additional comment here. However, I would like to underscore the points Logan made about the stability of the plant during these protracted negotiations. The team at Hawesville continues to work diligently on reducing costs at the plant. This is a challenging process as we successfully removed a significant amount of structural cost during late 2008 and 2009. The hard work is necessitated by the effective step-up in power prices we will see after this year in the support we received from [E.On ENS]. To put it into perspective, all else being equal, the plant's cash operating cost will increase by approximately $250 to $300 per ton without the credit. In addition to our own resources, we are using some outside experts with fresh eyes to make sure no stone is left unturned. We also continue to speak with Hawesville's historical major customer about the future of that relationship. As you know, the current contract concludes in early 2011. Considering the status of the current discussions, we believe we will be able to conclude a new contract in the coming months.

Logan spoke about the operational issues that have impacted Mt. Holly since late last year. As noted previously, operational issues associated with [Anadcoke, Cabot] failures and supply chain challenges have affected production quality and cost. We continue to work with our partners to return the plant to normal operations. Continuing on with Mt. Holly, we and our partner have held detailed discussions with the power supplier about the future of this relationship. And as we have said many times, Mt. Holly is a relatively modern plant. However, this favorable attribute is more than offset by a power [supplier] that will not support competitive long-term plant operations. To bring this situation to an acceptable conclusion, we continue to speak with the incumbent supplier as well as investigating all alternatives.

Let's move over to slide number nine. At Ravenswood, from an operational standpoint, really there is not much to report other than we remain on or a better-than-expected trajectory for the various curtailment cost items. As we recall, at Ravenswood we have been working on objectives that would be required for a restart were market conditions to permit. First amongst these is the formulation of a new power contract. We have told the various constituencies that we would require a contract that protects Ravenswood's viability at low metal prices. As we have mentioned previously, the state of West Virginia passed legislation that enables power in the state to be sold to specific customers under this type of structure. Given this development, we have recently begun discussions with the power supplier around this concept. [Enabling] power contract, will need to be followed by a new labor contract. Clearly, there are a number of complex issues that need to be resolved prior to a restart.

Logan also spoke about the markets on a more macro level, so I will just focus on a bit more local flavor on what we are seeing. Availability of scrap has been increasing, indicating some underlying activity. But that market remains reasonably tight, lending support to the strong local premiums we continue to enjoy. The construction sector is not showing any signs of improvement, which is reflected by depressed demand for rod and cable. The strength in automotive sector continues continues to to drive the [Manfred Billiton Foundry]. I would also like to note that while the destocking appears to be slowing, customer and distributer inventories remain at historically low levels. With that, I will hand it over to Mike to discuss the financials.

Thanks, Wayne. We could turn to slide ten please. And as usual, I will refer in my comments to the financial information that comes after the earnings release. So if you could have that handy it will make my comments easier to follow along with. Before we go into the results, let's take a look at the market movements during the quarter to put the results into context. The cash LME price -- Quarter to quarter, all my comments as usual will reflect comparisons between the quarter just ended and the one directly prior. So Q2 versus Q1. Cash LME price, Q2 versus Q1, was down 3% on average and with a one-month lag was up 1.5%. As you know, we price some of our sales in the US on a [prompt] month basis and some sales on a one-month lag basis. So the weighted average of those drove a realized price in the US per unit absolutely flat quarter to quarter. In Iceland, realized prices up 2.5%, Q1 to Q2.

Shipment volumes were flat in the US and also flat in Iceland. And at Grundartangi, we produced at an annualized rate of 273,000 tons for the quarter, 2,000 tons below the rate of the last couple of quarters prior, as Wayne said, due to the transformer repair. Putting the price in volume data together, net sales on a US dollar basis were up 1% Q2 over Q1. Moving down the income statement, [talk about] gross profit was off $12.5 million dollars, Q2 over Q1. As you saw in first paragraph of the earnings release, the lower custom market inventory charge due to the falling prices a the end of the quarter took a $7 million charge on the quarter's gross profit or cost of sales. The aggregate of global raw materials costs, US power costs, and US other operating costs improved $4 million, Q2 over Q1. And Nordural operating expenses were up, or unfavorable, about $2 million Q2 over Q1 largely due to the planned pot relining program that we have instituted, consistent with Global Best Practices.

