Amerigo Resources' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Aug. 9.12 | About: Amerigo Resources (ARREF)

Amerigo Resources Ltd. (OTCQX:ARREF) Q2 2012 Earnings Call August 7, 2012 2:00 PM ET

Executives

Michael Kuta - Corporate Secretary

Klaus Zeitler - President & CEO

Rob Henderson - COO

Aurora Davidson - CFO

Analysts

Raymond Goldie - Salman Partners

Steven Aldridge - Hilliard Lyons

Sid Rajeev - Fundamental Research Corporation

John Pancari - Evercore Partners

Anthony Cantone - Cantone Research Inc.

Operator

Good day ladies and gentlemen. Welcome to the Q2 2012 investor conference call. I would now like to turn the meeting over to Mr. Michael Kuta. Please go ahead Mr. Kuta.

Michael Kuta

Thank you, Melanie. Good morning ladies and gentlemen. Welcome to the Q2 2012 investor conference call of Amerigo Resources Ltd on Tuesday August 7, 2012.

Before we begin our presentation, let me caution you that our comments and discussions will include forward-looking statements and information within the meaning of applicable securities legislation. Although, we believe that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based on reasonable assumptions and expectations.

You should not place undue reliance on forward-looking statements and information because they involve unknown and known risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements and information.

You should review our press release issued Friday, August 3, 2012 and our other documents filed with the Securities Authorities in Canada including our Annual Information Form under the heading description of the business risk factors. These documents describe the material factors and assumptions that were applied in drawing the conclusions and making the forecast and projections as reflected in the forward-looking statements and information and the material factors that could cause our actual results, performance or achievements to differ materially.

Finally, we undertake no obligation to update or revise any forward-looking statements or information made in this presentation.

Now I would like to introduce our President and CEO, Dr. Klaus Zeitler.

Klaus Zeitler

Thank you, Michael. Welcome to the Q2 investor conference. Before I start, I would like to introduce Rob Henderson, our newly appointed COO and Rob will make some comments on the operations. We also have Aurora Davidson, our CFO here and she can answer questions with respect to the financials.

As you could see in our press release, Q2 was a very good from a production point of view, a very good quarter. Financially, it was not so good. We explained that in the press release. We had very difficult mining conditions in the in the Colihues Tailings Pond and that increased our cost and decreased our recoveries. With normal mining conditions, our production results would have even been better in Q2 and having now moved into a new area in the in the Colihues Dam, we think that Q3 we’ll see this benefit from these better mining conditions.

As you also could see from the press release, our cash position was reduced significantly. This is due mainly to the fact that we have now finalized in the first half of the year a major investment program which we did in anticipation of the possibility of producing more from additional tailings ponds in the future and quite a significant demand of these investments which we have done will be for this expansion of our operation and will benefit our operation in the future.

In Q3 and Q4 our capital requirements are significantly less to the point that we will only spend about between $3 million and $ 4 million in these two remaining quarters of the year which is as you could see from the financials are less than what we spent in Q2. So we think that our cash position has reached a low point and we are looking forward to improving that cash position again, of course always depending on the copper price in the future.

These are all the comments I would like to make at this point and I would like to ask Rob to give more details about the operations during the second quarter.

Rob Henderson

Thank you, Klaus. Both copper and smelting productions hit new Q2 production records and the company remains on course to meet or exceed our 2012 production guidance of 50 million pounds of copper. The copper production for Q2, 2012 was 11.6 million pounds and moly production was 229,000 pounds.

The high rate form which MBT received in June made for very difficult mining conditions at Colihues and the tons processed were lower than budgeted. We expect to make up this tonnage in Q3 and Q4. Well, fresh tailings, a total of 11.4 million tons of processed at a copper grade of 0.131% for an overall copper recovery of 20.6% and producing 6.8 million pounds. The old historic tailings at the Colihues deposits processed 2.3 million tons of copper grade of 0.278 and a copper recovery of 34.5% produced 4.8 million pounds of copper from Colihues. The amount of copper sold was 10.8 million pounds and this is due to inventory increases at month end due to the delays in shipments to the smelter.

Operating costs, the total costs in Q2, 2012 was $2.37 per pound of copper which compares closely to the $2.35 per pound which we achieved in Q1 and power continues to be the biggest cost component and it will remain this way for Q3 and Q4 until we get the new power contract in 2013. The total operating cost for Q2, 2012 was $3.53 per pound of copper produced.

