Oct 27, 2009
Executives
Michelle M. Lair - Vice President and Treasurer Logan W.
Kruger - President, Chief Executive Officer and Director Wayne R. Hale - Executive Vice President and Chief Operating Officer Michael A.
Bless - Executive Vice President and Chief Financial Officer
Analysts
Bret Levy - Jefferies & Company Kuni Chen - Merrill Lynch Chris Dougherty - Oppenheimer & Co.
Operator
Thank you for standing by ladies and gentleman welcome to the Century Aluminum Third Quarter 2009 Earning Conference Call. At this time all participants are in listen-only mode.
Later we will conduct a question-and-answer session and instructions will be given at that time (operator instructions) I would now like to turn the conference over to your host Michelle Lair, Head of Investor Relations. Please go ahead ma'am.
Michelle M. Lair
Thank you, Christopher. Good afternoon everyone and welcome to the conference call.
For those of you joining us by telephone this presentation is being webcast on the Century Aluminum website www.centruryaluminum.com Please note that website participants have been advised to advance their own slides. The following presentation and discussion may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements related to future events and expectations and involve known and unknown risks and uncertainties. Century's actual results or actions may differ materially from those projected in these forward-looking statements, for summary the risk factors, that could cause actual results to differ from those expressed in these forward-looking statements please review Annex-A and refer to Century's Form 10-K for year ended December 31, 2008; Form 10-Q third quarter ended June 30, 2009 and other reports filed with the Securities and Exchange Commission.
Information were added in this presentation and discussion is based on information available as of October 27, 2009. Century undertakes no duty to update or revise any forward-looking statements whether as the result of new information actual events, future events or otherwise.
In addition, throughout the conference call, we will use non-GAAP financial measures, reconciliation of the most comparable GAAP financial measures can be found in the appendix of today's presentation which is available on our website. I'd now like introduce to Logan Kruger, Century's President and Chief Executive Officer.
Logan W. Kruger
Thank you Sherry, good afternoon everyone and thank you for joining us. We continue to focus our efforts on preserving the company's value and welcome the opportunity to report on our progress.
So let's get started and move on slide 4. The global economic environment undeniably strengthened during the past several months.
As this conditions in industrial metro markets. Stimulus spending in China has combined with a recently rapid return to higher levels of consumer activity.
I will provide some detail in a moment. But I will summarize our view as being recently constructive on the return to a consistent attractive growth in China and several other developing regions.
This positive trend has been counted by the restart of miniscule Chinese capacity providing a reminder of the flexibility of this particular supply. In the developed world the data while not merely straight forward, demand in many regions seems to be at least step bottom.
However, you are all familiar with the real structural challenges that remain. Only time will tell whether the high enough levels are sustainable of growth can be created to counter the very real imbalances which persists.
In a similar context we continue to run the company with emphasis of preserving the significant improvement in financial states we have created. The cost reduction programs that holds lot -- had proven their sustainability.
On the other hand we continue to see disappointing performance at Mt. Holly.
Wayne will provide more detail on the operations at the plant. And importantly we have progress the happened obvious and a careful timings.
I'm very pleased with our success, we've significantly improved a cost free financial profile. Mike will elaborate in a few moment.
In a nut shell we have successfully mitigated the risk of the debt, which effectively matures in 2011. And in current it has reduced the company's leverage.
In addition, we came to what we believe was an attractive resolution for our interest in Gramercy and St. Ann businesses and we're able to put in place some downside try key protection for our Hawesville facility.
We ended the quarter, with just shy of 200 million in cash. Let's move on to slide number five.
The automated cash drives averaged $1800 per ton for the third quarter of 2009 and it recently increased the approximately 1900 per ton based around 2003 months. The much recent spots in aluminum price in the Pacific basin was started at $284 per ton up from the $241 per ton in the second quarter.
Chinese GDP grew at a pace of 8.9% over third quarter. The fastest pace in a year and similar spending and record lending growth have had the desired effect and the industrial production was 13.9 in September.
These growths levels are some what lower in China than we are and seen in recent years but in trace of in the lights of global economic recession. India's economy is on the upswing which is reflected by the 6.1 year-on-year rise in second quarter GDP.
