Century Aluminum Company (CENX) Q1 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2012 Earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Enrique De Anda. Please go ahead. Enrique De Anda – Corporate Financial Analyst: Thank you, (Christina). Hello 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 presentation 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. Reconciliations to the most comparable GAAP financial measures can be found in the appendix on today's presentation and on our website at www.centuryaluminum.com. I'd now like to introduce Michael Bless, Century Aluminum's President and Chief Executive Officer. Michael Bless – President and Chief Executive Officer: Thanks very much, Enrique. If we could turn to slide 4 now, I'd like to make some introductory comments before we move on with the detail. I am going to talk on the next slide about the external environment, so I won't be repetitive here. Suffice it to say, as you all know that the aluminum price along with the price of other commodities has been held down here recently and quite frankly has performed poorly over the last couple of months due to a variety of factors. Again, I'll mention them just a moment and most of them will be if not all of you well known to you. Moving on importantly to our operations, at Hawesville, we did indeed reach and maintained stable operations this quarter as we expected with the plant now operating essentially at full capacity. As we predicted, the cost has started to move down nicely and though we still have ways to go here, I would say, the team has done a really, really excellent job. They inherited say about 9 months ago a reasonably new team, a pretty seriously difficult situation in the middle of last summer, and they have done an extraordinary job in getting the plant to where it is today. We still got ways to go and I'll talk about that in a moment too, but we are very gratified that the job has been done by the management team at Hawesville. The biggest issue remaining at Hawesville now is the power cost. I mean, it's a complex situation and I will talk about it in some detail towards the end of my remarks. Moving on we had a very busy quarter at Ravenswood as we predicated. I mean, importantly, we reached a key milestone there in reaching an agreement about post-retirement health benefits with our retiree group. That was a complex process that went for some months and we are gratified that we did indeed reach that key point. Next, we had a tax bill passed in support of our power price in the West Virginia legislature in the last couple of weeks. We had great support here from a variety of constituencies in West Virginia on this and importantly terrific leadership from Governor Tomblin of West Virginia and we are very grateful for that leadership. Next on in West Virginia will be the submission of our application to the Public Service Commission for a new contract and I'll talk about that in some detail again later in my remarks. We've begun discussions with representatives of the steelworkers. Those are going well so far, obviously a key part of getting to a restart. So, we are moving along well here and developing again continuing I should say good traction and let me just take a step back for a moment and remind everybody what we are trying to accomplish here in Ravenswood and more importantly, why? You might ask the question we seemed to be bucking a trend a little bit. Others who own similar capacity in similar markets as you all well know tend to be at the very best maintaining that capacity and in many circumstances curtailing that capacity. So, in essence, what's different about Ravenswood? There is a couple of things here and a couple of reasons why we continue to think that this could be a very good investment for our shareowners, i.e., restarting this plant. First and foremost, we think the market environment in the U.S. both current and prospective is conducive to reopening this plant. The supply demand equation in the U.S., the products that this plant will produce has produced successfully and will produce, and the customers for whom it will produce. We think that whole mix is an attractive one. Second, the physical plant here is in reasonably good shape as you've heard us talk, we've been spending modestly, but spending to maintain the plant in reasonably good order ready for a restart. And though despite the fact that as we've told you before that total cost of a restart here is quite substantial on the order of $80 million it might add that about half of that amount is to build the working capital that you need for a restart. A portion of that non-working capital amount that's attributable to CapEx is relatively modest. So, the plant is reasonably ready to go. Next on importantly we've got great support in the local community from all the constituencies. And importantly, we've got a very good workforce in the local area ready to go. We've obviously lost a lot of talents as we curtailed the plant just three years ago with the full curtailment at the beginning of 2009. Obviously, people have moved down and gotten new jobs and regrettably in circumstances have left the region to get new jobs. But we still believe here that we'll get a very good, very talented, very motivated workforce, back to workforce when we're able to restart that plant, and we've got great competence in the senior plant management that we've already got onsite. Last of course and most importantly as you know, we need power arrangement that is that flexible and that will protect the plant in retail and the environment and I'll talk about that. That's what we’ve been working on. That's what the tax bill that was successfully passed in the state legislature named it and that's what we'll be working on to supplement that tax bill in the special contract process with the Public Service Commission. Again, I'll provide some more detail. Let me move on to Mt. Holly, there as well we've been working hard on power. We've been talking obviously with our partners and co-owners at Alcoa with the power provider, Santee Cooper, about a short-term amendment to the power contract. And that we've been making good progress in those discussions. Here again we have had great support from the local constituencies and local legislature, and here again we've had excellent leadership for which again we're grateful from Governor Haley of South Carolina. We hope to be able to conclude these discussions successfully over the next couple of months and have something to talk with you about in detail both the form of the short-term amendment and the economics to Mt. Holly when we release our earnings to you in July. Lastly before moving on to health a bit, we've continued to have substance of discussions with all our power suppliers. Again, I'll make some more comments here at the end of my remarks, but bottom line, we are reasonably confident here that before the summer or by the summer. We all know on what trajectory we are heading here in terms of timing for restarted that project. Okay, if we could turn to slide five please and talk a little bit about the external environment. First and foremost, the cash aluminum price for the quarter on average was $2,180 that was up 4% from Q4, but down 13% from the same period of last year. The price reached a high of just over $2,300 a metric ton in late February and it's come down pretty consistently from then. Again, the factors that have led to this and the performance of other commodities are well-known to all of you. Amongst them are obviously first and foremost concerns about what's going on the Eurozone, a lack of a new quantitative easing program in the U.S. and the slowing of China's growth target as you know they took their economic growth target down from 8% to 7.5% although we would note that they would consistently beat their targets over years and years and years now. Also in China again I'll make some more comments about this in just a moment, but we have seen continued capacity growth and production growth there and then around the world you've seen the maintenance of high inventories. Having been said, the physical market remains reasonably strong in most markets and that will remain as pretty scarce. The contango obviously cash to three-month contango has averaged around $40 for some months now. It's been a little bit above, a little bit below, but it's been hanging in that range. In the U.S., the Midwest premium has been above $0.09 a pound. In Europe, the Rotterdam duty paid premium $200 per metric ton obviously. Japan premium $150 a ton. And we see nothing out there that tells us that this regime should change over the short or even medium-term. On the actual demand side, the picture is a bit mixed. In the U.S., consumption remains pretty good. Primary metal consumption, aluminum consumption, I should say, was up 5% in Q1 versus Q4 with the transportation sector continuing to perform extremely strong. Obviously Europe is quite weak and will be so or certainly is expected to be so at least for the balance of this year. I don't need to elaborate on the situation there. In China, the picture is somewhat varied. In the first quarter, demand was up 9% primary aluminum demand again versus prior year Q1 of 2011. The market for primary metal remains reasonably in balance. On the production side, we have continued to see some pretty heavy growth. The Q1 production was up 18% versus the same period 2011 versus Q1, 2011. And the market is expecting around 3 million tons of new capacity to come on in 2012, so quite a substantial amount. At the same time, we just haven't seen the cuts from local producers in older and higher cost facilities. Bottom line, I guess I should say that we are expecting and preparing the company for a range bound LME price somewhere in the very low 2000s, about where it is today at least for the next quarter or so. Just quickly on the alumina side, the market remains reasonably flattish. Spot prices have been trading in the range of $310 to $320 a metric ton. We've seen some minor cuts in developed markets, but again some new capacity coming on in other places like Vietnam and Australia. The consensus in the alumina market is currently around a million tons of consensus for a surplus I should say about million tons in 2012. If we could move on to slide 6 please, I'll detail the operational performance for you this quarter. First and foremost on safety, we had a good quarter across the company. Trends at Hawesville have been very good and were gratified by the performance there. We had a major pure audit at Hawesville in February. This is a program where we bring safety professionals from across the company to a facility and for several days look at the policies, the practices, and the performance of that plant. So, it's a good process and we always learn a lot of things. So, again the trends there are good. As importantly of the actual performance, we’ve seen a good increase in the awareness of all the constituents at Hawesville, our employees, and others on the importance in this area, the importance of consistent housekeeping and related areas. So, again, we are glad to see the progress there and proud of the management team for what they are doing there. Mt. Holly and Grundartangi also good safety performance for the quarter. At Grundartangi, we have that same periodic program in April. And we've continued to rollout with much success. You may remember I talked about this last time the behavioral based safety program. This is an excellent program in which you look systemically at the root causes of unsafe behavior that can obviously give rise to incidents in the future and it goes without saying what you are trying to do is to stop those incidents from happening in the future by getting people to think differently about their behavior and how the behavior could be unsafe. It’s a terrific