And I’ll hand it back to Klaus. Thank you.

Klaus Zeitler

Thank you, Rob. I guess I would just like to make few general statements. As Rob was saying, the power cost continue to be the highest cost component in our operations and I just like to remind people that when Amerigo started this operation in 2003, one of the attractions which we had at that point was that Chile had one of the lowest power cost in the world and certainly in South America when we have power cost of about $0.035 to $0.04 and this of course has completely changed in the meantime. Chile now is the highest power cost producer in South America and probably also one of the highest in the world.

And as Rob indicated, for us this will only change next year, but then it will change dramatically and that should take us back to earlier years where we had a very good profitability due to the fact that we had low power costs. Our power costs as we have said various times will revert to a kilowatt hour price of $0.062 which will be indexed so that will take it up to about $0.08 in 2019 and then including the fixed costs, transmission costs and so on we will probably be just short of $0.10 for power.

And that is basically half of what we have, what we had in Q2. Now in the second half of the year we hope that power costs will ease a little bit. In fact in July they were down to about $1, for the [$1.50] and that in fact have an effect on our per pound power costs of about $0.20 to $0.25. I also like to make a general comment with respect to our revenues which we can expect in Q3. Due to the fact that we have lower deliveries in 2011 we are now behind in our pricing so at this point, we basically know what our prices will be for Q3 and these prices will be higher than the present actual prices of copper by about $0.15.

So both the reduced power costs and the distilled goods copper price which we will receive in Q3 2012 will hopefully contribute to a better financial result. I do however have to caution because in Q3 we will have our negotiations for a new labor contract. We are hoping to conclude a new labor contract for another four years.

And as is usual in South America or in Chile particularly new labor contracts are connected with a signing bonus and the signing bonus is in the mine industry are substantial and we will have to report the signing bonus at a cost probably in Q3 or depending on when these negotiations end perhaps in Q4. But overall, our cash situation in the second half of this year should consolidate and hopefully improve.

So operator, if you could take questions now.

Question-and-Answer Session

Operator

We will now take questions from the telephone lines. (Operator Instructions) The first question is from Raymond Goldie of [Toronto] [Salman Partners]. Please go ahead.

Raymond Goldie - Salman Partners

I had three questions. Can I ask them all now or should I go back in to the queue after one or two?

Klaus Zeitler

No, please go ahead, Ray.

Raymond Goldie - Salman Partners

Thank you. First question is that you added some $0.09 per pound of copper produced to your labor cost and is that $0.09 included on the income statement and if so, whereabouts in the statement of cash flows do you read back the $0.09 to profits to get cash flow?

Aurora Davidson

Ray, this is Aurora. That amount has been added in the statement of operations at production cost, particularly labor cost and we're basically taking it off on the cash flow statement under order line called order. It's non-recurring. It is basically an accounting estimation adjustment. So it has been taken out because as we mentioned in the MD&A, non-cash cost for the company.

Raymond Goldie - Salman Partners

The second question is of your additional capital expenditures that you added to the budget this year. $1.9 million is for the capitalized pilot plant operating cost. What proportion of that could be reimbursable by Codelco?

Klaus Zeitler

Not.

Aurora Davidson

That’s the net. The amount we’re showing is the net amount after the reimbursements that have received from Codelco.

Raymond Goldie - Salman Partners

Okay, thank you. And the third one is I am delighted see you are allocating a percentage of copper coming from different sources now and I wondered if you could tell us what percentage of copper came from old tailings in Q1 this year?

Klaus Zeitler

Q1 or Q2?

Raymond Goldie - Salman Partners

You presented the Q2 number and I just like the Q1 number.

Klaus Zeitler

In Q1 Colihues was higher I don’t have it here right now but Rob is looking but Q2 was slow due to the problems which we had difficult mining conditions but Q1 should have been something like 49%.

Rob Henderson

Ray, I don’t have the exact number but I can give you Q1 plus Q2 and you can do the math and take out the difference. Total copper from Colihues in tonnes for Q1 and Q2 was 5,451. Total copper from fresh tailings El Teniente was 6,092. So that’s Q1 plus Q2 numbers in tonnage.

Operator

The following question is from Steven Aldridge of [Vancouver] [Hilliard Lyons]. Please go ahead.

