Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Kim Rogers-Carrete

Nicholas N. Carter - Chairman, Chief Executive Officer, President, Chief Operating Officer and President of Texas Oil & Chemical Co II Inc

Connie J. Cook - Chief Financial Officer, Principal Accounting Officer, Treasurer and Secretary

Simon Upfill-Brown - Executive Vice President

Analysts

Thomas Harenburg

Gunnar Hansen - Sidoti & Company, LLC

John H. Curti - Singular Research

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

Arabian American Development (ARSD) Q4 2012 Earnings Call March 7, 2013 4:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Arabian American Development Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions]

Today's conference is being recorded, March 7, 2013. I would now like to turn the conference over to Kim Rogers, of Genesis Select IR firm for Arabian American Development.

Kim Rogers-Carrete

Thank you, operator, and good afternoon, everyone. Welcome to the Arabian American Development Company's Fourth Quarter and Full Year 2012 Financial Results Earnings Call. The earnings release was distributed over the wire service approximately 30 minutes ago and should be available on most financial websites.

On our call with us today will be Mr. Nick Carter, President and Chief Executive Officer; Connie Cook, Chief Financial Officer, and Simon Upfill-Brown, Executive Vice President.

Following management's prepared comments, there will be a formal Q&A session open to all participants on the call today. Before we get started, I'm going to review the Safe Harbor statement, which is Slide #2 in the presentation.

Statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events. And as such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. Such statements, including, but not limited to, expectations about future operating results, involve a number of risks and uncertainties, competitive factors, market demand and the company's ability to fund and exploit its mining resources. Various future events or factors may cause the actual results to differ materially from those expressed in any forward-looking statements made on this conference call.

As a result, actual results may differ materially from any financial outlook stated herein. Further information on potential factors that could affect the company's financial results may be found on the company's reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission, which can be reviewed at www.sec.gov.

As a reminder, this webcast is accompanied by a slide presentation that's accessible on the Arabian American website at arabianamericandev.com.

For those who want to participate in the Q&A, you must do so through the dial-in provided in the release today and the one provided on February 19 as well.

And now, I'd like to turn the call over to President and CEO, Nick Carter, for comments. Nick?

Nicholas N. Carter

Well, thank you, Kim. I'd like to thank all of you who have joined us for the conference call today to discuss our fourth quarter and full year 2012 financial results. As Kim mentioned, slides are available on the website and Slide 3 identifies our agenda for today's call.

I'll start with an overview of our financial and operational highlights. Connie Cook will follow with a discussion of the financial details and Simon Upfill-Brown will discuss his role in the company. I will then conclude with an operational update and information on the AMAK mining activities.

Now, let's turn to Slide 4. We are pleased to announce that for 2012, we had record full year revenues of $223 million, which was a 12% increase from the $200 million we recorded in 2011. This revenue increase was primarily due to a record volume of 63.6 million gallons for the year, up from 54.3 million we recorded in the 2011 calendar year. We also set a new record for operating income of $17.5 million. We've seen a steady increase in our international shipments with volume up 28% and revenue up 25%.

Now turning to Slide 5. All of these records were achieved despite the fourth quarter of 2012 which was below our expectations. The drop off in fourth quarter was largely beyond our control as we had several issues come up affecting the volume of sales quarter-over-quarter. Our competitor had experienced operational difficulties in the fourth quarter of 2011 which put us in the position of supplying the entire market and this issue was resolved by them in the first quarter of 2012.

Secondly, a large customer suffered a fire and extended shutdown in 2012 and we therefore lost considerable volume to that incident in the fourth quarter. That customer is still currently not in operation but is expected to be back in the next few months. And lastly, as we've discussed previously, a large oil sands customer has been late in starting their brand-new process in the second half of 2012 and they were accepting product for inventory in the fourth quarter of 2011 and so that skewed our volume of sales of 2011 versus 2012. This customer, by the way, has now placed orders for March and April delivery and so we wish them good luck in operating their process going forward. We know it's been a long and difficult startup phase for them and we can sympathize with that.

We also had maintenance shutdown in the fourth quarter of 2012 but final analysis indicates due to preparation and planning, we were able to make it through that event without significantly affecting the volumes sold.

Moving on to Slide 6. Petrochemical product sales revenue and volume for the last 10 quarters are presented. You can see that petrochemical sales revenue ranged from $32.4 million in the fourth quarter of 2010 to $60.7 million for the second quarter of 2012 and dropped down to $48.8 million in the fourth quarter of 2012.

While we didn't have any normal customer issues, the second quarter and third quarter historically tend to be our highest demand quarters as those are the warmer months and since our isopentane is used extensively as a coolant in the polyethylene industry, we see the results in volume demand during those quarters. The interesting point about this slide, is that I'm pleased to -- I'm pleased about, is that our 2012 revenues and results are much more consistent than we've seen in past years. In many past years we have made most earnings of the year in just 2 quarters and the other 2 have been modest at best. I believe that a number of factors have contributed in increased consistency. A larger market share domestically, international sales volume increases and formula pricing have all been factors.

Now turning to Slide 7. This slide shows the movement of our feedstock price over the last 4 years. The interesting point about this is not the final price, which we don't show for competitive reasons, but the movement of the price over time. In 2009 through about mid-2011, there's definitely an erratic but steady climb in price. While in the last 6 quarters, the price has fluctuated within a range. This price stability has contributed to some of the consistency we discussed when looking at the revenue slide.

We have talked before about formula pricing of products, hedging, price adjustments. But I think these 2 charts together show clearly what our business is capable of when we can focus on sales and service and we're not chasing margins in a volatile cost environment. With increased North American oil production, we believe we are entering a stage of more stable pricing in the U.S. petroleum market which will be good for many petroleum-related businesses, such as ourselves.

Now, I'll hand the call over to Connie Cook, our CFO, who will review our financial results for the quarter. Connie?

Connie J. Cook

Thank you, Nick. In reporting these numbers, I would like to caution you that we have converted to the equity method of accounting for our investment in AMAK. Therefore, some of the following discussion will not match prior year's reporting. In moving to the equity method, we were required to restate prior year's financials as if we have always already reported using the equity method. We'll have a simplified slide later in the presentation showing some of those effects. So just keep that in mind as we go through the presentation and we talk about the different numbers. There are differences in 2011 that versus what was reported last year.

Beginning on Slide 8, we'll first address results for the fourth quarter. Consolidated revenues for the fourth quarter decreased 19% to $49.9 million, compared to revenue of $61.5 million for the same period in 2011. Petrochemical product sales represented $48.8 million or 97.8% of total revenues for Q4 of 2012, and $60.2 million or 97.9% of total revenue for 2011.

