Freeport-McMoRan Inc. (FCX) Q1 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Copper & Gold First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Kathleen Quirk, Executive Vice President and Chief Financial Officer. Please go ahead, ma'am.

Thank you, and good morning, everyone. Welcome to the Freeport-McMoRan Copper & Gold First Quarter 2012 Earnings Conference Call. Our results were released earlier this morning and a copy of the press release is available on our website at fcx.com. Our conference call today is being broadcast live on the Internet. Anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. As usual, we have several slides to supplement our comments this morning, and we'll be referring to the slides during the call. The slides are also accessible using the webcast link on fcx.com. In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today. Before we begin our comments today, we'd like to remind everyone that today's press release and certain of our comments on this call will include forward-looking statements. We'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. On the call today is Jim Bob Moffett, our Chairman of the Board; Richard Adkerson, our President and Chief Executive Officer; and Mark Johnson is also with us today. I'll start by briefly summarizing our financial results and then turn the call over to Richard who will review our recent performance and outlook. As usual, after our remarks, we'll open up the call for questions. Today, FCX reported first quarter 2012 net income attributable to common stock of $764 million or $0.80 per share compared with $1.5 billion or $1.57 per share for first quarter 2011. The first quarter 2012 results included $149 million or $0.16 per share in losses…

Thank you, Kathleen. During the quarter, we published our annual report to shareholders for 2011 and Slide 3 talks about the themes that we spoke to in the annual report about our leadership position in global copper markets, the gold production we have out of our Grasberg mine in Indonesia, our world-leading low-cost molybdenum business, our growing cobalt business and our company, with its very substantial proved and probable reserves of resources -- and of reserves of our products, as well as our significant resources, is particularly well situated to take advantage for the global demand in the future. For these products, we are geographically diverse, long-lived reserves. Within our set of assets, our existing assets, we have a very attractive growth profile, both in the intermediate term and the longer term. Our financial position is strong with our recent financing and with our focus earlier in reducing debt and we continue to recognize our responsibilities for environmental, social and sustainable development activities and it’s an important part of what we do. In the mid May, we celebrated the 5th year anniversary of the Phelps Dodge deal. When I visited our mines and our team here in mid March -- when I visited with our team at a number of our mines and here in Phoenix and Indonesia, I was just so encouraged by the quality of our people, the very high morale that we have and our focus on creating shareholder value. Kathleen reviewed our financial results, and it showed strong performance in the Americas and in Africa, which reflects the geographic diversity impacts of our business. I'm happy to report that we are making continuing progress in restoring normal operations in Grasberg, following the 3-month strike and the issues associated with returning the workforce after the strike and…

[Operator Instructions] Your first question comes from the line of Michael Gambardella with JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: I have a question though on this contract of work in Grasberg. Can you explain to us how the extensions will work in 2021 and 2031? And then the second question is I understand how the contract of work supersedes changes in taxes, changes in the law in Indonesia, and that you're paying actually a much higher tax rate than the current or the proposed mining law suggests. But why is it that government officials seem to come out with statements contrary to the contract of work issue almost on a weekly basis? And I think yesterday, I saw a story on Bloomberg quoting the Director General of Minerals and Coal at the Energy and Mineral Resource Ministry saying that you'd have to stop shipping concentrate by 2004 and specifically saying Freeport.

I think you meant 2014. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: 2014, sorry.

Yes, because that's provided for under the new mining law, which is -- which we're not -- our contract is technically -- has a status, it's called the lex specialis, which means that it was adopted by law and has a status of law there. The situation in Indonesia is -- in terms of resource nationalism, is something that the mining industry is facing globally right now. It comes of course, from the very high levels of commodity prices that we've had in recent years and comments about resource nationalism are popular politically. Indonesia is a country today that's a democracy. It has a free press; that's a different situation than it was during the 1990s. Just like comments we hear in our own political process, there are things that are often said that are changed as the reality of facing a situation comes to bear. We have great respect for the government. For years, people have talked about headline political risk in Indonesia whether it was because of the change of the government in the 1990s and the Asian financial crisis and the number of presidents that have happened since then. It's been a constant feature of our being in Indonesia and yet, what's also been a constant feature is after operating there for 40 years now, the government has honored the contracts. Indonesia as a country has become more prominent in the world from a financial standpoint. They're an active member of the G20 now. Their credit rating has increased, the internal economy has grown. They're actively attracting foreign investments particularly for infrastructure, and we're a big infrastructure investor. So I would just remind you of all the history of press reports and so forth that we've lived through. We're very experienced with this. We're working very positive with the government. We listen to them and we respect them and we want to find ways of working forward that is responsive to the issues in Indonesia but is also in a way that protects our assets for our shareholders. And as we talk to senior government officials, there's a mutual recognition of achieving both those objectives. So there will continue to be press reports, we'll report our progress and you can be assured that -- Jim Bob's had years and years of dealing with this. It has our attention, we're focused on it and we're confident we're going to work this way through that at the end of the day, the government will be happy and our shareholders will be happy. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: And what's the process though to get the extensions?

