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Century Aluminum Company (NASDAQ:CENX)

Q4 2012 Earnings Call

February 21, 2013 05:00 PM ET

Executives

Enrique DeAnda - Senior Corporate Financial Analyst

Michael Bless - President and CEO

Shelly Harrison - VP and Treasurer

Analysts

Kuni Chen - CRT Capital Group

David Gagliano - Barclays Capital

Brett levy - Jefferies & Company

Operator

Welcome to the fourth quarter 2012 earnings conference call. At this time all phone lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, today's conference is also being recorded. I'll turn the call over to your opening speaker for today, Enrique DeAnda. Please go ahead.

Enrique DeAnda

Hello, everyone, and welcome to the conference call. Before we begin I would like to remind you that today's discussion will contain forward-looking statements related to future events and expectations including our expected future financial performance, results of operations and financial conditions. These forward-looking statements involve known and unknown risks and uncertainties which could cause our actual results to differ materially from those expressed in our forward-looking statements.

Please review the forward-looking statements disclosure in today's slides and press release or a full discussion of these risks and uncertainties. In addition, have included some non-GAAP financial measures in our discussion. Reconciliations to the most comparable GAAP financial measures can be found in the appendix to today’s presentation and on our website at centuryaluminum.com.

I’d now like to introduce Michael Bless, Century's President and Chief Executive Officer.

Michael Bless

Thanks Enrique and thanks for everybody for joining us this afternoon. If we could turn to slide four please, I'd like to give you just a brief review of the major events in 2012.

Okay, first and foremost. I am proud to say that the company recorded the best safety performance in its history and this was at each of our facilities. This takes a tremendous amount of hard work as those of you familiar with industrial safety now; this kind of performance requires focus each and every day. This results is especially noteworthy at Hawesville where our people have been working in an environment of some uncertainty due to the power situation there and I'll talk about that obviously in detail in just a moment.

I'd also like to note that this result was the result of great cooperation and ownership from our represented workforces and I'd like to salute them for that.

Turning to Hawesville. As you remember, we returned the plant to stability in the latter part of 2011 going into 2012. Got a great management team at this plant now with the right mix of skills and experiences. We saw improvement through 2012 in all areas of the plant; it's especially noteworthy in the pot rooms and in the rotting shop. We're now working at staying ahead in housekeeping and maintenance which are obviously the key to plant stability.

Importantly here, our people are feeling a great deal of pride in being part of the well run plant. These efforts resulted in significant cost reductions across the plant in each and every department throughout 2012. Just to give you a sense, excluding power, if you were to take the power out of the cost base and as I'll talk about in a minute, the power cost has continued to rise. But if you were to take the power out, the conversion cost is down over $250 a ton since the fourth quarter last year. So fourth quarter of '12 over fourth quarter of '11, the non-power conversion costs down $250 a ton. And obviously we're committed to continue this process into 2013 and beyond.

So let`s talk about where we are at Hawesville now. The remaining issue indeed the power crisis. Power rate we are paying the highest or perhaps the second highest power tariff amongst all US smelters. As you remember during the first half of 2012, we spent significant time discussing alternative with our power supplier and regrettably we were unable to reach an acceptable solution. So as you'll remember, in August of 2012, we gave them a one year termination notice. It's important to note that our assessment hasn’t changed. The plant is not viable under this power contract and in this environment. It's also important to understand that Hawesville is a great plant other than this power contract. The cost structure excluding power is competitive as I said. As you know, the plant produces a premium product or many premium products for which we are in a premium above the Midwest transaction price, high parity and conductivity medal. We've got a world class customer next door that takes up to half of the metal in molten form, that’s south of our company. And we have the right team in place. So we need to fix that power crises. As you know, our intent is to access the wholesale power markets. There is plenty of power out there and plenty of transmission capacity to bring it in.

