Pan American Silver
2004 Fourth Quarter Results Conference Call
February 25, 2005
1:00 p.m. EST
Operator: Good afternoon ladies and gentlemen, and welcome to the Pan American Silver 2004 year-end results conference call. At this time all lines have been placed on a listen-only mode and the floor will be open for questions following today’s presentation. It is now my pleasure to turn the floor over to Ross Beaty. The floor is yours.
Ross Beaty: All right, thank you operator and good day ladies and gentlemen. I apologize it’s kind of a dreadful day for a conference call, Friday morning, but we feel a little tired we had a very long day yesterday and we had a board meeting in Seattle. Of course, it’s a very long drive to and from, but here we are. So welcome to the fourth quarter and year-end results conference call. Of course, I’m not going to repeat here everything that was in fourth quarter news release. It’s pretty comprehensive. Instead of doing that I’m going to try to fill in some of the cracks and put some of the numbers in context and pre-answer some questions you might have.
My bottom line about our fourth quarter results, is that they were reasonable but they could have been better. For the year’s results, the bottom line here is that it was our best year ever and yet there’s a lot of room to make these results even better in 2005. We established a lot of good records in 2004. Total production up 30% to 11.2 million ounces, operating earnings up over 500% to $12.9 million, net earnings of $19.9 million, compared to a $6 million loss in 2003, and consolidated revenues from $92.9 million, more than double that of 2003. By any measure, we have to be happy with those results.
Our balance sheet also improved profoundly during the year. Some of the improvements were due to financing activities. For example we raised $55 million in new equity in April and we successfully converted nearly all our outstanding debentures issued in 2003. We also repaid all our corporate debt and the improvements were also derived from the mining operations. We generated cash from all our six silver operations and I think that is the best news of all. Our financial position has never been stronger. We ended the year with nearly $100 million in cash and no debt, and $150 million in working capital. We sleep well at night these days in profound contrast to just a couple of years ago when things were tight and markets were tough. I believe Pan American today has the best balance sheet in the entire silver mining industry.
A number of items contributed to our fourth quarter not being as good as our third quarter. We accrued $2.7 million in improved income taxes in the quarter, $1 million in employment profit sharing and $0.6 million for a new Peruvian royalty. As well, and by the way, a lot of those numbers are not, they’re not really reflective of the quarter numbers, they’re reflected as the full year numbers. We just took the hit in the fourth quarter.
As well, costs at our La Colorada operation in Mexico remain higher than normal as we changed our mining plan there to a narrower remain style requiring higher-than-normal underground development costs, and then our new operation in Peru at Morococha incurred one-time costs to reduce the work force by about 200 workers and suffered a short-term breakdown in the mill. Neither of those costs should reoccur.
In 2005 we expect lower costs at both of those operations. I’ll quickly run through each operation’s current status. Starting in Mexico, we did not have a lot of fun in 2004 at La Colorada. It was our one problem operation, but we showed great improvement as the year progressed. The operation is now producing at its design capacity and we certainly expect 2005 to be a better year. Some of the challenges at La Colorada were management driven and we solved those by replacing the mine manager and other senior mine staff in April and since then we have virtually no turnover, no accidents and have dramatically improved operations. I want to give particular credit to David Drips the mine manager at La Colorada right now. And some of the challenges have been natural, very heavy water inflows and poor ground conditions to name a few. These water flows caused us to suspend sulfide mining indefinitely last year and the ground conditions caused us to change our mining method from wide vein mining to narrow vein more selective mining, requiring a lot of unplanned tunneling that we are expensing. We are studying the water situation now and we hope we can start sulfide mining in the second half of 2005. Obviously if we get the sulfide mining going again we will mine more ounces at much lower production costs.
Moving into Peru, we’re really very pleased with our four silver operations there and especially with our fantastic team of 3,800 or so Peruvians who work at our operations there. Our Quiruvilca mine has been a great performed after nearly killing us during the bear market, when low metal prices made operations at that mine uneconomic. The mine is performing extremely well now and has a great future especially at currently prices. Again, I want to give particular compliments to our mine manager, Jesus Cardenas, for his tremendous achievement at Quiruvilca.
Our Huaron mine and our Stockpile operation in Peru performed well in 2004, about the same as in 2003, and we expect roughly similar performance in each of those operations in 2005.