Just to remind you one more time, again, as detailed in that first paragraph in the earnings release and in the charts we are about to look at, $16 million this quarter of our cost of sales related to power at Hawesville were costs that we actually didn't pay on a cash basis, costs that Ion paid on our behalf based on the arrangement that was entered into about a year ago now. And as Wayne reminded you, that relationship, that contractual relationship with Ion terminates at the end of this year. Moving down the income statement, Other Operating Expense that obviously relates wholly to the curtailment at Ravenswood, $5 million for the quarter. Were Ravenswood to remain curtailed in 2011, those costs would step down next year. SG&A expense, $11 million for the quarter, of which cash was about $9 million. Again, on [forward] contracts, we talked about that. That's obviously the value of the put options that we hold, which obviously increase in value as the market goes down. So that is a $9 million non-cash gain in this quarter.

Moving down, tax provision. No changes there. US, we provided a 0% rate due to our fully allowed-for deferred tax assets in the US, Iceland at the statutory rate of 18%. All those taxes were deferred this quarter. We paid no cash taxes. Lastly, on the share count, common shares average for the quarter, diluted basis 93.3 million. Also 8.3 million preferred shares. As you know, the preferred shares are largely common stock equivalents. Just talk about some of the earnings items that we noted in the first paragraph of the earnings release itself, if you could just take a quick look at slide 16, the reconciliation chart that we normally show you. As you can see there, going back to the financial information on the income statement information, we reported $0.05 of GAAP EPS on a diluted basis. That is on the common share [of] count. And that's obviously the net income that is allocable to those common shares you allocated on a pro rata basis. So that when you spread all of the net income over all the shares, you obviously get the same amount -- $0.05 a share over a total share count of 101.6 million shares. And then again, the items that we have already talked about. The non-cash gain on the put options, $0.09, the E.ON amount that they paid for our causable power costs, $0.16, and the LCM inventory adjustment that cost us $0.07 a share this quarter. Before we move back to slide 11. I'm just going to make a couple of comments on the balance sheet if you have had a chance to take a quick look.

Cash, as you have seen, is up to $266 million as of June 30. That includes $10 million of restricted cash. Just to remind you, most of that restricted cash, about three-quarters of it, relates to the security deposit that we were required to post for the new power contract at Hawesville that we entered in to last July. In addition, again to remind you, we are required to post about another $20 million, little over that, during the Q4 of this year. What we will likely do instead of posting that cash per our contractual rights is post a letter of credit. And what we will likely do again, is to post and LC for the entire amount and take back that $7 million of cash. That LC will be backed by our new revolving credit facility. As you may have seen, we announced just after the quarter closed that we have entered in to a new four -ear facility, replacing the facility that was set to expire in September. Largely the same structure as the facility that just expired. Notably, we negotiated a larger supplement for letters of credit, which is really the only item we use the revolver for. So we We are happy to put that behind us. A successful process. No other change in debt in the quarter, as you have seen. And I will just note while we are on the subject of the capital structure, just a quick update on the Helguvik debt financing. We continue to make very good progress with both the European and Icelandic bank groups on putting together that facility. Again to remind you, the structure there is that of a traditional project financing, so that when the new plant is up and running and producing product of specification, that loan would have recourse only to the plant itself and not any of the other members of the Century Group.

Okay, if we could turn to slide 11 quickly, just a quick note about cash flow. As you can see, strong cash flow from operations for the quarter. We noted here a couple of items that we considered to be somewhat unusual for the quarter versus Q1. Obviously we bought the paid for the put options in the quarter. And we received a good size tax refund, as we disclosed early April, just after the quarter closed, $16 million. So when you adjust for those two, again, as you can see, nice growth in cash flow quarter to quarter, cash from operations on a slightly higher LME price. And finally, if we can just turn to slide 12, as we have shown you in quarters past, just a trace of the movements in cash from quarter end to quarter end. As you can see, nice growth in cash. Most of these items we have spoken about -- the tax refund, the cost of the puts. The interest on our senior notes obviously paid semi-annually, and are paid this quarter, so $9 million. Sustaining CapEx per our estimates, $2 million. And again, per our estimates, spending at Helguvik, about $5 million for the quarter. And with that, I will give it back to Logan.