Steven Aldridge - Hilliard Lyons

Yeah, good morning everybody. One comment you had there was higher grade in the fresh tailings in Q2, so far it is said, how much higher was it?

Klaus Zeitler

In fresh tailings, it was approximately about five points. So it was 0.005% higher than what the budget was, but it’s not a material amount, it’s in a, it’s about 6% higher than when we expected.

Steven Aldridge - Hilliard Lyons

Now the admin cost per pound went from $0.08 to $0.11 which is a 37.5% increase so what exactly happened there?

Aurora Davidson

Again that's a part of the labor adjustment. We hold labor as components of production costs and administration costs. So you can count for that increase as being a part of the accounting adjustment on the revision of the estimate for the severance provisions at MVC.

Steven Aldridge - Hilliard Lyons

Okay. The other thing is significant the capital costs and sort of ending now I guess in Q2 and that's really over for the new processing is that over for the new processing plants for oxides or what was the split between that in existing facility?

Klaus Zeitler

No, it's very difficult to split it up. It was really an improvement in the operating equipment which will however also be able to work for an expanded production. So I will give you one example. We installed a new transformer. Now the old transformer was…

Operator

It seems that there has been a technical issue. Please continue to stand by. [Technical Difficulty]

(Operator Instructions)

Klaus Zeitler

So, anyway the old transformer was still okay and was doing the job for our operation. Even though, it was still the same transformer as we had, when we were only producing 10,000 tonnes of copper and we’re now over 20,000 tonnes. So, however we decided to install a new transformer, an additional transformer in order to have back up. But that means that we not only have back up, but we also have enough capacity for any additional production which we will have.

So you can see this example, how difficult it is to say what is replacement, investment and what is investment for new and large operation. But it’s a good example and many of the other investments are very similar, the same for instance with the third thickener which we added, it’s the same thing.

Steven Aldridge - Hilliard Lyons

And one other thing, if I understood you correctly the problem with mining out of Colihues was because of rainfall at MVC?

Klaus Zeitler

Well Rob can answer that, it was for various reasons. Rob why don’t you go ahead?

Rob Henderson

Rain is the biggest problem. We are using hydraulic monitors to get the material out of the dam and they monitor down the slurry and it goes to a central sumped area where it’s pumped out with all water -- the sumps just got flooded out totally. So they had to drain them down which took a couple of weeks and install a new sump to replace the old one that had flooded. So that was the major problem is just excess water inside the mining area.

Yeah, the other associated problem is that we are right at the bottom of the particular mining area. So we are getting close to topography and they were getting sticks and rocks from the original ground coming into the mine as well. So it wasn’t a great quarter from a production point of view.

Steven Aldridge - Hilliard Lyons

Just on the electricity costs, my understanding it dropped down to about $0.14 to $0.15 now, is that what the cost is now?

Klaus Zeitler

That’s right, yes.

Operator

The following question is from Sid Rajeev of [Vancouver] [Fundamental Research Corporation].

Sid Rajeev - Fundamental Research Corporation

I have a few questions. First question is answered, you said you had mining conditions very difficult in Q2 and you explained why. But has all the problems been faced, do you see a huge improvement in Q3?

Klaus Zeitler

Yeah we see us getting back on track under the budget and you know the tonnes which we did not get out in June will come back in Q3 and Q4. We are into a new mining area and we don't expect the same water issues we had in the recent heavyweight winter conditions that were experienced. Q3 and Q4 are traditionally easier mining periods for us.

Sid Rajeev - Fundamental Research Corporation

And is that heavy rain in June, May June help you to cut down power costs?

Rob Henderson

Yeah exactly. That's the bright side of the cloud is that it will fill the reservoirs in Chile and we are seeing the power costs coming down. Right now as Klaus mentioned down to the $0.14 to $0.15 levels and that's due to the rainfall that Chile has received.

Sid Rajeev - Fundamental Research Corporation

Okay just one more question. The investment in processing plants, Klaus mentioned that that's going to lead to an expansion. In the guidance on what kind of capacity will you have once all these -- all the work is done?

Klaus Zeitler

Well right now we are basically at capacity with our production of 50 million plus pounds of copper per annum, but as I said, these things will have all been done in view of our discussions which we have with Codelco and we’re still very hopeful that before the end of this year, we should have an arrangement with Codelco on additional old tailings response.

