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Century Aluminum Co. (NASDAQ:CENX)

Q4 2008 Earnings Call

February 19, 2009 5:00pm ET

Executives

Shelly Lair – Vice President & Treasurer.

Logan W. Kruger – President & Chief Executive Officer.

Wayne R. Hale – Executive Vice President & Chief Operating Officer.

Michael A. Bless – Executive Vice President & Chief Financial Officer.

Analysts

Kuni Chen – Banc of America

David Gagliano – Credit Suisse

John Tumazos - Very Independent

John Tumazos – Very Independent

Mark Liinamaa – Morgan Stanley

Martin Pollack – NWQ Investment Management

Anthony Rizzuto – Dahlman Rose & Co.

Matt Mylam – Seneca Capital

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2008 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded.

I would like to now turn over your conference call to your host, Ms. Shelly Lair. Please go ahead.

Shelly Lair

Thank you, Ann. Good afternoon everyone, and welcome to the conference call. For those of you joining us by telephone, this presentation is being webcast on the Century Aluminum website, www.centuryaluminum.com. Please note that website participants have the ability to advance their own slides.

The following presentation, accompanying press release and comments, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Century's actual results or actions may differ materially from those projected in these forward-looking statements. These forward-looking statements are based on our current expectations and we assume no obligation to update these statements. Investors are cautioned not to place undue reliance on these forward-looking statements.

For the risks related to these forward-looking statements, please review Annex A and our periodic SEC filings, including the Risk Factors and Management's Discussion and Analysis sections on our latest annual report and quarterly reports.

I'd now like to introduce Logan Kruger, Century's President and Chief Executive Officer.

Logan W. Kruger

Thank you, Shelly. Welcome, to the fourth quarter conference call. Joining me today are Wayne Hale and Mike Bless. Let me move on to the slide number four.

We're managing through extraordinary and difficult times. The crisis in the financial and credit markets has led to a pronounced downturn in the global economic activities. The global market for commodities has deteriorated in line with the decline in the global economy consumers throughout the developed world are retrenching in response to the downturn and severe shortages of credit. Governments have taken on the role of spenders and lenders. The Aluminum industry has announced significant production curtailments. So far, a total of $6.5 million ton per year of production cutbacks has been announced of which some $3.5 million tons per year are in China.

This represents 16% of capacity, but many of the closures have yet to be implemented and further production curtailments must occur to offset declining demand. Our first priority at Century is to protect our existing business as we continue to believe in the long-term fundamentals for the Aluminum industry are sound. Our focus is on preserving the value of our assets, so that we will emerge from the downturn with a strong platform on which to grow.

Our smelters in Iceland and the U.S. continue to operate well. We have the leadership team at the plants focused hard on cash flow and we have hold on all discretionary spending in the U.S. and Grundartangi. Grundartangi in Iceland continues to exceed its rated capacity and produce records amounts of metal. Iceland’s political and economic environment has had little impact on Grundartangi, but the environment in the country will be difficult for the next years due to negative economic growth, inflation, and unemployment recent progress as we made in restoring stability in the economy and financial markets as financing packages have been put in place. Banks have been recapitalized and the foreign exchange market has been partially reopened.

We continue to plan to aggressively implement restructuring actions across the country to improve our financial position during these difficult economic times. We have concluded the orderly go climate of the remaining plant operations at Ravenswood in West Virginia and we are taking a critical look at all of our U.S. operations, which Wayne will detail later. We continue to look for at opportunities to reduce cost across the country and improve our liquidity position overtime.

The recent common stock offering will allow us to consider cost reduction and other alternatives including additional curtailments of production capacity from a greater traditional strengths.

If we move on to slide 5, declining demand for aluminum products in developed and developing nations, increasing stock from the LME and other locations and a general lack of confidence in the future economic conditions has combined to produce an unprecedented decline in the LME price of aluminum.

The average prices fallen some 60% from a got at the year ago to February this year. the LME has been a slow as $1280 per ton cash recently. The U.S. market remains subdued and the Midwest premium continues to be in the $0.04 range. Inventories have been increasing dramatically since last fall and now equivalent to 53 days of global demand, similar to the peak days inventory level at the last downturn in the early part of this decade.

Current metal prices reflects similar levels as we have seen in 2002. But, as you all know the cost structure for the aluminum producers today is significantly higher.

We move on to slide number 6. At current primary aluminum prices we believe at least three quarters of the global primary aluminum capacity is operating below cash break-even. While this has lead to significant production curtailments, the industry experts believe supply still outrage as weakened demand as confirmed by the increase in the aluminum inventories. We do not believe that the aluminum prices at these levels are sustainable. We owe but the very lowest cost producers all operating at a loss, but current prices could persist for sometime until the economy regains confidence and demands pickup and we are planning our business accordingly.

We’ll move on to slide 7. During the last several months the primary aluminum industry has responded to the declining metal prices significant production capacity has been curtailed or scheduled for curtailment $6.5 million tonnes of production capacity representing 16% of the 2008 global production capacity has been announced for closure in 2009.

I would like to note in addition to this some $17 million tonnes of alumina production capacity has been announced for closure as well. We believe more production curtailments in alumina and aluminum will be forthcoming. We continue to expect more cuts as China has the majority of the smelters continue to operate with negative cash flows. Shanghai prices has stabilized at somewhat higher levels in the aluminum price, mainly due to government actions both on the strategic stock volume and taxes. And as a result it is believed that production cuts in China will now slow.

In the Western world, particularly in Europe and North America there is still significant amount of high cost capacity that we expect to see curtailed in the near-term. While this idle capacity will create an overhang in the market, a significant amount of these curtailments relate to smelters of were nearing the end of the use for life and has outdated technologies in the case of mothball smelters all will be unable to secure power at competitive rates in the future to restart capacity.

We move on to slide 8. Practically, all our projects aimed at bringing new capacity on stream during the next several years have been cancelled. extended or delayed. As a result we expect little new capacity will begin production during the next several years and sponsors on these projects will not restart construction until the confidence in market returns. I would like to note that the construction period for a major expansion were our new Greenfield plant is generally several years. Obviously, this is will be a positive for the commodity price when demand returns.

Let’s move on to slide 9. This chart is really a discussion of urbanization and industrialization of developing economies over the long-term. Per capita Aluminum usage remains low in the BRIC countries supporting the outlook for future demand growth. There has been a significant increase in the Chinese usage over the last 20 years, but per capita consumption remains well below developed regions. Some economic data - economic growth in China has slowed recently. Industrial production in December was 5.7%, 12.9% for the whole of 2008.

GDP was 6.8% for the quarter - last quarter of 2008, 9% for 2008 total. Most of the forecast for 2009 are similar to the 5 to 5.5% range. Longer-term Aluminum demand growth is expected to return as capital for developing regions such as China and India reengage on a positive economic growth and urbanization

We’ll move onto slide ten. The rapid and significant deterioration in the industry conditions became evident. We began taking actions in the last quarters of 2008 to reduce our overall cost base and Wayne, will take you through these actions in detail.