Just to give you a sense the difference between the current price we're paying under the current power contract and the market price is fully delivered market price is over $50 million on annual basis. So of course we need to capture as much of that differential as possible. We've been on this path since we gave the termination notice in August at which time began negotiations with the power supplier to provide from market access. We've had substantive discussions principally in the last couple of months in the year and then coming into 2013.

Recently, we've developed some concern about whether we'll get to the finish line on a rational basis. Power Company has been taking some positions that just don’t make sense to us. And thus, we recently launched an effort in Kentucky to propose legislation obviously in the state capital to allow Hawesville to access the market directly. Given the developments in US power markets which you're all familiar, we strongly believe that Hawesville and similar plans should be more than viable for years and years to come. We need a framework for these plants to access the market on a rational basis.

As with anything having to do with utilities in this country, there are a lot of complex issues to deal with. But logic dictates that these issues should be solved. There is just too much on the line. For example obviously, we're talking about thousands of direct and indirect jobs. As you may have noted the other smelter in the region, gave its termination notice to that same power provider. This was just a couple of weeks ago, they did that. We've got 100s of millions of dollars of economic activity related to these two clients. We strongly believe that there is a consensus that this country ought to have a strong indigenous primary aluminum supply especially important for key industries like aerospace and the electrical grid. Given the developments in the power markets, we believe that we should be able to find a successful resolution here.

On that score, we had very good success at Mont Holly during the year. We did reach an agreement with the power supplier in June as you remember. This resulted in a 3.5 year arrangement so it goes out through the end of 2015 and which we've secured market based power against through the current power supplier. As we talked about before and have since we are releasing spare generation capacity from an outstate system and this gives all the parties time to work on an even longer term solution. We think this is one good example of how this kind of thing should work and it wouldn’t have happened without the strong backing of Governor Haley of South Carolina and other state leaders.

Turning to Ravenswood, as we expected in December, the public service commission generally confirmed the elements of its original order that it issued back in September. Let me just take you back to remind you we did secure during the year two tiers of power credits. This is support for our power price, in essence reduction on the price we would otherwise pay. Those two tiers if you will, aggregate this $40 million annually over a 10 year period.

We have been seeking a third tier of LME related power or LME reference power in order to support the restart of the plant. In essence, this would have been a third tier of support additional power price reduction that would kick in at lower LME prices. We believe we need these kind of support to justify the restart cost as I have said. Just to remind you, we thought about this before. It will cost us we believe about $45 million in onetime one-time costs to restart the plant plus an additional $45 million investment in working capital.

The terms of that third tier that was approved by the PSE just don’t make perfect sense to us. And in that respect, we're now looking at different ways to get to the same place. We're in active discussions with the key constituencies and I'll talk a little about next steps in a few minutes.

Turning to Iceland. At Grundartangi we made significant progress during the year on both growing the plant and continuing to improve an already very good cost structure. First and foremost, we began a major hot metal capacity expansion that will add about 15% incremental capacity to the plant over the next approximately four years.

Capital spending for the project will about $65 million over that four years. A good portion of that spending will occur in the 2013, about 40% of that 65 million we'll spend this year. That’s due to the fact that some large ticket items like high voltage electrical equipment need to be ordered and paid for in the early days of the project.

The new capacity will come on at a very attractive install price and add a good incremental conversion costs. Thus far, I'm happy to report we're at or ahead of plan in this project, at Grundartangi produced at an annualized rate during the fourth quarter of 289,000 tons. We've got a great plan to Grundartangi and a terrific management team and we're convinced that they can continue to produce incremental value for years to come.

During the middle of the year as you'll remember, we acquired a anode plant, in the Netherlands; this was an investment in cost reduction for Grundartangi as well as operational stability. As a reminder, there is anode plant at Grundartangi nor do either of the two other smelters in Iceland have their own anode plant. This due to stringent environmental standards in Iceland of course.