Sid Rajeev - Fundamental Research Corporation

When you mean additional, is that you mean any guidance on that 55 or 60, 65 just to get an idea in terms of the expected increase in production the next few years? Any guidance you can give, much appreciated.

Klaus Zeitler

We’ve said in the past that you know, this expansion will be substantial, we’re at this point thinking in terms of about 90 million pounds in the next few years.

Operator

The following question is from John Pancari of [New York] [Evercore Partners]. Please go ahead.

John Pancari - Evercore Partners

Klaus, what was the average power cost for Q2?

Klaus Zeitler

Just short of $0.20.

John Pancari - Evercore Partners

And you mentioned in July it had come down to, I thought you mentioned $0.20 to $0.25 per pound?

Klaus Zeitler

No, no, $0.14 to $0.15 per kilowatt hour.

John Pancari - Evercore Partners

Kilowatt hour?

Klaus Zeitler

$0.15. So we’re talking a reduction of $0.04 and as we have said in the past, we are using about between 5 kilowatt and 6 kilowatt per hour per pound of copper produced. So you can calculate you know if you have the $0.04 reduction you know that's at least $0.20 reduction in costs.

John Pancari - Evercore Partners

And in light of the reservoirs refilling; is it within the realm of possibility that August and September would see continued reduction in power costs?

Klaus Zeitler

No, I would be very cautious, I mean we had these very, very heavy rains in June, but since that time there was nothing anymore and we are now in August. Normally, the rainy season comes to an end by the end of August. So if we don't get any further rain in August, things don't look that great from the marginal cost point of view, because as I have said in the past, the reservoirs, they have only been half full before the June rain and even though the June rain was very heavy; I don't think I haven't seen any statistics, but it certainly has not filled up the reservoirs to normal water levels.

John Pancari - Evercore Partners

And historically that would be what 90% perhaps?

Klaus Zeitler

It may be 90%.

John Pancari - Evercore Partners

Okay, in terms of the level of the reservoirs in a typical year without the drought over the last several years going back historically?

Klaus Zeitler

Yeah, that's right, you know that it should be back to normal levels and I would think perhaps with the June rain they are perhaps at 60% or 70% maximum of the normal levels. So things are still not rosy, but you know….

John Pancari - Evercore Partners

I am sorry, what was the peak per kilowatt for this year, was it in the low 20s?

Klaus Zeitler

No the peak from the grid was 28?

John Pancari - Evercore Partners

And you had a cap I believe right at some point?

Klaus Zeitler

Yeah, the cap comes in due to the fact that we have our generators which produce right now at present oil prices at about $0.19.

John Pancari - Evercore Partners

And cover approximately what a third of needs?

Klaus Zeitler

No, could cover up to half.

John Pancari - Evercore Partners

And again, Q2 was approximately $0.20 a kilowatt and currently you are down to $0.14 or $0.15?

Klaus Zeitler

Yes.

John Pancari - Evercore Partners

And the new contract, just to refresh is five years when it starts January 1st?

Klaus Zeitler

That's right.

John Pancari - Evercore Partners

And lastly, if and when you finalize new agreement with Codelco, do you envision it encompassing increased production or perhaps a revision to the pricing of the entire operation because the original agreement was signed in an environment that was entirely different from where we are now?

Klaus Zeitler

That’s right.

John Pancari - Evercore Partners

So if you can just speak to that, do the discussions include perhaps a revision to the existing production or would any change to the agreement with Codelco just involve anything in excess of what are you doing now versus you spoke over the next several years of hitting perhaps 85 million or 90 million tons?

Klaus Zeitler

Pounds.

John Pancari - Evercore Partners

Pounds, I am sorry. And would the agreement encompass just the incremental production or will it revise the current agreement?

Klaus Zeitler

Right now, we are talking and I don't know whether that will be the end result, but we’re talking about an entirely new agreement for all tailings.

John Pancari - Evercore Partners

Where the entire production would be under a new pricing regime for everything you produce?

Klaus Zeitler

Yes.

John Pancari - Evercore Partners

Well Klaus, one last question, when does the actual labor contract expire?

Klaus Zeitler

September.

Aurora Davidson

September of this year.

John Pancari - Evercore Partners

September, the end of September?

Aurora Davidson

Yeah.

Klaus Zeitler

Yeah. And the discussions are before that.

John Pancari - Evercore Partners

Its four years to typical renewal term what this has been historically?