We believe the restructuring actions along with the recent equity offer, will position us to withstand current market conditions and be ready to participate in the upside when conditions improve. We continue to believe that Iceland is one of the most attractive locations in the world for primary aluminum production. We are actively working with the Government of Iceland to support in an investment agreement providing governmental support for our Helguvik project. We have every expectation of seeing this project through to fruition, but during these challenging times, we must put priority on the company’s liquidity requirements as a whole. As a result, new commitment has been reduced to a modest level.

I will now hand over to Wayne.

Wayne R. Hale

Thanks you, Logan. Let's turn onto slide 11. Beginning in September and then accelerating through the fall, we took a series of actions aimed at immediate improvement of our cash flow. We stopped all spending related to business development and other discretionary programs, result of these actions is that our cash, SG&A will be around $6 million per quarter in 2009.

This is around a 35% reduction from 2008 we also seized all discretionary programs at our operating facilities as well. We’ve always maintained a very small salaried staff at our corporate offices and at our plants. Nevertheless, we eliminated approximately 13% to the positions at the corporate offices and at Hawesville. We address Ravenswood as a part of a larger action and I’ll get to that in a moment.

Capital projects were suspended other than those few that were too far long to stop. We have set essentially a zero budget for capital in 2009. Any spending that must be approved and it will be approved by me personally and any spending that I do approve will only be if it’s required to maintain a safe and environmental responsible operations at the facilities. Logan has already covered the status of the Helguvik project. so I won’t repeat it here.

Now lets move on to the capacity curtailment. With the complete curtailment of Ravenswood and we have now shedded one-third of the U.S. capacity. This decision was regrettably the right one for the company. It followed a substantial effort involving all the plants major constituencies to find a way to keep the plant open. We’re especially gratified by the involvement of the elected officials and in particular the personal leadership or governor Manchin of West Virginia. Regrettably these efforts were overshadowed by the continuing decline in the industry conditions

The plant is now completely shutdown. We will maintain a small staff at the site to keep the plant safe and secure and the machinery in proper condition so that the smelter can be restarted efficiently when conditions improve. Mike will detail this in the curtailment costs later. The situation at Hawesville is reasonably complex and we have been spending a great deal of time working through the relevant issues. We have a new long-term power contract, the approval of which by the Kentucky Public Service Commission is expected at anytime.

In addition, we have a large and valued long-term customer who requires metal in molten form. Despite these factors, you can expect us soon to be taking some decisive steps relating to Hawesville’s rate of production. Similarly, we have been working with our partners on the situation at Mt. Holly. And we’re in discussions with the power supplier with regard to how to make this plant more competitive in the current market situation.

As you can expect, we also have been working hard with our partners in Gramercy and St. Ann’s as well. At that present time, their refineries running at 3% of its capacity of this smelter grade alumina. The chemical production continues as it benefits the plant economically. We will continue to assess the situation as it unfolds. Lastly, I should point out that beginning largely in January we have began to see some relief in our major operating costs such as market pace power and as Grundartangi, cook and pitch for anode production in the U.S. facilities and other key raw materials.

Let’s move onto the next slide. It is critical during time such as these not to lose site of the importance of world-class operations. As you know, our first priority continues to be ensuring the safety of all our people at our facilities and the responsible operation of other plants. In addition, throughout this very difficult environment, our teams have been delivering exceptional performance. As shown on this slide the U.S. smelters have all continued to run above available rated capacity. The team in Iceland has demonstrated why we believe so strongly in the future of this business. The plants output has continued to exceed our expectations as you can see from the slide here, since the completion of the expansion program the smelters production has been consistently above the capacity. We’ve also seen the positive impact of continued improving efficiency and productivity Grundartangi's results.

Turn over to Mike now to talk about financial.

Michael A. Bless

Thanks very much Wayne. If we could turn to slide 13 please, and as usual our reference in my comments the financial information that directly shows the earnings release, so if you could have that handy, it will make my remarks easy to follow along. Okay on slide 13 as usually you can see a portrayal of the current quarter versus the prior one sequentially, so obviously Q4 versus Q3. Before we get into the company’s results, let me just take a step back and talk about what the market did that quarter obviously Logan addressed it at a high level average L&E price, cash price for the quarter was down 34% versus Q3 on a one month lag basis the cash prices was down 26% and as many of you know we've been following the company many of our sales are priced on a one month lag so on that basis our realized average price per ton was down 27% again versus a 26% we have declined in the one month lag cash LME.

Turning to shipments volumes on the domestic side volumes were down quarter-to quarter about 2% more than, all of that decline was cause by the curtailment of the line at first line at Ravenswood in December. Iceland was up 2% and Grundartangi if you had a chance to look at the operating data at the end of the financial statements produce and shift that in annual rate of 276,000 tons for the quarter were obviously extremely pleased with that result. See put all that together the price and volume data net sales as you can see on the chart were up 27% quarter-to-quarter.

Now skipping over to the financial information if you get it in front of you going on to gross profit it was up on a reported basis a $185 million quarter-to-quarter if you exclude a $56 million charge we took for inventory accounting to reflect the value of the inventory at lower customer markets as required obviously under the accounting standards. Gross profits would have been down $129 million again if you exclude that $56 million of CM charge. The drop in price cause more than all of that decline in gross profit prices took a $145 million gross profits quarter-to-quarter. Going the other way as Wayne explained we've seen the beginning of some of costs following quarter-to-quarter let me detail a couple of those for you. As you would suspect given the severity and the suddenness of the decline the cost which fell the most for those that referenced directed the metal price and for us as you know those are alumina, at Mt. Holly and, Ravenswood and our power of cost in Iceland and those cost in aggregate were down $22 million quarter-to-quarter.

Gramercy alumina obviously into Hawesville’s is down $4 million quarter-to-quarter, these are all favorable obviously Q4 versus Q3. U.S. power costs $4 million favorable Q4 over Q3 and as Wayne said we just began in the last month to see drops in raw material cost principally carbon. Q4 was just $1 million favorable to Q3 going back as the first quarter in over two years that we've seen a sequential drop in carbon and related costs and as Wayne said we expect to see more coming.

Continuing down the income statement SG&A costs $4 million for the quarter that was after a $3 million reversal and compensation accruals as you know the way company like or is account for their incentive compensation is actually grew on an ongoing basis every quarter for what's you think you're going to pay obviously in the fourth quarter when it became apparent but doesn't announced will not be paid based on the company's performance.

We've reversed as accruals. Going forward as Wayne said we're looking at ongoing quarterly cash SG&A of about $6 million…

Reported our GAAP basis of about $8 million. Couple of more comments on the income statement net loss and forward contracts as you can see there the $13 million almost all of that relates to the determination of our Atlantic Krona foreign exchange contracts in the fourth quarter. Lastly, share count we had a chance to look about $49 million common shares, $15.6 million preferred shares those are basically common stock equivalents and as you doing a numbers in the future obviously you need to add the $24.5 million common shares as result of the common stock offering in the beginning of February.

