Arabian American Development Management Discusses Q3 2013 Results - Earnings Call Transcript

Oct.31.13 | About: Trecora Resources (TREC)

Arabian American Development (ARSD) Q3 2013 Earnings Call October 31, 2013 4:30 PM ET

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, Treasurer and Secretary

Simon Upfill-Brown - Executive Vice President

Analysts

Conner McMahon - Sidoti & Company, LLC

John H. Curti - Singular Research

Thomas Harenburg

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

Peter Castellanos

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Arabian American Development Third Quarter 2013 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kim Rogers with Genesis Select. Please go ahead.

Kim Rogers-Carrete

Thank you, operator, and good afternoon to everyone. Welcome to the Arabian American Development Company's Third Quarter 2013 Financial Results Earnings Call. The earnings release was distributed over the wire services approximately 30 minutes ago and should be available on most financial websites now.

On our call today will be Nick Carter, President and Chief Executive Officer; Connie Cook, Chief Financial Officer; and Simon Upfill-Brown, President of South Hampton Resources. Following management's prepared comments, there will be a formal Q&A session open to participants on the call.

Before we get started today, I'm going to review the Safe Harbor statement, which is Slide #2 in the presentation. Statements in this conference call that are not description 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.

These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in the economic environment; the company's failure to meet growth and productivity objectives; fluctuations in revenues and purchases; impact of local, legal, economic, political and health conditions; competitive conditions; impact of relationships with critical suppliers; impact of changes in market liquidity conditions and customer credit risks on receivables; the company's ability to successfully manage acquisitions and alliances; industry cycles; specialty petrochemical product and mineral prices; feedstock availability; technological developments; regulatory changes; foreign government instability; foreign legal and political concepts; and foreign currency fluctuations, as well as other risks.

Further information on potential factors that could affect the company’s financial results can be found in the company’s reports on Forms 10-KA and 10-Q filed with the Securities and Exchange Commission, which can be reviewed at their website, www.sec.gov.

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

[Operator Instructions] And now I'll turn the call over to President and CEO, Nick Carter, for his comments. Nick?

Nicholas N. Carter

Thank you, Kim, and I'd like to thank all of you who have joined us for the conference call to discuss our third quarter 2013 financial results. As Kim mentioned, slides are available on the website, and Slide 3 identifies the agenda for today's call.

I'll start with an overview of our financial and operational highlights, and Connie Cook will follow with a discussion of the financial details, and Simon Upfill-Brown will discuss South Hampton Resources' operational updates. We will then conclude with an operational update on the AMAK mining activities.

Now let's go to Slide 4. Our third quarter revenues were $60.9 million, which was a 12.1% increase from the $54.3 million we recorded in Q3 of 2012 and an increase sequentially of approximately 8.7% from $56.0 million. The volume of our petrochemical products was 16.9 million gallons compared to 16.1 million gallons, an increase of 5.4% from the third quarter of 2012 and up 7.8% from the previous quarter's total of 15.7 million gallons.

A couple of significant reasons for the volume increases were the typical seasonality in our domestic business and increased international sales. Additionally, we had $6.7 million in deferred sales, and deferred sales in gallons were 1.8 million, an increase of 42.5% from Q3 last year. The growth in our deferred sales, which are essentially goods in transit, is a function of an increase in our international sales.

Now we'll go to Slide 5. We're happy to see our volume improve sequentially with typical seasonality as we expect, which increases the demand for our components that are used as coolants in various manufacturing processes. As I mentioned, our international business was quite strong in the quarter, and in fact, we had 2 record months in terms of iso-container shipments. As a note, I would like to publicly congratulate our team on this accomplishment.

On to Slide 6. This slide shows the historical trend in our feedstock price, which shows the movement of the price over time. In the last 1.5 years or so, the price has fluctuated within a range, and though the feedstock price was up this quarter, it continued within the same range. And due to a drop in price the previous 2 quarters, we're still down about 2% year-to-date.

Going forward, we anticipate that pricing to continue the same pattern for the remainder of 2013. With the increased production of LNGs from the shale formations nationwide, we expect feed prices to stay in the current range or go down at the end of 2014.

Historically, our feedstock pricing has followed the crude oil market in direction, and to a lesser degree, magnitude. We continue to see the disconnect with the crude price changes being reflected with a price balance in natural gasoline. But the magnitude of the changes have decreased from just a couple of years ago.

