Freeport-McMoRan Inc. (FCX) Q2 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan Copper & Gold Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (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. Good morning everyone, and welcome to the Freeport-McMoRan Copper & Gold Second 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. And anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. 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 on the webcast link at 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 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 Chief Executive Officer; we also have several of our senior operating executives here today, Mark Johnson, Red Conger, and Dave Thornton. I'll start by briefly summarizing our quarterly financial results, and then turn the call over to Richard, who will be going through the materials on our website. As usual, we'll open the call for questions, following our prepared remarks. Today, FCX reported second quarter 2012 net income attributable to common stock of $710 million or $0.74 per share compared with $1.4 billion or $1.43 per share for the second quarter of 2011. Our second quarter…

Good morning, everyone. We’re pleased again to be able to report a solid operating performance by our organization and as Kathleen indicated, the financial performance was in line with our plans. Some important things happened during this quarter. We made further progress by improving productivity at Grasberg; it was about this time last year that we began to see the issues with our PTFI union that led to the strike in the second half of the year. And our relationships with our workforce has improved significantly, and we're taking some steps to help build positive relationship there in terms of being responsive to some of the aspirations of the workers. Outside of Grasberg, we had some important developments. As you know, our strategy is focused on our significant resources of copper, and we have a number of brownfield development projects, which we’re currently engaged in, which we’re focused on for the future. At Tenke, we have achieved our first copper, we’ll be completing this expansion project by the end of the year, this is the first expansion at Tenke following the initial development of the mine in 2009. We’ve initiated construction of Morenci our flagship mine in North America, Red Conger’s group there is really focused on taking advantage of the resources we’ve been able to identify through our exploration and drilling. And this is the first project, but not the last, and we’re really excited about that. At Cerro Verde, where we are developing that mine to be the world's largest concentrated milling operation, we are progressing with the planning and permitting, we have some important steps to accomplish with the government, government intrude on a non-controversial supported basis. And so we’re looking to move forward with construction there. At our molybdenum operations, Dave Thornton is here, the Climax…

(Operator Instructions) The first question comes from the line of David Gagliano with Barclays. David Gagliano – Barclays Capital: Hi, thanks for taking my questions. I just have two quick ones, on the contract extension discussions, are there any particular milestones or dates that we should be looking in terms of either deadlines or potential resolutions? That's my first question.

Well, Dave, it’s a process that we just can’t. We can’t identify those things, we’ve been thorough things like this in the past, it’s not something that’s set with a specific regulatory timeframe. Both government representatives that we’re speaking with and our team really wants to get this done as quickly as possible. And then, we’re certainly going to be responsive as we can. We hope that the government can meet it’s targets of completing these reviews by the end of 2013, and we’re going to continue to work to do that in advance of it. So but, it’s not something that has any sort of set timeframe that we can say, here is the milestone. David Gagliano – Barclays Capital: Okay, all right. Fair enough. Just switching gears, you mentioned in the prepared remarks the strategies not built on acquisitions. My question is, are acquisitions essentially off the table or if not, where does that sit in the packing orders internal project development versus returning cash to shareholders versus acquisitions?

Well, it’s certainly not off the table. We are always looking at opportunities; we’re monitoring internally opportunities in the resource business around the world. Our friendly investment bankers are constantly knocking on our doors, suggesting thing to us. We’re thinking ourselves about what we might do in talking about things with our Board. So it’s not off the table by any means, and we have – we’re fortunate that we are not pushed to do anything. We have the ability to grow and return cash to shareholders, if something doesn’t work out, but if an opportunity came to us that was attractive we have the financial wherewithal, the capabilities to take an advantage of it. So I want to be clear about that. We have a good strategy; if an opportunity came to us we can take advantage of it. If the opportunities don’t work out we have got a great future without them. David Gagliano – Barclays Capital: Okay fair enough, thanks.