We recorded $1.1 million in toll processing fees during the quarter, down from $1.3 million in the year-ago period due to one of our toll processing customers' raw material issues. The cost of sales and processing, including depreciation, was $43 million versus $51.3 million in the same period in 2011. This is due to the decrease in volume produced during the quarter and the decrease in the average feedstock price.

Average feedstock price per gallon decreased 6.3% from Q4 of 2011 to 2012, and raw material volume decreased 17.8%. Total gross profit for the fourth quarter 2012 decreased to $6.9 million, as compared to $10.2 million in the same period last year. Our gross profit margin for the quarter was 13.8% compared to 16.5% in the year-ago period. Our gross margin typically increases as volume increases.

G&A cost for Q4 2012 was $4 million versus $3.6 million for 2011. The increase was primarily due to increases in insurance premiums, property taxes and salaries. We reported net income attributable to Arabian American in the fourth quarter of approximately $2.9 million or $0.12 per basic and diluted share compared to $3.8 million or $0.16 per basic and diluted share in Q4 2011. Adjusted EBITDA for the fourth quarter of 2012 was $3.7 million, compared to $7.2 million last year. We are providing adjusted EBITDA in order to provide some continued -- some continuity from prior year's reporting.

Moving to its full year results. Consolidated revenue for 2012 increased 12% to $223 million, compared to $200 million in 2011. Petrochemical product sales represented $219 million or 98% of total revenue in 2012, compared to $195 million or 97.5% of total revenue for 2011.

Petrochemical product sales increased by 12.3% for 2012 compared to 2011 due to an increase in the volume of 17.1%, offset by a slight decrease in the average selling price of approximately 4.1%.

For 2012, we reported net income attributable to Arabian American of approximately $11.4 million or $0.47 per basic and $0.46 per diluted share compared to $13.9 million or $0.58 per basic and $0.57 per diluted share in 2011. Please remember that these numbers reflect our change to the equity method of accounting for our investment in AMAK therefore, prior periods have been restated. Full year adjusted EBITDA was $20.9 million, up 20.8% from $16.9 million last year.

Moving on to Slide 9. Our balance sheet remains strong. We completed the year with $9.5 million in cash compared to $6.7 million at December 31, 2011. Cash provided by operations was $21.4 million for 2012, versus $4.1 million in 2011. Trade receivables were $15.8 million compared to $23.2 million at year end 2011. The reduction is due to the lower sales volume during the fourth quarter of 2012.

Inventory increased slightly by $0.4 million due to a 4.8% increase in volume partially offset by a 1.8% decrease in cost per gallon. As a reminder, deferred sales are classified as inventory until shipments arrive at their destination. This is primarily a factor with international shipments. As you'll also notice on the balance sheet, our investment in AMAK is recorded at $39 million at year end 2012. This includes the restatement entries that were made in changing to the equity method of accounting.

Long-term debt was approximately $15.7 million at year end 2012 compared to $24.2 million at year end 2011. Due to the cash flow generated in 2012, we made net principal payments of $8.5 million on our line of credit and term debt. We had $29.2 million in working capital at December 31, 2012 compared to $29.7 million at year end 2011 and we ended the quarter with the current ratio of 3.4:1. Shareholders’ equity increased to $83 million from $71 million at December 31, 2011.

Slide 10 provides a simplified reconciliation from 2011's income statement reporting to the restated amounts discussed today due to the conversion to the equity method of accounting for AMAK. It also shows 2012 entries for comparative purposes. As you can tell, there was a positive impact on both years. The most significant change was a gain in 2011 due to the issuance of the additional stock by AMAK to ARMICO. This issuance caused a recalculation in the value of our investment which resulted in a gain of approximately $8.9 million. This entry affected both earnings in our investment in AMAK. Taxes in our percentage of AMAK's earnings or losses also affected our reporting. Please see the 2012 10-K after we get it filed for more detailed information.

That concludes the financial review and I will now turn the call back over to back over to Nick. Nick?

Nicholas N. Carter

Thank you, Connie. Turning to Slide 11, I'd like to add some detail to our sales and operational activities for the quarter. As we reported, we have enjoyed a nice volume increase from 2011 to 2012 and we expect it to continue going forward due to the large oil sands customer coming back online this month, along with the victim of the refinery fire coming back in the near future. On the international petrochemical side, year-to-date total revenue was $53.9 million which is up 24.7%, compared to $43.3 million in the year-ago period. Volumes are continuing to progress with 2012 international volume of 14.2 million gallons versus 11.0 million gallons for 2011 and we have a number of good prospects in the pipeline and feel we can continue to grow in that area.

As we have discussed on earlier calls, we feel that the South Hampton facility will be approaching its existing capacity at points during 2013 and we've been investigating alternatives and options. As mentioned on our Q3 call, we brought Simon Upfill-Brown to the newly created position of Executive Vice President to lead this effort. We have Simon on the call with us today and he's going to speak with his progress on this issue. Simon?

Simon Upfill-Brown

Thank you, Nick. In line with our strategic plan, I have specifically been charged with analyzing ARSDs current opportunities, both domestically and internationally, to help us determine where we should focus our energies for future growth. Initially, we will debottleneck existing equipment, the cheapest and fastest way to get additional capacity, and we believe we will be readily able to get to 7,000 barrels per day. For the future, alternatives we're studying include both building an additional train at our current facility and/or constructing a separate facility to support our product sales growth.

We have also hired a highly regarded firm to guide us through a diligent evaluation of assets, companies, that we might acquire. Rest assured that any acquisition will have to be accretive to shareholders to be considered. We'll keep you informed on our progress and plan to have a formal path forward in place during the third quarter of this year. We'll continue to build on our custom processing reputation and expertise as well. We have extended our contract with Gevo to make a renewable chemical for them and we're seeing a significant additional interest in our services from others.

One of the reasons I was excited to join the team here is that Arabian American has the track record of executing on decisions and plans in a timely manner. Doubling our capacity through expansion in 2008 was a testament of how we can make things happen quickly. From initiating permits to full operations took just 15 months and we lost no production during that time.

As a smaller company in this industry, we are agile and nimble allowing us to respond rapidly to customer needs and develop on the high-quality, exceptional service reputation we have earned from our Fortune 500 customers.

I look forward to exploring further opportunities to help Arabian American grow.

With that, I'd like to turn the call back to you Nick.