Thanks Mike. We have continued, and this is on slide 13, the low intensity construction and engineering work at the Helguvik greenfield site. The capital estimates to complete the first phase remain on or below budget. We are spending significant effort on completing the final [costs] required to support a major restart of construction activity. These efforts primarily relate to the finalizing negotiations of the power companies over a maintenance to the contract signed in the year 2007. These are long-term agreements and the most significant operating cost component of the project. So we as a Company must take the time necessary to conclude these arrangements successfully. After [Century starts], the plant would being to produce metal in approximately 24 months. Mike mentioned the status of the financing of the plant. So I won't repeat his comments. What he did mention is that through the outside [experts] of the banks looking at the financing have retained on their behalf, we have again confirmed the new plant's attractive position on the global cost curve. We continue to believe that Helguvik will provide attractive growth for our shareholders for many years. And with that, Rocko, we would like to take questions now. Thank you.

Okay. (Operator Instructions). Our first question comes from the line of Kuni Chen with BofA Merrill Lynch. Please go ahead.

Hi, good afternoon everybody.

Hi Kuni.

Hi there. I guess just first off, I wanted to ask you again on the potential de-linking of alumina and aluminum prices, can you talk about how that may impact the Grundartangi situation longer term with your partners there? If we are looking at structurally higher alumna prices down the road, what would that imply for kind of the tolling relationships?

Okay, Kuni, it's Logan. I'm going to have the first pass at this, and maybe Mike will want to add in some comments. First of all, in Grundartangi, you are really looking at [$213, $216] before those total contracts are all off anyway. But the whole debate is will there be suitable [timing] arrangements or would we go to a purchased alumna contract basis like we do at Hawesville? And we will see. We will obviously be able to tell as we move forward. The broader debate, which I think your question is, Kuni, if I'm not incorrect, is the debate about de-linking the alumna price to a percent of LME. There is a lot of debate going on that, and a lot of this is stimulated from the discussion going on within a practice in some part from the iron ore business. One of the big differences I think, is a reputable reliable index [that would] make it possible for us to actually relate to this. So from all parts, I think it's pretty unclear where this is going to go. And existing contracts with long-term users and suppliers exist any way, and these aren't going to roll off instantaneously in one year. They are going to roll off over a number of years. Obviously from the producers of alumina aside, they see opportunity to perhaps increase their margins and their revenues. So again, it's going to be a balance of how this shakes out. But one of the biggest questions to be answered is whether you can actually find a suitable index that everyone can actually relate to. And there is a lot of discussion going on around that. Mike, you want to add any comments?

No. Thanks.

Great. And then just as a follow-up, this is a little off-the-wall type of question. The [Eyjafjallajokull] volcano in Iceland. Can you talk about any contingency plans you have in place or what your thought process is there? Seeing headlines around this recently, what is going on in Iceland, and how is the country sort of preparing or thinking about the potential for an eruption there?

Well, the good news first of all, is the volcano has subsided and has gone off. Obviously it's very much remote from the existing plant and its infrastructure. It's about 125 miles to the southeast of the existing Grundartangi facilities. One of our concerns obviously, is the potential interference with the electrical grid. Obviously the Icelandic Power Company operators have experienced some of the things over the years and find that their system is rugged and robust enough to take quite a lot of the impacts of fly ash that you will get from a volcano. There is very little that we can do from a control point of view other than prepare for a potential disruption. But it is low risk from a potential happening, and the experience in the last incident has shown the system is pretty robust. It disrupted more of Europe in terms of the wind directions. And fortunately, from the way the system is set up, our plants are on the west side of the island, and most of the volcanic activity seems to be relatable to the central and to the east.

Great. Thanks. I'll turn it over.

Thanks, Kuni.

Thank you. Our next question comes from the line of Brett Levy with Jefferies & Company. Please go ahead.

Hi guys. Can you talk about [your plans] for increasing the amount you have got hedged in 2011 in the United States in terms of your hedging aluminum prices?

Sure, Brett, it's Mike. As you know, you have seen it in the 10K and the Q, that we did, and as we talked about during the last call I believe, that we did purchase some protection for 2011 in the form of put options, as you said. As you saw during the quarter we didn't make any further purchases. We did [K] for the traunch that we had just bought, just per the terms the way they settled in early April That is why you saw the cash flow out for those options in April, in the quarter that just ended. And I would say that, Logan, our stance on this hasn't changed. We are opportunistically interested in protecting a higher amount of production volume in 2011, and we are watching the market. We don't like the price versus the risk protection right now. But as we all know, these markets and the cost of the options based on volatilities and other things can move reasonably quickly. I don't know, Logan, if you --

No, Mike. I think just our strategy is just to protect the downside and to maintain all the upside. I think that is the only additional that I would add.