We remain focused on differentiating our company with superior sales and service. And we anticipate our margins to be relatively stable for the foreseeable future even as prices fluctuate due to the formula pricing structures that we now use with about 50% of our volume.

We are well positioned to benefit from increased North American natural gas production and believe the country is continuing toward more stable pricing in the petroleum market, which will be good for many petroleum-related businesses such as ourselves. We continue to evaluate long-term opportunities in our industry with announced additions of ethylene crackers that are expected to come online starting in 2016. These crackers produce the feedstock for polyethylene, and polyethylene is our sweet spot in this business that we operate.

We are moving forward with the permitting process for a D train that we feel would improve feedstock. And the debottlenecking we've done this year, we have some time to evaluate future expansion plans and to find a solution that most cost effectively meets potential increase in the longer-term demand.

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 remind you that we have been -- that we have converted to the equity method of accounting for our investment in AMAK. Therefore, prior year results have been restated to incorporate the change.

Slide 7 represents the income statement for 2013. As Nick stated, quarterly revenue increased 12.1% to $60.9 million compared to revenue of $54.3 million for the same period in 2012. The increase in revenue was due to an increase in volumes, slightly higher processing -- slightly higher pricing and an increase in processing fees.

Volume increased 5.4%, primarily due to international sales, many of which are shipped via iso-container. We had 2 record months for iso-container shipments during the third quarter of 2013. This does, however, also affect the amount of deferred sales that are carried over to the next quarter due to the longer shipping time required.

Deferred sales volume for the quarter increased 42.5% from the third quarter of 2012 to 2013. Sequentially, deferred sales volume decreased 11.6% from a record in the second quarter of 2013 to the third quarter of 2013.

Petrochemical product sales represented $59.4 million or 97.5% of total revenues for Q3 of 2013 versus $53.2 million or 98% of total revenue for the same period last year. We recorded $1.5 million in processing fees during the quarter, which was up 38.2% from the $1.1 million a year ago. We have renegotiated some of our processing contracts and are now collecting fees for services like engineering and changeovers.

Cost of sales in processing, including depreciation, was $50.8 million versus $45.5 million in the same period in 2012 due to higher volumes processed, feedstock costs and an increase in freight. Average processed feedstock price per gallon increased 7.2%, and volume increased 5.8% from Q3 of 2012 to 2013.

Gross profit margin for the quarter was 16.6% compared to 16.2% in the year-ago period. The slight improvement in margins is primarily due to improved ratio of prime products to total sales, resulting in increased butane sales with less byproduct sales and the aforementioned increase in processing fees.

G&A costs for Q3 2013 were $3.4 million versus $3.1 million for Q3 of 2012. The increase was primarily due to increases in insurance premiums, consulting fees and officer and director compensation.

We reported net income attributable to Arabian American in the third quarter of $5.2 million or $0.22 per basic and $0.21 per diluted share compared to a restated $3 million or $0.13 per basic and $0.12 per diluted share in Q3 2012.

EBITDA for the third quarter of 2013 was $8.8 million compared to $5.9 million last year. Adjusted EBITDA, which removes the effects of AMAK for comparative purposes for the third quarter of 2013, was $7.5 million compared to $6.4 million in 2012.

Slide 8 presents our balance sheet. Inventory increased approximately $3.3 million from December 31, 2012, due to the increase in deferred sales, which are counted as inventory even though they have been shipped, and an intentional build of inventory during hurricane season. Long-term debt was approximately $15.2 million at quarter end compared to $14.2 million for year-end 2012.

During 2013, we drew $6 million on our line of credit for working capital purposes and to fund a capital contribution to AMAK. We made principal payments of $1.1 million on our term debt and $4 million on our line of credit.

We had $31.6 million in working capital at September 30, 2013, compared to $28.2 million at year-end 2012. And we ended the quarter with a current ratio of 3.4:1. Shareholders' equity increased to $99.4 million from $81.9 million at December 31, 2012.

That concludes the financial review. And I will now turn the call over to Simon Upfill-Brown. Simon?

Simon Upfill-Brown

Thank you, Connie. As we move to Slide 9, I'd like to add some detail to our sales and operational activities for the quarter. As we have reported, this quarter was a good one for South Hampton. We enjoyed a volume increase year-over-year and sequentially. We have had strong international growth, and we expect that to continue. And we feel bullish that the Canadian oil sands customer is online, and shipments resumed in the quarter.