Nicholas N. Carter

Thank you, Simon. Turning to Slide 12, we'll now focus on the progress being made by AMAK and, of course, on Slide 12, you can see the pictures of the various shots of AMAK, and these pictures are also on our website. And by the way, we've added some, if you haven't looked recently at the ribbon-cutting ceremony by the prince of the region that took place in January, I think. I think it was a month or 2 ago.

Anyway moving on to Slide 13, the mine continues to progress well, currently producing zinc and copper concentrate daily. We've settled into a production routine and the focus of everyone's efforts currently is reliability of the mine, underground equipment and the mill's operating equipment. We feel that development is proceeding as planned and it's a matter at this point of keeping everything running on schedule. Our engineers and consultants are currently putting on a big effort to analyze spare parts requirements and getting orders placed for the critical items. And that's been going on for some time now, as you can imagine. As you know, we shipped the first shipments in October, then we had another one in December, again in January, and again in February. We are shipping 9,700 tons of zinc concentrate next week. The ship has scheduled in and then copper will be moving again in early May. And then I think we've got zinc scheduled for June. So the product is moving out of the mill steadily. The mill last month passed the 500,000 ton of ore processed milestone and during 2012, produced approximately 17,000 tons of zinc concentrate and 13,000 tons of copper concentrate as of the end of the year. We projected approximately 34,000 tons of zinc concentrate and 33,000 tons of copper concentrate for the fiscal 2013 year. We won't be at full production in the mill as far as product produced for some time as we're still currently processing development ore and we will do that until the ore bodies are fully opened up. We're currently working on the second of the 3 ore bodies and probably won't have the third one fully developed until sometime next year.

Slide 13 addresses the equity raised which AMAK has undertaken recently and the interesting note on this slide is the valuation and what it should mean, could mean, to Arabian American shareholders when the U.S. market price recognizes the value of this investment. If you'll notice on about the fifth bullet point, Arabian American ownership is now 35.25% and the implied valuation for Arabian American shareholders would be approximately $6.25 per share on the share price of the Arabian American stock valuations once fully recognized. Our final and summary going forward about the year, our financial results on the fourth quarter were not as strong as we would have liked. But the year-to-date results came in within our expectations and it resulted in a record year.

In 2013, we will continue to diversify our customer base and our geographical footprint. We see additional opportunities in the Middle East, the oil sands project of Canada and Asia-Pacific area, primarily China, India and Australia. Domestically, with all the abundance of natural gas, we see considerable market opportunity and I'm sure you're aware of the already announced additional ethylene capacity to be built on the Gulf Coast.

Ethylene production ultimately leads to polyethylene and servicing that industry is, without question, in our sweet spot. As we near capacity in our South Hampton facility, under Simon's leadership, we are diligently reviewing our options and looking forward to updating you along the way as we make strategic decisions. Whichever path we'll take, I can assure you that we will operate in the same meticulous manner we did with the 2008 upgrade and any moves we make will be beneficial to the shareholders.

Our exploration of market opportunities with new technology and expanding our products into new applications is a result of our quality performance and reputation in the marketplace. The AMAK mine is now a producing entity and as milestones are met, it continues to encourage us with its potential as well as the growth potential in those surrounding area. AMAK is actively exploring the current ore bodies and the existing lease and we're poised to start exploration on its surrounding areas when we get the signatures we need and the permit so that the AMAK joint venture can continue to grow and prosper. This concludes my prepared remarks and at this time, I'd like to open the call for questions. Operator, please open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Tom Harenburg with Carl M. Hennig.

Thomas Harenburg

First question I have is and I have another place in Montana, so I don't have the data with me, but it seems to be that about 4 weeks ago, you lowered your projections for the fourth quarter to us, if memory serves me, $0.06. This $0.12 is quite a surprise and what caused the difference in that jump?

Connie J. Cook

Well, the difference was the adjustment to the equity method in accounting for AMAK. That is the basic difference. We had to go back and spread that out over the quarters for 2012, and so, it affected the fourth quarter positively.

Thomas Harenburg

Okay. So that all basically -- so without those, you would've been at about $0.06, is that correct?

Connie J. Cook

Correct.

Thomas Harenburg

Okay. Nick, on the additional leases, again, going back, 6 months ago, I was under the understanding that at least one, possibly 2 of those, were imminent. What -- where do we stand on those?

Nicholas N. Carter

Tom, you know, you're probably not any more frustrated than what we are, for sure. But over there, when you're dealing with the bureaucracy, it just takes time. And I guess, that we saw that when we were trying to get the lease, the current lease to produce. It took like 7 years to get the operating permit, all that kind of stuff. And the fact of the matter is, we're still working with the authorities. We've dealt with the Wildlife people, we've dealt with the regional office, we've dealt with the people in Riyadh and it's just taking a lot longer than what you think it should. It's pretty easy to get discouraged or it's pretty easy to get impatient with it, but probably, we're trying to get a permit in the U.S., we'd run into the same thing. So it’s just -- I don't have a good answer for you other than we're continuing to work on it and, ultimately, it will happen. It always takes longer than what you think it ought to.

Thomas Harenburg

Okay. I mean do you -- I guess, it's impossible to project whether you're going to receive those this year or not?

Nicholas N. Carter

Remember, I was thinking we'd get them a year ago.

Thomas Harenburg

Right, right.

Nicholas N. Carter

I mean, let me tell you this, I'm not seeing anything that says that ultimately, we won't get them, get the lease. I think it's just a matter of persevering with the thing.

Thomas Harenburg

Okay. Good. Well, we'll keep our fingers crossed. Regarding the metals prices that were originally projected, I think it was by Watts Griffis as to what AMAK needed to breakeven. And again, if memory serves me, it was zinc at $0.57, copper at $1.10, gold at $400 an ounce and silver at $6 an ounce. Now that you're up and running and into production, are you finding that those prices were accurate? Or where do you stand on that?

Nicholas N. Carter

I actually think based on the cost studies I've seen on what we're doing that the breakeven price is actually considerably lower. And to generate enough cash to make debt payments and all that, that's different than breakeven, okay? The 2008 -- December 2008 prices which were really low, still we're cash positive with the project but there wasn't quite enough cash generated to make debt payments. So the prices that we're seeing now, yes, there'll be positive cash flow, the financial statements for AMAK over the next 10 years are going to have a lot of depreciation because of the facility we built. And so I'm not too sure about operating income but I know the cash flow looks good.

Thomas Harenburg

Okay. And are you -- are the silver and gold operations up and running over there? Or is that still going out as a -- with the zinc and copper concentrate?

Nicholas N. Carter

No, it's still going out with the zinc and copper at this point in time.