For me personally, our most exciting story in 2004 was at our newest operation, Morococha, which we took over effective July 1st. Even though we experienced some temporary disruptions to production in Q4, we are optimistic this mine will be our best operation in a year or two. I can already report that after only four months of exploration activity at Morococha, we have nearly doubled the mine’s proved and probable reserves, even after accounting for production. Morococha’s exploration environment is simply outstanding and I look forward to many years of profitable mining there and profitable mine expansions in the next several years.
Finally, we remain active at our San Vicente operation in Bolivia where we plan to produce about 700,000 ounces in 2005 at a cash cost of $2.23 per ounce.
Now to our project pipelines. I am very pleased with our announcement today that we have made a construction decision at our Alamo Dorado project in Mexico. This is a happy event for any company, but I will say the projected financial results are not as good as we had expected when we acquired the project in early 2003 from Corner Bay Silver. Unfortunately we drilled a number of deeper holes there in 2003 and 2004 that required a recalculation of silver and gold resources and a new geological model. We ended up with about the same amount of recoverable silver, but we lost about 115,000 ounces of gold resources. The other major thing we did, which was much more positive, was to re-engineer the proposed processing method from the heap leach operation as had been contemplated by Corner Bay to a mill operation. This had several impacts, higher capital costs, but offset by much higher silver and gold recoveries, a much more steady profile of, or fluent profile of silver production over the mine’s eight-year life, fewer tons mined, but nearly as much silver produced and, more importantly, better profitability.
Also, a very innovative tailings process, developed by our project engineering team, which means that closure and reclamation costs will be much lower. Our original budget a year ago estimated CapEx at about $65 million. The final feasibility results that we announced today of $76.6 million reflects current costs and takes into account the serious cost creep over the last 12 months. We don’t expect this is going to continue for us. We think our numbers are a very safe capital estimate. We have already secured our truck fleet, shovel, lab and a few other of the most important capital items, so we think that we’ve got a pretty good number now that we should be at least be able to meet, if not develop the mine under budget.
So away we go with our second Mexican mine development under the construction leadership of Joe Phillips and Steve Busby. I look forward to a busy 18 months ahead and a successful commissioning at Alamo Dorado in late 2006.
Our budget estimate for 2005 is for us to produce about 13.6 million ounces of silver at a cash cost of $4.22 per ounce. I should emphasize that this cash cost assumes by product prices of only 45 cents per pound zinc, 39 cents per pound lead, and $375 per ounce gold. So we would produce at much lower cash costs if today’s known prices prevail throughout the year. I would particularly point out our second most important metal is zinc and in contrast to our budget price of 45 cents per pound that we base our projected cash cost on, we are, at today’s zinc price of 60 or 63 cents per pound.
By late 2007 with Alamo Dorado producing at a 5 million ounce per year rate and with our planned higher production levels from Morococha, La Colorada and San Vicente, we should be producing at an annual rate of over 21 million ounces per year, thus cementing our position as North America’s foremost silver producer.
So those brief comments will, I hope, put in perspective our financial and operating results announced today. As many of our shareholders know, Pan American turned 10 years old in 2004 as a silver company, with the best financial and operating results in our history. It was a good way to celebrate executive growth from the mere idea to the largest, purest, most liquid silver investment readily available to North America in equity invested.
As for the future, we plan to continue with what has worked so well in the past decade. First and foremost, a constant focus on improving our leverage to silver prices, to maintain our position as the best silver investment in the world. Number two: focus on stronger growth in silver production, continuing to push for higher and more profitable production. Number three: lower-cost production, again the emphasis there is to improve our profitability. Number four: increasing our silver reserves and resources, and we’ll do this through discovery both around our minds and in more regional or grassroots programs, and furthermore, through acquisition. Fifthly, maintaining our policy of no hedging of our silver. We do hedge our base metals and we do that in order to increase our leverage just to silver prices. Number six: retain our strong balance sheet, and number seven: and this is something that is often overlooked I think, when you look at a balance sheet or a report of earnings, maintaining our great reputation that we’re very, very proud of we’re honest, fair and professional management in all areas.