program. It had great uptake at Grundartangi and we are hoping to be in a position to be able to roll that out at Hawesville if not in late 2012 and certainly in early in 2013. Moving down the charts on the production side, as I said, we are now stable at Hawesville at reasonably full capacity. The plant is operating now at any given time with only about 1% of the reduction sales out of service. That’s quite normal for a plant of this type. And we have produced this quarter at an annualized rate of 250,000 tons that's a bit above the rated capacity of the plant. Mt. Holly production was essentially flat Q1 versus Q4 with the full plant producing again a little above its rated capacity at an annualized rate of 230,000 tons. Obviously, we own 50% of that capacity. Grundartangi, I'd note that a terrific quarter annualized production of 283,000 tons that’s a record and that's despite the series power outage which we were faced in January. The team has done a terrific job there. Moving down to talk quickly about production metrics or KPIs as one might suspect the performance at Hawesville was up across all categories. This quarter let me just give you a couple of examples. Current efficiency, key measure was up a point across the plant. Energy efficiency improved by 3 percentage points. Bath temperatures were down. Anode defects were down significantly. For those of you who know our business, that’s real important not only in respect to conversion costs, but in respect of improved environmental compliance. Finally, metal purity was very good. As I said at the beginning of my comments, we made great progress at Hawesville, but the team there would be the first to point out that we've got ways to go get this plant, where it needs to be and were similar plants are producing. Mt. Holly and Grundartangi also good KPIs this quarter, essentially consistent with what they did in Q4, already at good levels. Lastly, before I finish these remarks, cash converging costs, obviously critical at Hawesville. As we predicted last time upon attaining full production again the cost has started to come down nicely and they have come down across all product cost categories, pardon me, except the electric power, and again I'll talk about that at the end of my remarks. Just to give you a sense of how these costs are coming down, if you put aside power and alumina obviously the two largest costs and take some of the other large conversion costs, for example, pot lining maintenance and supplies and total labor costs. Those cost categories in aggregate came down decreased by $9 million quarter-over-quarter and that was obviously in the phase of increased production. So, you get a sense there of number one, the leverage obviously of the volume, and number two, the absence of the unusual spending to get the plant back to where we needed to be. Mt. Holly as you see also cost came down nicely that's largely the result of lower carbon costs. And as you see, Grundartangi flattish, just down a little bit, that's obviously in the phase of higher power prices driven by the increased LME. I might note and Shelly will elaborate this on a little bit for the first time in quite sometime. Across our system, we are seeing some relief on carbon costs both today and predicted for the future. So, that's gratifying. And with that, I will turn it over to Shelly. Shelly Harrison – Vice President and Treasurer: Thanks Mike. We can move along to slide 7 please. The average cash LME price was up 4% Q1 over Q4, but on a one-month lag basis, the LME was down 3%. When you look at our realized unit prices in the U.S., they were actually flat quarter-over-quarter, which is due to the improved product mix at both Hawesville and Mt. Holly. In Iceland, our realized unit prices were down 2% in the quarter, which is consistent with the market. Turning to shipment volumes, as a reminder, a portion of our shipments from Iceland are now in the form of direct shipments rather than tooling. In the past quarter, direct sales from Iceland were 4,200 tons. If you include that volume along with the tooling shipment, you will see that Iceland volumes were flat Q1 over Q4. At Hawesville, we reached full stable production during Q1 and that drove a shipment increase of 8.5% in the quarter. Mt. Holly shipments were essentially flat with Q4. So overall, we had a 3% quarter-over-quarter increase in our global shipment volume. Moving on to the income statement data, net sales were up 2.5% Q1 over Q4, the decline in LME price drove a net sales down by 2%, but the increased volume essentially offset this decline and higher premiums from improved product mix in the U.S. made up the balance of the increase during the quarter. Adjusted operating income increased $12 million from Q4 to Q1. As you can see on slide 14 of the presentation, the few adjustments we made to reported operating income including add back for depreciation and elimination of the lower cost or market inventory adjustment. The $12 million improvement is on the $8 million sales increase. So, we are able to bring a 100% of the increase in revenues down to the operating income level plus an additional $4 million. Let me take you through a few of the key cost drivers there. In Q1, we saw net favorable LME linked aluminum power costs of $4 million and raw materials were better by $3 million. As Mike said, the raw material improvement is primarily due to lower carbon cost especially at Mt. Holly. This is the first time we've seen a decline in carbon cost after several quarters and very large increases. Going the other way, we saw $1 million increase in power prices at Hawesville and a $1 million increase in casting cost at Mt. Holly. At Hawesville, higher cost associated with the additional volume produced in Q1 will primarily offset by efficiency improvements and labor supplies, maintenance, and outlining as a plant returned to stable operations. Moving down the income statement, we had a quarterly adjusted loss of $16 million or $0.17 per share on total common and preferred shares. As detailed on slide 13, the adjustments through reported net loss included deduction for $17 million credit related to the inventory adjustment I mentioned earlier and an add back of $5 million for unrealized losses on forward contracts related to marking to market our meaningful options as the LME rose during the quarter. Our total share count consisted 88.7 million common shares and 8.1 million common share equivalents related to our outstanding preferred stock. During Q1, we repurchased 400,000 shares under our stock repurchase program that brings the total to 4.8 million through August. At this point, we have approximately $10 million remaining under the original $16 million stock repurchase program. Lastly on the slide, I'll just make a couple of quick comments on cash flow. As you can see here, CapEx for the quarter was $3 million, a decrease from Q4 is in line with our expectation. The capital spending will generally be weighted towards the back end of the year. Helguvik CapEx was $2 million for the quarter, which is consistent with our expectation of approximately $1 million per month. Quarter-over-quarter cash flat at $183 million. I'll take you through this in more detail on the next slide. If we could move on to slide 8 please, just the quick explanation of some of the larger unusual items we saw during the quarter. Similar to recent quarters, we had withholding tax payments of $10 million in Q1 related to return of cash from Iceland to the U.S. As we mentioned previously either temporarily tax payments that are refunded to us at the end of the year. We also spent approximately $4 million during the quarter. Our share repurchase program and the last item I'd like to call out is a payment of $3 million, we received from our joint venture anode facility in China. This represents the final payment on a loan we made as part of the original acquisition. With that, I'll hand it back to Mike. Michael Bless – President and Chief Executive Officer: Thanks, Shelly, pardon me. If you turn to slide 9 please just a couple of last comments and then we will take your questions, but we give you a sense of the issues on which we'll be working over the next couple of months and on which we'll hopefully had some progress to report to you and we speak to you again in July to report the second quarter earnings. So, first Ravenswood, I think I said most of this already, so the application for the special rates and the special contract goes into the – we'll be submitting that to the Public Service Commission here within the next week or so. As I said, the purpose of this contract is to develop a special rate and a structure that will protect the plant in weak LME environments. We've been told to expect at least a four-month process is quite the complex process as you might expect or sometime during the summer, we should start to get a sense of where we are heading there. In addition, we will obviously be meeting again with the steel workers to make progress on the labor agreement and we'll be doing some modest work on the sites to prepare for the eventual restart of the plant. As I said, we'd like to be in a position to conclude these processes, the PSC contract process and the labor contract process by the end of the summer. At which point, we require about four months to prepare the plant for restart to build our hard work done during those four month time. Ultimately as I said, we got to get the power situation right in order to put our sales in a position to be able to restart that plant. But it also goes without saying that along with the power. We need an economic environment and commodity price environment that will be conducive to the restart of that plan. So, we'll obviously be watching the market carefully here as we go forward over the next couple of months. And on Holly as I said, we are going to be working with the various constituencies on this short-term power amendment here over the next couple of months. This arrangement would give the plant some relief here over the next couple of years while we work on longer term solutions and again we hope to have some success to report to you add or before the next earnings call. Hawesville as I said the power issue here is a very significant line and to our knowledge Hawesville along with Rio's plant Sebree, which takes power under essentially the same contract from the same generation system. Those two plants are again to our knowledge the only two smelters in the U.S. that continue to say the rising or certainly not decreasing power prices. So, we've got a lot of work here to do. The situation that produces this is quite a complex one and it has to do with a variety of factors among switch our number one, the size of the generation system, it's a reasonable small system in Western Kentucky. And two, the position of the smelters in that system, the two smelters, Hawesville and Sebree combined take 70% of the power generated by the system. So, it's a reasonably unique situation there. As I said, we are undertaking now a significant effort to change the equation here and we'll again hope to have something to report to you over the next couple of months. The important here is quite simple that at the power prices, price forecast that we have been given by the power supplier. We have a smelter that's not economically viable, it is very simple. So there is a lot of hard work here to be done and it’s a critical work. At Helguvik, we have continued to work with the vendors here and to look at where we can make reductions and improvements in the capital cost. As I said over the next 60 days, we are going to have some meaningful discussions with the power suppliers here and by the beginning of the summer. We think we'll have a good sense on the timing for a restart of the major project activities there. And with that, I think we can take your questions.