Due to operational efficiencies, the new feedstock makeup and balanced sales demand, our prime products made up 80% of sales in the third quarter versus 74% in the same quarter of 2012 and 69% in 2011. Connie touched on this, and you'll note from the slide, deferred sales volumes were up significantly at the end of this quarter compared to earlier years, although down a bit from the 1.98 million gallons at the end of the second quarter of this year.

International sales represent 25% of our volume so far this year, up from just over 21% for the full year 2012. Our representative in China is off to a good start, building relationships with both technical and procurement departments at potential customers who participate in the higher value polyolefin end of our market.

As mentioned last quarter, our debottlenecking efforts and the change in feedstock composition have taken the pressure off our need for immediate expansion. We continue to analyze strategic options, and as Nick noted, we have applied for a permit for a D train in Silsbee.

With our Canadian oil sands customer having licked their start-up issues and further potential growth in North America and other parts of the world, we will be able to accelerate a major capacity increase in Silsbee should it be required. We continue to evaluate acquisition targets that fit our existing business model in niche markets with a high service component and where we can add new customers and products.

Although we consider a number of these each quarter, nothing has fit thus far. We have renewed contracts with 2 of our major toll processing customers, one for just over 3 years and the other for 5 years, both with terms more economically favorable to SHR. The third customer is working with us on an additional product, and we came close to winning a fourth toll processing customer, but this party decided to go another route where we were unable to compete.

We do, however, continue to see strong interest in our custom processing capabilities, and we'll continue to build this end of our business. We pride ourselves on being responsive and flexible, attributes that allow us to react rapidly to customer needs and build on the exceptional quality, impeccable service reputation we have earned from our Fortune 500 customers. This remains an important competitive differentiator for South Hampton resources.

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

Nicholas N. Carter

Thank you, Simon. Turning to Slide 10. The mine is continuing to reduce zinc and copper concentrate daily. We're happy to report that the mine is producing in line with the original feasibility study, and we see development proceeding as planned. And it's important that we're to keep everything running on schedule.

This was a good quarter operationally, but we will be seeing considerable fluctuations going forward as AMAK is still processing a mixture of development ore, which can vary in grades significantly as different tunnels of rooms are built near the main orebodies. AMAK is projecting approximately 36,000 tons of zinc concentrate and 36,000 tons of copper concentrate over fiscal 2013. Although for the first half of the year, they were below that rate of production.

They will be processing development ore until sometime next year as they're currently working on the second of the 3 orebodies and probably won't have the third fully developed until later part of next year. Exploration is ongoing in the original lease area, both to delineate better the orebodies being produced, but also to identify other potential mining sites.

The outlook for 2014 remains good. There's about 30,000 tons of copper concentrate, and 41,000 tons of zinc concentrate is planned to be produced. The change in the mix of product has to do with the ore grades expected to be mined in the coming year.

Also, it may be interesting to note that AMAK is recording about $60 per ton of cash cost for production so far this year. Recently, AMAK tested a gold recovery circuit, and after running the circuit, it was concluded that modifications will be necessary for the circuit to run at desired efficiency. We think that the modifications will take around 6 to 8 months to be completed, and they will be paid for by the original contractor. During that time, AMAK will continue to sell the precious metals and the concentrate as they have been doing.

Simon, Arabian American Director Al McKee and myself make up the commercial committee for AMAK, and we are in charge of marketing the product for AMAK. So we are close with that end of the business. Even though metal prices are currently off somewhat, the first 3 quarters of 2013 met expectation in terms of revenues and returns.

During the recent metals conference we attended at London, the outlook was that zinc prices could increase as much as 20% in 2014 and even more in 2015 as some producing mines are scheduled to cease production. The level might be around $1,900 per ton with the high reaching $2,400 in 2014.

The consensus about copper was that it will be fairly stable pricing and range balanced, with the worst case being around $6,500 per ton and with a high potentially of $7,500 per ton. AMAK has placed the remaining cargoes for 2013, which are 2 zinc cargoes and one copper cargo. And sales should mirror production pretty much by the end of the year as they plan to have the warehouse empty of the product as much as possible.

AMAK now has steady operations and has accumulated most of the equipment needed for an ongoing operation, and its spare parts procurement program is underway. The next step is to ensure a stable, experienced workforce, and that program is being established and organized with the recent adoption of a -- the typical pay grade position and benefits HR package.