We can move on to please to slide 14. Same format just year, full year, over full year I'll just make some very high level comments. Again just talking about the market before we go into the company's results the actual cash LME on average in '08 was 3% lower than '07, and if you look at that on the one month lag down just 1%. The company's realized average price per ton was down 2% that's excluding the impact of our cash flow hedges as you remember we were settling cash flow hedges throughout 2007 and in the last cash flow hedge contract settled in January of '08.

So if you take out the impact of this cash flow hedges and look at what we actually realized on our pricing excluding those hedges. Our realized average pricing was down 2%. Shipment volume domestic was flat year-over-year Iceland was up 15% Grundartangi shipping 271,000 tonnes well above its rate of capacity of 260,000 tonnes and I might add the first year after we completed the major expansion about plan. It's an extraordinary testament

Net sales as you can see on the chart as reported up 10% again if you pull out the impact of those cash flow hedges, net sales up 3% year-over-year. And if you take a look at gross profit again on the income statement data if you pull out that LCM charge in '08 gross profit basically flat year-over-year.

Couple of comments on cash flow; if you had a chance look at the cash flow data further in the financial statements. Free cash flow a $178 million in '08, just as a remainder the way we calculate free cash flow is cash from operations minus CapEx, but excluding the Helguvik project spending.

On that basis CapEx in Q4 was $24 million, which brought it to $51 million for the full-year. As you remember, our forecast for the full-year had been $75 million to $80 million. When we gave you that forecast at this time last year and obviously as Wayne said we stopped all of those projects other than the one that were really too far in process to start during the fourth quarter.

Helguvik project spending as you can see in the cash flow data $27 million in Q4 which brought it to $80 million for the full-year. As you might remember in the third quarter call we forecast $45 million of spending for Helguvik in Q4 and the rest of those amount has been based on discussions with our suppliers for that project, have been pushed out to 2009. Those were again amounts that for work that had already been expended on or behalf either in services or products those suppliers based on discussions agreed with us to appreciate those amounts in our comments and a couple of slides on what we see help of its spending for all of 2009.

If you can move on please to slide 15, year end accounting items. These were all details or estimates for these I am pleased to say were details in the perspective supplement that we put out in connection with the common stock offerings and the final results all came in within those estimates, but just to bring everybody current, for us to look at the accounting for long life assets number one, PPNA as we predicted there was not impairment as of the balance sheet date December 31, obviously of PPNA that obviously balance sheet date was a good month a little bit more before we made the final decision to curtail all the operations with Ravenswood. So, we need to revisit that accounting this quarter, to put into context the current PPNA at Ravenswood as of December 31 was about $18 million.

Good will again consistent with our estimates in the perspective supplement we did find impairment of that goodwill, that could will obviously produced by the acquisitions of norredal back in 2004, and we have written-off that entire amount. Lastly, the largest amount obviously, our deferred tax assets with company at December 31 had over $600 million of deferred tax assets on the books largely but not certainly but largely caused by the settlement, termination of our Middle East contracts in the middle of last year. those of, who follow this mostly you probably know the relative accounting standards, you need to show in your forecasts that you can utilize the deferred tax assets generally within the next three to four years or else its indeed impaired and you need to put a valuation allowance or reserve against it. Not surprising given the environment, our forecasts show that they would not be used and so we've put a valuation allowance against most of the deferred tax asset. The only amounts that weren't allowed for are amounts that will go back and file our carry back claims for in that to use and I will get to that in a moment. And the lower cost of market item for inventory, I have already covered. So, I won't go through it again.

Turning please the slide 16, some comments on the balance sheet and the company's liquidity. Cash, if you had a chance to look at the balance sheet at December 31 was a $144 million that has grown to $156 million at January 31 of that $156 million, a little over half of it was owned by the U.S. company with the remainder owned by Nordural just to remind you we keep almost all of Nordural's cash off-shore from Iceland in U.S. dollar accounts in Europe and in the U.S. We keep minimal funds in Iceland. So, if you take that $156 million at January 31 and you pro forma it for two items, first item obviously is the net proceeds of the equity offering earlier this month and the second I will get to in a moment is the repayment of the $25 million that we had borrowed under the revolver as of December 31 and as of January 31.

You get pro forma cash at January 31 of about $235 million. On the revolver, we had borrowed during the fourth quarter under the revolver the balance as I said was $25 million at year end and then again at the end of January we borrowed that amount due to some issues we were having around timeliness of payment with one of our major customers after a series of discussions with that customer those issues were solved, no issues today and we have repaid that amount just this week the major reason for the repayment is due to the decrease in the borrowing base under the revolver for two reasons. One, that’s already happened in one perspective. The one that's already happened of course is the lower cost to market charges that's a direct $56 million reduction to inventory carrying values.

The second is the prospective liquidation of working capital as we wind down the operations at Ravenswood. And so when we ran the borrowing base pro forma for those numbers for those actions I should say, we believe it is prudent to repay that amount if you were to look at it today. Again based on taking Ravenswood’s working capital i.e., receivables and inventory out, we believe we could re-borrow that $25 million, but no more so that the best extent of the availability under the revolver. As you know, we have no near-term maturities under any of our debts and not maintenance covenants or any covenants of that source. Lastly, on liquidity, two items to brief you on again we talked about this in the perspective supplement.

The first is the new power contracts for Hawesville, we are waiting for to hear from the Kentucky Public Service Commission any day now. Assuming they do approve that contract and we would receive a $45 million cash payment upon its closing. Second tax carry back claim, again produced the by the loss that we took when we settled our hedge contracts. We filed for the first portion of that in January and actually received the check for that full amount just under $11 million late last week and we’re filing now the residual amount or $84 million and under the statutes believe we should receive those funds within 90 days of the filing.

Okay, last page for me on slide 17, just a couple items as we normally do to give you some forecast items for 2009 starting at shipment volumes, domestic, 375,000 tonnes that includes Ravenswood operating with three lines, for the month and a half that which it was operating and also it assumes at Mount Holly and Hawesville are operating at full capacity the rest of the year. So to the extent that we take and capacity for example out of Hawesville that would reduce that number and we’ll obviously update it for you at the time that we would take any action. Grundartangi has been producing as I said above consistently, above its rated capacity and so we feel confident in this is estimate of 272 and 275,000 tons.

Major pricing items alumina obviously contract rated at, Mount Holly is the same LME percentage obviously ’09 verus ’08. At Ravenswood the contract is down ’09 versus ’08 and we’ll obviously use as much of that alumina at Ravenswood as we can as Hawesville and then sell the rest of it on the open market.

Power cost as we sit today based on the forecast on the power suppliers, looks like cost set at both Hawesville and Mount Holly, ’09 versus ’08 about the same maybe up slightly. That assumes that the Big Rivers contract the new energy contract at Hawesville were to close.

If you want to close our power cost at Hawesville would be significantly lower in ’09 than they were in ’08. And at Mount Holly, I should say that we and our partners there obviously Alcoa or having substance of discussions with the power supplier there about what can be done about this power costs.

Carbon costs as Wayne said are coming down and we think that trends are good here and we would hope to see continuing trend. Cash spending for the curtailment cost at Ravenswood $450 million in ’09 and we expect to get back in the near term in the next month or two a substantial portion of that amount in terms of the liquidation of working capital out of that plant.