(Operator Instructions) The first question comes from the line of Brett Levy with Jefferies. Brett Levy – Jefferies: Hey, Mike. Hey, Shelly. Can you talk a little bit about kind of the political environment in Iceland if there is I guess I am trying to figure out you said kind of in the next 60 days what do you think kind of some of the key gaining issues are politically, economically to kind of getting itself to the point that you can actually restart construction here?

Good question, Brett. Thanks. There is nothing I’ll talk – I can talk at length obviously about the political environment, but there is nothing specific in the political environment either today or perspectively over the next couple of months that will post this process either way. It’s just unique to these discussions where we have got some processes with both power companies with whom we have contracted. Remember these contracts go back to their signing in 2007, where we’ll be able to determine where we are just to remind you to very different power companies one HS, that’s the one with whom we did the arbitration, the result of which we got just before the end of the year. And so after that over the last couple of months, we have had some discussions with them on the basis of that arbitration result and those discussions I would say are sort of in the 7th or 8th inning. I am not a Red Socks fan, so I probably shouldn't go there at this point in time. But we are getting close to discerning whether we can make an agreement there in the near term. And then with OR, the other power company, Reykjavik Energy as they are really known. Again, this has been a process ongoing there that should be winding its way to conclusion here over the next couple of months. And so I don’t want anybody to believe that just we sort of successfully conclude these discussions here over the next 60 days and we’re going. I mean that would be the successful conclusion of the two processes would be a pre-cursor to a lot of additional work that would have to be done to memorialize agreements and then get the project ready to be restarted later in the year. But I think the next 60 days, Brett will be telling. Brett Levy – Jefferies: And based on the way their bolt-on has been performing so far you don’t really want to be a Red Socks?