Industrial production growth 10.4% year-on-year in the month of August Compared to other markets which were severely depressed for the first quarter the Indian economy merely slowed down and is recovering strongly. Similarly Brazilian GDP expand to 1.9% in Q2 and out the plan of 1% in Q1 and is now back to pre recession levels.
Let's move on to slide number 6 With rising metal prices in the third quarter new capacity could tell have essentially come to our halt. In fact as indicated by the dotted boxes approximately 2.5 million tones in re-stock have occurred in China and another approximately 1.5 million tones of newly commissioned capacity have come on line with produced continue to enjoy a $200 flat premium per ton a metal to that sold out with.
Global consignments now stand at 4 million that compared to 6.7 million tons of production at the height of the consignments in Q1 of this year. The National Development and Reform Commission in China have recently published a circular then in Greenfield project for the next three years enforcing the closure of 800,000 tons related to inefficient clause I am most concerned of a capacity glut.
I would note that this is nearly restated the previous government announcement and thus does not represent a new policy. We here remain somewhat skeptical that the stolidly will have any significant impact on supply.
We continue to believe that further consignments are required to balance the market, particularly outside of China, but additional closures are unlikely in the current priced environment. So we move onto slide number seven.
LME stocks have remained slightly low in the last couple of months. We believe that's indicative of some stabilization in demand.
Although I would note that the warehouse in inventories are still at historic high. It will take significant decrease in inventories to return to more normalized level.
A meaningful portion of these inventories are believed to be plied up in financing transactions as producer and customer inventories remained low. Both of these factors according near-term market attractive and driving the US mobilized -- to the $0.05 range.
We've believe that this significant warehouse inventory levels will be on the market for some signs of recovering in the future. Let's move on to slide number 8, inventories are now equivalent to 65 days levels demand.
This is roughly double the normalized levels of the between 30 and 40 days. This Chart indicates that current signs are above the level justified by the current inventory levels based on the historical relationship.
Even now we also continue to have the supply trends to the market. We continued to be cautious and believe that -- and risk remains to the downturn.
Let's look at slide number nine. We continue to please that this note that Helguvik will be among the most efficient in the world.
And will be attractive investment for our shareholders. As we pursue the various requirements for the restart of our major construction activity we are advancing the project at a modest and reasonable clip.
Mike will update our current spending rate and will provide a summary of our progress in formulating a financing package. We had spent quite considerable efforts on the capital planned on our pleased with the results.
- has made good progress in reducing the project expected costs and capital cost. Our present estimates of the first 90,000 ton phrase is around $600 million.
Of course the cost per ton of the early phase is significantly greater than the lesser phases and the weighted average of the whole first phase due to the direct deposits and other equipment must be purchased for the full and is ranked higher. At this point, we believe the full clause will require an investment of approximately $5000 per annual ton of capacity.
This metric compared favorably with all the recent Western -- projects. These capital estimates are based upon today's economic conditions as well as recent engineering and construction work that has been performed including with respect such items as exchange rates and commodity prices.
Our project in Hawesville enjoys wide scale support in amongst the local governments, local federations for the union and broader population. We will provide a significant boost to the economy when the project restarts major construction activity as well as a significant number of permanent jobs when the plant will commence operations.
The government has demonstrated its tangible support through the execution of an investment agreement which draws a lot of long term economic advantages. As a reminder to us all there has been a number of changes in the government over the last nine months.
There has recently been some public discussion with the government around the EIA, Environmental Impact Assessment process for the software power line and prepare for tax on existing businesses. Based upon our assessment of the out roll situation our best current estimate is that we can achieve first half metal early in 2012.
The schedule would require the restart of major construction activity in early 2010. I'll ask Wayne to provide a few comments on the stages of construction before we brief you on company's other operations.
Wayne
Wayne R. Hale
Thanks Logan. Let's turn to slide number 10.
Supplementing Logan's discussion about Helguvik shown is a recent photo of the site. Though we have reduced the spending on the project progress is still being made.
All the columns for phase one A are cast the basement floor is nearly finished and installation of the working floor and building fuel support structure has started. To provide further direction and energy to the project, we have recently supplemented the integrated project team with additional personal resources.