Thomas Harenburg

Okay. And at what point do you think you may get that resolved?

Nicholas N. Carter

Probably if we get to that point, as long as we're getting some value -- good value out of the zinc, out of the gold, and the zinc and copper, it takes some of the pressure off trying to hurry up and get that done, but if we do it at all, it's probably going to be in the last half of 2013.

Operator

Our next question comes from the line of Gunnar Hansen with Sidoti & Company.

Gunnar Hansen - Sidoti & Company, LLC

Just have a couple of questions. I think, Simon, did you say -- you guys said -- would a decision be made by the third quarter? Is that the understanding in terms of kind of strategic decision moving forward?

Simon Upfill-Brown

Yes. I mean, we have a plan laid out and to be clear with everybody exactly what it is, we're planning to do by then.

Gunnar Hansen - Sidoti & Company, LLC

Okay. And would it be a similar timeframe when you guys mentioned about 15 months to get a new facility up and running. Is that -- was that correct?

Simon Upfill-Brown

That's about right.

Gunnar Hansen - Sidoti & Company, LLC

Okay. And I guess, just in terms of capacity, obviously, it sounds like you guys -- is it by the end of the year it'll be at almost full capacity there, on a daily run rate, is that right?

Simon Upfill-Brown

Well, our plan for the month is roughly 80%, but you do know that the volume comes in spikes, right? So you have some months where you approach the full capacity utilization.

Gunnar Hansen - Sidoti & Company, LLC

Got you.

Simon Upfill-Brown

Which is why we want to try and add another 10% or so of volume with the debottlenecking plan.

Gunnar Hansen - Sidoti & Company, LLC

Okay. And -- I guess, just in terms of, obviously, it seems like there's going to be some short-term excess capacity with a few of your customers having some issues. Is there any kind of international opportunities that you guys can kind of approach in the near-term? Or maybe kind of speak on behalf of that outlook.

Simon Upfill-Brown

We've got quite a bunch of active efforts internationally. We've got a couple of good-looking projects starting up for Singapore and we continue to chase business in the Middle East and Australia. We're looking at how we can develop business in China on a more effective basis. So, yes, obviously we're doing it as much as we can on grabbing the business we can get internationally.

Nicholas N. Carter

On that last question, if I could add, you've got to keep in mind that these are specialty products and, generally speaking, the marketing of the products is a pretty long tail, winded things -- it's not a commodity that you can just take it and knock a couple of cents off of it and sell it quickly. It's very much specialty markets that we're into and it just takes longer to place that stuff.

Gunnar Hansen - Sidoti & Company, LLC

Okay. And then I guess, just one last question. On a daily basis, what's kind of -- what was the kind of a run rate that you guys had for the full year of 2012, do you guys have that?

Simon Upfill-Brown

It's about 72%, I think, average. And it varies by month. I think that's the right number.

Nicholas N. Carter

Yes, I think it's the average for the year.

Connie J. Cook

For the year.

Simon Upfill-Brown

Average for the year. Yes.

Operator

Our next question comes from the line of John Curti with Singular Research.

John H. Curti - Singular Research

I'm trying to drill down a little bit more on how you see sales volumes kind of playing out through the course of the year. Fourth quarter, obviously, was the low point. You've got some customers starting to come back, kind of staging in over the course of the year. Would you expect the first quarter volumes be above the fourth quarter volumes and then second quarter volumes above the first?

Nicholas N. Carter

No. I think that the first quarter volumes are going to be pretty flat with the fourth quarter, that oil sands customer has placed orders for March and April delivery, but 1 month of sales is not going to probably make a huge difference, whereas, if you had 3 months in the quarter, you'd have a pretty nice increase but just that 1 month, is not going to, by itself, raise the volume too much. Now going forward, of course, second and third quarters are our best quarters, they always are. And so, yes, we'd expect some big volume increases starting the second quarter, third quarter and really through the rest of the year, but first quarter is probably going to be pretty flat like fourth quarter.

Gunnar Hansen - Sidoti & Company, LLC

The income for your share with AMAK in the fourth quarter, reflected how many shipments?

Nicholas N. Carter

Just the -- well, we shipped zinc -- shipment in copper and zinc, mainly in October and then in December, we shipped a zinc shipment. But we also had sold, as of the end of the year to a trader that was in the warehouse, I think that Canada had in revenue as of the end of December. So probably you're really talking about maybe 4 shipments, 1 in October for each product and then, in essence, if you count what was in the warehouse sold plus the shipment in December, that's probably another shipment. So you're really talking about 4 shipments. Essentially everything I mentioned what we had produced as of December '12 and essentially everything that was produced was sold in 2012. And that's the way you should look at it.

Gunnar Hansen - Sidoti & Company, LLC

Okay. So that was like 17,000 tons of zinc concentrate, 13,000 tons of copper. And then you're projecting 34,000 tons of zinc and about 33,000 tons of copper for 2013?

Nicholas N. Carter

Correct. Right.

Gunnar Hansen - Sidoti & Company, LLC

And you mentioned about the copper and gold being included within the concentrates, probably at least for the first half of the year before being broken out separately and sold separately maybe in the back half?

Simon Upfill-Brown

Right, right.

Gunnar Hansen - Sidoti & Company, LLC

And the mill is operating at approximately what now? 1,900 tons per day? The processing mill?

Nicholas N. Carter

Yes. It's been operating somewhere in the 90%, 95% range. The capacity of the thing is actually -- the nameplate, it's 2,000 tons a day and at times, we've been able to operate 115% of capacity but we found out that we see a downgrade of quality when we do that. And so consequently, we're holding the capacity at about 2,000 tons a day. But you periodically have maintenance issues where you have to shut down for 6 hours or 8 hours and so our utilization right now is somewhere between 90%, 95% of that 2,000.

Gunnar Hansen - Sidoti & Company, LLC

In terms of working your way through the development ore, will 2013 largely be just kind of working through the development ore and the ore that was stockpiled early in 2012?

Nicholas N. Carter

Right. Yes, that's what I was talking about until they get all the tunnels into all 3 ore bodies, they won't really be able to produce a very consistent blend of ore out of the 3 ore bodies. And we're probably not going to get to that point until the latter half of 2013 because it is -- it's going to take a while to get all the tunnels strictly on the third one because we're just getting started on the third ones, it could be towards the end of the year, really, before they get to that point. And at that point, once you've got access to all 3 ore bodies, then, if you're operating your mine correctly, you should be able to produce a pretty consistent blend of ore which gives you better recoveries and better product quality.