SG&A, Wayne has already covered $6 million cash per quarter; $8 million on a GAAP basis is our expectation. CapEx as Wayne said, he is got no budget out to the plant operations personnel and have personally approved any spending that’s required. For financial planning purposes, we put in a budgetary amount of $15 million we think that’s on a conservative side.

Helguvik spending $25 million to $30 million for the year, again that includes as I said that approximately $20 million of supplier payments that we deferred out of Q3 and Q4. And lastly depreciation $70 million, amortization $16 million, that amortization would go away if the new power contract at Hawesville were to close these we would write-off the intangible related to that power contract if we were to terminate that one and enter into the new one.

And with that will hand it back to Logan.

Logan W. Kruger

Thanks Mike. We expect - on slide 18, we expect the weak market conditions will continue to 2009 until stimulative global fiscal measures and the return of more typical supply demand equilibrium results in any meaningful increase in primary aluminium prices. Once global economic conditions improve the environment will be attractive for producers of primary aluminum. The forces that were in place before the current economic crisis industrialization and urbanization will return.

As described earlier, primary aluminum producers are generally respondent to the current economic crisis by significantly curtailing production existing facilities and sustaining construction of new facilities. As a company, we have taken significant containment and cost reduction actions today and expect to see more in the near future. We have also taken meaningful steps to improve our liquidity position so that we can emerge from this downturn well positioned to take advantage of stronger markets when they return. At this point I’d like to thank you and invite any questions Ann.

Question-and-Answer Session

Operator

[Operator Instructions]. And our first question is coming from Kuni Chen from Banc of America. Please go ahead.

Kuni Chen – Banc of America

Hi good afternoon.

Logan W. Kruger

Hi, Kuni Chen.

Kuni Chen – Banc of America

Hi, tough time’s folks certainly I’ll sympathize with what you are currently going through? I guess-just my first question, think in the prospectus it mentioned that you guys would be cash flow break even at about $1900, and can you give us an update to that sensitivity assuming that baking in the full curtailment now of Ravenswood and where that could go, if you curtail a couple more potlines in your system.

Wayne R. Hale

I think to start off that number I think is not a range of 1800 to 1900 and Mike could comment as well and obviously Kuni I think you are aware from those presentation and other perspectives amongst other things that we are looking very seriously at what we do in all of the businesses. We’ve already reduced with our partners in Gramercy and St. Ann those amounts down to 500,000 tonnes of smelter grade alumina a total of 700 with a chemical grade and these actions are coming through. So we hope the trend will continue to go down, but it is difficult at this stage with all the materials costs and other things taking place to really give you a give your fair number other than the range of about 1800 to 1900. I think another comment I would add Kuni is Mike who has made a comment about Grundartangi being at about today's cash prices being breakeven. The team is going to get better than that and they obviously are working very much on that as well. I don’t know if Mike or Wayne would like to add any comments.

Michael A. Bless

No, Kuni it's Mike. Ravenswood as you know was a little higher than the weighted average, but not much as we have talked about in the past obviously Ravenswood smaller plants, smaller pots, older technology, but a pretty decent power price and so, when you kind of blow that off through and compared it to other smelters it was a little higher, certainly higher, but not, standard deviation higher and so that's a long-winded way of saying that kind of the weighted average break-even has dropped a little bit as well, we said, but not a whole lot, and we will off take this as we move forward to the extent that we would curtail further capacity. But I think its fair to say you should not expect that break-even point to drop very much and just to emphasize the break-even here we’re talking about is a consolidated breakeven, if not just adding up the plants, but it's adding on the SG&A and the interest expenses basically the overhead at the corporate level.

Wayne R. Hale

I think just one other bit of information if you know sort of an idea what we are seeing flowing through, I think Mike on average on, when the cost it also for example

Kuni Chen – Banc of America

Taking the average of Q4 going through to January has improved somewhat we’ve seen some of the process come off.

Logan W. Kruger

All right, yes that's actually improved 7.4%.

Wayne R. Hale

So Kuni we all see it. This is a bit of a lack on this. But it certainly starting to flow through. But I think Mike is correct in saying that we expect some improvements. But they’re not large on the downside.

Kuni Chen – Banc of America

All right. Okay and then just as far as some of other liquidity items that you talk about the – I guess as first of all the $11 million tax refund is that kind of based into that 235 liquidity.

Unidentified Company Representative

No, no, no that's was pro forma, good question thank you there. The 235 was pro forma as at January 31 and the 11 we just received last Thursday or Friday I think it was Friday.

Kuni Chen – Banc of America

Okay so we should include that. As far as the other items on Hawesville and the other pieces of tax refund, can you give us your best guess as to when those items will up?

Unidentified Company Representative

Again this is Wayne. In the regards to Hawesville as we said earlier, we expect the KPSC to make a ruling within the next several days. And with that ruling then we’d see that flow in the $45 million shortly thereafter.

Unidentified Company Representative

On the tax claim Kuni as I said we are filing it literary as we speak here today, tomorrow kind of things and because after 2008 return done before you file a claim against prior years and the status says that the services is suppose to pay within 90 days. I mean that's what the law says. But it's being the government they tend to do what they want. The only remedy that we have as we understand with our experts were they not to pay within that 90 days is that the have to buy law and begin to accrue interest on it. So we believe we should receive it, but until we do again the further $84 million we are not going to account this money in the bank.

Kuni Chen – Banc of America

Okay. And I guess just last question and I’ll turn it over, its kind of Wayne maybe a little bit more of a direct scenario. But just hypothetically if all of your U.S. operations were shutdown at some point, can you just sort of walk us through the cash flow implications of that. Would that the, another $100 million or so, of cash, and excess cost if you just kind of outline that for us.

Unidentified Company Representative

I think Kuni a slogan it’s quite difficult to take you through that, because you have to deal with the couple of fundamentals. And one of the fundamentals of Hawesville is we got a very major customer with a contract for conductivity metals through into 2011. And that basically absorbs the best part of three launch. So you’re going to have to take it obviously a Gramercy furnace we’re not down substantially, but again we got a partner at Mt. Holly similar situation the partner, as you know its Alcoa. And Alcoa is certainly saw some real drive to take off capacity where it is not needed and where it is not relevant in terms of return. So I think you have to take if I can and some idea of what relevant would have down and says execution order of numbers I am trying to get my colleagues do not in agreement what I am telling you, so I think that gives you some order of numbers and well obviously as we go for our next quarter update towards at this goals Michael?

Unidentified Company Representative

Yeah, I mean just to restate what we said about Ravenswood, so $40 million to $50 million of cash spending in this year and about half of that again in 2010. This year we will get out of the 40 to 50. Our estimates say we will get that as I said a good chunk at least half of that within the next months or two. The working capital gets liquidated very quickly. So that's Ravenswood. At Hawesville, the situation is a little bit different, the contracts are different and just slightly a bigger plant. But from an order of magnitude it would be around the same. And Mt. Holly again is quite different. It's not a represented plant. But there are payments due to the - of the employees, their demand charges for electricity. So, it would be within the range consistent with Ravens. As Logan said the durability of either the two of those is really the issue.