Turning to slide 11, we'll review the operations. The team of at Hawesville have continued their excellent performance in safety, production and cost improvement.
Production is stable at about 80% of capacity. The cost structure based upon the significant rationalization actions taken earlier in the year has been preserved.
The team has consistently demonstrated that they can run the plant safely, reliably predictably at these levels. During last quarter's call I spoke in detail about the terms of the new long term power contract that gives energy and a shorter-term agreement with on US.
For the few months having a lapse big of reliably and cost performance has been on target. We continue to take an active role in monitoring the business.
Grundartangi continues to perform well introduce above it's rated capacity this is a testament to the leadership skills of the principally Icelandic management team cost are obviously up a bit to the linkage of the power price to the -- price however in every other area, the efficiency and production metrics remain on track. Looking forward there is additional capacity decrease effort at Grundartangi.
As you may recall the plans operating permit was expanded from 180,000 tons per year up to 300,000 tons per year in 2005. To enable low risk confirmation of performance and potential capital cost we have commissioned a booster session at the plant where the -- across the few sales can be increased.
Turing to Mt. Holly the performance continues to be disappointing.
Though safety remains excellent and is actually on an improving trend operational performance and costs have been poor relative to the plant's good performance. There are several operational issues on which the management team in whom we have confidence is working to resolve.
We continue to hold discussions with our co-owner about the long-term issues facing the plant. Turning to slide number 12, Ravenswood continues to be fully curtailed and the related to cost to remain in line with expectations.
Mike will provide additional detail. The power contract has been extended for a year.
Obviously we would require a long terms power agreement before we could contemplate restarting plant operations. We have recently begun discussions with the union leadership regarding the long term sustainability of the labor costs of the facility in its current state.
We have also taken certain actions to significantly reduce long term benefit costs. The divestiture of our interests in Gramercy and St.
Ann's has well completed on September 1. We have put in place a short terms luminous supply agreement with Gramercy, we wish the teams in Gramercy and Jamaica all the best.
Reviewing the markets we are seeing some stabilization as end markets in most industries. There are space things to have level out but as demand far below a year ago.
It has been modest increase in the construction activity but residential remains quite weak. Automotive has shown small increases and decreases, but no discernible trend.
Midwest premium remains at a tick about $0.05 a historical high level indicative of relatively tight physical supply. It has increased its debt over a penny since the beginning of the year.
Inventory is held by distributors and consumers remain quite low and now I'll turn over to Mike who will discuss the financials.
Michael A. Bless
Thanks Wayne. And if everybody could turn to slide 13 please.
And also if you could have in front of you the earning's release and specifically the financial data that the tax too for comments that will make them easier to follow on. Okay first looking at the top of the income as usual my comments will compare the quarter that just ended to the prior quarter so the sequential comparison of Q3 over Q2.
Before looking at the financial results, just take a step back and talk about the market as Logan spoke to. The cash LME price quarter-to-quarter on average was up 22% Q3 over Q2 and with a one month lag, just a little higher than that, 23% Q3 versus Q2.
In fact in our average realized prices in the US those were up in on a per ton basis about 19%. They were up a little bit less than the markets because as we've described before we do have one reason we start contract in that's US as priced up one quarter lag.
Our realized average total prices in Iceland per ton were up 23% consistent with the increase in the LME. Shipment volumes both in the US and in Iceland were up slightly as you can see at the end of the earnings data, following the earnings release and slash on a per day basis.
There is a one more shipping day in Q3 versus Q2. As you saw in the earnings release Grundartangi shipped at an annualized pardon me rate of 275,000 tons.
As Wayne said we are very pleased with the performance there again remind you that's safely 5 to 6% above Grundartangi's rated capacity. And now going onto the income statement back to the slide and to the data you see net sales were up about 21% Q3 versus Q2.
Working down the income statement at gross profit was up $3 million Q3 over Q2 on the sales increase of $40 million; let me talk about some of major items that impacted the movement in gross profit. First with lower -- market, obviously inventory adjustments.
As you recall in Q2 we had large credit or income item for LTM accounting $27 million in Q2. We had a much smaller credit in Q3 of $2 million.
