Good morning, ladies and gentlemen. My name is Brian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mercer International first quarter 2008 earnings conference call. All lines have been placed on mute to prevent any background noise. (Operator instructions) At this time, I would like to turn today's conference over to Ms. Alex Tramont of FD. Please go ahead, Ms. Tramont.

Thank you. Good morning, and welcome to the Mercer International 2008 First Quarter Earnings Conference Call. Management will begin with formal remarks after which we'll take your questions. Please note that in this morning's conference call, management will make forward-looking statements that remain in the press release according to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. I would like to call your attention to the risks related to these statements, which are more fully described in the press release, and in the company's filings with the Securities and Exchange Commission. Joining us from management on today's call are Jimmy Lee, President and Chairman, and David Gandossi, Executive Vice President, Chief Financial Officer, and Secretary. I will now turn the call over to David Gandossi. David, please go ahead.

Thanks, Alex, and welcome everyone to the Mercer International's first quarter earnings conference call. The format of our call today will be a little different than in the past, but we hope that you will find some of the additional topics we have in mind useful to understanding our results, our strategy, and some of our unique characteristics that sometimes are not always obvious from our statutory filings. I will begin by making some prepared remarks regarding the results of the quarter and our current financial position, and then I will pass the call to Jimmy, who will provide some additional detailed commentary on our operating results, our markets, and highlight some of the strategic initiatives we are advancing. We assume you have had a chance to review the pres release we released yesterday, so our comments will focus on the highlights rather than the detail. And as always, we will be pleased to take questions before we conclude the call. We were quite pleased with the company's financial performance in the quarter. Our sales volumes improved from the seasonally lower fourth quarter, and list prices in all of our markets continued to rise. We reported net income of EUR 2.9 million in the quarter, or EUR 0.08 per basic share, compared to net income of EUR 1.1 million, or EUR 0.03 per share in the same quarter in 2007. Our earnings in the quarter included pretax accounting losses totaling EUR 1.8 million for the mark-to-market changes in our foreign denominated debt and our derivative instruments. This compares to the same quarter in 2007 when we recorded gains of 7.8 million on our then outstanding debt and hedging instruments. As you would expect, our debt reduction schedule is one of the contributors to our lower interest expense, which was EUR…

Thanks, David. As David mentioned, we are pleased with our overall performance during the quarter. While operationally we continued to improve, the headwinds created by what has been a steadily weakening of the U.S. dollar have been punishing to many in our industry. Our productivity approached record levels of the fourth quarter. However, one fewer calendar day in the quarter and the preparation for Celgar's April annual shut resulted in our production being about 9,000 tons lower in the first quarter at 361,000 tons. This compares favorably to the same quarter in 2007 when our production was 347,000 tons reflecting the capital expenditures and mill optimization projects we completed in 2007. We commenced Celgar's scheduled annual shut in the final hours of the quarter, and we are pleased to report that the mill safely returned to full production after 12 days of maintenance. This shut is the only scheduled down in the second quarter and while it went as planned, you will notice its impact on reduced production and higher maintenance costs in the second quarter when compared to the current quarter. Pulp markets remain in balance and we increased our sales volume by 25,000 tons from the seasonally slower fourth quarter. The list price for NBSK pulp in Europe increased during the quarter by about US $30 per ton and ended the quarter at US $880. This compares to US $757 per ton one year ago. Along with others in the industry, we have commenced a $40 per ton NBSK increase in Northern Europe effective April 1. We expect the increase to be fully implemented by the end of May. We have experienced some recent congestion in our supply chain, which has increased our inventory, particularly at Celgar, where port congestion on the west coast of Canada is particularly…

Thank you, sir. (Operator instructions) Our first question comes from the line of Herve Carreau with CIBC World Markets. Please go ahead. Herve Carreau – CIBC World Markets: Yes, thank you. Just wondering if you, first, can tell us what are your fiber costs in British Columbia from the two different sources. And, second, I am just wondering if the congestion at the port also reduce your shipments in Q1? That will be appreciated. Thanks.

David, you want to deal with that?

Sure. On the wood side, Herve, the – maybe the way to think about it is on average wood costs in the southern part of the province are averaging around $50 to $55 a cubic meter. The woodroom all in costs for us now we are seeing, they are about $20 a cubic meter lower than some of our remote chipping, so that sort of gives you the range. And our own woodroom would be competitive with sort of the average of what the sawmills are charging us for residual chips today. So that’s the scope of the cost in British Columbia. All in our fiber cost in the first quarter is slightly lower than they were in the fourth quarter of last year. Herve Carreau – CIBC World Markets: When you say that they are becoming more efficient, that all log shipping versus when you started it earlier last year?