I’m incredibly proud of our achievements today, culminating in all the records we achieved in 2004, but I know we can improve our performance even more, and I really look forward to reporting to you on how we achieve this in 2005 and beyond. As for silver prices, what can I say, strong natural economic factors and strong fundamentals of supply and demand carry prices in 2004 to 15-year highs. I expect silver prices to be strong for a long time. I can go into endless detail here. I sometimes have been accused of talking for far too long about silver, but instead of doing that, I think I’m going to stop with all this preamble and open the call to questions, and I forgot to introduce people around the table here with me in Vancouver at our office headquarters. With me is Geoff Burns, the president and CEO of Pan American; Steve Busby, our senior vice-president of projects, Steve is going to be looking after Alamo Dorado and can answer any questions you have on that project, or for that matter, our other development projects like Manantial Espejo, which is also proceeding well right now in Argentina; Andy Pooler, our senior VP of operations, who can respond to any questions on our operations; Brenda Radies, our VP of corporate relations; and last, but not least, Rob Doyle, our CFO who is responsible for all the numbers.
And, with that operator, I’d like to open the call to questions. Thank you very much.
Operator: Thank you. The floor is now open for questions. If you would like to ask a question, you may press star, followed by the number 1 on your touchtone phone. If at any point your question has been answered you may remove yourself from the queue by pressing the pound key. We do ask that while you pose your question please pick up your handset to ensure the best possible sound quality. Once again callers, if you do have a question, you may press star, followed by 1 on your touchtone phone at this time.
Our first question is coming from Adrian Day with Adrian Day Asset Management.
Adrian Day: Oh yes, good afternoon. I didn’t expect to be first. I had a question on Quiruvilca if I may, and I’m wondering to what extent is the turnaround over the last couple of years due to the increase in zinc prices, and then the subsidiary question is, is the mine at this stage vulnerable to a decline in zinc prices?
Ross Beaty: Okay Adrian I can answer that one. The improvement at Quiruvilca has virtually nothing to do with zinc prices. It may sound surprising but we had this turnaround that really was starting from the late, second half of 2003 and it just accelerated through the first half of ’04. It resulted from a lot of operational changes that we made in response to the bear market where the mine just about did us in with operating losses. When zinc went to 33 cents a pound and silver to $4.00 an ounce we just simply couldn’t run Quiruvilca profitably. It is very narrow vein line and we had to do some surgery there and one of the things was to close the north half of the mine, which, in fact, was the more zinc rich part of the mine, reduce our workforce significantly, make a lot of just surgical cuts at the mine, and improvements to profitability. And it was really the silver price rise plus those management changes at the mine that caused the financial turnaround more than anything. We actually don’t get, we get some benefit from higher zinc prices, but we’ve also hedged our zinc production to some degree, which takes away that, we certainly aren’t getting, we’re getting part of the benefit of today’s zinc prices, Adrian, but not nearly as much as we would get if we were totally unhedged on the zinc side, and furthermore, even if we were unhedged, even if we were hedged totally I think, the impact of zinc prices at Quiruvilca is minor rather than major. If zinc does decline, again, we don’t expect to change the profitability of Quiruvilca at all. And the last thing was, we got into some higher grade areas, so our grades went up about 30% on the silver side, maybe 10% on the zinc side, and that also, of course, goes straight to the bottom line.
Adrian Day: Okay, I appreciate that. What price are you hedged?
Rob Doyle: 2005 is just below $1,100/tonne, it’s $1,091.
Ross Beaty: And how much do we have hedged?
Speaker: About 2,200 tons, roughly 45% over the next 16 months worth of production.
Adrian Day: Okay, great. Thank you so much.
Operator: Thank you. Your next question is coming from Haytham Hodaly with Salomon Partners.
Haytham Hodaly: Good morning Ross and everybody there. Quick question for you I guess. With regards to, you gave in the outlook section a forecast of $15 million in operating cash flow before working capital changes for 2005, what silver price are you using there Ross?
Geoff Burns: Haythem, it’s Geoff. We’re using a $6 silver price for that estimate.
Haythem Hodaly: So that being said, would that indicate that you’re still expecting cash costs to stay, you know, about $4 per ounce produced? Is that correct?
Geoff Burns: Based on the prices that Ross went through in his discussion earlier, the $4.40 is where we’re roughly going to be. Higher prices on the byproducts will obviously bring that down.
Haythem Hodaly: Okay, perfect. Thank you.
Operator: Our next question is coming from Terence Ortslan with TSO & Associates.