John H. Curti - Singular Research

Now with the share issuance, have all the remaining partners taken up their share of stock?

Nicholas N. Carter

No. There were -- out of the 9 partners, there were like 6 that took up their share of the stock and we've got one that's committed to taking the final amount that anybody else didn't take but that hadn't exactly all closed up at this point of time.

John H. Curti - Singular Research

But you do anticipate that the full amount of shares will be subscribed for by...

Nicholas N. Carter

Oh, yes. Yes, there's no question about that.

John H. Curti - Singular Research

Your G&A expenses were a little bit higher than I was anticipating, about $4 million for the year and I realize there's some year-end expenses there and there's probably some extra accounting expenses as well. What's it kind of look like on a quarterly run rate for 2013, or on annual basis?

Connie J. Cook

Well, on a quarterly, I would estimate around $3.5 million per quarter. At the end of the year, we had to adjust -- our property taxes went up quite a bit, all the health insurance was higher than it was in 2011. It's pretty much every piece of insurance that we had went up versus what it was in 2011. So it was overall -- we had a little bit of an increase in salaries, I mean, we hired Simon. You know, a few more people out in the plant, but that wouldn't really affect G&A. So I would say probably $3.5 million a quarter would probably be a good number.

John H. Curti - Singular Research

And then the tax rate for the year was about 34% but about 29% for the fourth quarter. I'm assuming with you getting some equity earnings from AMAK and that, I think including the tax rate against it, your tax rate would be lower on a quarterly basis?

Connie J. Cook

Well, deferred taxes are a mess to have to try to deal with and try to figure out. Hopefully in the 10-K, we can provide a little more information on that. You know, our effective rate, what we expect to be paying has actually gone up just because our income went up for the year. So we actually went up to the -- we assumed around a 35% rate versus the 34% the year before. So when we went back and figured in the earnings on AMAK and worked with the value allowances and worked all that through the process, it lowered what it showed on the income statement.

John H. Curti - Singular Research

And then the new business that you're doing with Gevo, that's going to be relatively low margin business, takes up a little bit of capacity but how much do you -- does that maybe improve revenues in the processing area, the processing piece?

Nicholas N. Carter

Well, you know we've got a non-disclosure with them, we're really not supposed to talk about that kind of detail. And -- but the -- this contract that we've got with them to build this new demonstration unit, in addition to the other one that we've been running, these will be on a different basis than what we've been doing before. We deal with them before in anticipation of doing a bigger unit and so we thought we gave them a pretty attractive deal and since that time, the bigger unit is, is a little bit undefined and so, consequently, we stepped back and said, well, we need to kind of adjust how we look at it this thing. And so I think we still made an attractive deal for both parties but the [indiscernible] of these have changed.

John H. Curti - Singular Research

And they're responsible for the capital costs?

Nicholas N. Carter

Yes, yes, it's similar to last time.

John H. Curti - Singular Research

You mentioned you're seeing increased demand maybe versus some additional toll processing from other people?

Nicholas N. Carter

In the petroleum sector, there's a lot of people who look for ways to take advantage of all this shale production and natural gas and things that are happening right now. And so there's a lot of activity in the market right now, a lot of people looking at projects and how to get into different types of businesses. And we're getting a lot of inquiries about that.

John H. Curti - Singular Research

Excluding -- maybe beginning any kind of new construction either for an additional train at the existing location or beginning to -- or starting something for a new facility somewhere, what would you anticipate CapEx, just ongoing maintenance CapEx and expansion CapEx, to debottleneck the facility to be this year?

Nicholas N. Carter

Well, the CapEx that we've given for the [ph] manufacturing approval for this year to spend without coming back for further approval is $2 million. And that's down from $4 million last year. But over the last 2, 3 years, we've put probably extra money into that to try to get a few of the areas of the plant upgraded and up to speed. And consequently, we decided that this year, we could probably get by with a lesser amount. Now as far as capital expenditures on any kind of debottlenecking that Simon talked about, we haven't really looked at that at this time. When we did the expansion in 2008, it ended up being a $16 million or $18 million project, but that was adding a full new train. And what we're talking about here is just simply taking what we've got and figuring out a way to get more barrels through it. And that's not going to be nearly that expensive as well. It's not going to be a big, big number, for sure.

John H. Curti - Singular Research

And CapEx for 2012 was how much in total?

Nicholas N. Carter

I think we had approved $3 million and we ended up adding that pipeline project, which was a $5 million deal. So we probably spent around $8 million last year counting that pipeline project, which worked out very well for us by the way.

John H. Curti - Singular Research

And that pipeline project is up and fully running?

Nicholas N. Carter

Yes. We finished it in December, probably.

John H. Curti - Singular Research

And lastly, how are things going in terms of looking for alternative sources of supply?

Nicholas N. Carter

We're working on that. There's another place. There's an awful lot of opportunities out there right now, John. As you know, there's a lot of very light NGL-type materials being produced, and we're in contact with people trying to figure out the best way of taking advantage of that right now. That's one of the things Simon is working on.

John H. Curti - Singular Research

And lastly, for Connie, when do you anticipate the 10-K being available?

Connie J. Cook

I think it's probably going to be on the date of the deadline, which is the 18th. We're still trying to document some of the accounting issues with the change to the equity method and working all that through our system.

Operator

Our next question comes from the line of Dan Wissink [ph] with Carl M. Hennig.

Unknown Analyst

Regarding the Canadian oil sands, customer coming back onboard you talked about in March, is that something that will be basically regular shipments monthly going forward after that? Or how is that set up?

Nicholas N. Carter

Yes. It will be -- if they keep their plant running according to their plan, those people are spending a lot of money up there and we're under a lot of pressure because things are so late starting up. And I'm sure they're doing everything they can do to make it run, and so therefore, it should be a regular monthly deal.

Unknown Analyst

Okay. And you talked about being -- going back to what you call expected volumes. Is that -- I mean, they're not -- their purchase orders that came through recently aren't higher than expected. They're basically right in line with the numbers you had originally expected from them?

Nicholas N. Carter

Yes, yes. They are. The question mark probably is going to be, I might have mentioned this before, is that it's a brand-new process and what they're predicting that they're going to need is based upon laboratory stuff. It's not based upon actual operation. And so if there's a change in the volume, up or down, it's just going to be -- depend upon their experience operating the facility.

Unknown Analyst

Okay. Now going back into your fourth quarter, there wasn't anything held back from a sales perspective, thinking that you're going to be shipping product to that Canadian oil sands customer. Was it -- I mean, you just seem like you have a big drop-off, and all of a sudden, it kind of hit you by surprise because you were expecting them to come back onboard. Was there anything related to that, that you missed out an opportunity? Or was that not the case?