Your next question comes from the line of Sal Tharani with Goldman Sachs. Sal Tharani – Goldman Sachs: Thanks. And Richard if I look at last two years inflation and the cost excluding the byproduct credits, it’s running about 20% average, I was just wondering, how should we think about it over the next couple of years, you think that kind of inflation rate will remain in the cost side?

Well Sal, let me just say one thing that I think is really important in looking at those inflation rate, a lot of our significant elements in our costs are correlated to copper prices. So when energy cost or when steel cost or certain other input cost increase, it’s in a world where the scenario is the copper prices were increasing and we are able to maintain or increase our margins, because when you look at those other cost elements, it’s hard to picture a commodity that’s better situated from a price standpoint than copper, because of the supply challenge. : We’re doing a major test right now with the Caterpillar’s large trucks, and they’re putting money into that, we’re putting money into it, and we believe at the end of the day, we’re going to come out with a lower cost alternative for our big truck fleet, which is going to be very helpful to us as we ramp up these mine rates and mines take advantage of the resources. So, it’s something that we fight every day. And we are – when we look at our outlooks here, we’re not projecting significant inflation. Labor rates are increasing through around the world, but if that inflation hits certain of our costs, it will we be in an environment with a much higher copper prices. Sal Tharani – Goldman Sachs: Okay. Thank you very much.

Your next question comes from the line of Brian Yu with Citi. Brian Yu – Citigroup Inc.: Great, thanks. Good morning, Richard and Kathleen.

Hi, Brian. Brian Yu – Citigroup Inc, Research Division: My question is on CapEx, you touched on a little bit that seems like the reduction this year is related to timing. I guess the bigger question I’ve got is, when we look at your CapEx spends going forward, you’re running at close to this $4 billion above level. In a scenario where – let’s say copper prices due correct, so I guess significantly, what’s the ability to try to lower that CapEx spend, are there leverage that can be pulled?

Brian, I say this with a smile, but when you say correction, you mean it goes down right? Brian Yu – Citigroup Inc.: Yes, sir, yes.

Well, that was right at the forefront of our mind five years ago. Obviously, we had a lot of debt at that point and we were taking of – working with our new team, how we would manage that. I think we had a great track record in 2008, 2009 for what we can do. And when you look at our set of assets, our set of assets, we have an ability to do that in a way I think that’s better than many others in the industry. We were able to adjust operations at Morenci and drive our cost down dramatically. We can defer some of these projects, if we have to without loosing them. And there is always some inefficiency of starting and restarting, but we did that at Climax. We were going out at Climax and we deferred it, and came back and completed it when the financial situation was improved. So, and when we did that we always did it in a way, so that, one, we wouldn’t loose assets or we wouldn’t loose opportunities to grow, because we believe the longer-term view even if we do face a downward correction will ultimately be positive. So we have plans of doing that, our project economics are not built around having to have $3.50 copper. And so we can take that into account, but as we’ve shown, if we have to, we have a business it can be adjusted to take into account some period of lower prices. Brian Yu – Citigroup Inc.: Okay. And then my second question is a clarification on Grasberg, I remember last quarter in early April you were running at close to 200,000 ton per day rate and at average 180, was there anything notable that happened in May or June?

Yes. Brian Yu – Citigroup Inc.: That changed that?

In June we had a nine day scheduled maintenance for realigning SAG mill. And we made our targets, we were targeting 180, and we may have met our plan. As we look forward into the third quarter, we’re looking at 200, a little bit better than that. So we anticipate normal operations in what you’re seeing. In the second quarter numbers, it was a scheduled nine day maintenance to realign one of our big SAG mills. Brian Yu – Citigroup Inc.: Great. Thank you.

Your next question comes from the line of Oscar Cabrera with Bank of America. Oscar Cabrera – Bank of America/Merrill Lynch: All right, good morning everyone.

Hi, Oscar. Oscar Cabrera – Bank of America/Merrill Lynch: Richard, about two thirds of your Brownfield expansions which are very, very competitive compared to the rest of the industry. BHP and Exacta have had a tough time managing the social unrest, and I just wonder if you mentioned in your comments that the government and the locals are very supportive, but there are still some signs of opposition, could you just provide us more color on that?