As this has been a total start-up type business, AMAK has stepped through the building process as time and funds have allowed. Unfortunately, there is no current firm news on the application for additional leases. Those shareholders have recently met with and received support from the local governor of the province.

AMAK's shareholders are curious if the approvals are being worked through the process, but we don't have a firm date of accomplishment at this time. Obviously, we're up following the progress of these closely, and we'll report any significant events.

In summary, for the year and going forward, let's go to Slide 11. We're pleased with our financial results for the quarter and feel that the outlook for our industry this year, as well as the longer-term macro backdrop with the outlook for abundant natural gas bode well for the company's long-term prospects. We're working on diversifying our customer base and expanding our geographical footprint with additional opportunities in the Middle East, oil sands projects of Canada and Asia Pacific area. We're optimistic about the potential for international business to continue to grow. We're focused on evaluating the best approach for capacity expansion so that we will be well positioned to benefit from the ethylene capacity projects, which have been announced by leading petrochemical companies.

Ethylene production ultimately leads to polyethylene, and polyethylene is one of our most important markets. AMAK mine is producing entity, and its milestones are met. It continues to encourage us with its potential, as well as expansion potential in the surrounding area.

AMAK's actively exploring current orebodies of the existing lease. And when the time is right, we'll start exploring the neighboring areas. We believe it should continue to grow and prosper over time. From a financial perspective, we hope shareholders will ultimately benefit from the equity income stream from the mine.

This concludes my prepared remarks. 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 Conner McMahon with Sidoti & Company.

Conner McMahon - Sidoti & Company, LLC

Can we just get a little bit more color on the Canadian oil sands and pretty much where it'll be going into 2014?

Simon Upfill-Brown

Well, it -- the -- our volume this year is up about 1 million gallons over last year. We have some good orders for the rest of the year. So -- and we expect that to continue for 2014. Volumes will be -- they're at full rates now pretty much. I think they're about 95% of capacity.

Conner McMahon - Sidoti & Company, LLC

Okay, 95%?

Simon Upfill-Brown

Yes.

Conner McMahon - Sidoti & Company, LLC

And what are -- in terms of international expansion, I know we talked about this last time, are we getting any more headway in China?

Simon Upfill-Brown

I mentioned it briefly. And our representative there is sort of working, doing the rounds and getting to know folks at this point. She's asked for a couple of prices and maybe sheets and those kind of things, but it's early days yet, but she's working hard at getting to know the various not only the procurement function, but also the technical functions because this is a technical sale. So she's making good headway there. We haven't got an order yet, but that's going to take some time.

Conner McMahon - Sidoti & Company, LLC

Sure, sure. Great. This might be a little geared towards Connie. I see inventory levels at about $13.1 million. I know we are ramping that up for hurricane season. In Q4, obviously, we're going to see a pretty good drop in that, correct?

Connie J. Cook

Well, we hope so. A lot of it depends on when foreign customers order. If they order in December and we do a lot of shipping in December, and we have to defer those sales, then that will present inventory from going down. Of course, we shouldn't hold any more here for hurricane season. It actually ends, I think, tomorrow. So we won't be trying to hold any inventory for that purpose. But it basically depends on when our foreign customers order. For instance, we had record months in July and August. And then in September, our iso-container shipments decreased significantly because they had their inventory full. So a lot of it's just timing.

Operator

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

John H. Curti - Singular Research

On the petrochemicals side, you mentioned that, I think, the sale of prime products was about 80% of sales for the quarter. In the event that these couple of North American customers step up their volumes and pick up in tar sands volumes maybe next year, does that percentage move up towards the 85% or 90% for prime products and their volumes?

Simon Upfill-Brown

I don't think so, John. I think we probably got that as optimized as we can have. And the other side of the equation is we've been very balanced on demand during these first 9 months of the year. So should we get to a point where we get a little bit out of demand for some of our prime products and we might have to move some of that at a lower price, we don't count that as a firm prime product when we have to fire-sell it. That number might go up a little bit. But on the whole, the way we're able to minimize the amount of byproducts that we make and optimize the amount of prime products, I think 80% is probably about our limit.

John H. Curti - Singular Research

Okay. Can you speak to the capacity utilization figure for the Silsbee operation in the third quarter this year versus third quarter last year?

Simon Upfill-Brown

Yes. We can, and Connie can get me straight here if I get it -- if I start to get it wrong. But...

Connie J. Cook

Okay.

Simon Upfill-Brown

We changed the basis from 600 barrels a day of feedstock.