Unidentified Company Representative

I think Kuni just on the lost piece. Just on the standing back to the high level on liquidity. You I think understand our position and other way we set this up is to take us indeed to the – well into the second half of next year or more. So that's what are we working towards and obviously it will depend on how the market treats us going forward.

Kuni Chen – Banc of America

Thanks. I’ll circle back.

Unidentified Company Representative

Thanks Kuni.

Operator

Thanks Tony. The next call is coming from the line of David Gagliano from Credit Suisse. Please go ahead.

David Gagliano – Credit Suisse

Hi good afternoon. Thanks very much for taking the call the questions. First of all, I just want to clarify just to make sure the $56 million lower cost market inventory charges is that actually flow through the cost of goods sold line I think Q4 is that correct.

Unidentified Company Representative

Indeed, yes David.

David Gagliano – Credit Suisse.

So we ship that out. It works at about cost of goods sold or that’s a propound shift and tieing in to the previous questions. It sounds to me like we should expect that number unit cost number of $0.87 per pound number to be below $0.80 per pound as we move through 2009 is that right?

Unidentified Company Representative

Yes.

David Gagliano – Credit Suisse.

So that start in Q1 or is that they slower transition now that Ravenswood is shut down?

Unidentified Company Representative

David, that’s hard to – it’s Michael. It’s hard to estimate I would say your $0.80 I assume you’re just picking up on the range that we gave on the break-even

David Gagliano – Credit Suisse.

Yeah and then trying

Unidentified Company Representative

You have to just careful here. I mean the break-even at that metal prices, it is a bit of our circular reference because it assumes to the extent. For example that you have cost that are indexed for the metal price that is at that price. I mean you’re calculating you just dividing our cost of sales by perhaps to get to sort of the results that is static piece of that point in time. Right.

David Gagliano – Credit Suisse

Correct right. So, what you are saying that break-even declines as the metal price declines, is like that what you are saying?

Unidentified Company Representative

Particularly if you are take in third party alumina (multiple speaker)

David Gagliano – Credit Suisse

Sure. But you know at the 1300 metal price, what’s your break-even, cash break-even is it that the $1800 to $1900 range or is it lower?

Unidentified Company Representative

It’s lower.

Unidentified Company Representative

It would be lower

Unidentified Company Representative

And I think my colleagues will correctly David we used around about 1400 to give you that range, somebody has that calculation. I think 1900 run about 1400 or less.

David Gagliano – Credit Suisse

Okay, all right. Fair enough.

Unidentified Company Representative

Yeah

David Gagliano – Credit Suisse

I think you can talk a bit more offline.

Unidentified Company Representative

Thanks David and any other questions.

David Gagliano – Credit Suisse

No, that’s it, that's perfect. Thanks.

Unidentified Company Representative

Okay.

Unidentified Company Representative

Okay

Operator

Thank you, David. We also have a question from the line of Mark-Anthony Sifontes from Perella Weinberg Partners Please go ahead.

Unidentified Analyst

Hi, guys, its actually this is John Hale. Looking at the slide six, which is I guess your industry kind of cash costs. Can you just provide some color in terms of some of the key underlying assumptions here and the timing in which you put this together, because obviously this curve shifts as the dollar moves in and raw material costs and shipping costs and all that source stuff changes. So, could you just provide a little color here?

John Hale – Perella Weinberg Partners

I think, John, it's fairly recent Shelley.

Unidentified Company Representative

Yeah it was produced in January of 2009 and the key assumption in there is the LME price that obviously that drives the alumina and the assumption in there is $1500 per ton because the line is showing the full curve the assumption that builds that four curves is currently 1500

Unidentified Company Representative

That pretty recent but obviously these things change pretty quickly.

Unidentified Company Representative

Correct.

John Hale – Perella Weinberg Partners

But as a dollar continues to strengthen I guess a lot of this Chinese Russian capacities becomes more competitive.

Unidentified Company Representative

You are correct. You’re starting to get the currency impacts and that’s obviously were taken into account at that time. As those currencies erode I think you can change the positions on the curve from ever. I don’t think that who is making cash versus not making cash is going to change significantly – quite frankly.

John Hale – Perella Weinberg Partners

Okay. And so how you explain more of the folks do not take in capacity out at these current LME prices

Unidentified Company Representative

Yeah.

John Hale – Perella Weinberg Partners

When do you think we are going to see some – we’ve seen 16%. But I mean clearly it’s not enough when do you anticipate some more dramatic drastic cuts from some of your peers?

Unidentified Company Representative

I think those all have been considering this for sometime. I think it’s the pressure on the decisions have become more stronger in the last while I think I focused on plus two areas and maybe comment on some other areas that we will. The first area is in North America and Europe I think just recently in the couple of days in the last week just recently in the couple of days in the last week, John, you are seeing numbers and announcements come out in Europe, Norsk Hydro, Trimet amongst others. I expect you would see more. It’s somewhat unclear beyond the, I think a 11% production cut it RUSAL, whether we will see more, but certainly some of the older operations there would obviously be under consideration, but you got foreign exchange impacts, currency impacts. On North America obviously, we’ve been quite open about our thoughts on some of our operations and we look at does. I don’t like to comment beyond that on any individuals, but certainly I think the pressure is there, I think the pressure is also going to replace and as you notice today, in Borsbeek that, there has been cost cutting in Borsbeek, although that’s not I will think with it favorable direct and cost of labor, particularly should be fairly low, but there was a cuts in production there. So I think this is still to come. I think, that this pressure, yeah we’ve been in this phase of pricing for about 5 months now. It sounds like we’ve been here for a longtime, but, if you really think about it - it was probably November. We have really, where this would have been sounds so it takes a bit of time for people to site, part of what hasn’t flowed through into the actual production is people opined the shutdowns. I don’t want to give examples that people are bringing off of their production say at the end of March announced it, but the metal still flying till the end of the March, because they’re running down inventories and their working capital amongst others. So, I think there is more to come, it has to do because the demand, which is difficult for anyone to estimate is not there, and you see with the inventory growth. There is a disconnect between supply and demand.

John Hale – Perella Weinberg Partners

Okay and how does the decision making process work at Mt. Holly and maybe Gramercy, which you have a partner, how does that work and what are your obligations to funding losses and…

Unidentified Company Representative

I think the answer is, we have a partnership lease obligations and, we really don't like to comment other than we have got two good partners, who we are working with, you are seeing the result ready at Gramercy and the discussions at Mt. Holly are ongoing. So, I just note that Mt. Holly is also one of the newest smelters in North America as well. So, it's a part process of fundamental to that in the Wayne I think and Mike made remarks about the discussions on the power contracts.

John Hale – Perella Weinberg Partners

But do those operations have their own source of funding or to the extent they're incurring losses are you obligated to contribute cash, your portion of cash needed to ffund the operations, the loss making operations?

Unidentified Company Representative

It’s the latter.