I know where you are residing, so I thought I might at least get a friendly voice there, but maybe not. Brett Levy – Jefferies: It is what it is…

It is what it is…. Brett Levy – Jefferies: I’d say in terms of the short position you have sort of versus U.S. production, can you talk about the current quarter and sort of how you positioned yourself in aluminum for in terms of hedging for the balance of the year?

Yeah, Shelly, you want to go ahead and answer this. When you say short, I think you mean just the puts or what do you… Brett Levy – Jefferies: Yeah, essentially puts.

Yeah, yeah, where we have not sold forward any metal obviously, so okay.

Yeah, so as we mentioned in previous quarters, what we have got in place as Mike says right now is simply put just a downside protection and copper is roughly 25% of our un-priced domestic production through the first half of this year. Brett Levy – Jefferies: Anything for the second half?

No, that’s where we are right now. And as we said, we've been looking at it carefully. We think sort of where the market is now our view of the – it's our view, but our view is the potential downside from here, upside from here, and obviously the cost of protecting that downside, we just don’t think it's a good trade right now for our share on investment right now for our shareowner. So, we are watching it carefully, but that’s where we are right now. Brett Levy – Jefferies: And then lastly and I know I’ll get a diplomatic answer to this. The capital markets are relatively open you guys are posting decent numbers here. Any thoughts with respect to coal prices in refinancing the 8% notes?

Sure.

Yeah, Brett, we would expect them to have those notes have about 24 months left to run. There is another call date approaching in a couple of week here. So, we'll be taking a very hard look at this over the next 12 months. We certainly wouldn’t want to get very close to that when your maturity marks, so that we'll be watching those markets.

As you know Brett, your market there has, as you say, it's generally been pretty good. It’s had some, I don’t have to tell you, some fits and starts here over the last couple of weeks for all the obvious reasons and but as Shelly said we are looking at it hard. Brett Levy – Jefferies: Thanks for the time. I’ll get back in queue.