Connie J. Cook

6,000.

Simon Upfill-Brown

6,000. Sorry. Get my digits right here. 6,000 barrels a day in 2012 to 6,700 barrels a day in 2013 because we completed our debottlenecking now and have that extra capacity. So our capacity utilization in the third quarter of 2012 was 73.5% -- 73.6% and for the third quarter of this year, it was 70.7%.

Connie J. Cook

But you have to realize it's on a different basis.

Simon Upfill-Brown

Different basis.

Connie J. Cook

Last year, we used 6,000 a day, and this year, we're using 6,700 a day.

John H. Curti - Singular Research

73.6% last year, 70.7% this year?

Connie J. Cook

Correct.

Simon Upfill-Brown

Yes.

John H. Curti - Singular Research

During the quarter and as we head into the fourth quarter, any customers kind of dropping out of the queue because of mechanical problems, resuming shipments with somebody else, finding a new store, anything like that that's going to push the volumes around to any large degree or impacted third quarter to any large degree?

Simon Upfill-Brown

No, I mean, I think we've mentioned last time some customers south of the border who started taking from a supplier down there who had restarted their plant because they've been able to get feedstock back in line. That has continued in the third quarter, and that will probably continue through the fourth quarter and much of next year, although we have been awarded a couple of more rail cars than the customer had committed to us. So it's not too bad but it is -- volumes are down there pretty significantly, and we'll probably stay that way. But beyond that, things look good with everybody else.

John H. Curti - Singular Research

In terms of the outlook for 2014, I know it's a long sales process. Anybody that you've been talking with in 2012, 2013 that might come on board in the Mideast that would add volumes?

Simon Upfill-Brown

We mentioned, I think, on the slide a couple of North American customers who have committed us some fairly large additional volumes. The Middle East one is a little bit tougher to predict. We have 3 or 4 pretty significant customers going there a little bit slow in September. But well, it should be strong next year again. Nobody new as yet. I think the biggest -- bigger potential for us internationally might well be China, should we start being able to bring in orders from there. But we will be attending the Gulf Coast -- the Gulf Petrochemical Association meeting, GCPA, later on this month, and we'll be pushing then to see if there's other potential business for us from there, John.

John H. Curti - Singular Research

Okay. The 2 North American customers have committed to additional volumes for 2014?

Simon Upfill-Brown

Yes.

John H. Curti - Singular Research

Kind of based on what you're seeing lined up for 2014, can you kind of give any indication of how much your capacity utilization might move up from 2013 levels? Or if not utilization numbers, maybe in terms of gallons, what you're seeing?

Simon Upfill-Brown

I'm not sure how much we've given indications of future volumes forecast, John. But the capacity we have now allows us, as we mentioned, not to have to rush any expansion that we need. But it's worth having the permit in place because that can take 9 or 12 months to get. And then once you have it, you can -- we can move very quickly to build the capacity that we need.

John H. Curti - Singular Research

A couple of questions for Connie. With respect to AMAK, Connie, the $1.3 million or so of equity income, can you break that out in terms of how much was operating earnings and then how much was the amortization of the change in the basis that you were able to increase? Is that...

Connie J. Cook

Yes, for the 3 months, we're actually recognizing about $337,000 every quarter for the accretion amount. So the rest of it, around $1 million, was the equity in earnings.

John H. Curti - Singular Research

And then when will your Q be available?

Connie J. Cook

It should be out there, barring any unforeseen problems with the tagging, no later than Tuesday.

John H. Curti - Singular Research

And then a question for Nick on anticipated shipments of zinc and copper in the fourth quarter. I know you had said -- I think it's -- I don't have it in front of me in terms of the slide, but can you kind of give us an indication of what the anticipated shipments would be in the fourth quarter to bring them to the year-end total that's anticipated, assuming there are no difficulties?

Nicholas N. Carter

The shipment that's sitting or waiting on the ship getting in right now is going to be around 8,000 tons, and that's zinc concentrates. And then around December 15, we'll have another one that's probably going to be a little bit more than that. It's probably going to be about 8,500 tons. And as far as the copper side, we...

John H. Curti - Singular Research

That zinc, that 8,500 is zinc?

Nicholas N. Carter

Yes, right. We got 2 zincs and 1 copper. And we won't have another copper shipment till right at the end of the year. And that's actually not going to be a shipment. That's going to be a sale in the warehouse. We made an arrangement with a trader to buy actually in the warehouse, and that will, in essence, clean out the inventory in the warehouse. And I think that number could be as high as 9,000 or slightly above 9,000 tons.

