Cleveland-Cliffs Inc. (CLF) Q1 2012 Earnings Report, Transcript and Summary

Good morning. My name is Shannon and I am the conference facilitator today. I would like to welcome everyone to Cliffs Natural Resources 2012 First Quarter Conference Call. [Operator Instructions] At this time, I would like to introduce Steve Baisden, Vice President of Investor Relations and Communications. Mr. Baisden?

Thank you, Shannon. I'd like to welcome everyone to this morning's call. Before we get started, let me remind you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking within the Safe Harbor protections of the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Forms 10-K and 10-Q and news releases filed with the SEC, which are available on our website. Today's conference call is also available and being broadcast at cliffsnaturalresources.com. At the conclusion of the call, it will be archived on the website and available for replay. Joining me today are Cliffs Chairman, President and Chief Executive Officer, Joseph Carrabba; and Executive Vice President, Finance and Administration, and Chief Financial Officer, Laurie Brlas. At this time, I'll turn the call over to Joe for his initial remarks.

Thanks, Steve, and thanks to everyone, for joining us this morning. A year-over-year volume increases in all of our business segments led us to achieve a first quarter global iron ore sales record of 8 million tons. In North America, we continue to experience healthy steelmaking utilization rates, with first quarter averaging around 78%. Conversely, many mills in Europe are operating at rates well below capacity, ranging from 60% to 70% with a number of announced permanent idles. Europe's lower rates will have a minimal impact on our iron ore sales volume and recent announcements suggest stable pricing in premium -- in pellet premiums. We continue to see the Platts index pricing for iron ore trading within a pricing band of $140 to $160 per ton. First quarter's average Platts price was $144 versus $180 per ton in last year's comparable quarter. Despite the year-over-year pricing headwind, we still recorded first quarter record revenues. Additionally, we anticipate the iron ore spot sale, spot price to increase throughout the remainder of the year. This is supported by our expectation of China's crude steel production of over 730 million tons. Although China's January and February crude steel production was lower than expectations, the momentum appears to be gaining. China's annualized steel production increased to 725 million tons in March with even higher annualized production suggested in April's early reports. In the coal markets, spot pricing during the quarter was continually under pressure and softer relative to last year. However, we believe we have experienced the bottom. This will be especially evident if we see continued supply side shocks including industrial actions or adverse weather in primarily production basis. The softer market in the quarter required our global marketing group to seek out new customers in nontraditional markets for our North American Coal…

Thank you, Joe, and thanks to everyone also for joining us. In addition to the operating performance demonstrated during the quarter, with the announcement of our significantly increased dividend rate, a new capital allocation strategy, I believe, the first quarter marked a significant milestone in the company's history. Going forward, we will make capital allocation decisions through a process focused on driving top quartile TSR performance. As part of this, we intend to strategically shift from M&A focused growth to organic growth, which includes developing assets within our existing project pipeline. I believe the successful completion of our expansion project in Asia Pacific Iron Ore, along with our continued turnaround in North American coal illustrate an ability to deliver large-scale complex projects. Now turning to the quarter's result, I am pleased to report first quarter 2012 revenues improved 7% to $1.3 billion, another first quarter record for Cliffs. The increase was driven by higher sales volume, partially offset by lower pricing. Consolidated sales margin was $304 million, and was unfavorably impacted by higher cost of goods sold rate, including higher mining, maintenance and transportation cost. I would also point out that last year's first quarter sales margin included a nonrecurring $179 million favorable impact from negotiated pricing settlements with 2 of our largest customers. During the quarter, we recorded discrete tax items with a $255 million net favorable impact. The primary driver was the Australian federal government's recently enacted Mineral Resource Rent Tax or MRRT. The MRRT includes a provision which requires us to value our business and record a deferred tax asset which can be used to offset a portion of the calculated MRRT in future years. We expect to add approximately 3% to 4% to our effective tax rate with the duration of the life of Koolyanobbing. That…

Shannon, could you please prompt the call participants on how to ask a question?

[Operator Instructions] Our first question comes from Brian Yu with Citi.

You talked about Bloom Lake ramping up. So I have a couple of questions related to it. One, are all the repair works completed there? And then two, I think you're expecting about $60 cash cost. Would that reflect a steady date -- a steady state type of average? Or does that still incorporate some sort of startup so the steady-state is potentially lower than say at $60?