John Hale – Perella Weinberg Partners

And so you have no ability to not contribute cash and move of, giving up equity or your ownership portions, your ownership interest in those assets.

Unidentified Company Representative

I think there is a lot of options available to us and…

Unidentified Company Representative

We are looking at them all.

Unidentified Company Representative

Exactly.

Unidentified Company Representative

I mean, the answer to your question effectively not unilaterally is the answer to your question.

John Hale – Perella Weinberg Partners

Not unilaterally.

Unidentified Company Representative

Not unilaterally.

John Hale – Perella Weinberg Partners

Thank you.

Unidentified Company Representative

Thanks

Unidentified Company Representative

Thanks very much for question.

Operator

Thank you. And we have a question now from the line of John Tumazos from the company of Very Independent. Please go ahead.

Unidentified Company Representative

Hello John.

Operator

One moment please. John, do you want to start again, please.

John Tumazos – Very Independent

I am sorry.

Operator

Thank you. Just you now, can ask your question.

John Tumazos – Very Independent

Thank you. In terms of your sense of the market, how do you size off the big inventory deliveries like yesterday's 141,000 ton LME report. If you would merely take the change in exchange inventories in January, it suggest that demand was 12.9% below supply and February first three weeks is about a 11.4% differential, despite the output cuts reported or announced. Do you think a lot of the output cuts haven't been made, or do you think there is – foreign inventories migrating into the system or demand really down much. It would seem to me that the investment funds got wiped out around September, and the auto suppliers were liquidating your raw materials more like November, it surprises me to still see these amounts of metal flowing onto exchanges.

Unidentified Company Representative

Yeah. I think John the answer is it's all of the above, taken the first step, people have announced cuts and we know of examples that the reduction will only be fully effective in March. So, that's part of it, I think it takes time for those to come off this and maybe some off wired stuff at people there. But in terms of that particular day, it's – you could look at the individual LME warehouses and the major inflow is Detroit and so you can understand that. So, I think all of these, you are trying to work out what the differential is between demand and present supply. I have looked at this numbers in that form, John. So, I can't comment but I think there is still more to come to get both demand and supply in a closer order and this being obviously anyone with that stuff want may kinds, business looks as it has liquidated that, John I think you have seen, so you got a combination of all of those.

John Tumazos – Very Independent

Thank you.

Unidentified Company Representative

Thanks John.

Operator

Thank you, John. We also have a questions on the line of Mark Liinamaa, he is with Morgan Stanley. Please go ahead.

Mark Liinamaa – Morgan Stanley

Hi, all.

Unidentified Company Representative

Hi Mark.

Unidentified Company Representative

Hi Mark. how are you?

Mark Liinamaa – Morgan Stanley

Good, thanks. In China there has been much discussion of power subsidies that are trying support their industry through these times. Can you comment are you hearing anything about that kind of activity?

Unidentified Company Representative

I think, the answer Mark is yes, but it varies by area. I think in my notes, I don't see a further large reductions in capacity in China and one of the reasons is that, two is the – the Shanghai Exchange price is somewhat higher supported by purchases on the strategic bureau by China as well. So, it depends very much on the regions, you have also seen Guangxi province or to the west has bought or funded 350,000 tons. So, and some new capacity came on in Mongolia, so which is very new, but at the plant level, the present price on the Shanghai front at least are more than half of the smelters in China, even if that price are still not making cash that - that’s the real issue so.

Mark Liinamaa – Morgan Stanley

So, your view is that – the power subsidies will maybe preclude further curtailments but aren't going to encourage some of the smelters that are already idle to come.

Unidentified Company Representative

Joining China, all of the above it will vary by area or vary by region, we monitor a couple of problems that we know quite well and obviously through other sources we look across the board, I think its very mix you can fund and get an update today and that may change in some areas dramatically by the next couple of days.

Mark Liinamaa – Morgan Stanley

Sure. And one question, I don't know, it's fair or not, but just for the value investor approach, you've got one world class smelter in Iceland and then three that are maybe struggling a little more right now. If you decided to or somebody decided to walk away from the smelter altogether, that's it doesn't make sense in the future world to see it. But, what kind of cost is associated with that?

Unidentified Company Representative

I think Mark, I plan that basically with guidance, but then you could have answered the question…

Mark Liinamaa – Morgan Stanley

Requested to keep it online.

Unidentified Company Representative

Yeah. You could have – you could have asked the question, are you looking at a curtailment or a full closure, I don't if Mike or Shelly you want to answer.

Wayne R. Hale

This is Wayne. You have got certain…

Mark Liinamaa – Morgan Stanley

Hi.

Wayne R. Hale

Certain remediation cost that you would have to enjoy and take that on and particularly if there is any issues in regards to groundwater or soil and that varies from smelter to smelter. So, we can't say at this time what that would be.

Unidentified Company Representative

I think Mark, the reason that that you, you hardly ever answered that question that real world is that, it doesn’t make sense to do that a) from a preserving ones options standpoint, I mean the cost structure you are quite right is in competitive today, no doubt not just of our smelters, but of North America, Western Europe and other regions generally, but one never knows in the future and Wayne could speak with much more clarity and experience to this, but smelters have remained closed for many, many, many years only to reopen profitably again in the future and so, that’s the first reason, the second reason is Wayne correctly said is that the cost are not only substantial, but they're it's difficult to estimate them until you kind of see what you've got and so for all of those reason, but the first one predominantly it just doesn't make any sense to kind of go down that road. The cost of preserving the optionality fancy word is not great after the year or two.

Unidentified Company Representative

I mean the real point is that these facilities are very capital intensive. So, to the degree you can maintain a 200 carrying maintenance or the time that it becomes a swing smelter it make sense.

Mark Liinamaa – Morgan Stanley

I'm more thinking about it maybe as even a theoretical exercise, because it seems to me that there is value in Iceland that maybe is under appreciated today.

Unidentified Company Representative

I think, so. I think the other thing Mark is, you got to look through these thing and put all the lens and what you think is a process on aluminum maybe in the medium to longer-term, but restocking the smelter, you got to also have power contracts with some parts, pocketed ahead of you, that's another decision point.

Mark Liinamaa – Morgan Stanley

Sure.

Unidentified Company Representative

Well, I think I made the point that those are closed down there are certain ones that are less likely to restart and as we have seen in the Pacific Northwest, I think is good examples of that. So, they are less like to restart one from a technology environmental board another from the power contract. So obvious to the Wayne’s point about after a period of time we’re starting to incur cost that I have incurred - estimate and then you need to have sort of a 3 to 4, 5 year period ahead of you and uncertainty around that.

Unidentified Company Representative

Mark

Mark Liinamaa – Morgan Stanley

Great. Thanks and good luck.

Unidentified Company Representative

Thanks a lot to that.

Operator

Thank you Mark. We also have a call from the line of Kim Hayes from Davenport & Company. Please go ahead.

Kim Hayes – Davenport & Company

Hi good afternoon.

Unidentified Company Representative

Hi Kim.