The contract provides that we have the ability to apply for the extensions, and we can apply for both of them at the same time. And we've started that process and we've started the discussions. And so, that is underway. At the same time, the government has separately started a process of reviewing contracts for all mining companies. And so those things are progressing together.

Your next question comes from the line of Brian Yu with Citi.

Rich, I just want to just switch topics a little bit over maybe to the U.S. here. At Morenci, you mentioned that the permitting is underway. I was wondering if you might be able to give us what's embedded in your expectations of when you're going to secure those permits. And then also, just on the cash cost side, how would these incremental pounds compare to your guidance for 2012 here in North America?

Yes. We've actually received -- we've already received our air permit for this project. As there's several permits to obtain; that is one of the critical ones. There are controversies in Arizona about new mine development projects. It's a different situation for us because we're expanding an existing mine and you just don't have the same degree of challenges with communities that you have in terms of expanding existing mines than building a new mine. Overall, we're in great shape with permits; we don't see any issues. The community in the county where we're working is supportive. The state government is very supportive. In fact, Arizona's celebrating its 100th year this year, and The Copper Club is going to recognize the state of Arizona as being -- rather than having a Copper Man of the year, we're having a Copper Club event here and I'll be giving recognition to the governor here. So it's a place where we feel we can operate where we are operating well and cooperatively with the community and the governmental authorities. Our cost situation, Kathleen is going to talk about that.

Yes, in terms of the incremental cash cost of the expansion at Morenci, it's a very attractive cash cost relative to the current levels. We expect that incrementally, these pounds that we'll be able to process through the mill will be lower than our current average cost at Morenci. So it's an attractive project in that we're able to expand the current mill. We have the footprint to do it there and as Richard said, the permitting for this particular project is pretty straightforward. So we see it as a very attractive project and we own a significant portion of Morenci so it's impactful to the company.

Your next question comes from the line of David Gagliano with Barclays.

I have a few quick questions. First, you flagged the -- obviously, the 25% company-specific growth and I was wondering if you could comment on your appetite for adding to your growth profile outside of your existing project pipeline and outside of your organic opportunities. That's my first question.

Well, we're very positive about the outlook for our commodities. We have this growth pipeline that you mentioned. It extends over many years. The challenge, and this is one of the reasons that the copper price is so high, is that it takes time to develop new sources of supply, both from permits and community issues and engineering studies, and construction cost escalation is a huge factor of the industry. It's going back to where we were during the first half of 2008 and that's also an issue. So we are -- we look at opportunities. We have an internal team that monitors the industry and bankers are constantly bringing ideas to us and if we did something, it would be from an opportunistic standpoint because of the attractiveness of a specific investment. We have the capability and the financial resources to do things but the challenge is seeing opportunities that are attractive to us on the basis of their economics after you -- if you were to pay for their values and a premium to those values and how that matches up. We're going to be very disciplined in terms of managing capital allocation.

Okay, that's helpful. My other question, I was wondering if you could just briefly comment on any concerns or lack thereof regarding water accessibility with regards to the Cerro Verde mill expansion?

Well, let me just say, water accessibility is kind of the major issue for expansions in the Americas. I mean, it is a very significant problem. We're building a desalinization plant now to support our operations in the Copiapó valley for Candelaria. As we look at expanding El Abra, water is a huge issue there, and you'll hear other companies talking about it. At Cerro Verde, it has been a major issue. We looked at a number of different alternatives including expanding access to the river through dam construction that we had but this approach that we have about using wastewater for Arequipa is really -- looks to be a really attractive situation for that community as well as for us. And so right now, we're very happy with where we are and the community seems to be very happy.