Okay. Well, first of all we did some ground work early on, we came in, and this is where our experience in Indonesia has proved useful, I think in creating the team we have here now, with organization we have, because we had to learn how to work with the government, government that changes rule for the local community of indigenous people and the surrounding community and we knew that it took investments and resources and people involved with it, so even before we started our expansion, we were working more aggressively with the people of Arequipa. We committed to build a water system for them and that's a big issue for them, when I talked with President Humala and his background and his aspirations, he talked about very basic things of infrastructure for people, water, energy, education and so we focused on that before we started talking about expansion and then as we were talking about the expansion we benefited by the fact that, we had a footprint, we weren’t building a new mine in a new location, and the footprint was very conducive to what we are trying to do. And then we started, we worked through the power situation and we were able to find sources of that. Then when it came to water, we looked at a number of different alternatives about what we might do including building new dams and things like that and then hats off to Red and this team, they came up with this idea saying, let's do this wastewater project for Arequipa, the second-largest city in Peru and a city by the way that traditionally has had a pretty radical political ban in terms of the country. But that wastewater system is a big addition for that city and the Mayor of Arequipa, who was a early supporter of Humala, got into it, see the benefits to the community, we’ll find ourselves as many other miners do, putting head on to agriculture interest for competition for water, there is always some of that, but at the same time, it’s a way that gave us a way forward to do something on the co-operative basis. And it reflects a lot of hard work and focus on what works for the community as well as what works for us. Oscar Cabrera – Bank of America/Merrill Lynch: That’s great. And if I may, just a quick clarification on your reconciliation of unit cash costs on slide 24. You talked about $0.31 decrease when Grasberg volumes returned to normal. What metal prices are you assuming for gold and molybdenum that’s part of that as well?

Oscar, it’s Kathleen. That reconciliation just says, what would be a 2012 average cash cost on a consolidated basis. If we were to roll in the estimated production both copper and gold from Grasberg in 2013 and ’14. And so it assumes the same $1,600 gold that we are using in the second half of this year. And this rolls through what those volumes are, and we expect Grasberg, unit net cash cost to look a lot like they did historically before this year in the outlook. And so on a consolidated basis, that has the effect of dropping our consolidated cash costs by 30 plus cents. Oscar Cabrera – Bank of America/Merrill Lynch: Great, okay. Thank you very much.

Your next question comes from the line of Richard Garchitorena with Credit Suisse. Richard Garchitorena – Credit Suisse Securities: Thanks, good morning.

Good morning Richard.

Good morning. Richard Garchitorena – Credit Suisse Securities: Yeah, so my question is on Tenke, and it looks like the current expansion is progressing on target and on budget. My question is, when should we expect some additional commentary on the next phase, are you – so working towards completing Phase II first before you look at Phase III and beyond?

No, no Richard not at all. I mean we have a master plan of what we can see. We can see another expansion, think about whether that's one step of two step, that still focuses on the oxide ore, and that's what we're processing now. So we're looking already at additional tank house capacity as we complete Phase II. And then, we have a team that go from our wells exploration team, what they’re drilling to doing metallurgical work and different processing alternatives for this what appears to be a very, very large sulfide mixed ore. That information changes continually as we go through things. I can tell you the information has become more positive recently, but we will be reporting to you as those plans go forward. The first thing we have to do is get the first expansion done and prove that we could operate in reasonable way. Logistically, operationally, administratively, and we've done that. So we're comfortable going with the second expansion, its going very well, but as we do that we’re studying for the future. Richard Garchitorena – Credit Suisse Securities: Okay, great. And then my, just one follow-up. Announced for Grasberg that, you didn't change your volume expectations for 2013 to 2016 despite the fact that you are – you lowered 2012s. Does that mean, is the higher grade ores to be – is that going to be past 2016 or just being concerned at this point in terms of when you will access that?