So the difference there, obviously these are non-cash items when they're booked. That $25 million difference produced a lower $25 million lower gross profit Q3 versus Q2.
As Wayne said power troughs were up in Iceland, that totally related to the increase in LME that increase was $4 million quarter-to-quarter. In US power cuts on as reported basis were up several million dollars quarter-to-quarter.
I need to take step back now and explain it to you how the accounting works for these new power contracts related to the hubs that we've been talking about now for sometime. Wayne just mentioned in his comments.
So take a step back and remind you there are two power contracts here principally. One is the actual supply agreement between ourselves and Big Rivers so they produce power and they sell it to us.
And we pay roughly their cost of production with some minor adjustments. That contact does go about 2023.
In addition, we have this originality with Eon which we discussed in detail which goes out roughly, generally through the end of 2010. And under that contract Eon is responsible for paying part of our obligation to Big Rivers at least to the end of 2010.
Now, the relevance here and you saw a comment in the first paragraph as the earning release related to this is where the accounting works through this is that we expense through our cost of sales the full amount of the power bill from the Big Rivers, even though we're not responsible for paying it all. GAAP -- under generally accepted accounting principles we expense that entire amount.
We see it rolling through our P&L. And Eon pays Big River directly part of that and we pay Big Rivers directly for a part of it.
So as you saw in net earnings announcements in the first paragraph, there was $14 million this quarter that we booked in our cost to sales that we weren't actually responsible for paying. And we own item out each quarter for US as we go forward through the tendency of the Eon arrangement.
Working down the income statement, the next major item also deals with the new Hawesville power contract and that's on the other income line. You see at $56 million net income item there.
Let me explain what's driving that. If you turn over to the cash flow data following the earning release you will able to see these items that I refer to.
The first thing on that line is actually a charge and that's a $24 million charge we see it on cash flow statement related to the write-off of the remaining unamortized intangible asset that we set up when we originally bought Hawesville that related to the power contracts. So $24 million you get to be amortized we had to write that off obviously when the old power contract was terminated.
Offsetting that -- more than offsetting that obviously than $81 million asset that goes to the income statement as a gain that reflects receivable for the amount that are beyond or obligated to pay to Big Rivers on our behalf as I just described. So, the net amount of those two is about 57, $58 million of net gain rolling to that line.
The other items rolling to that line is consistent what comes to that line to past couple of quarters that's cost related to our US curtailment activities, principally rated was a little bit with Hawesville. Not that the actual cash spending on those activities with $10 million of last quarter obviously we had accrued certain items in past quarters.
Okay, moving down to income statement, SG&A expense $11 million just a couple of comments there. 2 million of that give or take is non cash items on a regular basis.
This quarter we also had a couple of dollars there for professional advisory fees, related to the various transactions on which we have been working hard that Logan described. Obviously a significant effort to bring to conclusion the Hawesville power contracts.
The sale of our interest in Gramercy and St Ann's in Atlanta and the balance sheet restructuring on which we have been working hard that I will describe in a moment. The cash recovering amount before those professional fees is around $7 million.
Just a reminder on taxes we provide 15% taxes on our effective income in Iceland and we provide neither an expense or a benefit on other income or taxable loses in the US as you know we have launched pre-tax asset against which we have a full valuation allowance in the U.S. so 0% U.S.
subject to taxes. The other item you see going to the tax line this quarter, you've read about in the first paragraph of the earnings release a couple of million dollar item related to the release of tax reserves, directly related to the sale of finance offset in Jamaica.
Couple of other items, 74 million, 74.2 to be precise average common shares during the quarter, 15.3 average preferred shares. Let me take you through the items constituting EPS, if you go back to slide 22 in the slide that you'll see the reconciliation there to which Shelly referred.
So as reported basis, you see the $0.45 under GAAP you allocate that earning -- those earnings to the common shares and the preferred shares on a pro rata basis, so you can see the both adjustments. Now, I'll talk about the adjustments that we described in the first paragraph of the earnings release.