Last year we terminated our relationships with our two historical European anode suppliers. Two reasons really, first is that these supplies weren't cost competitive. Second, they weren't flexible enough to support the larger anodes that we need as we start to run higher and higher amperages at Grundartangi. Thus, we were opportunistic when the former zinc and aluminum smelter went into bankruptcy was in the last month of in December 2011. The anode plant that we bought requires a reasonable investment before we can restart it, so this year in 2013, Shelly will give you some more detail on all this when it takes you through the numbers. But this year we'll spend between 25 and 30 million to restart in essence half of the plant, one of the two baking furnaces for a capacity at 75,000 tons of anodes.

At the right time, we'll spend another approximately $10 to $15 million to start up being modernizing and start up the other furnace, so thus we'll have a total capacity of 150,000 tons of anodes at that plant. Combined with the supply that we get from our 40% on affiliate in China, this will leave us well covered in anodes at a very good cost.

Lastly Hawesville, we spent considerable time last year with the power companies getting closer to final agreements to enable a restart of the project. To be blunt, we're disappointed we didn’t get all the way there last year. We were reasonably confident at the beginning of the year that we can get to the finish line in 2012. We've got some complex issues that remain. But the parties continue to work together to try to solve those issues and I'll give you a sense of what's coming up next again towards the end of my comments.

Okay, if we could turn to slide five please. Just like to make some quick comments on the market environment. Obviously its changing everyday as we've seen over the last couple of days. First just some historical data for you. In the fourth quarter, the LME cash aluminum price averaged $2,000 a ton. That was up nicely about $80 a ton from the average during the third quarter. Since November, as you’ve seen the price has been a reasonably tight, at least tight for this commodity, reasonably tight range of between $2,000 and $2,150 per ton.

For all 2012, the average cash price was $2,020 a ton. That was as you know down significantly from 2011 when the price averaged $2,400. I won't go into all the causes of this, there were well known to everybody on the phone. Obviously relatively weak economic conditions in China for most of the year and the Eurozone concerns about banking system and a couple large sovereigns and other factors weighed down the price for a good portion of the year.

Overall, the sentiment seems generally to be on an upswing in most of these areas. But as we've seen over the last couple of days, it's not going to be a straight lineup into the right.

Moving on to talk about inventory a little bit. LME stocks increased 150,000 tons during the fourth quarter that made 240,000 tons total for 2012, that’s a reasonably small amount in a market the size of the global primary aluminum market. LME stocks now stand at about 5.1 million tons and as you know, this has been commented about widely. A majority of that stock serves as collateral for warehousing transactions, the conditions for which remain attractive.

Couple comments on premiums, they remained as strong, regional premiums around the world. In the US, the Midwest price is now over $0.113 per pound. Duty paid European premiums just shy of $300 a ton. Japanese premiums came down slightly over the quarter but they're still strong at just shy of $250 a ton.

Just a couple quick comments on fundamentals globally. First on the demand side, global consumption was up 4% in 2012. Inside that China was up 8%, that’s obviously down from the mid-teens just a couple years ago. In China, the PMI has been above 50 every month since October, we're obviously watching that closely. The US had a strong consumption performance in 2012, we're up 7%.

Turning to supply, global production was up, just about the same as demand, 3.5%. So you’ve got a market now that’s close to imbalance. Almost all of that new production came from China where the production was up in the year 2.2 million tons over 2011. Most of that increased production coming from Greenfield projects coming on stream in the northwest part of that country.

We continue to see few closures in China despite the high cost of their smelting base there, that’s due to principally the power subsidies on a regional basis plus metal stock piling by the government and related entities. Chinese authorities obviously realize this issue. We've recently seen them aggressively encouraging industry consolidation.

Lastly, we see little supply coming on other than China and perhaps places like India but certainly in the western world, you’ve got little supply coming on over the next couple of years other than a couple of large projects in the Persian Gulf.

Before I move on, just a couple of quick comments on alumina. Prices continued to increase during the quarter, the spot Australian price now about $345 to $350 a ton. Part of that increase was due to some production disruptions caused by some severe weather events. The market globally is reasonably balanced to maybe a modest surplus but you’ve got some significant regional variations.