Thank you.

Thank you. We’ll go to the line of David Gagliano with Barclays. David Gagliano – Barclays: Hi, thanks for taking my questions. I just have a few. First on the cost improvement during the quarter, obviously, very nice improvement relative to Q4, some of which was expected, I am just wondering looking forward I didn’t hear much specific commentary with regards to Q2, any reasons we should expect the cost savings realized in the first quarter to reverse in Q2?

I think our expectation at this point is that we will continue to see those cost , improvements, the main area being carbon, which if you look at what we anticipated back at Q4 we thought we would see those sort of flat with 2011, I am sorry, flat in 2011. We actually saw pretty good improvement in Q1. What we are looking forward to that continuing in Q2 and we expect that if that does continue and hopefully we'll have some power pricing update as well. We'll come back to you in July at earnings date then and give you some new guidance.

Yeah. It wouldn’t be as David – as Shelly said, we are not going to – those improvements are here to stay and hopefully will continue. And as it relates to other positive trends, we see them. We are not quite ready to call it yet, but as it relates to the cost guidance and whatnot we gave you just I guess what Shelly, two months ago now. If these trends are to continue the way we have been seeing them, you could expect just to comeback over this in July and update that positively.

Okay great. That’s very helpful. My next question in your Ravenswood negotiations, I am curious what is your sort of downside aluminum price assumption embedded in that weak LME environment commentary that you made on the call?

Yeah. I mean, there is two answers to that question. And I am speculating now because we haven't submitted this application yet and then it becomes a pretty complex process, where a lot of constituencies are looking at this, but few in a perfect world, David, you would have a power price that is so flexible that it protects the plant almost at any LME, that obviously that world doesn't exist, A) because it just gets too, the support you would need just gets too onerous at some point in time and B) because things got really ugly you would be restarting the plant anyway. It goes without saying and so it's a hard question to answer. If you look back I think one way to approach it is, if you look back at where we put all our economic analyses in place and began the substance of discussions with retiree group and then we have active labor. It was around kind of the end of the year and it really accelerated in January/February and at that point in time as you well know, the LME was kind of 200 bucks or so ahead of where it is today, and if you look at as you well know people who forecast, nominal – forecast for the nominal price over the long-term. They are in that range or a little bit better, sort of 2300, 2400 or so and so that's a longwinded answer to your question. Our base case was probably a little bit higher than we are today 10% or so, but again depending upon what kind of power accommodation we could get if one could confidently reopen the plant at lower levels in that kind of longer term rate. So, was that responsive? David Gagliano – Barclays: Yeah. Actually, yeah it was, it was actually very helpful. And then just have one more quick one…

No problem. David Gagliano – Barclays: And this is long lines of asking the obvious question I guess, but with regards to Hawesville, obviously nice sequential cost improvement, but also commentary that it's not economic. So, the obvious question is one, I just show that down until a reasonable power agreement is reached.

Yeah. So, a good question let me and I am glad you, let me make sure I am impressed, I don't say clearly enough. So, when I said that, I said at the forecast for the future the next couple of years that, that power provider has given to us. The plan is not a viable on from an economic standpoint. So, it's not necessarily today, but its prospect. If everything else of the same, the LME was frozen and as power places were perfect forecast and came to be that wouldn’t be a good equation. And so that’s why are pulling the fire alarm now and saying something has got to give. The second half, I think, the second answer to your question as you saw was just if you are seeing that rate is what it's neither easy nor costless. I guess those are both understatements to shut and reopen these plants. Shutting them is reasonably easy. We are starting them as you are seeing now in Ravenswood take some time. You are starting with essentially nothing without a power contract, without a labor force. And even though working capital tends to largely finance itself you are dealing with a reasonable investment $80 million to get Ravenswood back to producing hot metal. So, I think that's the two part answer to your question.

Okay, thanks very much.

Thanks David.

Thank you. We'll go to the line of Kuni Chen with CRT Capital Group. Kuni Chen – CRT Capital Group: Hey, good afternoon folks.

Hi, Kuni. Kuni Chen – CRT Capital Group: I guess it takes a while to detail here just one more question on Ravenswood. Obviously on the power side of the equation that’s undetermined at this point and could go many ways, well, I guess as you see things right now, and if the plant restarts over the next few months, where do you see Ravenswood on the let's say North American cost curve?

Yeah, that’s a great question. You want to do North America or U.S. In North America, obviously you’ve got all the Canadian on the – if I may answer on the U.S. business, it's an easier it’s a more discrete set. I would say it's still, Shelly, a solid third quartile, high third quartile that your guess. Again, it depends on the power it's such, in answering that question I kind of used an average U.S. power price, but as you said at the beginning of your question, Kuni, it depends so heavily on where that power comes in. Shelly, do you have….

Yeah, I would say it is very dependent on metal price and also depends very much on the negotiations that we are having now. So, a bit hard to pinpoint that, but probably somewhere in the third quartile is the right point. Kuni Chen – CRT Capital Group: Okay. And the idea when and if that restarts that's the metal would be sold at market prices or would you do something to sell that forward and kind of lock in your spread there?

That’s a very good question and we’ve thought a lot about and done some modeling on that. And it really, I am not trying to duck it, but it really depends upon again how flexible that power price is, because again in the perfect world if you had the power price that was perfectly linked to the LME like we do in Iceland, you’ve got a natural hedge there and you buy your alumina largely if not wholly on an LME linked basis. You’ve got a pretty large hedge right there naturally between those two items. And thus you might depending upon your view that the market might be able to, might be willing to or I think it’s the best alternative for your shareowners to take advantage of the market price. So, it really depends, but I can tell you it's something that we'll look very hard at and already have that in place, the analysis that is. Kuni Chen – CRT Capital Group: Okay thanks. That's all I had.

Thank Kuni.

Thank you. We'll go to the line of Sal Tharani with Goldman Sachs.

Hi guys.

Hi Sal.

Quickly on Mt. Holly, you mentioned about a short-term amendment with Santee Cooper, when is that contract renewing or come for renewals and what does short-term amendment needs?

Yeah, so the contract is almost an evergreen one, but in 2015, it's been new rate schedule that basically that gets published. So, practical answer to your question is 2015. The answer to the second part of your question is it's still under discussion, but several years. It's not one or two years, but it's not five years start to be, so cute about that answer.

So, you are looking for an amendment after 2015 it doesn't change or you're looking at…

Yeah, this would, I am sorry to cut you. This amendment as it's being discussed would supersede that 2015 data which I just spoke.

Got you. And the next question is on the premium you mentioned which obviously have gone up. I was just wondering if the premium has to do with also the load out rates at the Alameda houses and with rules changing, I believe this month or next month, do you think that might be some decline in the premiums going forward?

Yeah, I would absolutely say what that is, it's part of it. I think the bigger driver is probably the financing transactions tying up the metal units that we've talked about a bunch of times, but the load out rates are important as well, but I am talking about the changes that actually came into effect this month and the topics and so far let's say the impact is very, very modest. And so we don't expect that to have a major impact on the premiums.

Okay, thank you.

Thanks.

Thank you. We'll go to line of Tim Hayes with Davenport & Company. Tim Hayes – Davenport & Company: Hi, Mike and Shelly.

Hi Tim. Tim Hayes – Davenport & Company: Several questions just to clarify on Hawesville that it's not economic under this new power contract is that a current LME price or is that on the forward curve for the LME?

So, let me, three responses there Tim with apologies. So, first its not a new power contract, is a power contract into which we entered in 2009 when we old one with terminated with the EON. It just a current price deck or forecast, forecast the current forecast for future prices coming from the power supplier. And yes, embedded in that comments thanks for the clarification was adding around current LME. So, if the future price that they given us where to be apply to current LMEs, then you've got an economic equation that doesn’t work. Tim Hayes – Davenport & Company: Okay. And then at today's aluminum price, do you have a sense of how much of the industry is losing money?

Depends on regional premiums but and regional prices obviously noted China, but Shelly you want to share with that?

Right, (indiscernible) maybe even little more than that.

Yeah, I don’t think it has, but it's I think Enrique is pointing in terms of as well. Well, we got to consensus here at 35% to 40%. Tim Hayes – Davenport & Company: It sounds alright okay. And the SG&A of 8.5 is that something that’s now sustainable or so that it maybe be a little higher going forward?

No, we think it's going always pump around based on whether you are working on some things, goes up and down based on legal fees for a variety of things and other consultant fees and things like that, but that has kind of Shelly an average number should be unfortunate that is non-cash as we talked about before small portion. And I think that’s a pretty good number.

We say about 10 million including the non-cash plus a little bit, for Helguvik Q1 was little bit better methodic in the ballpark.

That’s a very good point that Shelly makes is that when we gave you the guidance items in February or whatever we called them embedded in there was an average number for SG&A spending this thing from of course what we report on the cash flow statement, project expanding at Helguvik. And that has been while the project is relatively dormant phase, we're spending CapEx now as you've seen well under a $1 million of month by design, the related SG&A is going to be relatively small. Until and unless or I hopefully until we reach accommodation of power company at which point will start we're having up engine again the financing discussions and on other things around that obviously getting the documents with the power companies more or less will take some time and effort and dollars. Tim Hayes – Davenport & Company: Okay. And moving to the LCM benefit how does that split between the U.S. smelters and iPhone?

Yeah.

Non U.S. Tim Hayes – Davenport & Company: Last question in the press release you mention how customers are worry about sign long-term contract is that a comment for Century or is that industry wide.

That’s a very good question. The comment was meant specifically on our customers and the other people in the marketplace of the U.S. market and we speak. So, I can’t comment more generally than that. But I can tell you with good certainty that’s what our customers are telling us at this point in time. Tim Hayes – Davenport & Company: Okay. Thank you.

Thanks.

Thank you. We'll go to line of John Tumazos with John Tumazos. John Tumazos – John Tumazos: With tongue and cheek, Mike I was going to ask if (indiscernible) South Korean, North Korean nuclear issues. And I'm serious could you give us a little background on how the steel workers issues all the progress was made towards resolving those and the legislative support and the public utilities etcetera and sounds like an interesting novel but may be you could give us…..