Nicholas N. Carter

No. There wasn't really any missed opportunities. The only thing that we might have had was a few rail cars and inventory that we might not have had otherwise. We kept a few inventory of rail cars just in case they needed something quick. But other than that, there really wasn't any effect on our operation.

Unknown Analyst

Okay, got you. And going back to the AMAK mining situation and your additional purchase of shares, where did the $7.5 million that you guys spent on those shares come from? Was that additional borrowed money? Or how did you go about that?

Nicholas N. Carter

No. It was -- basically, it was just cash on hand. We have probably drawn on our line of credit a little bit since first of the year, which we might not have had to do have we not bought those shares. But on the other hand, prices of feedstock, we've been watching the markets for 2, 3 weeks, went up. And that would have caused some increased cash payments out, and we might have had drawn on the line of credit anyways. So it's kind of hard to say, but anything that we've needed, we've got adequate line of credit to cover it. So really, that's not an issue.

Unknown Analyst

Great. So I guess if that was, in fact, the case and you mentioned basically that, that purchase equates to about $6.25 per Arabian shares, is that correct?

Nicholas N. Carter

Yes, that's what we've got.

Unknown Analyst

So a question for you then is, would it not have been better served to take -- if that was the case, I mean, that really leaves basically -- on today's quote at $7.88 and you're back off to $6.25, that puts the petrochemical business basically in $1.50 a share. Am I correct in my math?

Nicholas N. Carter

If you assume that the full value of the mine is in today's share price, which in our opinion is that the value of the mine is not in today's share price and today's share price is solely reflecting the petrochemical operation. And I guess our point of view is that our stock price should be up around $12 or $13 if you figure the value of the mine in on top of the petrochemical company.

Unknown Analyst

Correct. And I'm in agreement with you there. So with that being said, wouldn't it have been better served to take that $7.5 million and buy back your own stock? Even though you would have owned, obviously, less of -- in total of AMAK, you would have still been $3 [ph] ahead because of what you believe how undervalued your stock is.

Nicholas N. Carter

Well, I think that yes, that's one approach you could take. But I think our -- another opinion that we've had is that the amount of float that's out there on our stock is so small already, and that's one of the things that holds the stock price back. And to reduce that further, I don't think, would be probably a good idea.

Unknown Analyst

Well, would it have shown a little bit larger from an earnings per share increase by buying back -- if you had bought back stock. Plus again, at some point, hopefully the word can get out there as to the value of the mine and your petrochemical business and the combination of 2. I'm just -- I understand not wanting to dilute yourself any more on AMAK, but I'm just -- looking at it from just strictly a dollars-and-cents perspective, it would seem more beneficial to buy back your own stock with those monies as far as how that would work on the overall benefit to the company at large versus just going out and buying -- taking that $7.5 million and buying the stock. But that's just my opinion looking at the numbers.

Nicholas N. Carter

Sure.

Unknown Analyst

Okay. And I have one more question. And then we have approximately about a $1.6 million gain in the quarter off of AMAK, is that correct? Maybe Connie has that number at hand better.

Connie J. Cook

Right, right, that's correct.

Unknown Analyst

Okay. So using that number in the fourth quarter, is that a number we can kind of tag for 2013 in each of the quarters? Or would that be increasing or stay the same? What's your best guesstimate?

Connie J. Cook

Well, I don't really -- Nick is more familiar with the cash flows on AMAK than I am. I do know going forward, we do have an accretion in our original basis that will hit yearly, and that's going to be around $1.3 million accretion in our investment. But that's on a yearly basis. So you'll have that coming in each quarter and then what the mine actually does.

Unknown Analyst

Okay. So Nick, on that $1.6 million, does that seem like a number that we can use? Or is that not potentially all that accurate?

Nicholas N. Carter

Well, that's the kind of thing that I don't -- I can't sit here and tell you that we've got enough history to predict that, other than I can tell you that the budget for AMAK that the Board of Directors looked at and approved going forward. Yes, you should see that or more. But on the other hand, you've got lack of operating history, and so how good the budget is, it's kind of hard to predict. So I would -- I guess I would just say that if we get good full year production, yes, we should see at least that or more. There's no question about it. These numbers are looking good right now in today's prices, and it's largely a matter of keeping everything running. I think everybody's going to be happy with it.

Unknown Analyst

Okay. There you go. And then my last question relates to bringing on that additional capacity you're looking for where you could do that. In your last couple of calls, you thought you'd have that kind of worked up and ready to go as far as your thought process by now. And it seems like you've kind of pushed it off to the third quarter. Is that due to you just don't have it figured out yet? Or is that due to you just -- on a capacity basis, you feel like that with that 10%, if you -- you talked about the debottlenecking that Simon talked about that will give you -- buy you some time, if you will, on making that move?

Nicholas N. Carter

Yes. I think it's a bit of both. I think, number one, we're pretty cautious because whatever we decide to do, it's going to be a pretty significant event. We're trying to make sure we get it right. And second thing is we think some of the pressure is up by the fact that there's a [indiscernible] customer that had put off their startup and gave us extra 8 months, 9 months to kind of look at this thing. And okay, we're just now getting back to where we thought we'd be 8 or 9 months ago. And so I think the lack of pressure on capacity has probably caused us to slow it down just a little bit. It's a combination of the 2.

Operator

Our next question comes from the line of George Gaspar [ph], a private investor.

Unknown Attendee

Nick, first question would be related to the throughput for 2012 in terms of gallons for the oil sands project. Can you equate that number for last year? And based on what you're seeing in execution going forward starting March, April, what could be your forecast in terms of throughput for 2013?

Nicholas N. Carter

Well, I think that -- I think as Simon mentioned, I believe that we expect to be, on average, 80% of our nameplate capacity, okay? But that 80% of capacity, there's probably 5 months that are 100% capacity or more, okay? But the average in itself is going to be somewhere 80% or just above. And that's in this past year, 2012, without the oil sands customer for much of the year, we were around 72% or 73%. So we're seeing a considerable increase. And the fact that we are bumping our heads on the ceiling for 5 or 6 months out of that year is the reason that we think we will be able to close that debottleneck, spend the money and get that done, and that will give us enough time to get one of these bigger projects underway.

Unknown Attendee

Right. As you take a look at the project in the oil sands, looking forward beyond 2013, you must have some thought process on what this could evolve into in terms of total throughput for you. How might you be seeing 2014 versus what you can do there this year?