Okay, if we could turn to slide six please, just a couple of comments on the operations during the quarter. I've commented in a lot of this already, so I'll move through this pretty quickly. Again, safety performance, we had a great year in 2012. As you can see in the fourth quarter, we were relatively flat to Q3, Q3 already being a very good performance.

Now we’re focused on taking it to the next level as you would expect, we're very focused on forward-looking indicators and on recognizing and mitigating risk before accidents can happen. So more about that through the balance of this year.

Turning to production volume, Hawesville continued to have very solid performance this quarter, turned in annualized production at the rate of 251,000 tons. Shelly will explain to you that shipment volumes at Hawesville were down slightly during the quarter, it's only due to some timing issues.

Mt. Holly production down about 0.5% quarter-to-quarter, no specific issue there and Grundartangi as I said, a terrific performance producing at an annualized rate during Q4 of 289,000 tons.

Production metrics or KPIs as we call them, good stability across the operations, I've got nothing significant to report here. And conversion costs, obviously I have already spoken about Hawesville. As you see, we had an increase in Mt. Holly quarter to quarter, that’s Q4 over Q3 again solely due to an increase in the power cost caused by two factors. First and foremost, the average natural gas price was higher in Q4 than it was in Q3. In addition, one of the generation units at the system that in affect we're leasing power from was down for one of the three months in the quarter due to some scheduled maintenance. So we took a little bit more power than normal under our normal contract.

And with that, I'll turn it over to Shelly who will take you through the numbers. Shelly?

Shelly Harrison

All right, thanks Mike. If you turn to slide seven please, I'll take you through the company's financial performance for the quarter. Shipments for Q4 were down 1.5% at Hawesville and 4% at Mt. Holly primarily due to timing of deliveries. As you'd expect, we saw the benefit of these shipments reflected in our January results. For Iceland, we have direct shipments of approximately 3,500 tons in Q4. If you include that amount along with the tow in volumes, you'll see that Iceland shipments were up 1% Q4 over Q3.

Putting this all together, global shipments for the company were down about 1% in the quarter. The average cash LME price was up 4% Q4 over Q3, but on a one month lag basis, the LME price was up almost 7%. When you look at our realized unit prices in the US, they were up 5% quarter-over-quarter. This reflects the fact that we do have some sales in the US that price on a current month basis.

In Iceland, our realized unit prices were up 6% which reflects the impact of the tolling structure we have at Grundartangi.

Moving on to the income statement data, net sales were up 4% Q4 over Q3, the income or increase in the aluminum price drove net sales up by $16 million or 5% but slightly lower shipments offset a portion of this impact during the quarter.

Adjusted operating income increased $20 million from Q3 to Q4 primarily due to higher revenues. On the cost side, with our higher LME links, alumina and power cost of $5 million and US power cost were up roughly $2 million primarily due to the maintenance outage at a facility that's (indiscernible) Mt. Holly that Mike mentioned.

Moving down the income statement. We had a quarterly adjusted loss of $7 million or $0.07 per share on total common and preferred shares. This compares to an adjusted loss of $0.25 per share in Q3.

Lastly on this slide, I'll just make a couple of quick comments on cash flow. As you can see here, CapEx for the quarter was $7 million. This is consistent with our expectation that the fourth quarter will generally have the highest capital spending of the year. Also effecting cash in the fourth quarter was a refund of $28 million related to withholding tax payments. As we mentioned in previous quarters, we're required to pay temporary withholding taxes on certain transfers between our Icelandic entities and these factors are funded to us at the end of the year. The quarter over quarter cash was up $11 million and we ended the year with 184 million on the balance sheet.

Let`s go on to the next slide and I'll take you through the changes in cash in a bit more detail. On slide 8, we show our normal cash flow waterfall bringing Q3 to Q4 and I'll just focus on a couple of the more unusual items here. As I just mentioned, we had a withholding tax refund of $28 million in the Q4 partially offsetting that we made approximately $8 million in income tax payments which were primarily related to Iceland.