No, we will get back to that higher grade ore, most of what you see is just rounding differences but I would suggest, spend some time looking at our supplemental slides, and look at that outlook and I think you can get a good understanding about what we’re doing here and...

But in general, the five year plan at Grasberg and PT-FI is substantially the same as the previous plan. Richard Garchitorena – Credit Suisse Securities: Thank you.

Your next question comes from the line of Tony Rizzuto with Dahlman Rose. Tony B. Rizzuto – Dahlman Rose & Co. LLC: Thanks very much. Hi, Richard, Kathleen, Jim, Bob. I’ve got two questions, Richard I thought the color on Cerro Verde was excellent and how you have positioned yourself with building the relationship that was excellent. I wasn’t – and I wonder on the same lines, you mentioned about taking further steps at Grasberg to be more responsive to the workers there. And I am just wondering if you can elaborate a little bit on some of those steps that you guys are taking?

: And then so we’re having the change with that. And we made investments over time in facilities, and quality-of-life issues and we got to make some more and listen and do things in a way that is responsive to where we are. You’ve been there Tony. Everybody knows it’s the challenging place to do business because of the geography and weather, and the remoteness, and so we have to deal with those. ,: Tony B. Rizzuto – Dahlman Rose & Co. LLC: It’s a great insight. I just have one follow-up on Cerro Verde, and on all the progress there, can you update us on the status of the environmental impact assessment? And are you getting any indications when that – of the next key point on the timeline there?

Tony, I want Red to respond. Tony B. Rizzuto – Dahlman Rose & Co. LLC: Thank you very much.

Yeah, Tony, that’s progressing well. We've done all the community input; we’re now responding to the input that we've received. We anticipate having those permits, it’s all in place early next year and commence construction to maintain that schedule that we showed you in the packet. Tony B. Rizzuto – Dahlman Rose & Co. LLC: Excellent, good stuff. Thanks a lot Red and Richard.

Thanks Tony.

Your next question comes from the line of John Tumazos. John Charles Tumazos – John Tumazos Very Independent Research, LLC: Thank you very much. In terms of the capital spending profile going out multiple years, you have completed this phase the Tenke and you’re completing the mill next year at Morenci, and then the projects will build up at the Cerro Verde expansion or the El Abra mill and few build that one too et cetera. Will the CapEx increase as the $4 billion consolidated Cerro Verde mill starts up or will other things wind down and is there any level that we can comfortably say is the upper limit or cap on capital spending like $4.5 billion or $5 billion or $5.5 billion or $6 billion or $7 billion.

Right now, it depends on – I'm want to say some qualifiers, John he knows this industry well enough that I know I'm not, did you understand this. It depends on how these studies unfold. We want it, we’d like to go faster than we can but it just takes time because of the need to drill, to do metallurgical work, engineering analysis, get permits, arrange for water and power. I mean if you could just see the effort that our team is exerting to find water resources here in Arizona for the opportunities we have. We are looking at buying ranches, we are talking with Indian tribes, we’re talking with other water users, and dealing with things. So all those things result in a longer time period for developing these resources than we probably like. On the other hand, everybody in the industry faces these sorts of things and that’s what supportive of copper prices, because supply can’t be turned down very quickly. I would say that as we look out and what you are talking about that for purposes of investor analysis, the capital expending is shorter than the lower end of that range as you were talking about, $4 billion, $5 billion, $7 billion.

$4 billion to $5 billion.

Yeah, $4 billion to $5 billion. And it will be down for a period of time as projects wind down as we startup other projects. So… John Charles Tumazos – John Tumazos Very Independent Research, LLC: So I if could talk (inaudible) Richard, Jim Bob used to say, it’s all about buy mama a brand new dress, so when we are we going to see the brand new dress from all the expansions?

That’s going to unfold over time depending on copper prices and so forth. But we are thinking about pearls and diamonds rather than dresses, John. John Charles Tumazos – John Tumazos Very Independent Research, LLC: We just don’t want to feel subordinate to the capital expenditure vendor suppliers to shareholders and I’m a shareholder Richard and I idolize Jim Bob and you in the company.