Klaus Zeitler

Well historically it has been four years for us and the last contract was 44 months and the reason it was 44 months was because we didn’t want to renegotiation fall into the Christmas New Year time. So we had 44 months this year but this time we are trying to go back to 48 months agreement.

John Pancari - Evercore Partners

Would you characterize it as cooperative discussions at this point or?

Klaus Zeitler

I mean MVC never had a labor strike, so we are hopeful that history will continue. We do have good relations with our workers with the union, so yeah we are very hopeful that we can come to an agreement which is acceptable for both sides.

John Pancari - Evercore Partners

And the last question the size of the labor force the agreement would cover how many employees?

Klaus Zeitler

Well the agreement covers all employees of course whether they are in the union or not but it is for about 200 people.

Aurora Davidson

Just shy of 200 people.

John Pancari - Evercore Partners

And it would also cover any additional employees obviously, that would be brought on in an expansion environment?

Klaus Zeitler

Well, I mean you would have to pay the same wages to people which you bring on but they would not be covered.

Aurora Davidson

They would not be subject to a signing bonus when they join the company.

John Pancari - Evercore Partners

But they would, so they would just fall under the existing wage labor ground?

Klaus Zeitler

Right.

Operator

(Operator Instructions) The following question is from [Ken Hefner of Lakeland].

Unidentified Analyst

I was wondering if the generators that are required for our electric contract signing?

Klaus Zeitler

No we do have a contract with the simple grid.

Unidentified Analyst

But it was not required for the let's say $0.08 per kilowatt hour after five years?

Klaus Zeitler

No, no it has nothing to do with that.

Unidentified Analyst

Okay. I was just wondering if you had any comment as far as how the negotiations were going for the transmission lines for the new hydro dams, if they were built?

Klaus Zeitler

Well, before we can negotiate at the transmission lines, we have to know with whom we are going to have a power contract for the additional required audience, for the additional power requirements and that has not been decided at this point.

Unidentified Analyst

Actually I was referring to the transmission lines for the dam itself that looks like right now its on hold as far as the construction goes, just to note there were negotiations for the transmission lines were going? And as far as getting a new contract with Codelco I just wondered it looks like the new contract would have some sort of inflation adjustment or adjustments for when the electric costs that are high.

Klaus Zeitler

Yeah, no, as I said we've at this point we are talking about a completely new concept of a partnership between Codelco and ourselves.

Operator

Thank you. The following question is from Anthony Cantone of [Tinton Falls] Cantone Research Inc.]

Anthony Cantone - Cantone Research Inc.

I wanted to ask about the future expansion to the 90 million pound a year. How much more capital expenditures do we need to get us to that point, do you have any idea.

Klaus Zeitler

We should have a better idea of that towards the end of this year.

Anthony Cantone - Cantone Research Inc.

So in other words you still need a substantial amount of money, my concern is that we only have it looks like $7 million in the bank and we spent $7 million just in CapEx in the past three months, so we are running a little bit on thin cash reserves for a significant amount of CapEx?

Klaus Zeitler

Well, look at it in another way. The cash flow which we have made this year with high power cost and the cash flow which we expect to make in the second half, and you then add 20 million to 25 million in terms of cash flow which we would get through the saving of the power cost, that would add up to something between $30 million and $40 million per year. So, I don’t see that negative. We have been talking in the past that the expansion, we’re planning the expansion in sort of two stages and so in the first stage, that would certainly be enough to achieve that first base expansion.

Anthony Cantone - Cantone Research Inc.

So the first stage will not be to $90 million or would get you to something lower than $90 million?

Klaus Zeitler

Yes.

Anthony Cantone - Cantone Research Inc.

You feel that you have enough cash flow from operations to just fund this internally. You don’t have to go out and raise money and ease the pressuring level. So with the stock markets and being with the stock selling at the near bottom?

Klaus Zeitler

Yeah, of course it depends on the copper price but talking about the cash flow which we except based on price of copper prices.

Anthony Cantone - Cantone Research Inc.

Alright, I am just concerned that we may have this great expansion opportunity we don’t have the cash to take advantage of the expansion opportunity, that’s the point, but thank you for your answer. That’s all I have. Thanks.

Operator

(Operator Instructions) And the following question is from John Pancari of [New York] [Evercore Partners]. Please go ahead.