Nicholas N. Carter

Well, I think you'll see -- we intend to and plan on increasing the volume every year. There's going to be a big step when we really make the decision focused on what kind of additional facility we end up with. But in the plant here, you will see just in what we're doing right here where everything we're doing is focused on increasing volume over the next few years.

Unknown Attendee

Okay, okay. And then one question back to this valuation that went into the accounting for the fourth quarter in the year 2012 and the investment in AMAK. And so you raised 2011 from, what, about $30 million to $38 million and you're at $39 million -- just shy of $39 million for 2012. Now what's the relationship between how you -- these numbers and the implied valuation? I thought that when you were making this accounting change, that there was going to be much more considerable applied -- implied valuation that was going to be brought into your investment in the balance sheet. Can you explain that?

Nicholas N. Carter

Well, sort of. You can -- you're going to probably have to read the footnotes in the 10-K when it comes out to really get a good grasp of it. But basically, there's 2 types of changes in the valuations that we're dealing with. The first one is that when we donated assets to AMAK, okay, there was a -- there should have been, at that point in time, a stepped-up value, okay? That stepped-up value will be added to the value of our investment over the life of the mine, which will be 10 or 11 years. So maybe that's what Connie was talking about. Every year, you'll see us increasing the investment by 1.3 or something like that. And then I think the other step of increased valuation was when ARMICO bought 10% share. That was in -- was that 2012?

Connie J. Cook

2011.

Nicholas N. Carter

2011, yes, in 2011. And that increase in valuation hit the balance sheet all at one time. And as for the $8 million that shows up as a gain on the 2011 report, that's where that comes in. So you really get 2 different kinds of upticks in valuation that have to be dealt with. And it was an accounting nightmare to try to work our way through that. And then AMAK was a little bit late on getting their audit done. Deloitte over in Saudi Arabia was doing an audit. And the numbers came out later than what we needed, and so everybody was sitting around here, burning the midnight oil and trying to make sure we get that right. So it's been a mess. But anyway, we got it. So...

Unknown Attendee

Okay, okay, all right. And next, the -- your feedstock cost trend, you mentioned that you're seeing some escalation. And I'm sort of -- maybe a surprising short-term bull on gas prices relative to what we're seeing in the gas store to drive lately, pretty significant. I mean, we're down to just over 2 Tcf, and it looks like it could get down several hundred billion before we run out on the downside, and I think that's better than what the street was looking for. So what kind of an increase -- how are you treating your need to generate feedstock? If you're getting a turnaround in cost structure at this point in time, are you doing any additional hedging or just buying at the market price? And I know you're passing more along to your customer directly, but can you give us a flavor of how you're kind of looking at this situation on the turn here?

Nicholas N. Carter

Well, we have not hedged really the last half of last year, and we've also not hedged this year even though we had a price increase for a couple of weeks there. In late January, February, we had some price rises. They weren't terribly significant, but they were a little bit outside that range that we talked about earlier. And so we've not hedged probably in 8 or 9 months. Where are we going forward? I guess I'm not as bullish as, what, maybe you are because I don't -- there's so much NGLs being produced out there, an awful lot of it that's kind of captive. And if any of that ever gets to the market, I just can't foresee that we're going to see some great big price increases. Now what we're actively doing, I think somebody asked about the feedstock situation earlier, and that is that we're -- particularly in that Eagle Ford thing over in South Texas. We're talking to some people who are putting in facilities down there, and we're seeing that there's a fit for either trying to get in on the process, some of that, or potentially just get some -- offtake some of the units that are being put in over there. [indiscernible] closer to the source than what we currently are in.

Unknown Attendee

Okay. And then one comment just to add -- to take the other side of the equation with the gentleman who was saying that you should buy your stock back as opposed to buying shares in the mine. I would think that, I mean, considering the future possibilities, if I recall, that there is some kind of mechanism in the mining structure that would promote a public offering of the mine after, what, a couple of years or whatever. So that it would seem like you should be picking up the additional shares as they become available and protect your interest at this point in time and that they could become a very valuable increase over what you're paying relative to even current prices. Can you comment on that?

Nicholas N. Carter

Well, I think that's pretty much our opinion. That's the reason we decided to protect our position as much as we thought was prudent with the cash we have available. We still think it's a good investment. We think there's a lot of -- awful lot of uptick. I think we're in on the ground floor of an industry that's not going to do anything but get bigger over there. And being in that position, well, I think it's going to get more valuable as we go. That's why we invest further in it.

Unknown Attendee

About that mine, just investing further in it, you may have mentioned this, but where are you on the additional tracks that are -- that could become part of this mining operation? Has there been any forward progress and some opportunities to really start going in more effectively and increasing availability of one of these other 4 leases that you have?

Nicholas N. Carter

Well, see, that was a question Tom Harenburg asked. We're still looking at it [ph], and yes, it is taking a lot longer than what we anticipated. But everything we've done in Saudi Arabia is taking longer so far than what we anticipated. But we are -- as far as exploration, we are exploring not only the current ore bodies but the rest of that 44 square kilometers that we've got currently under lease. And we've actually got contracts in place that as soon as we get signatures, we're going to start exploration of these additional areas. But to get the additional areas, it looks like we're just going to have to persevere and stay with it, and ultimately, we'll get it. But it's pretty slow.

Unknown Attendee

Okay. The percentage of increase that these existing -- the additional areas on your existing lease, what percentage is that relative to what you're operating on currently, on that lease?

Nicholas N. Carter

It will increase our total acreage by -- we've got 44 square kilometers currently, and with the additional areas, we would have a total of 330 square kilometers. So it's a significant -- about 9 times increase, yes.

Operator

Our next question comes from the line of Mitchell Sacks with Grand Slam.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

I have a couple of questions. With regards to the lost business from the fire -- the customer that had the fire plus the oil sands, had those customers been operating in the fourth quarter, where do you think you roughly would have been in terms of percentage of capacity?

Nicholas N. Carter

We would have been similar to the second quarter, which was probably -- we'd be in the high 80s.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

Okay. And so in the second quarter of this year, you would -- you'll have the oil sands customer but possibly not the customer that had the fire?

Nicholas N. Carter

Yes. They say they'll be ready to operate next few months, but that's hard for us to judge and [indiscernible].

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

So when we think about the run rate in terms of the barrels per day versus last year, at 72% capacity on average for 2012, so then would it be reasonable to assume that you'll be somewhere, just with the oil sands customer, somewhere in the -- on an average figure, somewhere in the high 70s, low 80s then?