Well, we appreciate that and we understand that and I can tell you that message came through loud and clear as we have these investor conferences, and that’s the world today. we will be very disciplined about our projects. We believe the investments we make will create value for shareholders and the opportunity to return cash for shareholders as we go forward. and as I said John, as you can sense, I couldn’t be more pleased with the set of assets that we have. You know our track record; you know what this Board has done and what this company has done in the past. So I hope that give you some comfort. John Charles Tumazos – John Tumazos Very Independent Research, LLC: Thank you.

Your next question comes from the line of Melissa Hernandez with [New Burger Barmen].

Hi, thank you for taking my question. It’s a quick one on molybdenum and the Climax mine with our moly price that has weakened somewhat here and you mentioned that the ramp up for Climax would depend on market conditions. Could you tell us a little bit more about that? How confident are you that the market can observe the 20 million tons from Climax next year maintaining a price up about 15.

Dave, you want to talk about a little bit?

Yeah. I think we're ramping up Climax right now. The market has weakened a little bit and we’re down in the 1,270 per pound range, but our outlook for molybdenum and for growth remained strong. the European economic issues of slowdown in China causing some of the softness in the global economies today, but our long-term outlook for moly, as it is for copper and other metals continue to be positive. We feel next year with just our normal growth rates in the 2013 will be able to move those 20 million tons of moly into the market. So our view hasn’t changed on that .

The other thing Melissa, this is Kathleen. The other thing is that we’ve also got some lower byproduct production forecast as you look at our outlook for sales. We expect to go from roughly 80 million pound level, currently the 90. So we’ve got some offsets with byproduct and as Rich and Dave mentioned, we’ll have a delay to flex production with Henderson to meet market requirements.

Got it, thank you.

The issue at the byproduct is the sequencing issue, primarily at our U.S. mines. We have some lower grades coming in 2013 and it will ultimately get back to higher rates.

Yeah, you’re seeing that in fact this year, with Climax starting up, our sales are relatively flat compared to last year and that’s the same reason.

One good thing about our set of assets is we can adjust quickly. We can adjust quickly through mine rates, throughput rates, and so forth without turning our cost structure upside down. Because we – our cost are low and reduction would increase cost some, but not to the point where it’s a major decision to do that and then the nature of the operations gives us a lot of flexibility.

Thank you.

Thank you.

Your next question comes from the line of Brian MacArthur with UBS. Brian MacArthur – UBS Securities: Good morning, I had couple of questions. Just following on that last question, lower grade moly effect, in three day in 2013, does that continue like for three or four years or what sort of time horizon should we think about statics that will the effect the cost there?

It’s down for a couple of years, I think is Sierrita and it picks back again and I believe the ’14 range.

Yeah, 2014.

2014, we see a pick up again. So it’s just the sequencing of the mines in those two places. I think that’s a little more stable on their throughput where you see more variability at Sierrita. Brian MacArthur – UBS Securities: Great, thank you. My second…

Both of those have resources that we're looking at down the road. They have great expansion opportunities to Sierrita; we have the Twin Buttes property that we acquired for couple hundred million dollars that we're looking at. So we talk about these, this pipeline of opportunities those are two mines that have resources that we're looking at very hard. Brian MacArthur – UBS Securities: Just on that. My second question sort of follows on, and I realize you have lots of optionality in all these projects, which is a great asset to have all that optionality. But just to clarify on Morenci, we've talked about drilling the current mill to 115,000 tons per day, which will get us the 800 million pound. But you’ve also got the statement now, current expansion on page 18 could get Morenci over a billion pounds. Is that possible with the current 115,000 tons, i.e., there is some higher grade coming, or does that start to include the second sulfide expansion where you’ve talked about 800 million pound. Can you just reconcile like how all those numbers fit together and I realize there’s a lot of moving parts?