I think, on the steady-state question, we can actually, definitely, get into the $50 range moving into next year.

Yes, I think that's right, Brian. The repairs are complete. It was just the impact of the 10 days that we're down. It's not only the repair cost that went to complete the fix, if you will, from the damage that have incurred, but also as you know the resounding effects that we also get from both the loss of the volume that was the impact on the cost.

So this process of still ramping up the operations, I mean...

We are aware -- we're still balancing as we talk, Brian. We're -- things slowed down in the fourth quarter, as we all know, around the globe. We took advantage to really get into some blending schemes, if you will, on our mine. We ran intentionally some low-grade through the plant so that we can go ahead and get that bottom of the mine balanced. But we are still spending the time on getting the mine plan correct so we can get the blending through this ag mill. We don't have multiple mills. As you know, up there, it's just one mill that it goes through. So it takes some time for these low-grade deposits to get the blends right and get the kinks worked out. But once again, let me reiterate. We're very satisfied with the project we bought from Consolidated Thompson. We have not found any fatal flaws, if you will, or even major flaws in the flow sheet. We have found enhancements that we can make and we'll continually to steadily ramp this project up over the next few quarters. And as we said earlier, get it into the Cliffs standard, if you will, so that we can stabilize the operation and move forward.

Okay. On Australia, the increase in volumes you mentioned at drawdown stockpile, so I was curious if this 11.4 is kind of onetime type of bump? Or is it a sustainable rate that you can keep in 2013 also?

Probably a little early to make that judgment. But I would say, it's a possibility that we can get over $11 million. Because this year, we still do have some production from Cockatoo that will fall off.

Yes, that's about 0.5 million tons that will fall off about midyear , the Cockatoo tonnage, the mines if you subtract that. Should be at a sustainable rate, this is a big transition year. Not only from moving to bigger trains and really getting the rhythm down, if you will, of the mines, but we also have to open several pits. Those are pretty small pits there and we had to develop some new roads. So we're also trying to get the new blending schemes down at the mine. So a big transition year in APIO [ph] as well.

Our next question comes Timna Tanners with Bank of America Merrill Lynch.

I know you talk about being able to provide us more information on the pre-feasibility moving to feasibility stage for the chromite business. But I know there's a lot of interest in that topic and also the exploration activity, if there's any way you can give us a little further update, please?

Yes, sure, I'll be glad to. We are progressing very closely, I think in the next month or 2. We will be out of pre-feas going into feasibility. We've had several independent studies done on the engineering concepts and the cost as we bring those into the plus-or-minus 10% to 15% range, which is the standard to go to feasibility. So all of that work is progressing very well and we still have a robust project even with the increased capital that we discussed with that as we go forward. We're having excellent discussions and we're very close to announcements on agreements with provinces on where we're going to site the smelter and the road and those types of things that will allow us pin down the feasibility that goes with it. We've had very good discussions around the world with numerous potential customers about the grade and the quality of the product that are coming out. Very good discussions with the external stakeholders and with the first nations with the government environmental impact study is moving along. So that's all the information I could give you at this point in time. As Laurie said, as soon as we have more information to run the feasibility, we're going to be happy to provide that because we're very excited about this project.

And on our other exploration expenses, Timna, that you asked about. The primary focus is in a couple of areas. One is actually in Australia, continuing to look at new deposits to extend the life of that project that mine, and also proving out the reserve that Joe mentioned. We've been very pleased with what we've found at Bloom Lake and we think there's going to be more reserves there but we have to do the exploration and the drilling to prove that out. And the third major area is our Decar project in British Columbia. So those are the 3 major areas inside a variety of small things that our exploration's looking at, but those are the 3 major ones.

It's a pretty focused work around the exploration of the this year. There's not a lot of outside-the-box type drilling going on or expense.

If I could just one more. Conceptually speaking, it's early in the year, and it's hard to know of course what the full year is going to look like in terms of iron ore prices and steel prices in the U.S. But can you give us some idea about the variability if we were, say, to see things in China not improve as we're hoping, and in the U.S., let's say the price is closer to 650, 700 instead of 700, 750 for hot rolled. You used to give some of that variability, but can you give us a little bit of idea about what the sensitivity might be on a little lower estimates on both those variables?