Nicholas N. Carter

Well, that's kind of what we were saying we won't go, Mitch. I think that during the second and third quarters, there's going to be times where we go through periods of 100% capacity, okay? And we're saying we're going to average 80% for the year, but we're getting off to a slow start here in the first quarter because the guy with the fire is not back yet and the oil sands thing is just starting up in March. And so first quarter is going to be pretty flat with fourth quarter. And then we're expecting second and third quarters to be gangbusters, and then fourth quarter should be pretty high in itself. We don't think we'll see the drop-off, for sure, that we saw this past year.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

And then for the longer-term perspective, what are you seeing out there that's causing you to want to add capacity?

Nicholas N. Carter

Well, I mentioned that the -- how many ethylene projects have been announced on the Gulf Coast because of this plentiful and cheap natural gas. And ethylene turns into polyethylene, and we are a service industry for the polyethylene industry. And we see a ton of opportunity with the growth of the polyethylene industry, particularly down in the Gulf Coast region.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

And then with respect to my -- a couple of questions. So in terms of ramp on the mines and in terms of how we see cash flow developing over the next years, when do you expect the mine to be at a fully operational standpoint? And then when you talk about the numbers from this year, where does that number go assuming rate -- assuming that prices for the metal stays level?

Nicholas N. Carter

Well, the -- like I said, 2013, we're still going to be dealing with development of ore for the year. So you wouldn't get what I would call a normalized operation properly until 2014. And then when you get to normalized operation, you should see increased recovery, you should see increased percentage of payable metal in the concentrate because you're running -- you're able to run your mill at a tighter specification. With the development of ore, you've got an awful lot of waste material coming through in addition to your good stuff. And so once you get rid of all the development stuff, you're able to fine-tune your process and you get better recoveries and you get a better product out. And you should start seeing the actual full capability of operation, and of course, in that Mining business, you're always fine-tuning your costs also.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

And then in terms of the leases, I mean, I understand it's hard to predict when the leases might be approved. But assuming, just for the sake of discussion, they are approved today, when do you start to actually extract ore bodies from -- the ore bodies that are there? And when does that start to impact cash flow in terms of -- how many years after you have to get those leases do we start to see some economic impact?

Nicholas N. Carter

Well, the first thing you'd see is that the exploration, basically the mapping of the area where you try to pick out the most logical or the most likely spots for ore production. I think -- I've been told it takes 6 to 9 months and a couple of million dollars. And then once you map everything out, then you have to go out and start drilling holes and actually see if you can locate ore bodies, and that can be a period of several years. And it's much more expensive, obviously, $10 million to $12 million, or something like that. So it's -- on the other hand, all of this stuff, these new leases that we applied for are circling, if you will, our current lease and current operation. And so if you found a rich area that you could particularly get to it with surface mining, there's nothing that would keep you from bringing that rich ore over to the current mill and either supplementing or maybe replacing some of the ore you're taking out in the current mine. So that's it. That's the kind of the process. Depending on what you found on these areas or close by, well, then you could start an expansion program for your mill so that you can handle higher rates. And so I guess the long -- short answer for your question is you're probably talking about 3 to 5 years before you'd actually end up seeing some kind of return on these things.

Operator

Our next question comes from the line up John Curti with Singular Research.

John H. Curti - Singular Research

Two follow-up questions. First off, what was the utilization in the fourth quarter at the petrochemical complex?

Connie J. Cook

Let me find that for you.

Simon Upfill-Brown

I think it was about 65, Connie, right?

Connie J. Cook

I think it was in the 60s.

Simon Upfill-Brown

Yes. I might have to get that to you, John.

John H. Curti - Singular Research

Okay. And then the amounts of the gain on the additional equity issue by AMAK for the 3 months ended December and the 12 months ended December, is that a spill-over from the original purchase by ARMICO?

Connie J. Cook

In 2012, you're talking?

John H. Curti - Singular Research

Yes.

Connie J. Cook

No, that is from the original -- that's the amount that we're talking about that's going to be $1.3 million a year.

John H. Curti - Singular Research

The accretion?

Connie J. Cook

The accretion. Because we couldn't start doing that until the mine was in operation, and it didn't go into operation until the second half of the year. So we only took around 600,000 this year.

John H. Curti - Singular Research

Okay. Now as a result of the additional sale of the stock in which you participated, aren't we going to see another big step-up and gain from the second equity issue?

Connie J. Cook

We need to tie that down and make sure. My only question with that is since it was all existing shareholders that bought into it, if there's any kind of accounting difference because it was existing shareholders versus an outside third party that came in and bought the shares. So we need to tie that down and just make sure that we know what we're doing on that before we decide for sure.

John H. Curti - Singular Research

And if that does happen, it will be impacting on third -- the 2013 [ph]...

Connie J. Cook

It would impact first quarter.

John H. Curti - Singular Research

First quarter, okay.

Connie J. Cook

As long as it's all complete by the end of the first quarter.

Operator

Our next question comes from the line of Tom Harenburg with Carl M. Hennig.

Thomas Harenburg

Nick, just a follow-up on something that George alluded to. You folks were just over there here in the last 6 weeks or so. Was there any discussion about ultimately what's going to happen with the AMAK shares and any kind of a timeframe for potentially bringing that public?

Nicholas N. Carter

Well, the Saudi law says that after you're profitable for 2 years, then you have to do an IPO, and you have to do an IPO for 25%, 30% of the ownership. So at a minimum, and I'm not sure -- to tell you the truth, I'm not sure if 2012 is going to count as the first year or not. I haven't really looked at the requirements real close, but it looked to me like they had a small profit in 2012. And 2013, it should certainly be profitable. It would be your 2 years, and so you start the process sometime in 2014.

Thomas Harenburg

Okay. And I'm afraid to ask this, but how long is that process [indiscernible] project is going to take?

Nicholas N. Carter

Well, the one -- I've seen one of them, since I've been going over there the last few of years, I've seen one of them, and it was about 6 to 9 months there.

Thomas Harenburg

[indiscernible]

Nicholas N. Carter

Yes, 1 to 5 years or something.

Operator

I'm showing no further questions in the queue at this time. I'd like to turn the conference back to management for final remarks.

Nicholas N. Carter

Okay. Well, I would just like to thank everybody for your participation and your interest in the company. And rest assured, we're doing what we can here to increase shareholder value, and that's where our focus is, and hope you'll maintain your interest. And if you have any questions, of course, feel free to follow up with us. You have our contact information. And thank you very much.

Operator

Ladies and gentlemen, this concludes our call for today. Thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Arabian American Development Management Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts