Good morning and welcome to Mercer International's Fourth Quarter 2019 Earnings Conference Call. On the call today is David Gandossi President and Chief Executive Officer of Mercer International; and David Ure Senior Vice President of Finance Chief Financial Officer and Secretary. I will now hand the call over to David Ure. You may begin sir.

Good morning everyone. I'll begin by reviewing the fourth quarter's financial results. Following my remarks, I'll pass the call to David, who will comment on our key markets, operational performance, progress on our strategic initiatives, along with our outlook into the first quarter of 2020. Please note that in this morning's conference call we will make forward-looking statements. And according to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, I'd like to call your attention to the risks related to these statements which are more fully described in our press release and in the company's filings with the Securities and Exchange Commission. Our fourth quarter results were noticeably impacted by our most ambitious planned annual maintenance period in recent history along with weakness in the pulp markets which combined to dampen our financial results considerably. Our heavy maintenance spending this quarter leaves us well-positioned to operate without major maintenance until the third quarter allowing us to take full advantage of improving market conditions when they occur. We incurred an EBITDA loss in the fourth quarter of about $34 million compared to positive EBITDA of about $51 million in Q3. The majority of the sequential drop was anticipated and reflects the completion of the annual maintenance shuts at our three largest pulp mills in Q4. In total, our scheduled maintenance negatively impacted EBITDA by about $74 million. In addition to the planned impact of the shuts and modest reductions in pulp realizations, the U.S. dollar weakened significantly also negatively impacting EBITDA. The EBITDA loss is entirely attributed to the pulp segment which incurred a $37 million EBITDA loss while our wood products segment contributed positive EBITDA of about $7 million. Our strong wood products segment results reflect improved sales realizations and strong production despite the ongoing…

Thanks Dave and good morning everyone. As Dave has highlighted, our financial performance in the quarter was dominated by our heavy annual plan maintenance program in combination with weak pulp markets. Despite the impact of these elements on our financial results, we were generally satisfied with our mills' operating performance. Our Friesau sawmill recorded strong production and Stendal ran at record capacity on a per operating day basis. Pulp prices in Q4 generally experienced negative pricing pressure due to higher producer inventory levels, European and North American NBSK pulp prices weakened early in Q4 and then remained flat. In China, average NBSK prices were essentially flat through the quarter. Pulp shipments were strong, and we saw considerable reductions in Chinese port stocks through the quarter. This is reflected in the latest inventory -- industry inventory statistics. At the end of November 2019, NBSK and NBHK producer inventories were at 34 and 48 days respectively. These metrics may increase slightly at the end of December due to seasonal logistical slowdowns at the end of December, but we expect inventories to continue to move toward being in balance in 2020. In China, the Q4 average NBSK price was $588 per tonne virtually unchanged from the $585 per tonne in Q3. European list prices averaged $822 per tonne in the quarter, compared to $860 in Q3. The average Q4 hardwood list price in China was $475 per tonne, down $32 from Q3 and the hardwood list price in the U.S. market averaged $893 per tonne in Q4 compared to $970 in Q3. As we closed out 2019, high industry maintenance downtime levels, a mill closure in Eastern Canada, the threat of a lengthy strike in Finland, and lower producer inventory levels combined with tightening fiber supply in some regions led us to believe…

[Operator Instructions]. Your first question comes from Sean Steuart with TD Securities.

Thanks. Good morning, guys. Few questions to start. With respect to NBSK prices you noted the uncertainty in the near-term in China. Can you give some context on how the February hikes are progressing in the other markets?

Yeah. It's a lot of pushback obviously, Sean. So it's hard to say how much if any of those increases will get. Really too early to be definitive, but there's an overhang in China, so everybody kind of looks at that so as well maybe we should hold the line here so.

That makes sense. The buyback activity in light of the more recent weakness in your share price any context you can give us on your intent to get busy on the buyback through the next few months?

No. I don't want to signal anything too specific, Sean. It's a tool we have that we can use if we feel the timing is right.