About $10 is probably -- really not impact our U.S. Bio business. Too much has changed in the Platts index because, as you know, that's more longer-term pricing. So if you're looking at $1 to $2 a ton maybe, you'd probably get most jobs. If you have a $10 change you'd probably get $8 or so, most of the $10 would drop through on our other businesses which are more directly tied to the Platts pricing.

Okay and on the hot rolled changes, would that have a big impact in the U.S.?

Yes, the hot rolled price is not going to impact our U.S. pricing a lot.

As you know, we've moved a lot of our -- some of our U.S. business to more different contracts and that's not a big material driver anymore.

Our next question comes from David MacGregor from Longbow Research.

This is actually Arun Viswanathan on David's line. I guess, I just want to understand. I mean, last year when we're in initial stages of Consolidated Thompson, I think that you guys said that Bloom Lake at some point did get down in the $40, $45 a ton range on cash cost. I mean, do you still see that happening? And as kind of corollary, what has happened over the last year that cost is really kind of what are -- what are you learned through this and what can we do to prevent some of these mishaps in the future?

I think, we don't see $40, $45 a ton that we initially expected when we came out of the mine. We've got a lot of transition to do where we're trading OpEx and CapEx-type positions, more putting capital such as I talked about the tailings management systems in place as we go forward. And as we do, we're building it not for 16 but for 24. So there are a number of decisions that have to go with that. We just found a lot more cost particularly in the labor side as Eastern Canada and all of Canada ramps up on labor cost that are coming up. And certainly on the fly in-fly out basis, the cost of having all of those folks out there and where you have to rotate them out is an expense that a little bit higher than we had anticipated before. So yes, we're settled with the $60 for this year. We feel confident in that and as Laurie said, getting into the 50s, but we don't see going to the $40, $45 range.

Right, so then in the next phase, do you expect a similar kind of cost ramp out or how does that kind of play out?

We think it's similar -- these are 3 distinct lines. I mean they're all in the same geography, I mean, within hundreds of feet of each other. But they are built of single trains, they're built distinctive. We don't see a lot of synergies that would will get out of it by combining control rooms or maintenance forces or anything like that. So we see similar cost coming down the line.

I'm sorry, you said that it would start out higher this $90 to $100 ton range or with....

I think, our learning curve will be certainly a little bit faster because we will understand the deposit after having worked with it for 2 years by that point in time. So the learning curve will be much faster. But there is an absolute fixed cost component to all of this. So when you first start out and you're not running at the 8 million-ton run rate for the second leg [ph], we will not be leveraging the fixed cost. It will start out higher, but I would expect maybe not quite as high and I would expect that we would come down more quickly.

And then the concentrator, would that have a similar kind of 2-year learning curve or is that already kind of done with this buildout?

I think we'd get a steeper ramp up on the curve as Laurie had said, we are figuring out the mine if you will in the blending scheme. And again, it's the same plant set up, the same grinding system. So we should get a much steeper ramp up coming out of this.

Our next question comes from Michael Gambardella with JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: A couple of questions. One, can you explain what happened at Amapa? Because it seems now you had previously forecast, I think, about $30 million equity income, now it's breakeven.

Yes. The first thing is there were some tax reserves that were for local taxes that have been reversed. And that is why the first quarter, and this was unexpected, as you know, we don't manage that mine. But that was something we did not anticipate when we gave our original guidance. And so that resulted in a loss for the quarter. We do expect to be profitable for the balance of the year. With pricing being down not quite as profitable, but the major impact is the offset here of what happened in the first quarter. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. And then on Bloom Lake, in terms of the product sales that you've had to date, how is the pricing premium going compared to what you thought?

The pricing premium, Mike, is -- has shrunk as it has around the world right now and particularly with introduction of the product going to new customers. As you know, we're working with the pricing to get the test cargoes in. But it's a quality product that continues to move into the marketplace because of its quality, but certainly the premium is getting lower. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Is there a premium to the Wabush material now?

Well there's an iron content premium, but there's a discount because it's concentrate versus color. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. And just on the chromite project. Are there any possibilities for other major minerals in the deposit that you're looking at right now?

There is, Mike. There's the area, the Ring of Fire, as you know, as it's called up there. In the purchases we made of the juniors that we bought out, we've got a lot of extended land and there's a lot of potential up there for copper, nickel, there's been some small finds up there. I don't think anything economically yet. But certainly with the PGMs [ph] as well that could come through. We have not stepped out and gotten into any of the drilling campaigns there yet. We've stayed very focused within the chromite deposit itself. So we can do all the infill drilling and make sure that we've got that right so in the next year or so we'll start stepping out looking for other minerals.