Moving to the right, you can see we also had a $3 million cash inflow in the form of a dividend payment from our Chinese anode facility and I'd also note that the timing of metal deliveries I mentioned earlier, contributed to a working capital use of cash for the quarter and we saw its come back into cash in January.

So, if we can move along to slide nine, I'll take you through the company's full year performance. Shipments to Hawesville were up almost 18% year-over-year as we reached full production at that point in Q1, 2012. And shipments at Mont Holly were roughly flat.

In 2012 we had almost 15,000 tons of direct shipments from Iceland, so if you include that amount along with the tolling volume, you see the Iceland shipments were up 2% over 2011. So overall, shipments for the company were up 7% year-over-year.

In 2012, the one month lag LME price was down almost 17%. When you look at our realized unit prices in the US, they were only down 12% which reflects the improvement in Midwest premium. In Iceland our realized unit prices were down 16%. This reflects the improved regional premiums there as well but to a lesser extent because of the tolling structure in Iceland.

Moving on to the income statement data. Net sales were down 6% in 2012, the decrease in the aluminum price drove net sales down by 197 million or 15%. The higher shipments offset a significant portion of the price impact.

Adjusted operating income decreased 83 million from 2011 primarily due to low metal prices. On the cost side, we saw a benefit of $71 million due to LME linked alumina and power and $26 million for labor, supplies and maintenance efficiencies at Hawesville as that plan returns at full stable operation.

We also saw a $13 million year-over-year reduction in raw materials mainly carbon and another $6 million benefit for net unit US energy cost savings, primarily due to the emended contracts at Mont Holly.

So putting this all together, our adjusted loss for 2012 was $57 million or $0.59 per share on total common and preferred shares which compares to adjusted income of $0.28 per share in 2011.

I'll make most of my comments on cash on next slide, but I would note that even with the increase in working capital that we saw at year end, our full year reduction in working capital provided a meaningful source of cash in 2012.

Moving on to slide 10. Here we have the 2012 cash flow waterfall and I'll just call a couple of items here. For the full year, we had a net inflow of about $5 million related to withholding taxes in Iceland. Offsetting this was $18 million for income taxes paid in 2012 most of which is related to Iceland. As Mike mentioned earlier, we acquired a curtailed anode facility in the Netherlands in June of last year, and the total acquisition costs came to about $14 million. The restart efforts for this facility will begin in earnest in Q1 and I'll take you through our expected spending in just a moment.

Continue on to the right. We had a cash inflow of $8 million for an insurance settlement related to a transformer that was damaged back in 2010 and we also received a total $7 million from our Chinese anode joint venture in 2012.

Turning on to slide 11. On the next couple slides I'll take you through the company's expectations for financial measures for the coming year. in2013, we anticipate that all operating facilities we're introducing above the rate of capacity levels and slightly above 2012 levels. The significant production impact for the investment in the Grundartangi program will be seen in 2014 and beyond.

We continue to sell the majority of our products on a one-month lag basis but I would note that we expect about 10% of our US shipments in 2013 to be on a current month basis.

Continuing down the slide, we provide our cash cost expectations for the US and Icelandic facilities. As you'd expect, our cost production is highly depended on metal prices due to our LME linked alumina power contracts. The indicated ranges for cost are consistent with an LME price of $2,000 to $2,200 per ton. For this purpose, we're presenting cash cost in a format that we believe is directly comparable to the LME reported price. To do this, we added a cost of alumina for our tolling production in Iceland and deducted regional premiums above the LME for all facilities.

As indicated on the slide, the US cash cost and the power forecast for Hawesville are only for the period through August when the Hawesville power contracts remained. We'll provide an update on our cost forecast later in the year once we have further data on Hawesville power arrangement in August.