Kim Hayes – Davenport & Company

Actually just have a quick question, Mike I apologize I missed a couple of the numbers you gave on the sequential cost changes, I got the power I believe it was down $4 million sequentially, is that correct?

Michael A. Bless

That’s right. Q4 over Q3 Kim U.S power cost were down $4 million.

Kim Hayes – Davenport & Company

Okay, and then did you gave alumina and then carbon as well?

Michael A. Bless

I did – I did do both. Alumina I gave as parts of the - all of the metal based index power cost or rough cost. So I lumped in with the cost of power Grundartangi and so alumina at - contract alumina of course at Mount Holly and Ravenswood plus the Grundartangi power was down in aggregate $22 million quarter-to-quarter and yes and carbon down just $1 million quarter-to-quarter. Most of the decreases that we have seen recently as Wayne said, came in the month of January. So those weren’t obviously – weren’t reflected in Q4 results

Kim Hayes – Davenport & Company

All right. Very good. That's all I have. Thanks.

Michael A. Bless

Sure Kim.

Kim Hayes – Davenport & Company

Thanks guys.

Operator

Thanks Kim. Another call from the line of Tony Robson, he is from BMO Capital Markets. Please go ahead.

Tony Robson – BMO Capital Markets

Thank you. Good afternoon gentlemen.

Unidentified Company Representative

Hi, Tony.

Tony Robson – BMO Capital Markets

Hi, thanks for the great detailed presentation. It certainly makes a sell-side analysts lot a little easier.

Unidentified Company Representative

Thank you.

Tony Robson – BMO Capital Markets

Two questions on the – I didn’t copy down the current number of stock outstanding please.

Unidentified Company Representative

Oh, sure let me give it to you in the three pieces. So as of December 31, which you will see on the face of the 10-K in the income - in the balance sheet in the income statement 41 million shares a partly $49 million shares, common shares 49.1 to be specific $15.6 million preferred shares and as you know those preferred shares are essentially equivalent to common shares, other than they don’t vote. And then, going forward you need to add in 24.5 million shares as of the first week in February, obviously from the common stock offering

Tony Robson – BMO Capital Markets

Okay great. And the other question the, when your quotes in your first paragraph the goodwill impairment charge $94.8 million and the inventory write-down, is that an aftertax figure and is there any tax associated with those figures please?

Unidentified Company Representative

Yes, I mean, the answer on both, but for different reasons is that they’re pre-tax and after tax. There is no tax impact on goodwill enforce goodwill being a non-tax item that there is never a tax either benefit or expense associated with goodwill or the right - amortization of it or the write-down thereof. And then on the inventory side, we are not given the current environment – in prospective environments a tax payer in the U.S. and don’t expect to be one for, the time foreseeable.

Tony Robson - BMO Capital Markets

Okay great. Thank you.

Unidentified Company Representative

Thanks, thanks Tony.

Operator

Thanks Tony. Another call from the line of Mart Pollack and he is with NWQ Investment Management. Please go ahead.

Martin Pollack – NWQ Investment Management

Yes just if I may, looking at Q1, just sort of lets looking at the if I would be looking at the back of the envelopes I’m not really fine tuning the numbers, but if you look at gross profit numbers in Q4, I assume that the operating gross profit on just current sales. So that was about $62 million in a whole. What should one assume just sort of the implying the Q1 numbers considering that obviously your price have come down even though some of your costs but because one of the things that I think one can intuitively just sort of try to understand is that if we actually shut down the U.S. operations, you’ll have obviously some future cost associated with restarting that but you to extent that the market obviously does not improve from the current level and maybe there is the economics might slow suggest that limiting those cash losses at least to the ability of the company to hold on to a significant amount of that cash and essentially even if they restart later on, but the reality is that market conditions may change, and at that point, it will be just part of the a - any entities that would be facing an improved environment could do to restart operations. So in a sense is there a way still kind of to look at that scenario with understanding that if prices don't change, isn't that still the most viable at least that is a backstop as a potential option?

Unidentified Company Representative

Well, okay. Marty, there was a bunch of stuff in there. So let me answer your question on gross or cost of sales, gross profit or I think implicitly cost of sales and then we can talk again sort of where we are facility-by-facility on options regarding curtailment, partial or otherwise. So first I'm not sure I understood your question specifically about cost sales on current operations. Perhaps as you mentioned that

Martin Pollack – NWQ Investment Management

Well I guess, what we see in the numbers that you provided is Q4.

Unidentified Company Representative

Correct.

Martin Pollack – NWQ Investment Management

Net sales it's basically ex all of the other charges and impairments that we're talking about at the pure operating.

Unidentified Company Representative

Yes. Okay. Now I understand. Thanks. So in terms of the curtailment charges, Q4 only contained two items. The first is that (Rob) you need remember again that $56 million inventory charge the lower cost of market charge that gross profit number is net of that charge. And then perhaps to your question on the Ravenswood curtailment, given that we had as of December 31 only made the decision to curtail one line. There was only $2 million reserved in us that blew through cost of sales in Q4 for Ravenswood. You might have noted the 8-K that we put out at the time that we announced the full closure of Ravenswood, and we actually amended it to today with the new information that, we are going to talk – we have talked about in this call detailing not only, we have talked about in this detailing not only the cash spending that we would that we’re estimating for Ravenswood for ’09 and 2010, but how that will be accounted for in the first quarter. We couldn’t account for that in December obviously, because we had made the decision and it’s so called type two subsequent event under GAAP. So that's kind of just factual answer to your question on I believe anyway hopefully on such curtails in terms of going forward, I think we’ve talked about our number one options in two status. On discussions with customers and partners are the two major constituencies at each of Gramercy and Mt. Holly. And I think you could expect from our number one, you’ve already seen it at Gramercy that we taking down, significant amount of capacity half of the smelter grade capacities is off. And to the as - to whether we can go the rest of the way, again those discussions are ongoing, with our partners and they are good in constructive discussions. Mt. Holly I think Logan spoke to the discussions there or maybe it was Wayne. I’m sorry can’t remember.

Martin Pollack – NWQ Investment Management

In the case of Hawesville the power contract. it’s would change the economy significant and of that you would say that even at current price that would, economics would suggest keeping most of it running but maybe cutting back, its production right?

Unidentified Company Representative

No, no, no, it’s not the power, that as Logan said that’s a major determinant and keeping Hawesville running. Its our customer, its our contract with our major customers there, that requires us to supply as Logan said a minimum amount of molten metal for that customer that amount requires basically to just about 3 pot lines or 60% pot line with 60% so that’s that the issue at Hawesville, not the fair contract. As we said…

Martin Pollack – NWQ Investment Management

I understand that I’m just wondering in terms of again, if it comes down to the brutal case of the economics the power contract being more favorable as it significantly favorable enough so that while you can continue to supply and most of that customer the actual operating loss would still be significantly lower than let say what we might see at Ravenswood.