Right, right, it would require that further expansion. It's that opportunity that would get us to those kinds of levels. Brian MacArthur – UBS Securities: Right. Then it’d be kind of like, I have 800 million pound today, and then I get the other 800 million pound with major capital expenditures. That’s the way to think of it?

It would be a big capital expenditure. And it would be the sort of thing that would be done, faced on the world’s need for copper. Like, which you said about optionality. Having this here, gives us the chance to generate lots of volumes, lots of profits at today's prices, lower prices the world’s needs for copper growth, I believe they will. We didn’t have a resource like this where we can go in, make an investment, take advantage of that opportunity as an option. Brian MacArthur – UBS Securities: Great. My final question is a little bit the same, but this time at El Abra we’re obviously, at the current operation wind down we replaced whatever to 50 million pound. Again you talk about the billion is that – two questions, is that the additional 600 million that you talk about from the sell side, and if so is there a way to actually – does that make sense just in a capital allocation decision to go right from 350 million to 1.2 billion, and I realize this is the move in the future or how do you, are we talking about making like a 360,000 tons per day operation like Cerro Verde or how does that actually work at El Abra?

Yeah, it’s a long-term deal. It’s separating apart from ourselves sulfalix project. We looked at what to do as we were going from the hot side into the sulfur resource. And as frankly, we weren’t aware of this resource five years ago. It was only through this process that we had tried to understand that ore bodies do a lot of drilling, and so forth that we became aware that there was a bigger opportunity yet at El Abra. It has got some challenges to overcome, some big challenges to overcome. We decided to go forward with sulfalix and continue to work on this additional sulphide resource which would require major capital view processing, it won’t be a leach operation, it will require lot more water and power and all those things that are in short supply until it probably require us to work with our partners in the area to find ways of doing this in an efficient way. It’s an opportunity, Brian, but it’s a separate opportunity. Brian MacArthur – UBS Securities: Great, thanks very much for all the color, Richard.

All right.

Your next question comes from the line of Jorge Beristain with Deutsche. Jorge Beristain – Deutsche Bank Securities: Hi.

Hey. Jorge Beristain – Deutsche Bank Securities: Good morning, guys. I guess my first question quickly for Kathleen, a bit of a technical one. On these recent environmental litigation charges, could you comment as to – it’s just going to be more of a recurring kind of nature charge, something that you are working towards settling, are these just lumpy and kind of would you take them as they come?

It’s latter, we've got established reserves what we think our exposure is and when something changes from that, we review the reserves and in this quarter we had two matters that, they were things that developed that costs as too, as we look at those reserves, so it's more lumpy than it is a recurring item. Jorge Beristain – Deutsche Bank Securities: Okay, and then maybe for Richard, my second question was, would you expect the changes in the tax code coming in 2013, namely the higher taxation of dividends, is there a thought process in Freeport that you may want to shift to a strategy of maybe more buybacks, has a more tax efficient way to return yield to share holders?

We will take into account everything, but when we look at our shareholder base we have principally institutions that aren’t subject to income tax. And so it's not a – as we talk with investors it's not a major factor, investor feedback in recent years has been more positive about dividends, I must tell you as I am sure you’re hearing, I am hearing more about stock buybacks now being something that investors are attracted to, but it's not going to be tax driven. Jorge Beristain – Deutsche Bank Securities: Okay, and then just last quick question, what would be the incremental cost at Climax to ramp from the 20 million pounds to 30 million pounds that if you choose to do that?

There is no additional capital, we designed the facilities to be able to produce at 30 million pounds per annum. We’re operating those currently at a reduced rate in light of the market situations. So there wouldn’t be additional capital and actually there would be operational cost efficiencies of doing that. But we’re really trying to wrap it up in a measured fashion. We’re managing the costs closely. So we’re – but we did design it for the 30 million pound level. Jorge Beristain – Deutsche Bank Securities: Great. Thanks very much.