Thanks very much, guys.

Sure. Thanks, Brett.

Thank you. Our next question comes from the line of Chris Dougherty with Oppenheimer and Company. Please go ahead, sir.

I was wondering if there is also -- I know you gave a little bit of update in terms of the project financing on Helguvik. What about thoughts on equity? I know there has been some discussion in the past about maybe selling an interest in it or finding a JV partner. Can you give any more update on that?

It's Mike. Thanks Chris. We are still looking at all of the possibilities there without being too coy. At the end of the day, there is going to be some additional non-debt financing required for the plant, even though we will have cash flow coming from the operations and such. We are continuing to think about all of those options. When we get closer to the timing of an actual restart, we will start to think more tactically about that. Logan --

No. I think you just have to balance all of these options against the value of the project. I think that is the only other comment I would add, Mike.

Then, the other thing, too,is I think for a while if you look at the direct shipments, it's down versus Q4. And I think you were running above rated capacity at that point. Where you are now, is that a question of being able to run at that level? Or is it a demand? Are you selling everything that you can now produce at this point?

Yes. I think you have got to be careful what -- we have been -- obviously take a step back. We have had Line Five at Hawesville and all of Ravenswood would curtail long before Q4 since Q1 of last year for all intents and purposes. We have been reasonably flat over the last couple of quarters. You really have to look at it on a per-day basis because small changes can get amplified as to whether there is 90, 91, 92 days in a quarter, not to get too detailed. I don't think, Wayne, there is really anything in terms of the operations. Sometimes on a per-day basis this past quarter, we were down just a smidge, about 1%. That was simply due not to production at all, but just to the timing of shipments at the end of the first quarter versus end of the second quarter, and when there were cutoffs. And so is really no -- I can't any of any [storage], Wayne, related to production.

I t think just maybe underlying your question is, do we have metal at the plants that we are not selling? And the answer is no. This is Logan, Chris. We sell everything that we've got. So we are not carrying inventory of metal at the plants.

As you know, and as you see in every 10Q, we hold very little finished goods inventory.

Then just one last thing. In some of the previous presentations, you have talked about other capacity coming on. Can you give us a little bit of update of maybe industry capacity? If anybody is adding to that, given that you guys are running at full capacity, and I think some other guys are too?

Yes, Chris, I think the key ones from a global perspective is, obviously first of all in the Middle East you have got couple of the plants that are now commissioning, for example, the [Hedro] plant. You are getting that going up, so that's starting up. In addition, you have got a few growth opportunities that are happening in India. I suspect that most of that metal will be consumed locally or domestically. China, obviously brownfield expansions occur, but there is a pressure on because, as I mentioned in my remarks, cash costs are now looking very much near what the price of the commodity is. Other than that, I think very little restarts. Some slowdowns. There have been some incidents with plants in Europe, perhaps some existing production coming back on. But these are small amounts. The big move is really from a global perspective or really the Middle East. And then you are looking at perhaps some in India and some in China. The rest of the world is pretty stagnant in terms of growth. Shelly is here with us, so she could add any --

Yes, I agree. It's really just the small stuff, like you saw Venezuela this morning. Anything that was shut down due to pricing I wouldn't expect to see coming back on line anytime soon. So it's more [things] that were affected by flooding or a power shortage. And again, all small volumes.

And there is nothing other than perhaps the [modern] smelterring in the Middle East that is really on the books for some execution in next three to four years.

Great. Thank you.

Thank you.

Thank you. Our next question comes from the line of John [Tumazos] Please go ahead.

The puts that you did in the first quarter were well timed. And by the beginning of June, you might have been up, I don't know, $0.10, $0.20 easily. Could you explain if your philosophy is to just hold them in expiration in case of the world comes to an end? Or whether you are willing to take a $0.10 or $0.20 a pound profit and put those monies toward a couple of weeks of Helguvik construction.

Thanks, John, it's Mike. Its the former. We purchased insurance, that was the philosophy. It's still there for insurance. It is like insurance on your house. You hope you never need it, But we are not of a mind to trade in and out of options. We buy them for insurance, and we put them away to say it simply.

You guys could start a pretty good trading fund with your record this year.

That is not our business, John, but your observation is pretty much accurate to what was going on with --

Well done. Thank you.

Thanks, John.