Okay, that's helpful and just my very last question...

They're getting a better standard of living and we're getting access to water without competing with agricultural sources in the same way you would by developing other sources of water.

My last question. Maybe it's a bit of a touchy subject but it does come up in conversation. I was wondering, Richard, if you could comment on succession planning at Freeport.

Well, we have a great team. We -- one of the things, as we brought the Freeport team together and we did have a team that was focused on essentially a single asset with this Phelps Dodge group that had been involved in global operations but when we put those together, we ended up with just an outstanding team of people with high morale, people who are working together. And s, we have a good team that will provide for potential leadership for this company for years to come. Jim Bob and I are both real happy with what we're doing. We're both focused on this business. It's a dream come true in a lot of ways. And so we're focused with working with our team on the future and we have a great group of people that will be able to sustain it for a long period of time.

Your next question comes from the line of Sal Tharani from Goldman Sachs.

First on Morenci, I see that the cash cost, particularly the site and delivery costs which was 180 pound in first quarter similar to the fourth quarter is rising significantly because you're giving an average of 192 pounds for the year. I'm just wondering what's going to drive that for this year. And also, your CapEx has moved up on that one about $200 million. What was the reason for that?

Well, the CapEx reflects the new project for the Morenci mill expansion. So I think Sal, as we've talked all along, as we advance these projects, at some point, we get them approved and both the project and the resulting production numbers start getting factored into our numbers. And that's what you're seeing with the CapEx standpoint.

Yes. The Morenci project was still in feasibility as of the last update. And so once we completed the feasibility study, we rolled that into our outlook. And then with respect to your question on the cash costs in the balance of the year, we are expecting to see slightly higher unit net cash costs in North America in the balance of the year and that's associated with higher mining rates and some mill maintenance activity that we have scheduled in the balance of this year.

Okay, great. One more question on Indonesia. Richard, you said that you -- in the end, you will find a solution which will make both government and the shareholders happy. So are you guys looking for some middle ground in this -- all these commencements coming out of the government?

We're always looking for a foreign approach that makes the stakeholders happy. And that's the way, historically, that this company has succeeded there and other places. We have a contract. It defines some legal rights. We want to listen to the aspirations of the government and try to find ways to be responsive to that and protect our contracts. So I'll just tell you, our experience has always been it's better to work with people than to work against them. And so -- and governments officials in Indonesia recognize what Freeport means to the country and that's why I feel confident about what we'll be able to do. Jim Bob, do you want to comment on this?

Yes, Richard. I was just going to wait and see how the questions about this subject but went on. But let me reiterate what Richard said. The lex specialis on this contract is well understood by the civil servants and the ministries that will have the final say on this. Ministry of Finance, Ministry of Mines and Energy, Ministry of Industry, and they know that we're making this $15 billion capital expenditure to go underground. They also know that the programs in Indonesia that have been announced under this current President, and of course, there’s an election coming up in 2014 that their whole focus is on increasing foreign investment and in creating more opportunity for CapEx. So it's a little bit of an oxymoron to say that we're going to see a lot of changes in contracts. It will make it more difficult to go out and find foreign investors. So that's what the political landscape is today. But when it gets down to it, to reiterate Richard's remarks and substantiate my feelings, the lex specialis is very strong. There's only been one real contest to that, that was back in '98, and it was over a power plant that was going to be built by Mid-America. And there was a confrontation over in the Mid-America, filed for a hearing in the United States and there was about a $276 million award, and it was paid by the government of Indonesia. So the idea that this lex specialis, it says you can't change the contract without mutual agreement between the parties is well known. Now to say that there -- or a middle ground is your last question, what does that mean? That means that there are certain things that are not -- there is no middle ground. The…

[Operator Instructions] Your next question comes from the line of Aldo Mazzaferro with Macquarie Securities.

On the Freeport Indonesia situation, are you still operating under a force majeure there? And what are the prospects for you lifting that in the near term?

Well, we did give notice of force majeure during the course of the strike and we are working very cooperatively with our customers to meet their needs. We have long-term relationships with our customers. We do have a priority of providing concentrate to the PT Smelting smelter in Indonesia. And so we will lift this as we get back to full production and resolve some of the uncertainties that were faced in the first quarter.