Terence Ortslan: How much more benefit are you going to see in the reducing zinc charges? Because those charges are coming down as you know.
Rob Doyle: Yes, that’s right. The zinc contract market is certainly very favorable for producers at the moment. We do have fairly significant commitments to smelters and traders and so we have got our TCs locked in for the next couple of years anyway. However at Quiruvilca there is some free concentrate that will be available in 2006.
Terence Ortslan: How much of a benefit are you going to see in that in 2005 versus 2004?
Rob Doyle: We expect it to be very similar in 2005 as they were in 2004.
Terence Ortslan: Okay, okay. You’re not going to see the benefits right away?
Ross Beaty: No, we’ve marketed our concentrates under medium term contracts and not, we don’t really get the benefit of spot treatment charges, which is really what you’re talking about.
Terence Ortslan: No, actually it’s the one-year contract is coming down, by about $15 or $20 a ton or so, as you referred to.
Rob Doyle: That’s true, however we have multi, multi-year commitments, so we unfortunately don’t benefit in that at the moment.
Terence Ortslan: Okay, okay. And you’re not going to add to your hedges on zinc through right? You will just let it run down?
Ross Beaty: That’s something under which we’re debating right now, quite frankly, at the board level. We had quite a discussion yesterday on that. There are arguments for continuing to hedge as the mill rate rises, and there are arguments to just let it lapse. We don’t have long-term hedges. None of this is long term, and of course, again we’re doing it to try to smooth our base metal production so that we can, we can really deliver to our shareholders, true levers just the silver. We don’t have our revenues and productions profitability swing based on the base metal prices. That’s what we want to try to avoid. And that’s the reason we’re doing this.
So, it’s under some debate right now and we’re not, we’re not, we’re not actually settled on exactly what we are going to do.
Terence Ortslan: You can always TSO & Associates and we’ll tell you what to do. On the DD&A for 2005 please, and also give us some guidance about your taxes. You’ve got a pretty low tax rate going given your guidance on that? And, maybe Ross, I know you want to talk about silver so I’ll let you talk about silver because you said some definitions are made by Russian and Chinese central banks. Yes, they were, but I think numbers are very small maybe you want to adjust that later on. Thanks.
Rob Doyle: DD&A charges in 2005 are forecasted around about $1.15 per ounce of silver so it takes us up to a total cost around $5.26 on top of a cash cost of $4.11. So, most of that, of course, is depreciation. That does also include a part of the reclamation provision that’s required under the recent accounting pronouncements.
Ross Beaty: He wanted to know how our forecast tax bill is going to be in 2005 relative, it’s fairly low level in 2004?
Speaker: Two of our operations in Peru became taxable in the later part of 2004. So we would expect a tax buildup, it’s probably going to be in the $4 million range, is what our forecast is, but it depends on metal prices and also depending on our tax treatment of various expenditures, but that would be our forecast, roughly in that range.
Terence Ortslan: You mean for the total operations or all just Peru?
Speaker: Only Peru is taxable right now.
Terence Ortslan: Okay, gotcha.
Ross Beaty: And Terry in regards to silver prices with respect to stockpiles, government stockpiles, Russia was stated by Goldfields Mineral Services being a contributor to silver sales in ’04, but we don’t expect there to be any significant follow-up on that. We think that was the one-off relatively small amount. As for China, which has been the biggest contributor of silver to show the silver deficit between demand and supply and traditional supply and demand, China has been adding about 60 million ounces per year of silver into the world market from its own stockpile at the People’s Bank of China, and we think those sales were dramatically lower in 2004 to perhaps 30 or 40 million ounces and the signal there is probably that they are probably depleted or very much reduced to almost nothing. That would be our best guess. It might be something less than 100 million left, whether that is for sale or not, we don’t know, but we do think the era of China selling very large quantities of its own stockpiles of silver is over.
Terence Ortslan: Are you going to see a surprise in 2005, Ross, where are we going to see the surprise in silver do you think?
Ross Beaty: In silver? The biggest surprise I think that will happen in 2005 will be to the extent that there’s a silver ETF introduced to the market, and if there is and there is some discussion about it coming on, midyear or sometime in 2005, I think that could have a very significant impact on the silver price because it will add to one-time, it will be a large one-time demand, and the silver market, you know, it’s a very thin market, it’s very volatile, there it not a lot of silver stockpiles anymore that can see that. There just isn’t much silver available. So, I see that as having a potentially significant impact possibly the most significant impact of ’05, and we’ll just see if that happens. There’s a bunch of other impacts that are of the smaller nature, but that’s the one I single out as the most potentially explosive impact in the silver price.
Operator: Thank you. Our next question is coming from David Mallalieu with BMO Nesbitt Burns.
David Mallalieu: Thank you very much. Ross, questions for you with regards to Manantial Espejo. Could you just give us a sense of what your plan is for the, if you’ve got one right now, for what the pre feasibility could look like?
Ross Beaty: Sure, absolutely, Dave. We are heading towards a feasibility study but it’s just in the period right now where we’re finishing off the drilling, we’re getting the reserve models put together. In the meantime, we are developing the flow sheet for the mill and very much the ideas on an optimal size and we’re doing lot of work at Manantial on scheduling between open-pit mining and underground mining. It’s a lovely project in a very favorable area but we will have a high infrastructure cost in terms of power, particularly, and accommodation and so forth. But, the status of, Alamo Dorado kind of came first. We, it was more advanced than Manantial Espejo. We are still drilling off reserves, we’re still adding to reserves/resources at Manatial. So Alamo Dorado had that finished last year. As I mentioned we had to remodel Alamo Dorado - that was completed. We went right into a feasibility study which is now finished. And, obviously, current conditions allow us to proceed with the production decision and that’s what we did yesterday.
So it’s to the front now. We’re staffing up Alamo Dorado. It’s a big, big job, of course, for any company getting a new project going, but we’ve already secured a lot of the capital equipment that we need to build on at Alamo Dorado, and that’s, that’s moving very aggressively from today on. It will now switch very much into project mode, we’re fully funded to build it, while, at the same time, we finish off with our Manantial Espejo evaluation. We have some discussions on infrastructure and on tax rates, royalties and so forth, with the Argentine government that are needed and those are yet to come. We have a plan in the next couple of months to meet with them and go over those issues, but we also want to deliver to them a product that will be something that we can really look at as a feasibility stage or close to feasibility project and we’d like to have that finished by the end of the second quarter, not just scheduled for Manantial Espejo. We won’t, we won’t be looking at construction, any kind of a large mine at Manatial Espejo this year. We would be doing that next year, but that doesn’t mean we can’t proceed towards that stage through, for example, kicking off underground development at Manantial Espejo later on this year. Hope that answers your question David.
David Mallalieu: Can you comment on what component would be, I mean, from a percentage of reserves basis, what component would be underground versus open pit?
Ross Beaty: Right now it’s going to be dependant on our final operating cost estimates in the feasibility study. The selection of where we cut off the open pit to underground is really sensitive to that. Right now we’re estimating that it could be as much as half and half, half underground and half open pit.
David Mallalieu: Okay. And for, excuse me, for the Alamo Durado, is it possible to post a consolidated schedule up on the Web so we can take a look at that?
Ross Beaty: We can, absolutely David, we’ll do that.
David Mallalieu: Yes, thanks.
Operator: Our next question is coming from Mike Curran with CIBC.
Mike Curran: Morning gentlemen, or afternoon, or morning to you, afternoon for us. At La Colorada, obviously the water issues and whatnot are keeping the sulfide mine from operating. Can you give any sense what if it turns out on your review that you’re not going to restart the sulfide, what kind of mine life we’re looking at, at Colorada?
Geoff Burns: Hi Mike it’s Geoff. Yes, I think, based on our current reserve profile on the off side, we’re still looking at an eight-year life on the oxide side.
Mike Curran:Okay, so when I look at the reserves, those are all oxide?
Geoff Burns: There is a small amount of sulfide in there but the majority are oxide, yes.
Mike Curran: Okay, great. Thanks a lot.
Geoff Burns: And I will say that this year we have a fairly aggressive drilling program scheduled for La Colorada and we didn’t do almost, or did almost no drilling last year. We’re really focusing on getting the mine going and getting it turned around and getting to capacity. This year we are going to turn the drills loose again. We think there is some reasonable potential, particularly oxide, to extend them even further at depth. So, we’ll look through the year and see if we can do something with that mine life and tell you about it later on this year.
Mike Curran: Great, thanks.
Operator: Thank you. Your next question is a follow-up coming from David Mallalieu.