For carbon, we'd expect to see continued improvement in US costs due to lower coal prices and in Iceland we anticipate flat anode cost year over year. I want to point out that the restart of the Netherlands anode facility is expected to occur in late 2013, certainly have a limited impact on current year operations. When the first phase of the anode plant is fully up and running 2014, we expect annual price savings of about $5 million as compared to 2012 when we are buying these anodes for third parties. Not to mention the additional benefit of larger anodes that Mike mentioned as well as potential for further re-expansion.

Moving on to slide 12, we expect the cost to maintain Ravenswood in its curtailed state will be fairly consistent with 2012 and we expect cash and book interest to also be in line with the prior year. Corporate SG&A will be up about $10 million as we incur startup expenses associated with the new anodes facility.

In addition these startup costs, we expect to invest 25 to 30 million in capital to restart the first furnace. As Mike has mentioned, we have a multi-year investment programs to increase the capacity at our Grundartangi facility. And 2013 will be the most concentrated year for spending with an estimated investment of 25 to 30 million.

Moving on to income taxes, our current year income in Iceland will be tax to a rate of 18% for book purposes. Cash taxes in Iceland are on a one year ladies and gentlemen and we anticipate these will be in the range of 5 to 10 million based on 2012 taxable income.

In the US, we continue to expect essentially no book taxes due our significant deferred tax assets. From a cash standpoint, we expect to pay some modest amount of taxes in the US, due primarily to limitations on state NOL usage.

One last thing, that I want to note here is that based on some cash transfers that were made in 2012, we expect to pay approximately $8 million in withholding taxes in Q1 2013 and receive a refund of $21 million in Q4.

I'll now hand it back to Michael to take you through our priorities for 2013.

Michael Bless

Thanks Shelly, if we can turn to slide 13 please. As Shelly said, I'll just focus here on the major things that we'll be working on due to balance of 2013 and then we'll get right to your questions. First and foremost again on safety, we've got a real commitment to continuous improvement throughout the company here. There is a real effort just to stay even in this area, the proverbial gravity works really against here and so we're focused every day. We've got efforts drilling down to specific areas of focus for each department and each plant for safety improvement and we're also investing judiciously in outside experts where we think they can add some real value.

At Hawesville, and as I said earlier, we are absolutely convinced that this plant can produce attractive returns at market power rates. So we're using all efforts right now to pursue a plan to get that plant to market.

At Ravenswood, we remain absolutely committed to restarting this plant. As I said, we've had great support from Governor Tomblin of West Virginia and other state leaders and this support combined with the developments in US power markets about which I have spoken should provide the basis for a restart and a significant life for this plant.

At Grundartangi, we're very focused on the two large capital projects bringing those both in on time and on budget, first at the plant itself, the hot metal capacity expansion and second, the restart of the anode plant in the Netherlands.

Last, at Helguvik we're absolutely determined to assemble a package of power to enable this project to restart. As you remember, about halfway through of 2012 we announced that we had reached an agreement in principal with one of the two power suppliers on headline terms and we've been working with them and continue to work with them on working out the complex details to round out that contract. With the other supplier, we spent quite a bit of time and continue to working on discussing the terms of the new power station that they'll be building to support the Helguvik project.

And with that, I think Shelly, Enrique, we can take questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question is from the line of Kuni Chen with CRT Capital Group.

Kuni Chen - CRT Capital Group

Just to start off, obviously the volume expectations at Grundartangi continue to be pretty positive here, can you just talk about how that ramps up through the year, kind of sequentially?

Michael Bless

I think Kuni just thinking it through, I don’t have it in front of me, but I know I had a project; it's going to be more backend loaded as we create the conditions to start ramping up the amperage here. Just to elaborate, what we're not doing is adding any new production cells. So we're staying with the footprint we have now and to over simplify what we're really doing is just cranking up the amperage we need, as I said larger anodes in order to do that, we need some refurbishments for example the rodding shop in order to accommodate the transfer of those larger rodded anodes things like that. So I would say, Shelly please correct me if I wrong, more backend loaded this year in terms of the ramp. Since 2013 portion of it, Shelly correctly said Kuni. We're going to see that the more meaningful additional tons in '14 and '15.