Great. This full production at the mill, is that about 260,000 a day or is it higher than that?

No, it's not higher than that. It varies depending on the type of ore that we have. And so full production can range from 220,000 to 240,000, and there will be occasional days that we will go above that or below that depending on the nature of the ore that we process.

All right. If I could just slip one more in, do you think there's any possibility that the view of concentrate would be considered a processed ore in this whole regulatory discussion in Indonesia?

This whole area is one where the government is dealing with the new mining law, it's dealing with a number of different minerals which have different characteristics and it's really -- I wouldn't want to speculate on how these definitions ultimately get put down. But right now, there's not really specific regulations and so forth that deals with questions like that.

Your next question comes from the line of Tony Rizzuto with Dahlman Rose. Anthony B. Rizzuto - Dahlman Rose & Company, LLC, Research Division: I'm sorry to ask another question about Indonesia but I get a lot of questions from clients. And I was wondering if you can give us a sense as to how far along the process of this contract review and/or extension is at the current time? I just have a quick follow-up on that too.

Well, we're in substantive discussions. In terms of how to measure where we are in the process, that's really not possible. It is something you know that we're going to engage in discussions directly with the government and not indirectly either in the press or speculation and so forth. But the discussions are going well and we feel we're making great progress, Tony, and we'll just have to see how long this process takes. There is a sense of urgency though of dealing with it on both sides. Anthony B. Rizzuto - Dahlman Rose & Company, LLC, Research Division: Jim Bob and you Richard, when you were talking about the middle ground in the conversation there, and I know you're working hard to cement the extension, is it likely you'd have to give up something to achieve such as the higher royalties where there is a bit of errands versus the new mining code, if you will, and a possible sale as you indicated before? Is it likely that, that you'd give up a little bit but it sounds like you guys are very, very confident that a lot of the commentary coming out of the government is, as you said, there's a lot of things going on and a lot of things driving that but should we feel comfortable that it likely will be more minor kind of modifications to secure that extension?

Well, Tony, just -- it wouldn't be appropriate for us to get into the details of our discussion with the government as we're having those discussions. I think I'll go back and just repeat what I said and the essence of what Jim Bob said is we're going to find ways of working cooperatively. I think Jim Bob made a good point when we talked about middle ground. There are certain issues where there may be middle ground, there's certain other issues where we'll have to stick to our guns on. So -- but really, it's something that we will work towards getting to a resolution that the government's happy with, our shareholders are happy with. And at this point, it would not be appropriate to talk about any specific issues that we're considering. Anthony B. Rizzuto - Dahlman Rose & Company, LLC, Research Division: All right. Perhaps I could just change the subject a little bit to labor front. Obviously, you've got the Grasberg out of the way now in terms of the new contract there, and I think most of the operations in the U.S. are non-union. The operations in South America and Africa, can you give us an idea of any contracts that might be coming up for expiry this year?

Okay. Kathleen has a note on that so I'll let her answer.

Okay. We've got -- we did the Cerro Verde contract and the El Abra contract last year. We've got in South America, Candelaria that comes up next year and we'll likely work to try to renew that late this year in advance of the exploration next year. We also have waged discussions at Tenke Fungurume later in 2012. So really, we're well covered with the agreements that we had last year, and we've got some we'll be working on this year but they're not significant to the overall scheme.

And Tony, you're right. Except for one small unit at our Chino mine, New Mexico, we're non-union in the United States. This issue with dealing with unions and contracts is kind of a constant deal. I mean, you get one finished and you're shortly after that planning looking ahead, thinking about how to deal with it. We've had success in the past of often being able to get resolutions in advance of the formal timing for negotiations and that's what we'll work to do.

Your next question comes from the line of Paretosh Misra with Morgan Stanley.

I'm sorry to be asking another question about Grasberg. But regarding the 9% stake there that you own through a subsidy, if a sale of that stake were to take place, any thoughts on how the fair market value might be determined?

That 9.36% stake was once owned by Indonesia. Through a series of transactions that's fully reported in our corporate documents, we acquired it. There is no requirement under our contract -- a requirement for us to sell it. But several years ago, the Minister of Mines and Energy and Mines asked us to consider it and we have -- and I've looked at a number of alternatives on it but no transaction has happened. In the past transactions that we had during the 1990s, the sales price was always referenced back to the publicly-traded price of FCX, and that's the basis that we would be looking at in terms of considering what fair market value is. We -- over time and we continue to look for the possibility of actually having a listing of PT-FI shares on the Indonesian Stock Exchange, that would be received very favorably by the government. That exchange has developed over the years to where it's created a liquid market, and that's one step that we see as potentially a positive step in terms of increasing Indonesian exposure to PT-FI.