Unidentified Company Representative

I’m not sure what you mean but – by favorable we just said already that…

Martin Pollack – NWQ Investment Management

That’s lot of favorable clearly not as negative or not as again I’m trying to understand the impact that power contract on the economics of the Hawesville

Unidentified Company Representative

We’ve said here today its on the chart and then and its consistent with what we said for the last year or two. But that contract that the process the new cost under the new contract will be about the same to up slightly from what we have update on a weighted average basis for ’07 and ’08.

Martin Pollack – NWQ Investment Management

Oh, I see, okay. I apologize just sort of on and off the call. So, I didn’t catch that piece, okay.

Unidentified Company Representative

Yeah, as Logan, reminds as we said also that there is one-time cash payments that we will receive upon the closing of the contract of $45 million, that does not a repeating item

Martin Pollack – NWQ Investment Management

Okay, all right. So, that was essentially that – in sense those of the could be reflected in that as it favorable now just it spreading that out at least …

Unidentified Company Representative

Indeed, absolutely that payment was indented to make us whole.

Martin Pollack – NWQ Investment Management

Okay.

Unidentified Company Representative

For what we would be giving up in terms of the very favorable contract that we have that expires in 2010. So, that is I will get – I think that’s a reasonable way to look at the – as you just said.

Martin Pollack – NWQ Investment Management

And as far as Mt. Holly all comes down to what Alcoa decides with it’s been interest.

Unidentified Company Representative

Right, I think it seems – it’s a partnership seeing we both partners have to align themselves on the objective also but Alcoa is obviously taken some really tough decisions as you have seen so we are not in discussions within and with Santee Cooper of the power supply those are ongoing. And so, obviously, we will be progressing those as we can, over the next couple of months.

Martin Pollack – NWQ Investment Management

Yeah, thank you.

Unidentified Company Representative

Thanks Mark,

Martin Pollack – NWQ Investment Management

Excellent.

Operator

Thanks Marty. We now have a question from the line of Tony Rizzuto from Dahlman Rose. Please go ahead.

Anthony Rizzuto – Dahlman Rose & Co.

Thank you very much. Yeah thank you very much for all the detail do its helpful.

Unidentified Company Representative

Hi tony.

Anthony Rizzuto – Dahlman Rose & Co.

Two questions one on the, first on the industry, there has been a lot of discussion about the Chinese looking to build their SRB stockpiles and I am wondering is in danger that this may gives a maybe of four senses security or complaints with compliance might allow more of these smelters that maybe arrived at right now or that we start, how do you think about that?

Unidentified Company Representative

I think tony that is a basic concern this is an interesting corollary to that as well and kind of look to colleague shade to confirm but it hasn’t implied for Chinese an import tax. So what’s the normal choice like you’re seeing on the agenda you could actually attract metal from elsewhere into china and I think some of that’s are already happened. But yes that is a concern, whether you have -whether you will do reach part of other capacity but then you have to go back until the plants and say that cross $1700 at Hawesville12,000 RMB a time do not smelters so make money and the - seems to be that a large portion of the Hawesville will make plenty of that number. So again it's a credit issue, its ability and then there is an element to perceptual production in China as you all know where the prevention of governments as you know from our experiences and other, all the others of these facility so, this is essential element as well. There were very strong and taking production off. Some of them new projects in among the other cadmium again the concern I think you describe the project well, and then does put an overhang on longer term recovery of the commodity for us.

Unidentified Company Representative

Very difficult situation, never would have thought we would be in this position.

Anthony Rizzuto – Dahlman Rose & Co.

You are in good company.

Unidentified Company Representative

Yeah. No comment on it, Tony.

Anthony Rizzuto – Dahlman Rose & Co.

Yeah, the only other question I just all of my other issues have been discussed already but are there any issues from a pension standpoint, do you have any contributions to make as far as 2009?

Unidentified Company Representative

Yeah, let me advance of that is no, and we put some information Tony in the prospect of supplement about it, but I will just tell you what it said. So, sitting right here today pension fund is under, we thinks that that the good news as we went in to this mass overfunded generally so, we didn’t have a ketch up already. We are underfunded today on the order of $30 million to $35 million maybe as high as 40 somewhere in the mid 30s. There are no requirements to fund for ’09 that underfunded amount, if we didn’t fund in ’09, if we don’t fund in ’09. Would have to be paid again unless there was any change in law as we went to PPGC and asked for some kind of special deal as people have done but otherwise that amount would have to be paid over the years 2010 to 2012s of three years, you have to talk that out.

Anthony Rizzuto – Dahlman Rose & Co.

Okay and I would bet that at 35. 35 is…

Unidentified Company Representative

Yeah, use 35 sitting here today.

Anthony Rizzuto – Dahlman Rose & Co.

And over to 2010/12 period.

Unidentified Company Representative

Yes sir.

Anthony Rizzuto – Dahlman Rose & Co.

All right gentlemen. Thank you very much.

Unidentified Company Representative

Thanks Tony.

Operator

Thanks Tony. And we have one more call today from the line of Scott Pearl and he is from Seneca Capital. Please go ahead sir.

Matt Mylam – Seneca Capital

Hey it’s actually Matt Mylam. Hi guys.

Unidentified Company Representative

Hey Matt.

Unidentified Company Representative

Hi Matt.

Matt Mylam – Seneca Capital

So, assuming you guys get the full tax rate on and the Hawesville power payment. How many months of liquidity should we think about Century is having at current aluminum prices?

Unidentified Company Representative

Yeah, I mean that’s – it’s hard to estimate moving into June.

Unidentified Company Representative

No I think it’s a good question.

Unidentified Company Representative

Yeah, its - I mean there is a lot of assumptions in there. But it’s a current time, you can work you said obviously based on the statements that we made in - I mean company is burning this was free let’s see the closure Ravenswood…

Unidentified Company Representative

Just one line.

Unidentified Company Representative

Just one line. So, this would be improved at that point time the cash burn was around $20 million and amongst obviously that amount has declined of course, improved based on the closure of Ravenswood. So work it out, let’s see another 84, 94 for the total tax plus 45, 135, 140. So, it’s going to be something in excess of seven, eight months that kind of thing I suppose.

Matt Mylam – Seneca Capital

Seven or eight months more than what you guys gave in the prospects.

Unidentified Company Representative

Yeah.

Unidentified Company Representative

So, we are talking at least a year and half.

Unidentified Company Representative

I think I will repeat what I said earlier, our colleagues can comment as alike, our plan suddenly as obviously to take us well into the second half of next year.

Unidentified Company Representative

And remember the math that was in the prospectus supplement and that, we're all talking about right, now assume metal prices about where we are today above 1300.

Matt Mylam – Seneca Capital

Got it, okay great.

Unidentified Company Representative

And 1500, 13, 15

Matt Mylam – Seneca Capital

Got it, thanks guys.

Unidentified Company Representative

Thanks Matt.

Unidentified Company Representative

Thanks Matt

Operator

There are no further questions at this time please continue.

Logan W. Kruger

And thank you everyone for joining us today and we appreciate all your question in time. Thank you.

Operator

That does conclude our conference for today. Thank you for you participation, and for using AT&T Executive TeleConference Service. You may now disconnect.

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Source: Century Aluminum Co. Q4 2008 Earnings Call Transcript
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