Good morning and welcome to Mercer International Fourth Quarter 2012 Earnings Conference Call. On the call today is Jimmy Lee, Chairman, Chief Executive Officer and President of Mercer International and David Gandossi, Executive Vice-President, Chief Financial Officer and Secretary. I will now hand the call over to David Gandossi.

Thank you, Martina. Welcome everyone. As usual, we will begin with formal remarks after which we will take your questions. For safe harbor, please note that in this morning’s conference call, we will make forward looking statements, similar to those that were made 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 fully described in the press release and with the Company’s filings with the Securities and Exchange Commission. So I’ll start with the key financial aspects and then pass the call to Jimmy, relative to the third quarter average MBSK pricing was up in all markets. However, the stronger euro partially offset these price gains, demand remains fairly strong, but the Chinese demand slowed down late in the quarter due to the pending Chinese New Year Holiday. Overall 2012 was Mercer’s best production year ever with Stendal setting an annual production record and Celgar and Rosenthal both had their second best production years. We also achieved an annual sales tonnage record this year, however relative to Q3’s record pulp sales, Q4 sales were down approximately 69,000 tons. Lower sales in Q4 combined with production resulted in an increase in finished goods inventory of approximately 14,000 tons. All prices remained low, but demand and low inventories created pricing momentum in the fourth quarter with average prices up between $25 and $30 on average. The European list price ended the year at 10 U.S. per ton and our Chinese list price was 660 per ton. Since then we’ve seen a modest upward pricing pressure in Q1 and as you have seen in the press release, we reported a net loss of €5.2 million for the…

Thanks David. Good morning everyone. We're generally satisfied with our fourth quarter results given the challenging state of the market. We believe pricing reach bottom in the third quarter and we are encouraged by the modest pricing momentum experienced in the fourth quarter. On the production side, I'm pleased that our overall continuing focus on reliability has resulted in the annual pulp production record. In addition, the strong production translated into record electricity and chemical sales this year and we sold a record volume of pulp this year, suppressing our previous record of about 28,000 tons. Our energy and chemical revenue in Q4 exceeded our interest expenses by approximately €3.5 million which is significant given current pulp prices. In other words, our byproduct sales suppressed our debt covering charges by 25%. This is a simple measure, but it highlights the value of our strategy to increase our byproduct sales. In the fourth quarter, average MBSK list prices rolled slightly in all markets. With European quarterly average list prices rising $26 to $803 per ton and the Chinese quarterly average list price raising $32 to $662 per ton. I’ll talk a little bit more about recent pricing developments in a moment, but first let me comment on the mills. After adjusting for Stendal annual maintenance shut, our mills ran reasonably well in the quarter, Celgar and Stendal both experienced some unplanned downtime. However, Rosenthal continue to benefit from its Q2 recovery boiler upgrade, achieving a new quarterly pulp production record. In total, we produced approximately 350,000 tons of pulp this quarter, compared to 373,000 tons in the third quarter and 365,000 tons in the fourth quarter of 2011. Our Q4 production was broken down as follows; Stendal produced 139,000 tons, Celgar produced 117,000 tons, and Rosenthal produced 94,000 tons. In addition…

(Operator Instructions) Your first question comes from the line of Bill Hoffman from RBC Capital Markets. Your line is open. Bill H. Hoffman – RBC Capital Markets: Hi, good morning. Jim, can you just talk a little bit more about the shuts do you have this year, was there any major projects or whether just more normal than they were prior years?

I think it’s pretty much normal, I mean of course we have the tying of the Blue Mill, but that shouldn’t really produce any additional downtime than normal. Bill H. Hoffman – RBC Capital Markets: Okay.

There is, of course the ongoing capital investments. Bill H. Hoffman – RBC Capital Markets: And you mentioned some operating problems at Celgar in the fourth quarter; can you just talk a little bit about that like where you are with that sight right now?

Jimmy please start... Bill H. Hoffman – RBC Capital Markets: So you talked a little bit about operating problems at Celgar and in the fourth quarter, you took some extra downtime, I just wondered what was going on?