Shelly Harrison

That’s right, a very modest increase in 2013 and then you'll really start to see the impact over the next few years.

Kuni Chen - CRT Capital Group

Okay. Got you. And I guess just as a follow-up on the Big Rivers issue, I think you've talked about it in the past, seeking a 30% reduction in your power costs, by going to the spot market. Now, you know, in light of the fact that they are looking to raise rates, something on the order of 20% this year, plus you have the announcement from the other smelter in the region, can you give us some characterization of where you are in the negotiations? Are you guys miles apart? Give us some color there.

Michael Bless

Good question, so let me take a step back. That 30% reduction Kuni to which you referred is the difference between on the one hand the power rate that we're paying right now under the power contract with the Big Rivers as you correctly identified as the current supplier and the market price. So the market price doesn't change based on any request that Big Rivers makes to the public service commission for a rate increase. Those two are completely independent, that’s part of the issue here. What happened is, when we terminated our power contract in August, Big Rivers necessarily, just to remind you, Big Rivers, is a cooperative thus in essence a non-profit entity. Their revenues have to match their expenses. And so, when we gave them notice that our load was going away, our load is roughly 35% of their total load, a little bit more than that, 38 if I recall. They had to prepare a rate case which they filed, this is what you're referring on the 20% and apply to the public service commission to raise rates on the other rate payers in order to make up for the Hawesville load that’s going to leave their system in August of 2013. So, the two facts that you pointed out are correct but they are totally different things. Now, the last point that you raised I'll address, the other smelter in the region is about 50-60 miles away from Hawesville, gave their own termination notice, was just in the middle of January if I recall Kuni and so, all else being equal, the expectation is, in fact they’ve said it quite publicly that Big Rivers will have to again go to the public service commission and in essence or in practice, increase their request for a rate increase given that now in aggregate 70% of the load in that system will be leaving their system.

So, hope that made sense. Really, your facts are right, but two completely separate things. The market price hasn’t changed at all. It's been bumping along at about the same rate for the past at least year or so.

Operator

Our next question is from the line of David Gagliano with Barclays.

David Gagliano - Barclays Capital

I have a few questions with regards to page 11 in the slide deck, the 2013 item. First of all I want to clarify one thing. Did you see strip out the premium to calculate the cash cost range?

Shelly Harrison

We did. These are net of premiums that you truly can line up with the LME reported price and they are apples to apples.

David Gagliano - Barclays Capital

And what is the assumed premium in that number, just so I know?

Shelly Harrison

It's between right around $0.10 for the full year.

David Gagliano - Barclays Capital

And then just and this may be covered elsewhere and I apologize if it is. The shipment, the can you give us the 2012 actuals for Hawesville, Mount Holly and Iceland shipments, as well as the actuals for US and Iceland cash costs in 2012?

Michael Bless

So if you go to the back of the financial information as follows, the verbiage in the earnings release, you'll get part of that, you'll get shipments by quarter for the last eight quarters in Iceland that’s distinct from the US. We don’t traditionally breakout in the US Hawesville versus Month Holly and because it's just one geographic pool there of revenue and we haven't traditionally broken out cash cost by plant either.

David Gagliano - Barclays Capital

Okay. I'm just trying to get a feel for on the cash cost side. And what do those numbers represent on a year-over-year basis, on a percentage basis maybe or anything like that for the US and Iceland.

Michael Bless

When you say what do they represent…?

David Gagliano - Barclays Capital

In terms of percentage increase or decrease.

Shelly Harrison

Obviously a big piece of it is LME dependent so you'll have to adjust for that. Significant improvement as Mike mentioned already in the power cost at Mt. Holly, you'll see that embedded in the current year.

Michael Bless

The carbon price is down, just to go through them in both geographic regions and Iceland on the finished anode side if you will, and in the US principally because of reductions in the prices of calcined coke, pitch marches to its tune to a certain extent. Power as Shelly already covered, labor costs are up sort of normal amount per CBAs basically inflationary. So you will see them down in both. I wouldn’t want to quote David off the top of my head as Shelly said in LME consistent percentage, but they're both down in absolute.