Yes. I think the sequence of events would be best thought of this way. The sawmills, as the lumber markets got more and more challenging, needed to charge more and more for chips to stay open, and we were suffering from that. Then we started optimizing our woodroom, but it – the failures in the sawmilling industry were so dramatic, we had to engage whole log chipping at remote chippers, and that is our most expensive fiber. And so a continuing modernization of our woodroom and updating its volumes will allow us to turn off those remote chippers and in this current environment our woodroom will become a very competitive chip with the sawmills and will actually help us create a ceiling on what we need to pay for fiber generally because we'll have the capacity ourselves at a price that’s affordable. Herve Carreau – CIBC World Markets: But that will increase your bargaining like position for residual chips?

Well that’s right. We just – we are not going to be – we are just not going to be hostage to fiber. We are going to make our own way. Herve Carreau – CIBC World Markets: Okay, thanks. And just – and also just on the problem at the ports, was that a – did that impact the Q1 and Q4, or was that–

Yes. I mean, it is continuing to impact Q1 and it will have an impact in Q2, but we are continuing to find alternative ways of shipping, and we think that in Q2 and Q3 we have made significant progress to ship significant volume. So that should relieve our inventory to levels which have been more traditional for the season. And so the port congestion itself is not necessarily improving. It was just that we have been able to find alternative means of shipping the volume out and I don’t think that the port congestion is necessarily going to de-bottleneck at least in the short term. It will take the duration of the year. Herve Carreau – CIBC World Markets: Okay, great. Thank you.

Our next question comes from the line of David Post [ph] with Glen Rock Capital. Please go ahead. Mike Tannenbaum – Glen Rock Capital: Actually, this is Mike Tannenbaum [ph] speaking in place of David. A couple of questions. You said in your press release that winter storms in Germany and Austria increased fiber supply by damaging the forest and effectively lowering fiber costs. And we were wondering when do you think those supplies will be consumed and how will that impact fiber costs going forward assuming – we are under the assumption the costs – fiber costs will then increase. And then my next question is, this EUR 35 million project to generate 25 to 30 megawatts of power, I assume that is annually, and how much revenue will be generated from these sales approximately do you feel?

Yes, in terms of the wood that has fallen because of the storms, oddly enough, we've been experiencing significant amount of storms in the later part of the year and early part of the following year in Central Europe. And as a result of that, there has in the last nearly three years there has been a significant amount of wood which has fallen. And this, of course, has impacted the older trees and that’s why there is discussion in regards to potentially shortening the cycle time and, therefore, reducing the overall damage resulting from these storms. This would result in significant increase in volume for a significant period of time. The actual amount that was fallen in Austria represents almost a year's worth of consumption. So, we think that the wood certainly would have to be taken out to create economic value through the year. It just means that they will be reducing their purchases out of Southern Germany, but really the impact this year wasn’t just a result of the storm, but really the competitive situation because of our immediate competitors for pulp logs would have been the board manufacturers as well as the OSB manufacturers. And, of course, because of the overall economic activity in U.S. in terms of housing as well as in Europe certainly the competition in that area has been reduced. And, therefore, we do not project that at least in the short to medium term that there will be a likely change in terms of the wood prices in Germany. And, of course, in terms of our Celgar energy project, we believe that this of course will qualify for the energy, which has been called for under the renewable programs in British Columbia. And based on what we believe are alternative type of suppliers in terms of green energy pricing that this power will have a fairly rapid payback something in the order of just over three years. If we do not get the power under the renewable power program, we still believe that long term power rates are coming up as well as the fact that there will be additional calls for power. So, it will range, but certainly we'll have a fairly rapid payback if the projections for green power rates in the short term are contracted for. Mike Tannenbaum – Glen Rock Capital: Okay, thank you.

Our next question comes from the line of Bruce Klein with Credit Suisse. Please go ahead. Bruce Klein – Credit Suisse: Hi, good morning. What – I am sorry, the funding for the Celgar expansion is that internal? How is that being funded?

Well we think that clearly we do have the necessary funds, but because of the nature of the project, we think that it will be able to be financed as a standalone project finance facility. Bruce Klein – Credit Suisse: Okay. So, you are going raise money in the project finance market to do that? Is that what you are saying?

Right, because it will basically be likely sold under long-term contract to a utility. Bruce Klein – Credit Suisse: That’s on balance sheet, the financing?