Yeah. So that was really more of, let’s say kind of an era during the startup and there was of course, some items that should have been addressed during the mid short and therefore the startup was a lot more difficult subsequently we had to take a second shutdown to deal with that and it has been resolved. and so now it’s running quite well. Bill H. Hoffman – RBC Capital Markets: Okay, thanks. And then just final question, just with regards to the Chinese market, you mentioned some closures that were spilt up in 2012 with some skepticism of that how much – do you have any real sense of what they’ve shut so far of this year so far sort of high polluting coal capacity and what might more happen in 2013?

Well, I mean we are hearing that essentially the shut this time around of course were occurring where they were very much serious in the sense certain equipment were not down of course, the authorities are taking measures to ensure that they don’t restart as they leave. So I think the government in China is very much committed to essentially eliminating these facilities, because of course, environmental pollution as a whole is very much, a very high item in terms of their policies moving forward. So I think unlike in the past where of course, we’ve heard a lot of mills which were shut and restart, I think this time around, I think those essentially are going to remain down. And also the paper situation in China because of new capacities, of course their pricing situation is quite depressed, the availability is high. So these mills are not competitive. So I do believe that you will not see these mills come back. Bill H. Hoffman – RBC Capital Markets: Thanks. And then if I may, just sort of last question, between the new rush capacity, as well as additional hardware capacity that we expect this year. Your sense that either may take through second and third quarter to have markets start to balance better.

Well, I don’t think that the incremental rush in demand is going to have that much of an impact. But I think because of course everybody is expecting is, we are going to probably have kind of a moderate price, kind of increase rather than more stronger and that one would expect. As you know both resolute and of course Don is scheduled to take additional capacity. So if you are talking about the actual increase, it’s not that significant. And at the same time there is still a lot of very marginal mills which are operating at pretty significant losses, coal price levels. And therefore once the winter is over there is every possibility that there maybe production curtailment of economic reasons. So I think that one has to expect that the supply side will not be as robust as everybody is expecting, certainly the hard weather is a lot more challenging, there is no question about that. But in terms of the softwood, with the continued growth in tissue, capacity certainly in China, I am very optimistic that this incremental supply will be more than sufficiently taken up very quickly. Bill H. Hoffman – RBC Capital Markets: Great, thanks for your thoughts.

Your next question comes from the line of Richard Close from Jefferies. Your line is open. Richard Close – Jefferies & Company: Hi good morning. You know it looks like lower costs were a big partners for the improved performance particularly in the restricted group. Can you guys talk a little bit about what the puts and takes were relative to the third quarter there?

David you want to comment on this?

Yeah Richard it’s really, I mean there aren’t any really big cost changes, I think it has more to do with fixed costs coverage and timing of maintenance shifts and the material items. Richard Close – Jefferies & Company: Okay.

Fiber, chemicals well that kind of stuff has been relatively stable. Richard Close – Jefferies & Company: Okay. How much did the Celgar unplanned down time end up costing in the quarter?

Well probably about 5000 or 6000 tons, that’s what I guess. Richard Close – Jefferies & Company: Okay. And you guys talked little bit about the new union agreement that you have there at Celgar. Any idea of what the labor cost increase that you might expect from that will be on an annual basis?

Well it’s the same as the Canfor Pulp pattern agreement. So it had the two bonus payments in years one and two. And then I think it is two and a half, two and a half, three, for years three, four and five. What we did was we spent most of our energy talking about the need for a sustainability agreement, which is sort of an add on to the traditional collective agreement which talks about stability, we got some dual three ticket opportunities now. So it paves the way for efficiencies and just breaking some of the traditional patterns that have played BC waiver for many years. So we are quite excited about it, the wage increases is a small thing in the grand scheme of the cost of the pulp mill, it’s really more about the level of flexibility and structure that you can put into the mill to drive improve the liability and our production levels. Richard Close – Jefferies & Company: Okay. I see, and then just one last housekeeping question. Can guys give us the sales volumes by mill?

Yeah, I can do that Richard. So when the fourth quarter sales volumes for Rosenthal were 89,900 tons, Stendal was 143,000 tons and Celgar was 102,300 tons for total of 335.2 tons. Richard Close – Jefferies & Company: Great, thanks a lot guys.

Your next question comes from the line of Mark Kennedy from CIBC. Your line is open. Mark Kennedy – CIBC World Markets, Inc.: Hi, good morning.

Good morning. Mark Kennedy – CIBC World Markets, Inc.: First question I guess Jimmy just with regard to some of the recent further announcements of paper machine closers by Scandinavian producers. Do you expect that's going to result in more integrated pulp supply being turned on to the market?

Well, certainly last year that had a big impact in terms of the China market, there is no question about that, and we expect to those may continue, but at the same time surprising maybe euro is being less stronger than I think everyone as expected. I think if you take the euro kind of levels last year certainly was probably reasonable to sell, what you couldn't sell into Europe essentially into the China market, and probably not the best markets with certainly wasn't so bad. But I think with the euro being where it is today I think it the track business certainly is there, so I think considering the high cost continue to be because of the wood situation et cetera in Europe, I think. Those producers probably will reassess really whether it’s more economic to really sell into China or essentially take the incremental production downtime. So I think that those impacts will be pretty much similar if not maybe trending down if euro continues to be at more stronger levels. Mark Kennedy – CIBC World Markets, Inc.: Okay. And then just coming back to pulp pricing, certainly the North American list from the September low has moved up now probably close to $70 a ton, now you guys in terms of your average realized euro price didn’t see a significant move in Q4, is there any guidance you can give us in terms of what we should be expecting from Q4 into Q1 here like should we be looking for increases in the range of €10 a ton or closer to €25 a ton or because between discounts and everything else sometimes its hard to gauge the stuff?

Yeah, I mean of course our main market is Europe and China. So the America U.S. list is important to us, it’s really the European list and the Asian list. I think China certainly, the prices dropped last year much more than any of the other markets and that was of course the combination of the fact that you had additional tons coming in from probably the integration of paper makers pulp essentially were climbing their outlook in China. And so the Chinese prices dropped much faster and further than any other market, and I see the recovery in China market probably going to be stronger through the year than the other markets and I see stabilization in Europe, because I think we’re pretty much operating at kind of like flat conditions. I don’t see demand in Europe dropping much more than what it is at these kind of levels. And so, I think the European market because of the supply dynamics will continue to show moderate incremental increase in price, and the China market essentially experiencing much more stronger type pricing through this year. Mark Kennedy – CIBC World Markets, Inc.: Okay. And then finally, David maybe you can just highlight again, sort of CapEx expectations for 2013, if you can breakout sort of project, Blue Mill separate from sort of other, just sort of expected CapEx?

Yeah, sure, Mark. So the Celgar grows through the capital budget of about €6.5 million there, high return projects and nothing too large. Celgar is just a little shy of €5 million, and Stendal has got about 2.5 of high return and almost €27 million left to spend on Blue Mill for the year. Mark Kennedy – CIBC World Markets, Inc.: Okay, that’s great. Thanks, guys.

Your next question comes from the line of Andrew Shapiro from Lawndale Capital Management. Your line is open. Andrew E. Shapiro – Lawndale Capital Management LLC: Thank you. Hi, when you have the unscheduled downtime time on Celgar, you’ve provided kind of the tonnage that would have been sold at approximate sales realizations and gross margin percentages we could probably estimate the impact. But can you further assist us in how much energy sales and cash flows this downtime may have caused this quarter?

I can’t really do that off the top of my head, Andy, sorry.

A one-to-one, one tonnage equal to one gigawatt hour.

Andy, I think approximate numbers to use as a one-to-one type of thing, one ton is equivalent to like one gigawatt hour. Andrew E. Shapiro – Lawndale Capital Management LLC: Okay. And then, is there an energy sales realization kind of number then try to take a stab at the cash flow loss?

I think you can try to get an approximation from what our overall gigawatt production and sales were and what our income stream was. Andrew E. Shapiro – Lawndale Capital Management LLC: Thanks, okay. I can’t remember, energy was broken out separate from chemical?

I think it was basically, you’ll see the gigawatt production. Andrew E. Shapiro – Lawndale Capital Management LLC: Yeah.

And account numbers, David. Andrew E. Shapiro – Lawndale Capital Management LLC: Is the chemical and energy revenues…

I think we probably today have much…

The chemical we’ve guided, total assets is about €11 million of the total energy and chemical price. Andrew E. Shapiro – Lawndale Capital Management LLC: Okay, great. A follow-up or just a little bit more clarification on the grant programs, you’ve got some grants coming in for Project Blue Mill. Is there a talk in Canada or in Germany of any additional grant programs on the horizon for which you might be able to avail yourself up and take advantage of additional technological upgrades?

Yeah. well, there’s always seems to be new opportunities in Germany, if you got the right type of project that’s interesting to them. You’ll still hear about opportunities in the 3% range. In Canada, there are every year, there’s sort of a topping up of what they call the Isaac programs, which are basically grant money for first in kind technology investments. we took advantage of one of those for one of our chemical recovery projects that we did last year, early in the year. So yeah, I mean there’s still opportunities and lots of discussion about transformation assistance coming from governments globally, so we’ll continue to participate in those to the extend that we can identify? Andrew E. Shapiro – Lawndale Capital Management LLC: I guess a few follow-up questions here to get a little bit of color, elements then progressively delayed, from your eyes out there in the street and the industry, when do you expect this supply to actually find its way on to the market.

I mean, we’ve bee hearing rumors that some has been having some installation problems and that may have resulted in this kind of recent delay, again of course the winter conditions in Siberia as you know is extremes. So I would expect that the delay is certainly are taking not longer than we probably expected, but I would not be surprised that actually, it starts to ramp up some time in the Q2, rather than really Q1. Andrew E. Shapiro – Lawndale Capital Management LLC: Again on the item on the street that you have the recent China Antidumping announcements focused on consulting pulp, but as those issues get resolved, do you see any of the remedies of that problem having any carryover impact into the NBSK markets in the form of conversions or anything else.

No I mean I think their target is dissolving pulp market, producers because of course not dissolving pulp prices have dropped significantly and there is a lot of over capacity. There is also I think some thoughts that also the hardwood production or producers in South America would also have similar types of actions taken against them. And of course that may moderate where the prices for both hardwood deserving on that of course from a relative basis probably helps MBSK in the sense there seems to be this feeling that hardwood supply and pricing certainly has this impact on MBSK, which we don't quite necessarily believe but at the same time certainly anything that will move prices higher and stabilized this certainly benefits. Andrew E. Shapiro – Lawndale Capital Management LLC: And even after the recent price hikes, and taking into account Resolute and Domtar the pricing we were at still got to be believe in several higher cost players. After winter is over do you have any views that to what plans might be considered high-cost at risk coming out of the market?

I can't really comment about the individual mills, I think. The best thing to do and you probably look at where the closures where in the prior 2008, 2009 scenario where you saw eventually the announcements and you saw the closures and probably thought I would give you pretty good idea of which mills will be the most vulnerable. Because I don’t think that really – cost conditions have changed that significantly for them. Andrew E. Shapiro – Lawndale Capital Management LLC: Now a lot of those plans however when they reopen under Chinese ownership or Indian ownership and they seem to be running those plants with the different profit motive in mind but they seemed to be in more indifferent towards positive cash flow?

Well, of course they have deeper pockets, at the same time I don't think anybody like to move money continuously they are come to point where it makes more sense to look at economic downtime versus essentially running the mills and continuing to produce losses. It’s just really a fixed cost kind of balance between what the expectations are. What’s the half a million tons of high-cost capacity running as Scandinavia as well that we saw closures in and research. Andrew E. Shapiro – Lawndale Capital Management LLC: Okay, so they could the candidates that are coming up. And last question for you, you’ve been presenting [references] of late, that’s how you put up a new slide show on your website? Thanks for that kind of detail. What do you guys have planned in the coming quarter, what’s on the calendar, where you will be?

Yeah, there is nothing in the current quarter. But we’ve got most of the bank conferences during the year that we’ll be attending. Certainly the last year, we do about 10 in a year actually. And if pulp prices really start to pick up following the summer then I’m sure, we’ll do a marketing tour through the U.S. in the fall, generally an idea. Andrew E. Shapiro – Lawndale Capital Management LLC: Okay, thank you.