Operator

(Operator Instructions). Our next question from Brett levy with Jefferies and Company.

Brett levy - Jefferies & Company

First off, and I ask this every quarter, given uncertain levels of production in 2013, sort of what level of hedging --?

Michael Bless

Yes, so we got no hedges on right now at all, no reported sales and the last of our production contracts expired in June of last year of course. So we've got nothing on the books right now.

Brett levy - Jefferies & Company

And then the maturity [of the eights] [ph], obviously it seems like a lot of the different parts of your business are getting kicked down the road in terms of like decision making in terms of the Helguvik power contracts at Hawesville, et cetera. Can you talk a little bit about kind of what your thinking is given that the capital markets are very open right now?

Shelly Harrison

Sure, and we would agree with you, the capital markets are very open right now and we do anticipate a refinancing in the near term. As you likely know right now, we're waiting for the filing of the 10-K really before we can pursue anything for marketing purposes, we need that document. But beyond that, as you know, as we get closer to the call dates, the cost of redeeming those bonds actually comes down. So, during that time, we're taking a look at all those different instruments that are available to us and as I said, we anticipate that we will do something on that refinancing in the near term.

Brett levy - Jefferies & Company

And then at Helguvik, you said you are optimistic that something might happen in 2012. It seems like you're sort of reached an impasse, are you optimistic that something will happen in terms of reaching favorable agreement 2013?

Michael Bless

Yes, I wouldn’t say we were optimistic and we got it wrong. So that is correct. I wouldn’t characterize it Brett as an impasse. An impasse, at least the way I would define it is, you got two parties with mutually exclusive positions. It hasn’t come to that all; it's just the complexity of the problems. Remember that the issue here primarily is around the financial condition of both of these power companies post-crash, post-crisis in Iceland. Capital controls remain on despite the fact that the sovereign has continued to improve in its credit rating and its credit outlook as you know. But there is some still deeply embedded issues in each of those power companies which are both highly levered and so, that’s kind of what we're dealing. So I wouldn’t describe it as an impasse. We agree on the problem and we're just trying various ways to try to fix it. So the last part of your question I guess, I am going to again say, I hope I don’t have to sit here a year from now, I don’t expect to sit here a year from now and make the same comment. We do see for a variety of reasons conditions, coming together form some time during this year. I wouldn’t like to predict when during the year but we're reasonably confident that something ought to get done one way or another this year and get that project back up and running. Right now we've decided to close down for the winter, but we're hoping here is as early in 2013 as possible to get it running again.

Brett levy - Jefferies & Company

And then the last one and this is sort of just high in the sky, I know you guys think of yourselves as a global company and you should, would you look perhaps as a bargaining chip or perhaps just because it’s a good idea economically, would you look at pursuing a mid-east project?

Michael Bless

Well first and foremost, if you mean as a bargaining chip vis-à-vis the other situations with which we're dealing on power there, we have a firm view that each of these, just like any investment at which we look as a different cost of capital, a different risk profile, each of these is a different situation and none, as far as we're concerned, are mutually exclusive. So, never from that perspective. I guess I would never say no in terms of a mid-east project but Brett, we would really have to look at ourselves and ask, what do we bring, what does this bring to our share owners, what do we bring to that project, how can we get value out of it for our share owners that given our size and given who we are and what we do well in our opinion any way and so I guess that’s a long winded way of saying, I would wait up at night waiting for us to announce a Persian Gulf project but we would certainly look.

Operator

And speakers at this time we have no further questions in the queue.

Michael Bless

We appreciate again everybody joining us this afternoon and we look forward to reporting first quarter to you around the third week of so in April.

Operator

Ladies and gentlemen, that does conclude our conference call for this afternoon. Thank you for your participation. You may now disconnect.

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