Great asset, Jorge. Jorge Beristain – Deutsche Bank Securities: It sounds good. I’m looking forward to seeing the incremental production.

In regards to…

Your next question comes from the line of Paul Massoud with Stifel Nicolaus. Paul Massoud – Stifel Nicolaus & Company, Inc.: I just have a quick question about Tenke. It sounds like Phase 2 is coming along well and you’re adding the extra tankhouse capacity. I’m not mistaken, the extra capacity is coming on in the couple of phases. One Phase, being completed later on this year, and then the entire thing probably done, it sounds like in the beginning of 2013. Is it possible, you want to see any incremental benefit from increased capacity going through later this year that isn’t being incorporated in guidance, or would you expect to see cost go up before they come back down?

We’ve got – in our outlook we’ve got improved production in the fourth quarter associated with the start up. We won’t get to the full rates until next year, but we do have some benefit in the late part of this year from the new tankhouse capacity. Paul Massoud – Stifel Nicolaus & Company, Inc.: Okay. And I have – just as a quick follow-up. I mean has there been any more discussions about a potential cobalt refinery game plan in there?

We’re looking at alternatives about how to deal with this significant amount of cobalt in the small market, in the small market of getting it to market in an efficient way. The same sort of issues conceptually that our predecessor companies faced with the molybdenum business. So we’re looking at a number of different alternatives. Right now, we’re able to market the product we produce, and it’s a good demand for it, and it’s not something we have pressure on and it’s more of a long-term view as to how we’re going to deal with a significant amount of cobalt resources there. Paul A. Massoud – Stifel Nicolaus & Company, Inc.: Okay, thanks.

Your next question comes from the line of Charles Bradford with Bradford Research. Charles A. Bradford – Bradford Research, Inc.: Good morning. Now that the Supreme Court has ruled on the medical constitutionality, the medical plan, a number of companies have found we are beginning to look at maybe (inaudible) their medical coverage for their U.S. employees. So I think it’s pretty mature to do that. How many U.S. employees do you have that covered by the medical and what is the cost per employee?

Chuck, we don’t have a cost per employee situation here. we’re not going to (inaudible) our medical coverage for employees. We, it’s one of the important benefits that people see from working with our company. this issue about what the cost is going to be is a very complicated when that all American industry right now is trying to sort through as to what it had. it’s not going to be a game changer for us, it’s – and we’re going to find ways of dealing with whatever law comes down this hike and what we have to deal with in terms of being responsive to the needs of our employees and doing it on a cost efficient basis. Over time we made changes to our benefit plans and as other companies have, but this is not something, that’s of huge significance to our company.

We provide the coverage, we get some reimbursement through premiums from employees, but the coverage that we provide is funded by the company, it’s a self-insured program. Charles A. Bradford – Bradford Research, Inc.: Some people are trying to take advantage of the federal or the subsidized state exchanges. And of course nobody knows that that’s going to be yet. But anyway thank you very much.

I agree with that and you know, unlike everybody else read and scratch my head about it, in terms of running our business is something that’s manageable.

Your next question comes from the line of Wayne Atwell, Global Hunter. R. Wayne Atwell – Global Hunter Securities LLC: :

It's something our board looks at continually. I will tell you, in a world that we live in today, with the uncertainties that I mentioned earlier on in my comments, it feels great to have really a very strong balance sheet. And so, all I can say is that, our board talks about this continually and evaluates it, but in an uncertain world, having a strong balance sheet, to be in an investment grade rated company that allows us to look at opportunities, is a great benefit of our company and Wayne you’ve been around as long enough to know, it always hadn’t been that way and I guess that it’s just a great strength of our company today. R. Wayne Atwell – Global Hunter Securities LLC: Great, thank you.

Thanks for your question.

There are no further questions at this time.

All right. Well, thanks to everyone for your attention. I appreciate your support, you working hard everyday. Jim, Bob, do you have any comment you like to make.

No Richard, as you’ve covered them.

All right. Well, thanks everybody and we look forward to reporting our progress in the future.

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