John H. Curti - Singular Research

In terms of the outlook for 2014 and the numbers that were given, are you now getting on kind of a more regular schedule in terms of about every 6 weeks or so, something being shipped out?

Nicholas N. Carter

Yes, we are. But you remember I said that the copper shipments are really going to fall off a little bit next year, and that's just a function of the ore that we're getting into in the mining plan and the zinc copper -- zinc shipments will actually be increasing. So somewhat we did this year we're, in essence, going to have probably almost one less shipment of copper. We're going to have shipment in half ore of zinc and what we're going to finish here, at least maybe the shipment of ore. So the balance is going to be changing a little bit. But as far as the how often we ship, all that's going to stay pretty much the same. Will be better every 6 weeks or every couple of months or so.

John H. Curti - Singular Research

And then another question for Simon. With respect to the toll processing revenues, $1.5 million in the quarter, does that look like, based on your current contracts and what you're maybe currently looking at, as kind of a sustainable quarterly run rate? Or were there some amounts in there, that $1.5 million, that were onetime in nature?

Simon Upfill-Brown

No. I think that's probably sustainable and there might even be a little upside to that, too, John.

Operator

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

Thomas Harenburg

On these 2 new contracts that you picked up, one was for 3 years, one for 5 years. Are those -- have you got market fluctuation risks or were those tied to a formula?

Simon Upfill-Brown

They were renewals of existing contracts.

Thomas Harenburg

Oh, they're renewals of existing contracts. Okay, okay.

Simon Upfill-Brown

Yes, and so there is the sort of reduced market risk. Obviously, if they take additional volume, it helps us. There's a certain amount that cannot go below.

Thomas Harenburg

Yes, okay, okay. An observation here, Nick, and I don't know if you can answer this or not. I mean, 49 years in the securities business and I can't quite figure this out. Every afternoon, after the market closes, there is a print in the stock. Today, it's with 6,000 shares. What do you relate that to? I mean, if this were a NASDAQ traded stock, it might be the market maker laying off the stock, but this is on the New York Stock Exchange. Can you shed any light on that?

Nicholas N. Carter

Yes. I really haven't figured that out, Tom. We're going to talk to market makers in about 2 weeks, and I'm going to see if they can help us shed some light on it.

Thomas Harenburg

Yes, I mean, have you noticed that? Or I mean, maybe -- I mean, I'd pay attention to this. I mean, every day you can make book on it.

Nicholas N. Carter

Yes.

Thomas Harenburg

Okay. Be interesting to know that. Also, where do you stand on the possibility of a name change?

Nicholas N. Carter

We're working research and making sure we know what we're doing. We pretty much got it approved with the directors, and we're kind of working through the process. It's going to take a little while, and it's coming down the line probably about the first of the year.

Thomas Harenburg

Okay. So you think by the first of the year, you might be able to announce something?

Nicholas N. Carter

Sometime, yes, probably sometime around the first of the year we hope to be in a spot where we've made a decision and then you got to go through the process kind of get everything changed over and all that. So it's going to take a shareholder meeting to do that. And of course, we got to announce shareholder meeting ahead of time, maybe get some -- probably around the first of the year we hope to announce it in a shareholders meeting and get that taken care of.

Thomas Harenburg

So you need a shareholder meeting to change it? I don't think when it was called Arabian Shield and then switched over to Arabian American that you had a shareholder meeting. I don't recall that unless that was done at the annual meeting, and that'd be the thing to do. I mean, you don't need to cause the expenses of the special meeting, I wouldn't think.

Nicholas N. Carter

According to the Delaware law, you got to have a shareholder approval, and they did when they changed the name. They did that shareholder meeting. I think it was at the annual meeting. I don't know.

Operator

[Operator Instructions] And our next question comes from the a line of Mitchell Sacks with Grand Slam Asset Management.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

The first question is, you had a customer, I think, that had a fire, had gone offline, I guess, it was a quarter or 2 ago. Is that customer back online and taking normal volumes again?

Simon Upfill-Brown

Yes. We're up a little bit on -- compared to full year 2012. We're up on that volume already thus far this year, Mitch.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

Good. And then can you talk a little bit about the oil sands? Is there any seasonality to that business? Or is it pretty much once now that it's running, is it going to be more of a steady-state kind of business?