Okay. And then last question for now. You touched on incremental volumes on – for Friesau going into the U.S. market. Can you give us a sense of your sales plan geographically for that asset in 2020? How much more incremental supply would you expect to move into the U.S. market?

Yeah. It's – we're sort of around the 30% range right now. And I can see that creeping up a little bit. What's really nice about the Friesau mill now that we've got transverse grading and trimming capabilities and we're enhancing all our sorting obviously, we can take that lower value log and – that we get the calamity wood in Germany in and we can process select lumber out of it. So, many of the European mills can't do that. And so – and there is a – there's limitations on Greenwood in Europe when they're – everybody is chasing the lower cost of calamity wood. So sometimes the European markets get a little tied up with too much capacity chasing the same profile. And with our flexibility, we can step out of that and with good logistics to the U.S. market. We'll be taking advantage of that. I think we'll also be expanding our J-grade offering, and we have – also a dimension lumber in the U.K. can be fairly good return for us as well. So we'll be honoring our roots in the European market, but we'll be taking advantage of our ability to service the higher-margin markets the dimension lumber markets in the coming year, I'm sure.

Okay. Thanks, David. That's all I have for now.

Your next question comes from Hamir Patel with CIBC Capital Markets.

Good morning. David I want to ask about the calamity wood. How much supply do you see? Is that a multiyear event for you? I heard different things from different companies as how long that could persist. And are you seeing signs of some of the – your European competitors looking to invest in their sawmilling capacity to take advantage of that?

Yes. So it's – we're sort of on the third year of a drought in Europe, and some of the older spruce obviously is impacted by the beetle and so there's been lots of it available. And German forestry rules don't allow you to leave it standing and like the pine beetle situation in British Columbia, it's a very aggressive approach to bringing that wood out. So there's lots on offer and its pretty deep compared to what it would have been, if it was a prime sawlog before the calamity. What the future holds partially depends on weather. That beetle doesn't like really wet conditions. So if we get some good wet weather here before the summer that could have a big positive impact. If it's dry again and continues to be dry then there'll be calamity wood again for the foreseeable future. This could be – we don't know, but if you look at like the pine beetle situation, I mean, that was a 15-year situation where there was excess wood available. In Canada lots of the super mills were built up to take advantage of that. It's quite interesting. We're not seeing any of that in Europe. Like we have – we just are not seeing anybody else moving into the commitment to get into planing, drying and transverse optical grading and those kinds of things. It's – everybody seems to be hunker down. A lot of it – a lot of the sawmilling is smaller family-owned entities and I just not --- don't see them taking the bet to build bigger mills to process this kind of wood. So I think we'll benefit from it for quite some considerable period of time. We've got the flexibility. If there's – if the calamity resolves, we can process fresh wood like the best of them, if calamity woods available then we can hit it out of the park, because of the low cost.

Great. Thanks. And Dave would you look to I think free sell potentially could you add another shift there?

Good. Yeah. But we've got to finish off the ramp-up of the planer and then we've got the final sorting lines to do this year. So I don't think we'll be doing that this year, but certainly adding a third shift in the coming years is totally doable. It will be a very efficient sawmill. So the manning issues are not that challenging anymore. So, yeah.

Okay. Great. Thanks. That's helpful. And then just a final one for me. Your Performance BioFilaments partner Resolute they're building a plant to produce cellulose filaments commercially. Can you just update us as to how you're looking to commercialize other bioproducts from your own pulp mills?

Well, other bioproducts that we produce are things like green energy obviously crude tall oil, turpentine moving into biomethanol at our Stendal plant, we look at steriles and other products they're all just sort of additive, down the road we certainly see lignin in our future for a variety of different applications a number of – there's been a lot of people a lot of money spent looking at opportunities with lignin. I think some of that's getting close to being very viable. So we're all over that. Very, very pleased with Resolute's decision to build the CF plant. We're partners with Resolute on – we have a – we are partners in all non-pulp and paper novel products that are made with biofilaments. So their commitment to building the plant is a sign of their confidence in the future of this material and you would – it's a longer term project, as I've always said, but we're moving well in a good positive direction there.

Great. That's all I had. I'll turn it over. Thanks.

Your next question comes from DeForest Hinman with Walthausen & Company.

Hi. Thanks for taking my questions this morning. Just a little bit more color on the Chinese activity. You mentioned the coronavirus. But can you kind of give us a play-by-play in terms of what happened in January from the volume perspective? And then what's been going on the last couple of weeks in February? And color from a customer basis would be helpful. And then also from a trader perspective as well?

Sure. Well there's a number of things to forest. Start with leading up to the coronavirus outbreak. Chinese paper makers in general were running really hard. And consumption was good. Margins were great, particularly on tissue, it was fantastic and it looked like things are really about to turn. And then, what this outbreak has done is everybody goes home for Lunar New Year. And all of a sudden the virus hit and then -- so people get stuck where they are and they can't get back home. During the Lunar New Year, our understanding is that most of the big paper mills kept running, which is not always the case. But this year because they were so profitable and consumption was strong, the big guys all ran. And so -- and they're still running. The little guys that went down, small, medium mills, we're just starting to come back now. It's been -- the authorities delayed the Lunar New Year holidays to try to encourage people to stay where they are. But as these people are all coming back to work now, these mills are ramping up and trying to get going. Their challenges are -- there's twofold. They -- first they got to get the people back, then they have to get raw materials into the mills and they have to get their finished products to their markets. And the authorities doing everything they can to restrict the movement of the virus, you could imagine a trucker, he's got to sign his life away that says, you get to drive down this highway from a to b and you can't go anywhere other than a to b. And somebody in the background is trying to bribe them to turn off at c and the authorities are blocking entrances…

And just so we're clear, I don't -- I'm kind of asking the same question twice but on the trader side, I think in the past you had said they could be up to 30% of the volume going into China. Are they back buying? And you did mention in the press release fourth quarter Chinese demand was very strong. Was -- so was that encompassing B2B and then sales to the traders? Or what's going on there?

So what happened so there's two types of traders I guess really in simple terms. You've got the traders who facilitate trade finance for our customers. And so there's traders that bring the Russian pulp into China. It's a regular basis. That is -- that's part of the normal order fulfillment process. But there's also speculators and speculators can be the state-owned entities that buy commodities, but there's also - big paper companies will speculate as well. And our understanding is that we've had big shifts, that big push to sell that -- sell hardwood out of the warehouses in China in the fourth quarter. A good chunk of that would have been picked up by traders that are speculating. And so that's not going to come back on the market until there's profit in it obviously or it might show up in the market if pulp prices fell further and they could buy low sell this right? So I think that pulp is just kind of parked right now in these current conditions until you start to see some upward movement.

Okay. And then maybe just a different question, but similar lens. If we think about our, I guess contracted volumes and then our spot volumes as it stands today, are those customers still taking contracted volumes and then stuff on spot basis? Is the phone still ringing? Or is the market kind of just paused?

Yes. No so we have -- to be clear, we have no problem selling our pulp. Our contract customers are all taking product and that's fine. In China, you don't really have firm contracts with what you do in Europe and North America, but you have a relationship contract for a volume. And yes they're taking orders. I mean, there hasn't been a big price increase. So they're happy to buy their monthly allotment. So yes, we're not having any problem making pulp go away.

Okay. And then, can you give us any color on fiber cost outlook across the different markets maybe percent change year-over-year as it relates to the start of the year?

Yes. Well from our fourth quarter results, I think in Europe, you can expect sort of kind of modest continual downward slope. And that's really just us optimizing and managing logistics and really getting in sync with this calamity wood that's available to us and working off the higher cost average cost of wood that -- we've always got a pretty big bundle of wood in front of the mill. So as cost comes down, the average cost comes down. So we're -- we got a little bit more improvement coming in Germany. I wouldn't call it overly material to forest but it generally that direction. As I said in my earlier remarks for the Celgar mill I think wood costs are going to be kind of stuck at the current level for a while until you see – we see some improved sawmilling activity. I'm actually quite optimistic about that. There's – the U.S. markets are really starting to recover for lumber. And the curtailments, the closures that we saw last year, those mills have now run down their log decks. They've shipped their number off to the markets and it's really starting to bite. And I don't really think there's much inventory in the pipeline. And I also know that stumpage trades are scheduled to come down here in British Columbia in the near future. So generally quite positive. So what that translates into pulp mill like Celgar is that it's going to have more availability of sawmill residuals, which will allow it to take the foot off the pedal on some of the higher cost roundwood programs that they run. Peace River is – it will be stable. It's just – the only thing that really impacts it is the seasonality weather conditions those kind of things but it's a very stable fiber supply. So not much change there.

All right. Thank you. And then my last question, could you just remind everybody about your covenants on your senior fixed rate notes?

I'll let Dave talk to the financial thing.

Yes. So they're senior unsecured notes. They don't have material covenants. They have some baskets on the taking on of new debt but we're not near any – we've got several 100 million available in those baskets to take on new debt. And then the revolvers are – the German revolver has one covenant but very, very flexible. It's a leverage covenant but it's based on – the leverage is based on the borrowing on that facility. And as you know from our disclosure, we've not borrowed on that facility yet. So, lots of room there. And then the Canadian revolvers are springing covenant. So there's no covenants until you reach – till you get close to borrowing the maximum borrowing base. So the maximum imagine that the working capital that supports those covenants and we've got a lot of room, lot of room there. So the debt is quite flexible.

And just so everyone understands, is there any restrictions on share repurchases currently?

No there are not. I mean there are baskets in the notes for restricted payments and that would be one of them but there are – there's a lot of room in those baskets.

Okay. Thanks for taking my questions.

Your next question comes from Andrew Shapiro with Lawndale Capital Management.

Hi, thank you. Just a few. One is a follow-up on the nanocellulose, the BioFilament. Can you summarize for us the – I guess the details of the economics of the joint venture and the particular business model in terms of maybe the timing for the revenue ramp? And it won't be consolidated up? Or how will that show on the balance sheet as that business generates revenues?

Well it's a 50-50 joint venture. It – where we have a commitment to each other that as we develop these novel product applications that we will do it together and we'll share the economics 50-50. They're building the plant. They've – it ties into other work they're doing in Québec with one other paper mills. As a joint venture we have access to that product with them. And so that further ties us together. In terms of – I think the product itself is it's a refined – it's really highly refined pulp that creates like a strengthening agent and it provides properties to a number of different applications that it can go and concrete. It's a stronger slab through its impact on the drying. It can change the viscosity of liquids. It can use – have some of the applications might be in drilling mud and some of these other things as a lubricant. So...

And the timing?

Well the timing is always longer than we'd like it to be. So we've been seeing it like this for four years. And I just can't – I don't want to signal that it's going to become a material contributor to our bottom line here in the next year or two. But over time, these things have the potential to be very significant. So it's – I think you should park it in the category of R&D right now, long-term potential value creation. It's not consuming any material resources per say. We made a $3 million commitment four years ago and we still have room in that to go. It's not an overly expensive development process. It's just – it's the qualification the time that it takes for customers to really get their heads around how to use it and make the commitment.

And the plant that they're constructing, when would it be completed and starting to produce and I guess sell small amounts of product?

Yes I think it's going to be less than 12 months to be completed.

Okay. That's – I'm just trying to figure out where we can launch milestones. And then with Santanol, similar long-term investment but with prospective high opportunities. When do you start seeing I guess harvest station and revenue creation from that investment?

Yes the – right now the activities are fine-tuning the – all of the care and management of the trees and getting the team to be really demonstrating a sophisticated team. Working on our marketing resources to be able to bring the product to market. We've been able to – our trees are kind of like 13 years old and younger and the optimum harvest time is around 15 years. But – so we've had – we've been quite successful obtaining product to produce to sell in the market. And we sell what it's like $10 million of oil a year something like that. Our trees start becoming harvestable in their – based on their birthdates starting towards the end of 2021. And I think the scale of that will be something like 200 hectares per year of harvest from there on and replanting and tumbling forward in that way. And that's when it will really be – that's when you'll be able to see the business in its true form.

Okay excellent. Back to the core business here. Suzano recently announced their earnings et cetera. But one of the things that came out and they announced was, I guess a pretty substantial drawdown in the large inventories that had been booked up. Is this -- was this a typical activity, where they've been like, I wouldn't call the word dumping, but they've been blowing it out? Or is this now a stabilization of the market, creating of a floor since they are such a big player?

Yes. Well, maybe -- that's a great question, Andy. And I'll just try to recharacterize the backdrop. So, this -- Suzano's a combination of Suzano and Fibria two very large companies. And so they became the consolidator. It's a big, big hardwood producer. And as you know, we've had a really good run on hardwood and softwood pricing. And then as the trade war has started to slow down activity in China and other parts of the world, as the price of pulp started to fall like all commodities, it's just that sentiment move, this big company just kind of drew the line and said, we're not hitting the bid. We're going to -- this is our price. And if you want our pulp, this is our price and the market price, spot price fell quite a bit below what they were prepared to sell at and they felt they were big enough they could just hold the line. They held the line, they held the line, they held the line. And finally they realized they'd failed. So they offered a fire sale in the fourth quarter last year. They basically announced to the world for the fourth quarter, you can buy as much pulp in China as you like. You can come and pick it up or you can leave it in the warehouse, but by the -- after the end of the fourth quarter, prices are going up. So as I was discussing on my last call, we were expecting a pretty good shift of ownership. And in fact that happened like that pulp in China, they've been a massive sale off. A lot of its -- hasn't left the warehouses yet. Coronavirus is holding some of that back. But that more or less has all been sold. And a big chunk of that would have been purchased by traders as I was saying earlier. So that kind of takes it off the market though the price goes up. Now Suzano's come out and said, okay, price is flat again for the first quarter, I guess you just didn't see the momentum to be able to raise prices. So it's flat for the first quarter. So that's kind of holding everything in this limbo pattern. And if they can keep the volume moving, once the coronavirus grows up and things get back to normal, that I'm sure they're intending to -- they're not very happy with these pulp prices either. So it's just getting through these -- getting over these mean thoughts really is what everybody is trying to do.

Right. And is your intelligence coming back from China, we're all someone here in the dark, but you have business relationships there, so you might have better input than even the typical media coverage and all. Is it that consumption itself is slowed up or just it's now the movement of the goods? And unlike, let's say people who are not going to visit a hotel and the hotel sits vacant and that's lost inventory night's, right? That this is -- whether it's consumption of toilet paper, consumption of coated free sheet, consumption of whatever cardboard, is the consumption levels -- have they materially taken a hit that you can tell or not?

Yes, it's a great question. And my view is that, consumption doesn't change. These are consumable products. In fact what I -- what we think is going on is that, you're probably getting difficult to buy stuff on the shelves like the inventory in the shops is getting lower and lower. The supply chain is draining. But the consumption of some of our products is probably going up quite significantly like as an example in every single elevator anywhere in China, there will be a box of tissue that is used to push the buttons because this virus lives on surfaces and they all know that. So they will not touch an elevator button. They will not touch a door handle. They're walking around with little packages of tissue and doing everything they can to protect themselves. So, it's -- the challenge is getting inventory from the manufacturing facility into the stores, making sure the stores are able to be open and people can move around to go and buy stuff like that's the congestion.

Okay. And then lastly, what are your plans for investment presentations non-deal road shows in the coming months?