Your next question comes from the line of Paul Quinn from RBC. Your line is open. Paul C. Quinn – RBC Capital Markets: Yeah, thanks very much. Good morning. Just a question on, you mentioned the integrated mills in the Europe selling market pulp. I wondered if you could quantify that, is that sort of 500,000 to 700,000 tons. And then paper closures in that market, do you expect that to increase forward?

Well, I mean of course it’s very difficult to know exactly how much the incremental tons are. But based on shipment volumes coming out of Scandinavia into the China, the increase year-over-year, probably the amount that we’re talking about somewhere in the range of about 300,000 or so incremental tons. I don’t think that in terms of forecast, will that grow to another 300 and become 600. My feeling is probably not, I would expect that clearly there will be some additional tons coming out of this – the integrated pulp. But I would not expect the level of increase to be similar to the type of increases in prior year. So that’s basically my feeling. Paul C. Quinn – RBC Capital Markets: Okay, that’s helpful. And then besides the Ilim expansion project there, what are the additional Greenfield facilities that you’ve seen on the radar screen for planned on the softwood side?

Well, I mean there is still talk about this pellet roofs pulp mill as you know that looks like it’s getting some Chinese government or at least get Chinese producer kind of support. So that certainly a possibility, there is still kind of talk about another Russian mill being built. But it’s difficult to really say with any level of confidence that those will actually be completed.

To the Scandinavian guys, a step further away from Russia there in the last six months. Paul C. Quinn – RBC Capital Markets: You haven’t seen anything out of South America in terms of Radiata.

We haven’t heard any announcement in terms of any Radiata increase or any new southern softwood really. Paul C. Quinn – RBC Capital Markets: Okay. And then just lastly if you could make just a general comment on pricing mechanism, so it seems like in the fall there was a number of list price increases, but it didn’t seem to flow to the bottom line would suggest that discounts widened further. It seems like the level of discounts was getting up to almost well very high levels and just wondering if that mechanism is simply the broken yet?

Yeah, I mean I think the problem is initiated by the fact that you have these marginal mills, which essentially have restarted or essentially have lost their core customer base. So, the discounting unfortunately has been kind of driven by these players, which are forced to essentially take whatever they can, because the customers know they’re going to be in the market in the future. so this market clearly has been disrupted in the second half of the year and in particular in Q4, because of this type of behavior on the part of these producers and unfortunately, they have not essentially taken an economic downtime. They continue to be very disruptive and in a market where demand size for the paper product is not robust, of course, they’re going to tease on any opportunity essentially to reduce their raw material costs. So I think they’re certainly in terms of our customer behavior, it’s not at normal. what is really disappointing for me is that we’re having these kind of more, not really long-term producers essentially coming in and disrupting the market and this is certainly influencing prices movements over the last couple of quarters. I think those impacts clearly in my mind will start to moderate mainly, because I think the demand size, as I said in terms of China will pickup. we really have a lot of tissue machines, which were installed second half of 2012. We continue to see additional tissue machines essentially ramping up through the balance of this year. and when you’re talking about, 2 million, 3 million tons of tissue capacity additions, you’re talking about significant amount of softwood that needs to go in. So I’m very comfortable and confident that this kind of impact will become less and therefore things should improve, but as you know the discounting is very extreme, and it is driven by these guys who are essentially not there for the long-term. Paul C. Quinn – RBC Capital Markets: Okay, great. Thanks guys, good luck.

Thanks.

(Operator Instructions) Your next question comes from the line of Mark Friedman from Gates Capital. Your line is open. Mark Friedman – Gates Capital Management: Hi guys. I have two quick questions, one can you talk about payables at the end of the quarter and why those are, where they are, in fact, with regard to the Stendal facility, whether you got waiver or discuss with the banks on the leverage of the covenant?

Yeah. So the payables markets really mostly to do about the timing, for example, there was $10 million of interest payable at the end of the previous quarter, paid in the quarter. So other than that it’s just timing on the Stendal, update on Stendal is you achieved your covenant levels, so we pulled our waiver, so all streaming ahead, as we think there. Mark Friedman – Gates Capital Management: Okay, great. Thanks.

We have no further questions at this time. I’ll turn the call back to the presenters.

Okay. It’s ending today’s call, and hopefully, the next quarters will continue to see further improvements in terms of pulp prices. Thanks very much.

This concludes today’s conference call. You may now disconnect.