Well, I appreciate your comments John my son is hoping that I get the call to replace valentine, but that hasn't come quite yet. Look this was I know it sounds like a lot of words, it was a complex process with the retiree group. And at the end of the day like in all good negotiations both sides like and so that's as we all know that's a signal of a good negotiation when everybody is equally as unhappy. But we came to an accommodation, I can only speak on our side that we thought made sense and the reason it make sense for us is that A is conditioned on the plant restarting successfully and B it takes into account to support that we are going to be getting on the power side. So, it in essence uses that in order to fund a Vivat trust for the retire regroup. We said from the outset and obviously people didn't like hearing this. But we were quite serious about it, we said that we are not – we can't get back on behalf of our shareowners into a situation, which we are rebuilding a long-term fixed liability. We can't do it. It's got to be something that we can pay, but payout of the plans cash flow as long as the plant is operating and so, that's how we came together, I mean, again it sounds like words, but we had just tremendous help here, not only from Governor Tomblin, from the mayor of Ravenswood, Lucy Harbert who did a great job and directly and personally from Senators Rockefeller and Manchin who spent their own time, I got to say and energy on this and so, it kind of took all of that the rest of this over the go line and we are very helpful that will come to pass when we get this plant reopened. John Tumazos – John Tumazos: If you saw this (indiscernible), the issues in Kentucky or in South Carolina, the Alcoa is managing all those things looks less challenging.

Well, I don't know, John, I mean, every as I've learned in space here over the last six months, every stated different that's obviously a throw away comment, but they look at these situation differently based on economics and the importance of the industry and a lot of other factors. And so, we have our own set of facts and circumstances in Kentucky that is going to take a lot of work. But we think the result of the (indiscernible) goes without saying as worth and we think there is a solution that makes sense for everybody. It take a while and a lot of effort to get there and less for genuine and the same will be sure we're sure in Kentucky with a great support in Kentucky as well and as just working through the issues with people and being transparent again sounds like a lot of words. But this is just what it simply comes down to making sure everybody understands what the situation is and what we need. John Tumazos – John Tumazos: We look forward to the opportunity to live and play in another day.

Thanks, John.

Thank you. We'll go to a line of Richard Garchitorena with Credit Suisse. Richard Garchitorena – Credit Suisse: Great, thanks, good afternoon.

Hi Rich. Richard Garchitorena – Credit Suisse: Yeah, so, it's a couple of quick questions, one you are talking about carbon cost coming down and the equity going to remain at those levels, I guess my question is there any way that you can lock that in other for Q2 or the rest of the year given the possibility that we get some improvement in the global economy in the second half of the year and I guess what's your comfort that things don't start to move higher again.

That's a good question so, the answer regrettably is no. Our carbon contract as they are worked a little bit differently. Obviously as you know when we see carbon, so, we are talking principally about (indiscernible) and then pitch as well. We buy our own stuff if you will in the U.S. and then for (indiscernible) by finished anodes, which obviously are just the same materials. But generally speaking they are trade or the prices are fixed is a fixed component of all the prices. But they go up and down basically based on the cost of calcined coke, which is not as you know tradable or hedgeable commodity and it's got lots of factor that go into, it's not just simply the price of oil although the coincidence factor between oil and calcined coke is generally pretty high. But it's getting coke to its own market and in addition to that with the coke market, we need depending upon where we are manufacturing for example for Iceland, we need high quality or low sulfur cost so, that's its own little specialized market as well. So, that's a very long winded answer to your question regrettably that there isn't a way to kind of fix those hedges out. I just one could always try to do a coke deal with a supplier, go to the supplier and say hey do you want to move away from the index and fix a price out. But my guess is there going to be very reluctant to do it as well because their profitability is similar they're purchasing raw material that they're using to make their finished product that they sell to us. Richard Garchitorena – Credit Suisse: Okay great that's very helpful. Another question just on Helguvik I guess obviously you're looking into secure some low cost power going forward. I guess my question regards to Ravenswood you’d mention that you like to see not just the power but also commodity price environment that aren't to restart is there any scenario where Helguvik may not be push forward give us…

That's a great question. Richard Garchitorena – Credit Suisse: Yeah.

I mean the strict answer is yes of course. Richard Garchitorena – Credit Suisse: Yeah.

Excellent question and there again because of the framework of the power agreements that we have in place for framework of these that we're looking final Helguvik you've got very flexible power there its not necessarily low cost to higher LMEs but it's always flexible. And as we talked about before and so you might be willing to sort of reasonably some of our environment restart the project but eventually you got to be able to finance it and you got to be able to look for some confidence but way the world is heading pardon me so along with answer to your question but answer is yes. There is a level of which we would say it doesn't make sense to move forward at a point in time. Richard Garchitorena – Credit Suisse: Okay great thank you.

Sure.

Thank you. We'll go to line of Timna Tanners with Bank of America Merrill Lynch.

Hi good evening.

Hi Tim.

Just two hopefully quick one. I wanted to just know the thickness get back given at the or so many moving parts and so many things that we'll have to wait for your updates on or I guess the local media maybe what would you look at if you asked to try to get a sense of going to power arrangements and unit negotiations go ahead. What would you be looking for is there anything externally we can watch?

Yeah that's a good question. I think you've got two places that you've talked about. So, in Iceland really it just those unique counterparty to counterparty discussions with between ourselves and each of those two power companies. So, there is really no, there is no macro trend there is no political things that as with that before it really is just I mean good old fashioned negotiation with each of those guys. On the rate that would you mention union there again I can't I assume that when we reach agreement with the workers trying to think about the real time we would say something at that time. So, you could certainly look for that. But again as I said that process on the labor negotiations with power, the Public Service Commission process over the next couple of months. So, we're gradually not a lot we pointed to say look for this one that we're getting close.