Yes. And it will be relatively efficient capital for us, Bruce, because it is like there going to be a 20 year power purchase agreement will be the security from a government utility. So, it’s a way to add some lower cost of capital to our capital structure and if that’s not successful, and I cannot imagine why it wouldn’t be, but if it’s not, we've got lots of liquidity in the company to do this in a very rapid payback. Bruce Klein – Credit Suisse: Okay. And your latest views, I guess you noted pulp inventories on a day’s supply crept up a little bit. What is sort of your take on that? And it sounds like you are constructive because of the FX and the cost pressures, but is there a level where inventory bills were not quite as constructive or how do you view that?

Well, I think the problem is has mainly been in the Western Canada in terms of the port congestion. So, although we do have sales, it has been very difficult to reduce the inventory because we just can’t get the shipments out. Bruce Klein – Credit Suisse: I was – Jimmy, maybe just more – I was talking more macro in terms of the overall level of market–

Yes. I think the macro situation I think also represents a little bit of uncertainty in the markets that we saw in China, and I think there has been some inventory liquidation in China in the later part of the first quarter. And this is a combination of I think of the credit situation in China, because of course they are tightening down on credit, as well as the increase in the R&B value and therefore some of the purchased pulp could be sold still for a profit in terms of dollars. And so there was net selling, which tended to create a slightly weaker market in China, and there was also some loose pulp of course being let us say offered. And I think this kind of created a situation where there was some minor buildup in inventory, but we think that moving forward this weakness at least will be cleaned up very quickly. Bruce Klein – Credit Suisse: Thanks, guys.

Our next question comes from the line of Ben Carlin [ph] with Wachovia Securities. Please go ahead. Ben Carlin – Wachovia Securities: Good morning. The question is about supply demand with regard to potential shut down of high cost capacity. Where do we stand with some of the higher cost competitors out there who obviously have been experiencing tremendous pressure in the markets? Some of these are Scandinavian producers that are experiencing the higher wood prices coming out of Russia. And also, in Western Canada, what is going on with the Pope & Talbot transaction? Has that closed? Is that capacity potentially to be shut down? How do you guys see the situation?

Well, we think that still there is any producers which are losing money even with pulp prices at these type of levels, and this is really the result of the fact that, of course, raw materials have come up, energy costs have come up as well as freight costs have come up. So, many in the industry are still losing money. We, of course, heard that some of the mills in the Pope & Talbot group probably fit into that category. We, of course, have also heard that the sale to APP's subsidiary collapsed, and there is now a controlled shut down of the two mills in British Columbia, and also I believe also the mill in Oregon. I heard they will also be shut down in the very near future. So, they are presently going through a shut down procedure. We don’t know as a result of additional discussions with APP or potential other buyers whether those mills will ultimately be sold or even ultimately return in terms of production. But, let’s say that it’s a significant amount of pulp on an annual basis that, of course, the three mills produce, something in the order 700,000 to 800,000 tons, and of course just one of those significant impact in terms of the pulp factor depending on what finally happens to those mills. There is of course the other mill in Finland, Stora Enso’s mill, which of course is going through also closure, another half a million tons. And we still believe that there is room for additional at least one other mill probably in the Eastern part of Canada which may also go down. So, clearly significant amount of production which are under threat because of the high cost, because of fiber, energy, et cetera. And this could represent a significant turning point in terms of the price development because it is a significant amount of the percentage of global market NBSK production. I hope that answered your questions, Ben. Ben Carlin – Wachovia Securities: Yes, it did, Jimmy. Thanks, it was very helpful.

Our next question comes from the line of Aaron Rickles with Oppenheimer. Please go ahead. Aaron Rickles – Oppenheimer & Co.: Thanks. Good morning, guys. I guess just a couple of clarifications. You guys said that the Celgar revolver is currently undrawn?

No. It has got 22 million Canadian drawn against it and it’s a 40 million Canadian revolver. Aaron Rickles – Oppenheimer & Co.: Okay. Can you run through the shipments and production on a mill-by-mill basis?

Okay. I was anticipating this. Okay, for Rosenthal, the production is 85.1, Stendal was 155.1, Celgar 120.7 for a total of 360.9. And the sales for Rosenthal was 83.1, for Stendal 149.5, and Celgar 115.6 for a total of 348.2. Aaron Rickles – Oppenheimer & Co.: And then can you remind us what I guess the current inventory build at Celgar is?

Well, it’s probably about 20,000 tons higher then we'd like it to be at this point in time, and probably will be 30,000 tons lower by the end of the third quarter. Aaron Rickles – Oppenheimer & Co.: Okay. That’s helpful. The power program at Celgar, did you – I don’t think you guys said exactly when those costs are expected to kind of roll through. Can you help us out? I mean, is there any – there is no spending for 2008, I guess–

Yes, there will be. Yes, we'll spend about EUR 9 million in 2008 on it, and then the largest component of spending will be in 2009. Aaron Rickles – Oppenheimer & Co.: Is there any way to think about that on a quarterly basis when that kind of hits or–?

Well, it’s going to be even throughout this year and then it ramps up, big spending second quarter '09, biggest spending third quarter, and then ramps down from there. Very little after that. Aaron Rickles – Oppenheimer & Co.: And the anticipated revenue should start to come in, 2010? Is that how–

Yes, first quarter of 2010. Aaron Rickles – Oppenheimer & Co.: Okay. And then, so when you talk about a three-year payback, are you talking from the time of ramp – revenue?

Yes. Yes, for sure. Aaron Rickles – Oppenheimer & Co.: And the green power rates, there was some sort of a legislation sort of act that sort of happened in order to get the higher rates. Has that gone through? Is that what you are still sort of waiting for to see what happens?

There is a number of things going on. One, we've got many choices to sell our power because of where we are and who our utility is. So, where we are in the province we have choices, but BC Hydro has implemented what Jimmy mentioned as a bioenergy call. It’s a call for power. We submitted our project and we would expect to be a very attractive power project for that call. And we will know by July this year if we are going to be successful in that particular power sale opportunity. And if we are not proceeding on that course then we have other choices for selling our power. And as Jimmy mentioned, the way we are thinking about it is, this is BC Hydro's first call for power. Rates are going to do nothing but go up in the future, so we are going to be prudent as we go through and determine how we are going to wield our power. Aaron Rickles – Oppenheimer & Co.: Okay. That’s helpful. Is the – the CapEx of the restricted group, can you just let us know what that was?

Sure. CapEx for the first quarter for Rosenthal was 0.4, Stendal was 1.3, Celgar 1.3 for a total of 3. Aaron Rickles – Oppenheimer & Co.: Okay. And then I am going to ask one more little question. The down time at Rosenthal for the rest of the year?

Yes. Down time for Rosenthal will be 10 days in Q3 or about 9,500 tons. Aaron Rickles – Oppenheimer & Co.: Okay. Finally, on the wood situation, the Austrian wood basket it seems like it’s just geographically a lot closer to Rosenthal than Stendal. Is that accurate and would you say that the impact will be felt much more at Rosenthal or equally?

Yes. I guess it is closer to the Rosenthal mill, so it will have more of an impact on the Rosenthal. But, what we are seeing, as I said, the OSB side, which is the pulp logs, of course, is really more the stand out which is of course consuming more pulp logs. So, I think the combination of the two, the Austrian situation as well as the weakness in the board industry, is having a general type of impact on both of the mills. Aaron Rickles – Oppenheimer & Co.: And have you seen rates – have started coming down already for Q2? I mean, is there any sort of order of magnitude that you can help us with?

Well, I mean, we are projecting that there will incremental decline in wood prices, but it’s not going to be a material decline. Aaron Rickles – Oppenheimer & Co.: And then just finally, on the Canadian wood side, I don’t think that your mill is close enough to Pope & Talbot mills that that would have an immediate impact on your wood cost. Is that–

It has no impact in terms of wood cost. Pope & Talbot, they get their drawing from different areas. Aaron Rickles – Oppenheimer & Co.: Right, okay. Okay, great. Thanks, guys.

Our next question comes from the line of Andrew Shapiro with Lawndale Capital. Please go ahead. Andrew Shapiro – Lawndale Capital: Hi, good morning. I have a few questions, most of which are follow-ups on your answers to prior questions. First off, on the Celgar, David, you mentioned in responding about the 20,000 ton inventory level higher than you want, that you expected a 30,000 ton drop by the end of Q3. That’s 30,000 tons drop from where you are now?

Yes. Andrew Shapiro – Lawndale Capital: Where normal are–?

From where we are now, Andrew. Andrew Shapiro – Lawndale Capital: Okay, all right. And so that’s probably a creation of more cash than you had otherwise seen in the particular quarter, freeing up some of that. Can you give us a handle on the outlook for margins in the next couple of quarters as you are working off this inventory presumably that inventory is higher from higher cost fiber at Celgar now flowing out and flowing through and, of course, that’s offset by lower cost fiber coming through from Germany. Do you have some handle on that, give us some guidance?