John Pancari - Evercore Partners

Just a quick follow-up question, any increased production going forward would that be with the power needs for that be covered by the new contract or does the new contract have a cap on in terms of power commitment?

Klaus Zeitler

No, in the first stage we would still have enough power from the present contracts to cover these expanded needs. However, part of that contract would be based on marginal costs. So any significant increase beyond our present power needs would be –

John Pancari - Evercore Partners

Incorporated in the --

Klaus Zeitler

Yeah would be marginal cost based, however then again we do have our generators and if marginal costs are significantly higher than the $0.19, then the generators would limit these additional requirements to $0.19.

John Pancari - Evercore Partners

Right but I am confused as to the status then, you have enough incremental power to serve you through the first of two stages leading to 90,000 pounds.

Klaus Zeitler

Yes.

John Pancari - Evercore Partners

But in stage two, you need incremental power?

Klaus Zeitler

Yeah, we need an additional power contract and we need a new -- about two or three kilometer power line.

John Pancari - Evercore Partners

And would you -- that would have to be determined as to whether that would be under a fixed regime or variable or –

Klaus Zeitler

Yes, yes.

John Pancari - Evercore Partners

So to be determined?

Klaus Zeitler

That's right.

John Pancari - Evercore Partners

And in the meantime, you are saying until that was put in place you would have the ability to use your generators?

Klaus Zeitler

Yeah.

John Pancari - Evercore Partners

And transmission lines would be at the expense of the company?

Klaus Zeitler

Well you know that also of course is part of the negotiations that could be our expense with more favourable power price or at the expense of the power company and then of course the power company charges you for that.

John Pancari - Evercore Partners

Now the contract, the new contract begins January 1 and is it safe to assume that the second stage of any expansion would be beyond 2013, is that plausible?

Klaus Zeitler

How you mean beyond 2013?

John Pancari - Evercore Partners

Well wrapping up to 90 million pounds, in two stages. Obviously the first stage would be at its earliest in 2013.

Klaus Zeitler

Right.

John Pancari - Evercore Partners

The second stage would obviously then be probably beyond that. It wouldn’t happen in the same year. It would be sometime down the road.

Klaus Zeitler

That's right. Yeah, not much later.

John Pancari - Evercore Partners

Right, but being subsequent to that, you could considerably be in an entirely different environment in terms of two years of rainfall or two additional changes to climate to power costs. I mean there would be obviously – it's very early to speculate on variables in 2014?

Klaus Zeitler

That's right.

John Pancari - Evercore Partners

But as it stands, you would be in good stead as far as incremental power needs for the first stage. And the first stage you would envision ramping up to what 65 million and another 15 million, how does that break down among the two stages?

Klaus Zeitler

Yeah, 65 would be a good number. 65, 70, yeah.

John Pancari - Evercore Partners

And again, without the generators, you envision you would be adequately served with this existing contract?

Klaus Zeitler

Yes.

John Pancari - Evercore Partners

Which will -- all the incremental power up to 70 would still fall into the fixed rate?

Klaus Zeitler

No, not all would fall under the fixed rate. Part of it would fall under the variable rate, but that again through the generators would be max at 19, at present oil prices.

John Pancari - Evercore Partners

Right, but also then essentially variably you are subject to the petroleum prices, so.

Klaus Zeitler

Yeah.

John Pancari - Evercore Partners

What production is covered? What level of production is covered by the fixed power costs?

Klaus Zeitler

Present production.

John Pancari - Evercore Partners

Okay. 50.

Klaus Zeitler

50 million pounds.

John Pancari - Evercore Partners

50 million pounds. And do you have terms on the variable above that?

Klaus Zeitler

Well, no it's marginal, you know marginal cost price.

John Pancari - Evercore Partners

Okay, which at the moment is $0.14 to $0.15

Klaus Zeitler

It's $0.14 to $0.15, right.

John Pancari - Evercore Partners

And then even at the marginal cost level you would only have a commitment for enough power to get you to say $70 million.

Klaus Zeitler

Yeah.

Operator

(Operator Instructions) There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Kuta.

Michael Kuta

Thank you, Melanie. Thank you everyone for attending and we look forward to speaking with you again when we release our results after Q3 2012. Enjoy the rest of the summer and we will talk to you then. Thank you.

Operator

Thank you. And the conference has now ended. Please disconnect your lines at this time. We thank you for your participation.

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