Our next question comes from the line of Sal Tharani from Goldman Sachs.

Joe, on the chromite project getting back to it. Is there a opportunity possibility to get a joint venture partner who would also be your off-taker of the product, a lot of big standard steel/new company in the world who are big buyers of chrome?

Yes, Sal, it's a great question. There are numerous opportunities to do that. We've had conversations around the world, early stage, if you can imagine. And there are opportunities within this deposit because of the size and the quality of it, and being open pit, and in Canada that, we have numerous options that we're exploring at this time.

So you have been in conversations with some of these?

We have.

Okay. The next question, if I may, on the Bloom Lake. Couple of things. First, what is your sort of goal into China and Asia as you're starting to say that you're trying to develop some relationships long-term? And in terms of the mix of what you're doing and different blending, do you see any upside in terms of your -- of getting better revenue per ton by going through -- by doing some better blending over time?

On the first question, yes, we're taking the same philosophy that's important and which is now our Australia iron ore unit, it took many years ago and it's been very successful. We're trying to move the tons around to a lot of quality producers of steel within the area. So we don't want to get fixated on 2 or 3 very large customers, and be beholden to that if the industry or the company itself goes down. So we are exploring this with numerous customers, as we say, in Japan, in Korea, in Taiwan. And as you know, there's 17 to 20 customers that we have in China. So that is the -- that is our strategy is to mix the product around with high-quality steel mills as well as we go through the region and do that. The blend will take the variability. The iron content will not go higher, but the variability on the quality, which the steel makers really like to have, as anybody would, is really what we're striving, Sal, of that. And again, when markets weaken slightly like this, what the quality product and taking the variability out is it allows -- if all things are equal on pricing, that high-quality product is going to enter the market. And that's what we're striving to do.

Our next question comes from Jessica Fung from BMO Capital Markets.

I wanted to ask Laurie about the MRRT, I guess the value of the asset. And can you give us sort of a general explanation about how that's calculated?

It's actually a market value of our Australian business units. So we did that using our consistent pricing, and there's a lot of factors that go into it, but that's how you start.

So is that considered sort of fee asset allocation that you start with, and then that just gives you sort of credits going forward on the tax?

Yes, that's exactly the way to think about it, Jessica. So our tax rate, I said, will go up 3 to 4 points next year. It would have gone up significantly more if we didn't do this evaluation and use it as credit against it.

Okay, perfect. And my second question is, on capital allocation. I mean, obviously you guys are -- have the $1.7 billion in cash flow this year, with a $1 billion in CapEx and the dividend. But going forward, we still forecast quite significant cash flows being generated by you guys. How focused are you on paying down debt versus increasing a returns to shareholders, et cetera?

Well, we continue to reply a balance philosophy around that, Jessica. We do think that we said numerous times our investment-grade rating is very important to us. So I think paying down some of our debt would be prudent. But I think you continue to see the board look at the dividend as they've done over the last year and continue to look for opportunities to return it to the shareholders as well.

Our next question comes from Shneur Gershuni from UBS.

My first question, I guess, is about your guidance with respect to the U.S. And I understand that a lot of it has to do with pricing of iron ore and so forth, as well as some of the legacy contract indexes. But in your prepared remarks, you talk about a capacity utilization for the U.S. steel complex of about 75%. It's been running quite a bit above that at this point right now. I'm trying to understand, are you baking in a bit of conservatism into it? Is it really a function of your pushing out all the tons that you can anyway so it doesn't really matter if it goes higher? Or is it a reflection of some of the maintenance that we've been hearing about from some of the other steel mills and you're kind of expecting utilization to take down in the back half of year? I was wondering if you can sort of give us some color with respect to that?

We really don't have much additional tonnage to sell. So from a volume standpoint, that's where our guidance comes from. That's what we've got. And our contracts are fairly well set to increases in capacity utilization. It's not likely to impact the pricing in the United States.