Yes. So we've -- we'll be attending the RBC Forest Products Forum at the end of March in Toronto. And then, we're also -- just the details are a little bit fluid at the moment, but we're hoping to put together a little bit of a road show on the U.S. East Coast in the next two months as well. So, if there's anybody who'd like to -- like a meeting, please give one of us a call and we'll make sure we get you on the list.

Great. Thank you for answering the model of questions.

Your next question comes from Paul Quinn with RBC Capital Markets.

Yes, thanks very much. Good morning, Dave. Good morning, Dave.

Hey Paul.

Thanks for the pluck for the Forest Products conference by the way. I guess, stepping back a bit, it's been over a year since the DMI acquisition, just wondering what the major takeaways for you guys are from that deal and whether you're ready for another one?

Well, yes, so having operated the mill for a year, I would say Mercer is delighted with that acquisition. We really like being in Alberta, a very supportive government. They're very helpful on clearing away red tape and regulatory burdens those kinds of things. So, I really like that progressive conservative government there. We've got a tremendous FMA with a lot of wood on it. And as we're doing the inventories for our renewal, we're finding that the annual allowable cut on that FMA is growing quite significantly. So, our biggest challenge is going to be -- we've got so much wood we've got to figure out what to do with it, both softwood and hardwood. We've got a great team, great mill. Looking forward to getting this recovery boiler work done. We were in the boiler last year during the shut. I think those who follow us, know that the tubes were not available for the timing of the shuts that were -- we've deferred it to this year, but the boiler itself is fine. It's safe and operating well and will do for many years. But this boiler work is something that we need to do for the long-term of the boiler. And when we're finished, it will be like a brand-new boiler and so looking forward to getting that done. We see continuing opportunities to refine and improve our logistics and our wood processing logistics. Currently, that's done primarily in remote -- lot of remote satellite yard shipping. And we think, there's opportunities to centralize that, bring the cost down and improve the yields. Those kind of an issues don't see any major capital. Nothing really big going to be done in the mill here other than optimizing its cost structure and continuing to run with it.…

That’s all I had. That’s all I've got. Thanks.

Thank you.

[Operator Instructions] Your next question comes from Adam Zirkin with Knighthead.

Hey, gentlemen. Appreciate you taking the time. Just a few questions for you. David, most of the -- when we talk about fiber optimization over the last couple of years, it seems most of those conversations have been around Europe and you guys have done a great job there. Is there anything that could be done, particularly given the environment and what's the economic position of some of the other mills in Western Canada, to optimize the fiber planning in Canada?

Absolutely, Adam. So one of the topics is working with the regulators to get the bigger truck configurations, like, to get to 10-axle, both for log hauling and for the tandems for chips and we're making really good progress in Alberta. Things have been a bit slow in B.C. So that's one. There's other strategies that you can always do better. And one of the things we're working on is a concept of drop trailers. So instead of having somebody who's doing a long-haul for roundwood, which is what you have to do when you don't have enough sawmill residuals coming from the sawmills near the pulp mill. The guys can only drive for so long. So you guide drive and he stops and you just put -- parks his trailer in a holding spot and he goes to wherever he goes and another guy is doing back and forth, back and forth from there to the mill. You know what I'm saying. So it's like there's two legs. And one guy goes back and forth on one leg and one guy goes back and forth on the other leg and they just detach and attach and you've got loaded and unloaded going in different directions. And that can significantly improve your cost structure for holding those kind of volumes of wood. So that's an example of a strategy. Also there's -- it's always centralized shipping is better, when you're chipping in the bush, which is -- it's a lower capital cost solution, but you could have an 8% degradation of the wood in terms of -- these are pretty brutal chipping machines, so you get a lot of sawdust and fines and smashed wood, versus if you have a proper woodroom at a pulp mill you get a nice…

Got it. And as you roll those things out, Dave, is this stuff that inures to the benefit of Mercer specifically, or sort of pulls fiber down for the entire industry? One of the appeals of the railcar program, obviously, in Europe was that, it was sort of yours and yours alone, right?