Got it. And just one more on your potential phase for expansion in Africa. What kind of additional infrastructure might be required for that, and that would be my final question.

Okay, any expansion requires infrastructure. I mean, it requires power and -- but the current investments that we made in power and infrastructure with some tweaking, we believe, would allow us to do one additional expansion beyond what we have now. Now to get back into -- and then to go to the major expansion involving sulfide or mixed ores, that would require significantly greater access to power, transportation. We're looking at different types of processing. And so all of that is important factor. We're working cooperatively with the government and looking at long-term infrastructure and with other mining operators in Katanga. Those infrastructure investments, by the way, are very positive for the community, for the government, for the country and so that's a positive for us being there.

Your next question comes from the line of Brian MacArthur with UBS Securities.

I hate to go back to Indonesia as well. But just -- you made a comment about planning $15 billion in new investments. Is that actually PT-FI share or because obviously Rio Tinto once you go by 2021, will fund stuff if we're going to do KL and everything else. What exactly -- where does that number get you to and what does it get you? Just the Deep MLZ and block cave or does that include KL and everything else?

It does include the aggregate cost of our share and Rio Tinto share. The bulk of that is ours but it would include Rio Tinto's participation in those shares, and it would include the development of the deep Grasberg -- full development of the deep Grasberg and full development of all the resources and that involves an investment over a period of time. The point that we need to ensure that people in Indonesia understand, that investments we're making now and will continue to make will generate production volumes and cash flows beyond 2021 throughout the period through 2041, and quite frankly, there's resources there to be produced past 2041. Right now, we cut off reserve determinations at 2041.

Your next question comes from the line of Richard Garchitorena with Credit Suisse. Richard Garchitorena - Crédit Suisse AG, Research Division: Just a quick question again on Grasberg and this labor situation there. Just wondering if you can give us some color in terms of the current tension? How much comfort do you have that they won't flare up again? Has the union been supportive of easing the tension?

Yes. We have -- we had an issue in the first quarter of people coming back to work. In some cases, there was not a full understanding of the CLA agreement so we had to go through with the union, a process of socialization, that's a word we use. But it's a question of communicating and getting people to work together. Not surprisingly, there were some tensions between the workers that were striking and our staff workers that did not strike and there were some non-staff workers who did not strike and so that was an issue. There were some implementation matters under the contract CLA that we've worked with. In many respects, the union has been supportive in terms of working with us, and we have a structure set up to consider issues that involve potential strife and to get those resolved. So I can't report that everything is resolved today. But as evidenced by the level of our operations that we're achieving now in the second quarter, we're making progress. And we're looking at this on a long-term basis. We're looking at quality-of-life issues for our workers as this is a remote, harsh area to live in. And so we're looking at working with the workers and the union to deal with those quality-of-life issues to create more harmony within the workforce.

Richard, let me talk about the strike just a minute. I wanted to wait ‘til we've had a series of questions. But let's face it, the reality is that the Grasberg is known as the largest mineral deposit ever found and that's because of the high percentage of copper and gold in the mine. So we start out with sitting on top of the biggest reserve in the history of the mining business. When we found the mine in 1988, copper was selling for less than $1 and gold was selling for less than $400. When you take the copper, it goes up above $3 and hits $4 and you have gold prices go to over $1,500, the value just explodes. So the answer is around, currently, the world, all copper mines -- all mines whether they’re in Mexico, whether in South America, Africa or in Indonesia are in play as far the unions wanting to get a bigger piece of the pie. We're going to make sure that we pay our people and provide, as Richard said, living conditions in a very tough place to provide living conditions. But the fact is that as we all know, if you look at the front cover of Time Magazine, there was no Man of the Year this year. The Man of the Year was the protester. And whether you're talking about a protest against corporate America that's going on in America or whether you're talking about the uprising that started in Tunisia and went through Egypt, went through Libya, continues in Yemen, Syria, this is a political year where people are being urged to speak up and express their viewpoints. So with the new democracy in Indonesia, where the President is now elected by the people and the parliament is elected…

Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research.