Simon Upfill-Brown

We expect it to be steady-state. I mean, what we've done now is the impact when we get really into winter up there, what that does, because we haven't been through that with them yet. But expectation is that it should be fairly steady.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

Okay. And the final question, which is, I guess, more of an obvious question, with potentially having increased volumes going through your plant there in Silsbee, does that mean that you should be able to over time achieve some consistent higher margins over time?

Simon Upfill-Brown

That would be the aim. I mean, we're not quite hitting the limit yet, I don't think, on pricing. I think our guys do a very good job of making sure we're not below, but there is certainly some potential, I believe, and maybe increasing that in places.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

And putting the D train operation, will that be impacting margins negatively when that first goes online?

Simon Upfill-Brown

I'm not sure I can really answer that question yet, Mitch, because we haven't fully evaluated what -- how many additional operators and folks we would need. If we can do it with the existing workforce, it's obviously -- it could be pretty good right away. But we really have to think that through yet.

Operator

And our next question is a follow-up question from John Curti with Singular Research.

John H. Curti - Singular Research

Yes, this is for Nick. Can you tell us what shipments were in the third quarter, shipment volumes?

Connie J. Cook

Volumes? Okay.

Nicholas N. Carter

I think that's down a little bit, John. We had one that split from the second quarter to the first week of the third quarter and then I think...

Simon Upfill-Brown

We had one that slipped over the second week into the third quarter.

Nicholas N. Carter

I need to research that and get back to you.

Simon Upfill-Brown

I think we had one that slipped from the third into the fourth, too, Nick. That's why it's confusing here.

Nicholas N. Carter

We'll get back to you.

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

All right. Then -- for Connie then, can you give me volumes and dollars for the third quarter on the petrochemical side internationally and domestic?

Connie J. Cook

Okay. Total volume was 16.9 million gallons. Dollars, petrochemical sales dollars were $59.4 million. And then on the foreign side, we had 4.1 million gallons and $15.8 million.

John H. Curti - Singular Research

Okay. The balance, you just subtract that off and that's the domestic?

Connie J. Cook

Right.

Operator

And our next question comes from the line of Peter Castellanos with Glacier Partners.

Peter Castellanos

Yes. Nick, these questions relate mostly to AMAK. When you ship concentrate, do you have any idea what percentage copper you've got in the concentrate?

Nicholas N. Carter

Yes. The target and what's actually shipped is around 24%.

Peter Castellanos

0.4%?

Nicholas N. Carter

24%.

Peter Castellanos

24%. And then do you also -- do you have an idea of what your average grade was for the quarter? I mean, what kind of -- what your average grade would have been at the mine?

Nicholas N. Carter

It's been running around 1.2, 1.3.

Peter Castellanos

And then what sort of -- you mentioned that, I guess, you're going to go into a different section of the mine or a different mine or a different orebody. Is that -- what's that liable to change? Can you have any idea what it will do to the grade?

Nicholas N. Carter

Well, that's where I think the difference is in the volume. We're talking about next year is going to be -- it's our zinc concentration and a little bit less of copper concentrate. That's where the differences in volume are coming in. I think, as I recall, the discussion there is probably a little bit more gold and silver. And zinc will be higher and the copper will be a little bit lower.

Peter Castellanos

And then also you gave a number and -- for cash costs, which I'm kind of -- I just -- I think it was $60 what I saw. I think what you said was $60 a ton. I'm not sure if that's a metric ton, a regular ton. Can you give us -- can you break that down any better than that? I'm afraid to go any further than that.

Nicholas N. Carter

It's a metric ton, and that's a cost of operating the underground, operating the mill and operating the shipping facilities without the G&A. That's basically operating...

Peter Castellanos

But you don't give us a number in pounds. You don't have a number in pounds. Per pound, what's your average cost? What your cash costs are?

Nicholas N. Carter

It's metric tons divide it by [indiscernible]

Peter Castellanos

If I do the math, it comes up with pretty weird numbers so I'm a little bit afraid. I don't trust my own, I mean, basically, if I take the $60 and move into it. But you don't have that. I guess what I'm asking was if you have that number.

Nicholas N. Carter

No.

Peter Castellanos

Okay. And just moving on onto your -- into the exploration of...

Nicholas N. Carter

Cash costs, you're talking about no depreciation, amortization?

Peter Castellanos

Right.

Nicholas N. Carter

It's strictly cash out-of-pocket costs. There's no depreciation, amortization. There's no G&A expense.