Yes, we're very pleased, obviously, as I think we all are to see the steel industry starting to rebound back to hit those healthy utilization in the high 70s and the low 80s reported last week. That just bodes well for the industry. We do have nominations early in the year that can be adjusted in the first half of the year by the steel industry. And all of the known plan maintenance work is all baked into those nominations, as you can imagine. The way we have to plan and those steel mills have to plan. So we don't see anything lagging in the second half of the year. As you know, we're always on a slow start on the first year with the seasonality, with the locks being closed until the end of the first quarter. And we see those gains coming on. But as Laurie said, I just need to continue to reiterate, we are sold out this year going forward. So it's not conservative. That's just the position we're in.

Great, and my follow-up question, I was wondering if you can talk about the U.S. Iron Ore cost performance. You saw a nice step down. It was a surprisingly good cost number and so forth. If you can give us some color on what's driving this, and will this trend continue as things get rolling again? And is any of this is related to Empire and so forth?

Well, we reported $51 which is, as you noted, on the low end of our expectation. We still expect to be within that range. It's the early part of the year and many things happen in this industry. So I don't think we want to put a finer point to it than to say we're very comfortable that we will be staying within it. Empire is one of our higher cost mines and in the future it cycles off. Most likely, that could impact our cost in the future.

We're seeing the same inflationary pressures on just about in every area of the business that you can imagine going through. We do get a little bit of an offset from the natural gas, which is very nice. But also have a lot of increased pressure on the electrical power pricing as well that goes with it. It kind of offsets things. The increased diesel fuel certainly isn't helping things. It's not as dramatic as other mines as most of our mines are electrified, if you will, the shovels and the drills. It's just the trucks and the ancillary equipment. So we are seeing the inflationary pressures of the Mining business.

Our next question comes from Nathan Littlewood from Credit Suisse. Nathan Littlewood - Crédit Suisse AG, Research Division: I've got a few questions about Bloom Lake and also a clarification on the MRRT. So first thing on Bloom Lake, the pricing of -- was it was 1 16? I suspect that's a lot lower than what most people on this call were looking for. If we start with a Platts cost of about 1 44, I think you said, and you take off, say, $30 a ton freight, you get an FOB price for index funds of about 1 15, 1 16? There should have been a premium for the grade and there should be another premium for the pellets at Wabush. So I'm just wondering if you could give us a bit more color on why it was so low.

Well, we talked about what's the grade. Those premiums are shrinking as the market has tightened up with that. And the other thing that I explained earlier on the call was, as we put these trial cargoes in, obviously there are some negotiation to get the first draw cargoes in as well. So you would anticipate that at any time you're trying to get an entry point to going in from there. We've also seen the pellets premium shrink as well, around the world, and particularly those pellets that might be going into Asia which are always the first that are cut off in the market tightened, but our sales folks have been to continue to supply those as they come through the Wabush pipeline. Nathan Littlewood - Crédit Suisse AG, Research Division: Okay. So it looks as though, I guess, a customer placement discount is entirely offsetting any grade or quality premium and also the pellet premium for the time being. How long do you think it would take for that customer placement discount to start eroding?

We haven't changed our assumptions for the full year. And if all of this sort of was built into our plan and so we still got an expectation of $144, $145 revenue per ton for the full year. But this was part of the plan that our marketing team had in place. Nathan Littlewood - Crédit Suisse AG, Research Division: Okay. And on the tonnage, you mentioned there was 10 days downtime due to the fire, 10 over 365 is 2.7% of the year, but the production volume's down 10%. Just wondering if you could help us close the gap between 2.7% and 10%.

Yes, sure. As I said, again earlier on the call, within the fourth quarter, which I don't think they immediately shifted the mine from the lower grade ores that we're running to on 12/31 at midnight. We continued to bleed the mine in and to experiment in the first quarter to get our blending right. So I think you've got to take that into account as part of the first quarter as they brought their rates back up and got their blending schemes in place.

And also, keep in mind that guidance we gave is for all of Eastern Canada. So it would take into account Wabush as well as Bloom Lake. Nathan Littlewood - Crédit Suisse AG, Research Division: Okay. And on the Bloom Lake cash cost, I'm just trying to understand how you'd get to the $60 a ton longer term. So if we take out the impact of the fire, then that would suggest that the Bloom Lake cash cost went from $98 down to $82 a ton, because you said there was $16 a ton due to the fire. You multiply that by 1.1 million tons and you come up with $115 million worth of costs for the quarter. You multiply that by 4, you get $460 million operating costs, so for that operation at an annualized rate of 5.6 million tons per annum. So if we said that the cost base was entirely fixed, so the $460 million doesn't change and just divide that by 8, then you get $58 per ton, which is roughly...