Okay that's fair. And then if you could comment a little bit about the share buybacks and how that gets into kind of the way you're looking your business and your uses of cash just in general.

Yeah it's a nice thinking and the decision that was made for our third quarter last year looking at our balance sheet thing fairly large amount of cash if we wanted to put some work and no there would some delay and how the big projects that good opportunity given the share price in the market. So we're thinking you to what towards that as I mentioned were $50 million into the $60 million program so that would done with it so we feel ways to go.

And we're look as you would expect and hope I would expect we'll look at it again so the extent that we finish this authorization it's something that we'll always look at some or which on a capital deployment capital standpoint.

Okay thanks.

Sure.

Thank you. We do have a question from the line of Paul Massoud with Stifel Nicolaus.

Hi thanks for taking my questions.

Hi.

First is on the price pickup operating rate, is there any reason we should expect those rate to come down or other rates something like you could expect to extent to rest of the year?

First the reason the consistent you can always in a quarter the up or down or present or so. Number one you have just statistically some cores or more days than others and as you know these plants run 24 hours a day and so that will drive the actual results from a per day standpoint you can always be up or going little bit or generally answer your question is now you should no reason to expect that was an back economy of those.

All right. On the direction on the Grundartangi in the first it looked at least I think last year first quarter was also, first quarter is a big quarter for direction. I mean is there seasonality to a direction men's are you starting to see the some of towing arrangements pushing back on when they take delivery?

No real seasonality as we continue to accrete production capacity you're going see more and more direction and as we enter to pay on a last earnings call. But nothing these I can think.

And then finally I think you made comment about the client base arrangements what is being one of the reasons why do want open back up. I mean can you talk a little bit about the customer base. Is there special product coming at raisings would you just talk a little bit maybe you just elaborate on that?

Yeah sure. I mean the straight answer is you got a customer on sight over next door. So, the rolling no which this companies on until 1999 to 2001 it was so, it's now owned by a combination of a private equity firm and major industry player. So it would make sense we believe for us and for them and as you would expect at discussions with them to reinstitute that relationship from an economic standpoint productions, standpoint delivery and will just. That will make a lot of sense that plan produces many products but its sort core product base aerospace business and sort of that broader institute question is that really we believe going forward is answer now with Hawesville which does produce specialty products, high priority metal and high conductivity metal. The customers in the U.S. are going to want local supplied. It sounds bit doesn’t centric but as you talk to the customers they really believe they don’t want to be bring especially high priority product into more receive also the only domestic producer and so as we see more and more capacity in the U.S. either, we think that there we’re seeing in the premiums and you see just in our product premiums about the Midwest and we get on jump high priority product. And we believe there is now it's probably not – doesn’t give digital position are you making plant economic or not put plant as running it makes that much more process.

Thanks a lot.

Sure.

Thank you. And last question comes from the line of Paretosh Misra with Morgan Stanley. Paretosh Misra – Morgan Stanley: Hi guys, thanks taking my question. Just I guess two questions. One on this proposed power contract at Hawesville is that still expected to be linked LME price?

The current one at Hawesville not linked LME price linked two I will say function of I should say not linked to the power providers cost of production it’s a collaborative be power provider collaborative so they basically to their customers including ourselves in the other smelter and to their retail customers. The basically past along the cost and we would expect any change of amendment accommodation in that to be not unlikely to be based on LME linked to but one never no that certain one of things that will be looking at. Paretosh Misra – Morgan Stanley: Got it. At least across your portfolio any opportunities from keep natural for you?

Yes. Its an excellent question and I can’t go into much more detail now but as you just the answer is yes and as you would suspect that something that we are looking at very hard and were excited about that trend both in terms of the supply and the price because that thing and its were not really to say something that’s going change the equation of U.S. smelting but we think its something that could be very exciting for us you're going forward. So, please watch the excellent question. Paretosh Misra – Morgan Stanley: Got it. And actually maybe just last one and this amendment in South Carolina at Mt. Holly similar question, is that going be LME linked or not really?

No, I can’t comment. Yeah, I would say again the current arrangement is on fixed price basis and so I wouldn't expect those too early to tell. We wouldn't expect sort of wholesale change in the structure of that arrangement. Paretosh Misra – Morgan Stanley: Very good guys. Thank you very much.

Thank you.

Thank you. Do we have time for an additional question?

Sure.

Okay going to the line of Tony Rizzuto with Dahlman Rose.

Hey Mike and Shelly congrats on a little progress. I've just got one question just to follow-up on the premiums over the Midwest from a high period metal you sell out of Hawesville where is it now obviously we track it on some other products but could you tell us how should change over the past one to two years?

It's, you're talking about the security premium?

Yes.

Yeah. So over Midwest it's been a high of in some very sort of thin markets in time couple of dimes, Tony and as low as sort of the mid single-digits and if you ask me for I would say keep price our sales head here with me but if you ask me for sort of the general level I'd say dime give or take Steve.

Is that about where it is right now would you say it's little bit tighter and given the…

I'd say it’s around that level now.

Okay, alright fair enough. Thanks very much.

Thank you.

Thank you. Seeing no additional questions at this time. Michael Bless – President and Chief Executive Officer: Thanks very much everybody we look forward to talking with you in a couple of months not before.