Peter Castellanos

All right. Let me just move on to something else here. The exploration on the current lease area, do you have drilled -- do you have drills on site now? Or are you actually drilling any out -- drilling it out? Or what is the status of the exploration there?

Nicholas N. Carter

Yes. We just signed a contract weeks ago with a, I want to say, it's a Turkish drilling company. And they've got 2 drills on site and going to -- like I said, they're delineating the current orebodies that we're working on. We've developed one pretty well. We're working on development of the second one, but the third orebody other than the one that's there and having kind of a basic idea of what the -- what it looks like from a feasibility study, we need to go in for mining purposes and identify it better. And we're going to work on that first. We've got a fourth orebody that has come -- become apparent as we've been mining in that current area. As soon as we outline that third orebody, we're going to work on that fourth one and see if, in fact, it's worth getting into. And then we've got another orebody about 10 kilometers north of where the current mine is that it looks like it would be something that will be pretty easy to access. And then we're going to be drilling on it at the same time. So we've got 2 drills working and I think it's about kind of maybe 6-month program, or if we don't like it, kind of identify what we've got there.

Peter Castellanos

What have you budgeted for that? What's the CapEx on that?

Nicholas N. Carter

The total is going to be somewhere around $4 million.

Peter Castellanos

Are we going to get...

Nicholas N. Carter

That's for the budget for the coming years.

Peter Castellanos

Is that -- that's just for drilling?

Nicholas N. Carter

Yes, drilling and exploration. There is some geophysics work that needs to be done and some of that kind of stuff.

Peter Castellanos

So is there some -- I mean, is some of this open-pittable or is it all underground?

Nicholas N. Carter

The orebody, that ore, that's part of what we're looking at, is whether it makes sense to do an open pit up there.

Peter Castellanos

I'm sorry, Nick. I missed that. The orebody...

Nicholas N. Carter

The orebody that's north of the current site, we're looking at it to see if it makes sense to do an open pit versus underground. Decisions will have to be made, but we need to know more about it first.

Peter Castellanos

And I think when you first started -- or your projected, I think your rate was about 2,000 tons a day. Is that basically kind of around -- right around that number still? Or has there been any change in that number just from the basic mine?

Nicholas N. Carter

Well, actually, we've been operating at somewhat a little bit over that rate. We've been operating around 2,100 to 2,200 tons a day. The bottleneck right now seems to be the top circuit, which is where the first part of the process, refining that ore. And we've got a project going to expand that top circuit because it appears to be the current bottleneck. And if we get that expanded, we think we can probably get 2,400, 2,500 barrels -- tons a day. That would not be completed -- that project will not be completed about halfway through next year.

Peter Castellanos

When you're done with your exploration this year with the 6 months, are we going to get any sort of a reserve estimate on the mine? Or where are you on that?

Nicholas N. Carter

Well, I think the drilling and the exploration that we're doing is all going to be JORC compliant. It's the same as we get the JORC report on the orebodies that we're investigating. Yes, I think the reserves and the life of the mine will be recalculated.

Peter Castellanos

And then my last question on this is just on the list. And how are you coming on monetizing that asset? I see you're profitable now, and I think you mentioned before that you had a period of time that you needed to get it listed.

Nicholas N. Carter

Well, the -- I think that we're still on target. At this date, we're still on target to do this IPO thing in the first part of 2015, okay? And I think we mentioned before also that we're really trying to get these additional leases wrapped up before we get to that because when we do that, the other one that's on the stock exchange, we want to make sure we get full value for us. I think that having plenty of exploration area is going to be a key to this.

Peter Castellanos

Yes. And the -- I guess, at this point, the intention is to list it strictly on the Arabian Exchange or is it also going to be in London? It will trade on the AIM?

Nicholas N. Carter

Well, that's still up in the air. The parts that's required by law is to list it on the Saudi Exchange. Whether we go for a dual listing or something like that, we're still discussing that. That's always a possibility.

Operator

And I'm showing no further questions in the queue at this time. I'd like to turn the call over to management for closing remarks. Please go ahead.

Nicholas N. Carter

Okay. I'd just like to say that we appreciate everyone's participation in the call, and we thank you for your interest in our company. I know that your time's valuable, and I hope you could join us for our next call. We also hope you'll see the unrecognized value in our stock and will continue to follow our progress. So thanks for calling in, and we'll see you next time.

Operator

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

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