Yes. I don’t think it will be really dramatic because the fiber costs in Canada haven’t – I mean, in the first quarter they are slightly – sorry, just slightly above where they were in the fourth quarter. So, it’s not really material. So, the tumbling through effect of the fiber cost in inventory is not significant. So, as those tons are sold, they will have a similar type of an EBITDA margin as the tons you have seen sold in the first quarter. Andrew Shapiro – Lawndale Capital: Okay. We'll just see more of it as you bring inventory down?

That’s right. Andrew Shapiro – Lawndale Capital: Okay. In terms of your maintenance shut, you have done the maintenance shut at Celgar. I think you said Q3 is Rosenthal and Q4 would be Stendal. Did the maintenance shut at Celgar enable any improvements to capacity? And what are the updated capacities of the three plants? And your capacity expectations from the two German maintenance shuts that are planned for this year?

Well, I think clearly the Celgar maintenance shut improved the performance of the digester to the point that now that is running very steadily and is now putting pressure on the other parts of the equipment. We think clearly Celgar has the potential over time to get to almost 600,000 tons of annual production with very little investment. So, clearly the daily maximum run rates indicate that, as well as Stendal we think the mill certainly exhibits potential to get closer to the 700,000 tons annual production. Andrew Shapiro – Lawndale Capital: Now your Stendal number, is that after the upcoming maintenance shut, or with–?

No. We will be installing some additional equipment as part of the EPC C settlement contract and, of course, this will have a significant impact and, therefore, in the next year be able to further fine tune the balance of the mill to start to develop towards the 700,000 ton range. Andrew Shapiro – Lawndale Capital: Okay. And what are the – your current stated capacities for the three plants?

Well, we are looking at 620 or so for Stendal, and I think around 480 or so for Celgar. Andrew Shapiro – Lawndale Capital: Okay. You talked about towards the 25 to 30 megawatts of power that would be generated. I do want to clarify. This generation of the power is coming from your existing activity and just capturing in primarily the steam that you are already generating and is going out in the atmosphere?

Yes. Basically it is tightening up the steam balances. Andrew Shapiro – Lawndale Capital: Okay.

So, there will be really very little additional type of, let’s say, fuel that will be required. I mean, because the production overall is increasing, we will also have more bark, etcetera, and therefore you have naturally more biomass to burn as well as more steam production. So, it’s a combination of tightening up the steam balance as well as the overall increase in the projected production volume that will allow us to produce the excess electricity that we consume [ph]. Andrew Shapiro – Lawndale Capital: Now, so other than depreciation, which should be a non-cash expense on the CapEx you put in, and then – is what you are saying that there will be very little, if any, costs – incremental costs that will go along with the revenue generation on this power?

Yes, essentially no costs hardly. Andrew Shapiro – Lawndale Capital: So, a huge margin. And then in Germany you are right now you are selling excess power and the green power initiatives there, I think, they don’t require CapEx. It’s an issue of getting certain legislative milestones successful?

That’s correct. Basically it involves no change in the present operation. It’s just basically the rates that we will receive in regards to certain incremental power exports. Andrew Shapiro – Lawndale Capital: And so that again would then be basically 100% margin to the bottom line on incremental?

Absolutely. Andrew Shapiro – Lawndale Capital: Awesome. Okay. Now, the timing of hearing back on the Canadian RFPs, when do you expect to hear back on those?

Well, we will know in June and July, so– Andrew Shapiro – Lawndale Capital: Okay.

After the summer, we expect that we'll have a clear indication. Andrew Shapiro – Lawndale Capital: Now, you talked, I think, about the timing of the CapEx payment steadily through the year. Is it correct that the CapEx that you have mentioned here that that cash – none of that has come out of Q1. It will be Q2 and then going forward?

Yes. There is a little bit that went out in the first quarter, but it was just deposits on equipment and because the long lead item is the turbo generator. Andrew Shapiro – Lawndale Capital: Right.

We have ordered that– Andrew Shapiro – Lawndale Capital: So, the rest are just progress payments or other things?

Progress payments and finishing the engineering. That’s right. Andrew Shapiro – Lawndale Capital: Okay. And when would the timing of the project financing likely occur that would finance this rather than drawing on your more expensive lines of credit?

Well, we are expecting to put a book out to interested parties probably within the next two or three weeks and go through a process. It might take a month and then we would expect to get a line in place that we can draw on as we spend the money. Andrew Shapiro – Lawndale Capital: So, most of this money, even for 2009 – I mean 2008, the upfront CapEx, you would expect that you can get covered?