David Mallalieu: Thank you very much. In your January presentation package, it provides some information on Morococha with regards to the capital going forward, that was for 2005. Can you take an estimate of what you’re going to be looking at for 2006/2007, and, of course, that’s probably going to have something to do with how aggressive you are with changing plants, exploration development, the whole thing?
Ross Beaty: Yes, I think the biggest questions going forward are going to be what we find with our exploration program. At the moment we actually have seven drills active on Morococha, about half underground and about half on surface. We’re getting some very, very good results, both within the areas that we’re currently working in right now in terms of expanding reserves and resources, and in some areas that are a little outside of where we’ve been mining before. So, I think it’s a little, it’s far too premature for us to estimate what we’re going to expend in capital really in 2006. It’s going to depend on where we start to focus our mining and our mining efforts and what our long-term plans are going to be there with respect to our discoveries. So, this year we’ve got quite an aggressive capital plan, a lot of it in the mill, a lot of it in development, and very comfortable that with that we’ll achieve the numbers we’ve given you as forecast this morning, and we think we’re going to have some very positive news going forward and once we have that developed we’ll put the next level of capital to it.
One of the coolest things at Morococha, David, is that we actually have two mills there. We have one that is operating right now that provides the 40,000 tons a month or so of the mill feed of the grades you’ve seen in our quarter. But there’s also another mill that’s idle right now. And has the ability to be cranked up at a rate of about 30 to 35,000 tons a month and to the extent, I mean, one of the things we’re thinking about is if we do continue to have the results we’ve been getting here recently, you know, that’s available as a very potential, very low capital way for us to, to really crank up production up there in a significant way. So, that’s kind of my little fantasy. Going forward at this point, there’s nothing we can say we’re going to do for sure, but it’s on my hope that within a year or so to be able to favor what we’re planning to do.
David Mallalieu: Okay. Two follow-up questions on that then. It also stated in the presentation package that there’s a potential for bulk minable target at Morococha. I was wondering if you could elaborate on that, whether, I mean, just literally elaborate on that? And the second one is with regards to the minority shareholders, the subsidiary, or the wholly owned companies effectively, what’s the plan with regards to that?
Ross Beaty: All right. We can answer both of those. Andy Pooler is going to answer the bulk minable side of one of the areas that we discovered, and I’ll tackle the other one.
Andy Pooler: As Geoff said, we currently have seven drills, drilling very aggressively. One of the targets is an area we call the Italia target area, which is comprised of large replacement features that have the potential to yield large volumes of zinc that we can, we can exploit.
Ross Beaty: This particular target is more base metal rich.
Andy Pooler: Right now in the interim period we’re taking a few steps to decrease the number of stopes and increase the size of stopes, but we have a potential, if it works out, according to geological interpretation, to address it in a lot more aggressive way in the future.
Ross Beaty: Thanks Andy. The question on the minority side, the main shareholder of Morococha operating subsidiary, is not Pan American, is a Peruvian mining family, and at the moment they want to stay a shareholder and they’re going to be there as they’re going to be funding their proportionate share of capital and they’ll receive their proportionate share of dividends, and that’s representative of 12% of the company.
David Mallalieu: Are dividends, sorry, this is an ignorant question, but are dividends actually coming out at this point?
Ross Beaty: This company has produced dividends for quite a long time, however, we’re obviously going to, because we have such an aggressive program to modernize the mine to explore it, to really see what it’s brought in potential is long term, we’re obviously deploying all of the profits that come out of the operation right now back into the capital program that we’re running there.
David Mallalieu: Okay. One more question?
Ross Beaty: Go ahead.
David Mallalieu: All right. Then I’ll bail out. What you were mentioning with the bulk minable target, it’s kind of a catch 22 then isn’t it? If you are successful then you’ve got to consider the next plan which is what to do with perhaps the idle mill or turn the mills around completely and just make them bigger. So, I mean, that’s, it’s an open book isn’t it?
Ross Beaty: It’s a very happy problem to have for any mine. We’re doing a big program, we’re drilling about 40,000 meters this year, David, and, you know, at the end of this exercise we’re going to be able to plan properly, long-term plan for where we’re going to go there. It’s a very, very happy problem to have at this end.
David Mallalieu: Excellent. Okay, thank you very much.
Operator: Thank you. Gentlemen, at this time there appear to be no further questions.
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