Rather than bogging the call down with algebraic gymnastics, maybe we'll -- maybe I can follow-up with you after the call, I will tell you that there was...

It is a significant volume impact and Steve can walk you through the details afterwards. But you're headed in the right direction. It is primarily volume. And there are still improvements. Joe talked about some of the work that's being done. So you got the -- the onetime things need to go away. You need to get the volume up and then there are some improvements that we need to make. So it's really those 3 buckets and I think Steve can walk you through the details.

Yes, for everyone on the call, the volume impact we think is worth about $12 per ton on a cash cost basis. Nathan Littlewood - Crédit Suisse AG, Research Division: Okay. I guess the intent of the question is to ask on a dollar million basis, what are the potential improvements that you see being realized over the next little while because..

I have to dig into it and follow-up with you offline, I don't know what the dollar million amount is. But I would say in the second quarter, we'll see cash cost coming down into the $70 range and then progressive improvement in the second half of the year. Nathan Littlewood - Crédit Suisse AG, Research Division: [indiscernible] with clarification on MRRT. So am I right in saying that using the market value method for MRRT because there are some options there?

There are options and we have collected the market value method, yes. Nathan Littlewood - Crédit Suisse AG, Research Division: Okay, and so if you generated a tax credit. Does that mean that the market value is lower than the previous book value for these efforts?

No, it means it's higher. Nathan Littlewood - Crédit Suisse AG, Research Division: Okay. And why are we seeing the MRRT adjustment now. I didn't think it came into effect until 1st of July?

The law was enacted in March, which essentially creates this for us that we need to record it as part of the quarter. So there's been some things like in the U.S., the Medicare part B, there are some other things that have happened in the past where a law changes, most people think of a tax when I owe it. But this changes a value on our balance sheet as of the end of March.

Our next question comes from Jorge Beristain with Deutsche Bank.

Jorge with Deutsche Bank. My question was related to Valley and their announcement about bringing down that pellet premium last week. I think they went from $35 to $32. But importantly they switched back to an annual pellet premium-setting mechanism and I was wondering if it would have any effect on your U.S. pellet pricing formula? And if on a going-forward basis if you're kind of disconnecting from the international pellet premium that Valley's charging versus what you've negotiated in the U.S. in your recent contract?

Jorge, we've read the same thing in publications that I'm sure everybody on the call, the market has read as well. We have not seen the statements directly from Valley nor have we been able to validate that as versus the publication. So that kind's of the step 1 in this. We'd like to see the validation from Valley that indeed this is the deal that they struck and what they've done. And we would certainly strive then, if that is true, since they are the market leader, is that's where we would strive to put the pellet premium in place in our business in the spot business we have around the world with that.

And we don't know if that applies to 100% of their customers or what geographies. And our contract says our commercial payments gone through working them. They take into account various different factors and pellet premiums in publications. So we're early days in trying to understand if it has an impact. But I don't think it's going to change our guidance expectations directly at all.

Would it be fair to say though that your current pellet premium in North America from what I recall, I thought it was mentioned on the conference call 1 or 2 quarters ago, that you've kind of worked out it with a $15 pelletizing premium in the U.S, And so if this turns out to be true and Valley is again now publishing a new international benchmark, if you will, north of 30, does that give you guys any upside kind of opening in your contract. Is your contract's set up to allow this for this eventuality of reestablishment, if you will, of an international pellet benchmark after it had kind of disappeared for the past 2 years.

Jorge, they're all good questions. Again, I think this announcement came out 2 or 3 days ago. Again, one, it hasn't been validated by us anyway as that's what's in the market from Valley, so that's step 1. Step 2 is I wish I had answers and I don't with a 2- or 3-day announcement and publications. Our guys, as you know, our contracts are very complex. And we have to work through all of those with this new change of philosophy, if you will, for pellet premium back to an annual pricing, if that's correct. We got to dig into the contracts and see where they're at. I don't have any answers for you today.

Shannon, with the hour approaching being up, why don't we go ahead and end the call? Jessica, Miranda and I will be available for any of those participants that have additional questions throughout the day. So please feel free to reach out to us. Thanks, everyone for attending today's call.

Thank you.

Thank you.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation, have a wonderful day.