We are sure going to try. Andrew Shapiro – Lawndale Capital: Okay, all right. You generated a lot of cash. You made a substantial debt paydown scheduled principal payments for Stendal. Unfortunately that’s your lower risk debt, I mean, and your lower costing debt. What are your thoughts regarding either refin [ph] the restricted group or an overall refi that starts addressing – taking out your higher cost of debt and replacing some it with lower costing debt as well as obviously paying more of that down as we get into – we are not far from October when your right to redeem or call the converts kicks in.

Do you want me to talk to that, Jimmy?

Yes.

So, I guess the best answer I can give you is we are still considering all our options and we are going to have to wait to see how the year unfolds for us. We are motivated to de-lever to eliminate high cost debt. We are very focused on the converts. Half our constituents think we should hope that we can convert those into equity and the other half say, "Hey, if you can avoid the dilution that would great." So, we are going to have to wait and see how the cash flow position is following from the pulp markets. We'll have to see how our shares are trading in terms of the price and the affect that has on covenants for us, and to see what our options are going to be. But, Andrew, we are focused on de-levering and obviously we want to do that at the highest cost debt that we can, and we'll just have to wait and see. Andrew Shapiro – Lawndale Capital: Yes. Do you consider the converts right now to be with the share issuance potential in the high sevens to be your highest cost debt or is the senior notes, which have a very, amazingly right now high market yield in the low- to mid-double digits?

Well, the answer to that question depends on where you think our share prices is going to go in the future, so– Andrew Shapiro – Lawndale Capital: As one of your largest shareholders, I have an opinion, of course. I was just wondering if management and the Board had an opinion.

We are leaving our doors open right now. Andrew Shapiro – Lawndale Capital: Okay. But, it sounds like you are going to touch on at least one if not like redoing the whole package.

That’s correct. Andrew Shapiro – Lawndale Capital: Okay. In terms of the word out [ph], you have done a road show. I think it was primarily institutional focused, and I think we are actually down to one institutional sell side analyst from a year ago. I am just wondering what the prospects are for, one, expanding the institutional coverage and efforts there as well as maybe some, I guess you would want to call it retail presentation and road show in terms of I guess finding a home for – that’s longer term orientated for the excess supply of this company stock. Just the valuation on it is just pretty appalling.

Yes. I mean we are addressing the investor relations program with schedules both in Canada as well as in North America for the balance of the year. We are– Andrew Shapiro – Lawndale Capital: What’s the upcoming schedule? That’s actually the – the gist of the question is what are your next – you have done the road show. You do it maybe once or twice a year. You have interim road shows or what are the interim efforts kind of planned in between running the company?

Yes, I mean, we are focusing in terms of not just saying the normal two that we traditionally have done. We are also looking at, of course, conferences where several of the institutional banks may be prepared to host us as well as going with some of the analysts. So, we are scheduled for one fairly shortly in Canada in the next few weeks to meet with some of the Canadian institutions, and we are hoping to further accelerate that program for the balance of the year. Andrew Shapiro – Lawndale Capital: Okay. Thank you.

And on the analyst side, Andrew, just to add a comment there. We have been sort of strong-arming some of the analysts to – “Don't you think you should be starting to cover Mercer with a—,” the story is that in a challenging industry, the strong get stronger and the weak get weaker, and they are close, but they are still sort of monitoring and trying to understand the global economics of the world. And so, I think there may be some additional analyst coverage coming in the next six months, I am hopeful. Andrew Shapiro – Lawndale Capital: What’s the general criticism or hesitation that you hear in your interaction with the community?

Probably just the ...

You know the global economic situation and the uncertainty of the Russian tariff and, of course, they still have this short fiber, long fiber substitution question. Andrew Shapiro – Lawndale Capital: Well, at least your last road show seemed to address a lot of that. Well, thank you much.

Thanks.

(Operator instructions) Our next question comes from the line of Ronnie Kaplan with Wolf Point Capital. Ronnie Kaplan – Wolf Point Capital: Thanks. Most of my questions have been answered. But, as far as Celgar is concerned, how much of that product are you shipping overseas versus North America?

Well, the bulk of the production is shipped overseas and of course the critical market is China. Ronnie Kaplan – Wolf Point Capital: Right. Have you seen any changes in that market over the last quarter?