Our next question comes from Mark Linema with Morgan Stanley. Please go ahead.

Hi all. In the press release you talk about the Helguvik power supply contract being a primary factor as to the timing of the restart of construction. Can you comment a little bit about any of the details regarding that? And is it going to be when you get to the production stage, are you already talking about that it will be structured similar to Grundartangi? Thanks.

I think, let's start off with the last part of your question. Yes, similar. Not exactly the same, but similar. These contracts were signed in 2007. And obviously we are updating them now and with the potential to restart. But [they are] 25-year projects -- contracts, and they obviously are confidential. So we won't talk about too many details. But essentially, we are working through that with the power producers. And obviously, we will then take it once we settle that into the construction phase. Like Grundartangi, I don't think there is anything particularly confidential about it. It is a phased production or execution and the power production is on a similar basis. As you know, this will be mostly geothermal, and geothermal comes on in about 50 megawatt patches or pieces.

Would it be LME price-linked as well? That at low prices there is a benefit? Low LME prices?.

I think, Mark, your answer is confidential. I think you have got to take what you know of from our Grundartangi experience and extrapolate that in some way to your own decision.

Okay. And then on Mt. Holly, you have a joint venture partner. Who is leading the discussion with the -- is it [Sante Cooper] that provides the power there?

You are correct. I'll ask Wayne to handle that if you would like.

Yes, It's Sante Cooper that provides the power budget. It is a joint negotiations between both owners in the discussion we are having with Sante.

That's always been the -- it is the youngest smelter, but it has been laden with a bad power contract for -- well forever. Is there some local push at all or local support to get a deal done?

Certainly there is a local push and a local requirement to keep the jobs in place. So we have support in that regard.

Okay. No likelihood on timing or anything like that that we may see something?

No, we continue to discuss. Obviously it is a complex issue that requires detailed discussions.

Thanks. Good luck.

Thanks, Mark.

Thank you. Our next question comes from the line of Tim Hayes with Davenport & Company. Please go ahead.

Hello everyone.

Hi, Tim.

Couple of questions. First, was the EU supposed to review the 3% duty during the second quarter? And if -- were they supposed to review that, and if so was there any outcome from that?

Not that I'm aware of. It's Logan, Tim. Not that I'm aware of. I think it went into committees and then it got put aside for more discussion. I think there is obviously a natural tension between the those that will benefit from it, primarily those who are paying the duty versus the internal producers that obviously see some benefit from it. I think it hasn't been concluded. I'm not aware of any conclusion at this point.

My other question is back on Grundartangi and the power price that you are paying. Has that gone up this year? Because I think a couple of the other smelter producers in Iceland saw their power price, or at least what is tied to the LME, go up, or will be going up. Has your price there gone up or will it be going up as it relates to the percent of LME?

It hasn't. But we have seen a tax increase in Iceland. So perhaps that's part of it.

Is that tax -- is that a function of the LME price or is that just some --

Just direct tax.

Tim, it's Mike. I think you may be referring to one other producer in Iceland that negotiated an extension to an existing contract. And in that guise, it was reported maybe that the price changed. We obviously had no knowledge of that. That is confidential. But our contracts, as you know, go out some time at Grundartangi. So there is no -- it's not the same context there at all. And let me [answer this.] There is no change at all. Obviously they go up and down as the LME goes up and down. But the linkage stays the same.

Right. And have you disclosed the tax amount that was levied?

I am not sure if we have.

We haven't, Tim. It's not a material amount of money. It's more than say $1 million, but it's not more than several, several several millions of dollars per year over the next couple of years. It's a manageable amount of money, but it is something that, I think Logan, we and the other producers in the country sort of agreed to in the spirit of contributing to the economic recovery of the country..

Absolutely.

-- To the recovery of the country, yes. And what was that tax levee?

Mike, what's the change, from 15% to 18%. And as you know, we have an agreement that caps it at 18% at Grundartangi.

I'm sorry, could you repeat those? I missed that first part of those figures.

The Company tax rate in the last six or eight months has gone from 15% to 18% and -- but we have an agreement, an investment agreement at Grundartangi that caps it at 18%.

Okay. All right. Thank you.

Thanks, Tim.

Thank you. (Operator Instructions). At this time no further questions in the queue.

That's great. Thanks, Rocko, and thanks to everyone for joining the call today. We look forward to speaking to you again soon. Thank you.

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