Yes. They're all different dynamics. So in Alberta, it's all our fiber. So -- and its cheap fiber that I think the main cost is processing and logistics. So whatever we can do to be more efficient is all for us. And also, at the more softwood, we can seek out of that forest, the more softwood pulp we can produce, obviously. So, as you know, it's a swing mill. So we're moving in that direction. In British Columbia, for the Celgar situation, and I guess it's a lot the same for Cariboo, these are regional fiber plays. And the more efficient we can be mobilizing fiber in and around the pulp mill, the lower the cost for the pulp mill is to its benefit. In Germany, it's more of a global situation where, as you point out, you've got Central Europe and then you've got the fringe supply is coming in Russia, Poland, Czech, those kind of areas where you can get cheaper wood, but the logistics kind of prevent that wood from flowing for most. Most sawmills in Europe never buy anything further than 150 kilometers away. They're all just completely restricted by truck logistics, whereas there's Mercer block trains just went in to pull into the other, moving wood around. So we bring well over 1.5 million cubic meters of wood into Germany and that has the impact of lowering the entire wood basket in Germany, just by taking demand off the table, because we have so many different options for supply.

That's very, very helpful. David, can I just ask you also just, sort of, a larger capital investment question? I know you guys have been very consistent in your view that there's really nothing to buy in pulp land in terms of the quality of assets, but you are sitting here in a tough point in the cycle, very well capitalized with a ton of liquidity, right? I know you've thought about sawmill project. I know you've kicked around whether to build one right or buy one. I mean how are you seeing larger scale investment? And how are you thinking about perhaps that timing and what clues you're looking for, maybe, from the pulp market to dictate it?

Yes. The way we think about things is we're at the bottom of the cycle. So it's time to be really disciplined about costs and about capital. And we want to preserve everybody's investments in us and not create any risk and all that kind of good stuff, but we don't want to lose the momentum either. So we're very focused on what it is we want to do. We're moving those projects along at the appropriate pace in the context of where we are in the cycle. And when things improve and pulp prices start to improve and the free cash flow is coming, then we'll deploy capital in a very thoughtful way. And it's a longer-term value-creation strategy. We're trying to hit a home run next year. But over time this is going to become like a really efficient basket of assets that produce well throughout the cycle and that's where we're driving to. So we're not abandoning those activities, where we really know we're going to go. But we're not going to be launching anything of size in the short-term until we got a much better line of sight on the recovery.

Got it. And one last just a very quick housekeeping question. How do you see the working capital flows over the next quarter or two? I thought you typically consumed some working capital in the winter didn't see so much of that in the fourth quarter. So just curious, what should we expect as we model to cash?

There'll be a bit of a shift from the normal fourth quarter to first quarter. So a little more a little heavier build in the first quarter and that's partially explained by the dynamic of having the DMI assets, as I was mentioning before you really got to make a well when the ground is frozen. In Europe and around Celgar, well, I guess they're both different. So Celgar is sitting on quite a bit of wood because we've been very worried about the health of the sawmilling industry and the – there's a lot of regulatory challenges for sawmillers to get logs these days. And so I know there's going to be further supply restrictions to the sawmills. So we've got enough ground wood in our inventory that we run – will run through un-impacted regardless of what – even the worst-case scenario. So we'll be working through that into the spring. So I think we'll see a big working capital release from that. And in Europe, I think our goal is to – now that we can see the volumes of calamity wood that are available, we're going to continually ratchet down what we need to carry and continue to keep our foot on the – both on the price of the wood and keep the volumes down, because I don't see much risk that they're going to run away from us on the high side.

Got it. I appreciate it. Thanks for taking some chance.

Yeah. You bet, Adam.

There are no further questions at this time. Mr. Ure, I'll turn the call back over to you.

Well, on behalf of Dave and I thank you all for joining the call. Lots of good questions this morning. Obviously, an interesting time in the market. So if anybody has any follow-ups don't hesitate to call either of us. We're always available and happy to take your calls.

Thank you for participating in today's conference. You may now disconnect.