Well, I think that the demand certainly in China continues to grow. It is a more volatile market mainly because you have several participants in terms of the buying side as well as the selling side. And I think some of the problems recently certainly in China has been the result of new entrants because, of course, certain of the North American producers have been looking to increase their market share or actually get into the market. And, therefore, you’ve had some unsettled conditions because of this. You have also had, of course, the Russian pulp producers, which continues to be, of course, quite erratic in terms of how they sell the product in China. But, I think, overall, because of the – moving forward, we think that the tightness in supply will ultimately will create further price increases in China, aside from the fact that right now eucalyptus pulp prices in China are actually trading slightly higher than soft wood. So, in many ways I think there is only one way that prices can go in China, which is up. Ronnie Kaplan – Wolf Point Capital: Okay. And then as far as the assets you own now, are you happy with that or would you consider making any acquisitions in the near future?

Well I think our focus is to run very good quality, highly efficient mills, and of course we have stayed true to our discipline. So, unless there is really a very compelling acquisition because of certain characteristics – yes, I think we are quite happy with what we are running. We are focused in terms of the byproduct stream, as we said earlier, and try to maximize additional EBITDA from sale of our byproducts, and we think that will become more of an increasing focus as well as an important cash generator for us. Ronnie Kaplan – Wolf Point Capital: And just a final question, on your convertible notes, those you can call as of October, is that correct?

Yes. Ronnie Kaplan – Wolf Point Capital: Okay. And they are callable at par?

No, they are redeemable. Ronnie Kaplan – Wolf Point Capital: Redeemable?

Yes. Ronnie Kaplan – Wolf Point Capital: Great. Thank you.

Our next question comes from the line of Pit Barton [ph] with Upper Valley Capital [ph]. Pit Barton – Upper Valley Capital: Hi, Jimmy and David. I had a question about the Canadian capacity situation. The Vancouver Sun story discussing the Pope & Talbot shut down describes how the Mackenzie mill might be of interest to Stora, which obviously is facing possibly 30% – duty increases of 50% in Russia next year. But that facility is a '72 vintage with a '96 update, 230,000 metric tons or thereabout. If that transaction occurs, doesn’t that put a price on your capacity in Canada that – since you have got the most modern facilities, I am a little confused as to – we are clearly at the stage where private market transactions make Mercer look very cheap. And I am also interested in whether you would consider at some point maybe in the future like 2009 setting out a green power company for the people – the investors who seem to be interested in those types of things. I appreciate your comments.

Well, I mean, we are presently increasing the wholesale of green energy, and I think this will continue to develop at all of our mills. And presently I think although they are very interesting, they are not of a size or nature really to really focus on a spin off or such, presently. But, depending on where we are in the next few years certainly we'll look at various alternatives. In terms of the Mackenzie mill, I think the article just basically pointed out that I guess Stora or some representatives of Stora Enso basically had visited the mill. There was no indication that subsequent to such visits any bid was placed. So, as far as we know, under the Pope & Talbot bankruptcy, the only bidder for any of the assets was the subsidiary of APP. And, therefore, just the mere fact that Stora may have visited the mill does not mean that they actually wanted to buy the mill. I think the wood situation in Scandinavia certainly is a developing one, and this will mean that there will be a significant amount of additional closures in our mind mainly because it isn’t just the wood tariff alone in Russia, but really the very mild winters over the last two years has created a lot of problems for the wood harvesting activity in Russia. And I was just recently actually in Russia to look at the cost of harvesting and it’s not really that cheap. So, wood in Russia is not being offered to the producers of paper as well as to pulp at prices that would really be that attractive in many ways, and it’s a structural thing. The structural thing is you have a large number of small harvesters. You have huge cost related to building roads into the forest and taking out the wood. Fuel costs have come up as well and, therefore, there is a structural cost, which means that at least in the near future Russian wood is not as cheap as one would expect based on just the fact that there is so much of it. So, I think there is a lot more problems than just the wood tariff for Russia. It is availability of wood coming out of Russia at any price and it is very expensive to harvest right now. Pit Barton – Upper Valley Capital: Thank you.

Our next question comes from the line of Paul Quinn with RBC Capital Markets. Please go ahead. Paul Quinn – RBC Capital Markets: Yes, thanks. Just two questions. One, just you described looking for alternative shipping arrangements, I guess, primarily for Celgar. If you could sort of discuss that. And then just secondly on fiber sources for the Celgar mill, my understanding that some of the – historically Pope & Talbot residual chips went to that Celgar mill, and if you could just describe sort of on a percentage break down where those fiber sources come from.