It's pretty clear from the stock price and many of the questions this morning that the different political events and statements of government officials and power or out-of-power politicians, Indonesia and/or Congo confused the market and affected the stock price. Over the years, FCX has often bought back its own stock. I remember a soirée in New Orleans maybe in the '90s where Jim Bob read the bond rating agency press release and said I mean, where they were downgrading the credit rating because FCX was dedicated to the shareholders and bought back stock. And I think Jim Bob read that with pride and I certainly commend Jim Bob. It sounds like it's the right time to buy back a lot of stock because the market's completely confused by all this rigmarole. And would you be willing to delay a capital program a year or 2 so you could buy back some extra stock while the price is so lousy?

John, this issue of the stock buyback and financial policy with dividends are matters that our board discusses constantly and will continue to do so. To date, the board has directed returns to shareholders in recent years, let me just say to dividends and a number of our investors have responded positively to that. We do have a focus on projects and we've built a great momentum on looking at those projects. And the truth is it's difficult to turn these kinds of things just off and on. And we believe that these projects, with their high rates of return, ultimately create the value for shareholders and a lot of these short-term issues that affect the market and over time, there's a number of issues that affect the market. The concerns about Europe, for example, or issues in Japan, this resource nationalism is certainly an issue. But we really are focused on the long term and believe that by just continuing to invest in the kind of projects that we have is the right answer for shareholders.

Your next question comes from the line of Kuni Chen with CRT Capital Group. [Technical Difficulty]

Your next question comes from the line of Charles Bradford with Bradford Research.

You've talked a few times about water availability. What about labor and mining engineers and geologists? I keep hearing about shortage of skilled people. Are you getting delayed in any of the projects for lack of people?

Chuck, that's a very valid point and it's something that's increasingly become an issue in terms of being able to get outside resources to work on our projects. There's a lot of competition for engineering talent and increasing competition for equipment. We, fortunately, because of our relationships, are able to deal with a lot of those. But it does require us to have a focus on the most meaningful projects for our company. We're constantly in the market looking for good people. Others are as well. It's interesting, when we first went to Indonesia, there was very low mining talent. And now, we see Australian companies coming in to Grasberg and hiring Indonesian engineers away. We're using engineering talent in Africa and other places. It's a great opportunity for countries like Indonesia and Peru and Chile because of the experience they're getting. So it is a management problem. We had our Americas operating team here last week, and that was a major topic of what we're talking about. So like a lot of things we have to do, it's a challenge and we've got to be way -- able to find ways to meet it. With our global operations and our ability to use people in different places and give them good career paths, it's a real benefit for our company.

Your last question comes from the line of Paul Massoud with Stifel Nicolaus. Paul A. Massoud - Stifel, Nicolaus & Co., Inc., Research Division: I actually had one quick question on Tenke. I'm -- been a lot of discussions on Indonesia but I was more curious about the cobalt circuit at Tenke right now and one in part, the guidance that you're providing for the credit, is that based on the realized -- that $12 number that you put in there, is that for Freeport's realized price or is that for spot LME quality price?

We're producing an intermediate product called cobalt hydroxide and the price that you see that we talked about, a market price of $12, that's the price of the cobalt metal. And as we sell that to various processors, we receive -- essentially pay charges for them to process the material. So our realization would be reduced from the metal price to reflect the product that we're selling. It's generally in the area of about 70% or so of the metal price. Paul A. Massoud - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And I know you mentioned it before but maybe just a quick clarification on the infrastructure required to go, say from the 400 million pound range to the 600 million pound range. Does the infrastructure expansion in that step up include transportation or do you think transportation is something that you don't have to worry about until say, after Phase 3?

Well, worry about is one thing. Conceivably, we could handle it with the existing system but it's -- there are ways of looking at transportation alternatives that could be very economic for us in terms of reducing costs and bottlenecks. So we are looking at long-term solutions but we're also looking at some short-term alternatives in terms of warehousing, alternative routes, alternative transportation means and that's an ongoing process. We don't see it as being a constraint at that level to produce oxides but there are certainly opportunities for us to make our business much more profitable by dealing with different transportation logistic alternatives. We appreciate everyone's being on this call, and we look forward to reporting to you on our progress as we go forward. Thanks for your interest in our company.

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