Well, I mean, the Pope & Talbot sawmills have been closed for a few months already and, of course, we have been taking alternative means of getting the wood. And, of course, that is one of the reasons we have outside whole log chipping capacity that we have engaged as well as increased the amount of external chipping that we may contract out to certain sawmills as well as increasing the volume of our own production. So, when the Pope & Talbot mills were running near capacity, they represented a significant portion of our feedstock, something north of 20%. But, presently because they are shut, currently they are not representing in any way anything that is significant. So, all we are doing is essentially taking alternative means and we believe with the increase in efficiency at our woodroom through certain maintenance and other changes there that the capacity in our woodroom will increase significantly for the balance of this year and into next year. So, that even with continued market deterioration– Paul Quinn – RBC Capital Markets: You said they represented 20%.

Yes, 20%-plus.

We don’t think that the Pope & Talbot situation clearly has not had a significant on our fiber costs to date and we are, of course, taking measures so that even if the lumber industry remains very depressed that we will have more than sufficient wood at reasonable prices. Paul Quinn – RBC Capital Markets: Yes, Jimmy–

Freight situation, what we have done really is, of course, taken the initiative and together with certain other producers essentially chartered bulk carriers. So, without this initiative, we would have ended up effectively being held like the other producers in waiting for containers. So, we've taken the initiative and certainly we have now contracted volumes with chartered bulk carriers that – we know that we will have the shipments out in the second and third quarter. Paul Quinn – RBC Capital Markets: Okay, great. So, just for clarification, whole log chipping represents what percentage of source for Celgar?

The whole log shipping ...

The numbers are (inaudible) so residuals for the first quarter was 73% of the volume, and the remote chippers that we have engaged brought in 12%, and the woodroom was about 15%. And the woodroom historically has hovered around 8% to 10% of our supply, and what we are seeing coming from the sawmills, we are losing some sawmills because they are just not competitive at these prices. But, some of the other sawmills are chipping more for us than they used to, so it is a combination of both. And again, the woodroom optimization, we would like to replace the remote chippers with processing wood through our own woodroom. Paul Quinn – RBC Capital Markets: Great. That’s very helpful. Thanks.

We have a follow-up question from the line of David Post [ph] with Glen Rock Capital [ph]. Mike Tannenbaum – Glen Rock Capital: Hi, this is actually Mike Tannenbaum [ph] speaking again. I have a question about you G&A expense in Q1 here. Last quarter, in Q4, and during the conference call, you had mentioned that some of your costs – some of your selling costs were reclassified from cost into G&A and that your – that the 9.4 million run rate was something we should expect going forward. But, then we had a – kind of a noticeable decline in G&A expense this quarter. I was wondering if you could address that and talk about what you think the real run rate is going to be going forward.

Yes. So, we are working on harmonizing our accounting between our three mills. And so what you saw last quarter was an adjustment on selling expenses that we pulled out of cost of sales and put into SG&A. So, G&A turned into SG&A, and then this quarter we had a really good look at all the mills and in terms of what we classify as G&A versus other operating costs and we had almost an equal amount reversed the other way. So, we are back down pretty close to where we were before our conference call the last time. And the run rate, I hope from this point forward should be fairly steady for you. Mike Tannenbaum – Glen Rock Capital: So, you are saying that we should consider the run rate approximately 6.9 to 7 million going forward, which – what it was this quarter.

Yes. Mike Tannenbaum – Glen Rock Capital: Okay. Thank you.

You are welcome.

At this time, there are no further questions, and I'll turn the conference call back over to management.

Well, I thank everyone for, of course, attending today's conference call. As we said, we are very optimistic in regards to the overall balance in NBSK markets, and we think that there is certain developments which will further tighten up the supplies. There has, of course, been certain amount of volatility, mainly in the China market, which may have spooked certain producers as well as other market participants. But, we think that the fundamentals are very strong. The second half of this year looks still very positive, and, as you can see, our mills are running exceptionally well, and will continue to make additional progress not just in terms of production volume, but also production efficiencies. And, of course, our program in getting extra revenue and income from byproduct stream will also have a meaningful impact in time. Hopefully, certain changes in Germany will have a much faster impact, but certainly the developments in Canada will also be very positive for the future. And, therefore, we are getting stronger every year. It’s unfortunate that the general market does not recognize that, but I am sure that in time it will. So, on that note, I would like to thank everyone again and call this call to a close. Thank you.

Thank you again for attending today's Mercer International first quarter 2008 earnings conference call. This does conclude the conference call. You may now disconnect.