We believe its appropriate to look at those adjustments over the full earnings base for the company because as you know the common preferred share are generally equal in all right other than the preferred shares has some transmerge instructions attached to them. So if you look at I that net gain the -- receivable minus the write off that the intangible asset $0.62 a share that will EBITDA tax reserves that we released $0.08 and again that amount that $40 million is the amount by which cost of sales exceeded our actual obligations under the Hawesville power contracts $0.16.
So over the full share base we get $0.09 a share loss on an adjusted basis. Couple of other quick comments on the financials before we move on some other slide I am back now on slide 13.
If we just go to the cash flow data again back in the earnings release you will see sustaining CapEx for the quarter $3 million and how the big spending of $5 million is the amount more consistent with our expectations. Okay we can move on now to slide 14, just a quick review as the movement of cash during the quarter as you know we began with $230 million of cash that was amount on balance sheet as of June 30.
You see a small cash profit from operations for the quarter, the one month lag only price was $1725 for the quarter and that pay small cash operations. As, our bonds pay there interest and annually in August and September season to interest bill there have been paid.
And then just couple other items I'd like to point out for you during the quarter. The first is the first of the two payments that we owe based on our transfer of our interest in Gramercy and St.
Ann to them as $5 million that you see and we are second payment in December of this year. Second in concert with that same power agreement with Big Rivers Energy we were required to post $7.5 million dollars in security deposit.
And if you go to the balance sheet, you'll see that amount in restricted cash of $7.5 million. Lastly we purchased, we spend a little sort of $8 million during the quarter to purchase on down size protection for Hawesville.
Let me take a step back just to remind you we have a customers contract with sets about is -- under which we will require to supply that major customers through the first quarter of 2011 and another one of that roughly constitutes roughly three quarters of positive current reduction rate. And now with our power contract locked down in the agreement with Eon in place, we're still confident that we've been able to continue to produce -- at least with the short and medium term.
In that respect we thought it was prudent to protect that production there given the uncertainty in the metals market which Logan referred to. So, we bought aluminum twice during the third quarter for which we paid slightly less than $8 million.
We'd actually bought a little bit more protection here in the first couple of weeks of October. And so now with all of the insurance and that's we've in place.
We've roughly 60% of Hawesville's current production rate protected through 2010. When you add the natural hedge of the aluminum contract in 2010 that's index for the metal price provides 80% of those production rate in 2010 is protected to downside.
Okay that to on the slide 15, just an update on our cost estimates consistent with what we've shared in the last couple of quarters. You can see we've run the smelter cost at an LME range of 1700 to $1900 per ton and importantly these are cash COGS.
So the cost embedded in there again for the same -- power contract reflect the cash troughs that we're obligated to pay not the portion that Eon is obligated pay at the end of 2010. You see the cost ranges there and you can obviously calculate the sensitivity of those costs to the LME with the data that we've given you here.
Couple of other items, US curtailment cost absolutely consistent with what we've given you. So far this year under $10 million for the balance of this year, somewhere between 20 and $25 million in 2010.
SG&A again I refer to that $7 million cash base amount that's before professional fees and other unusual items. Sustaining CapEx, again no change in prior estimates but less than $5 million yet to go this year and about $50 million 2010.
Logan and Wayne both spoke about the status of Helguvik sort of current estimates cash spending is between 10 and $15 million in the current quarter, and about the same amount for the first quarter of next year. And I already represent the final payment that we are in the for the sale of Gramercy and St Ann for $5 million.
So, if you add all that up bottom line and rounded to analysis what you'd find is consistent with what we have been saying here over the past couple of quarters. The company breaks even on a cash basis somewhere between $1800 and $1900 on the cash LME.
Okay let's go to slide 16 please I'd like to spend just a couple of minutes before I'd conclude talking about some of our liability management activities that we've been doing over the last couple of months and a new transaction that we intend to announce this afternoon and open tomorrow morning. We've been doing a lot of work here on the management of the company's liabilities.
We had great help over the last couple of months from -- who have been helping us on both our financial and operational restructuring activities. We've been very happy with the success.
Let me talk about what we've done and we prefer for launch. So, the first on the convertible announced under 1.75% converts.
As you know those who have the 2024 saving maturity but effectively be mature and August in 2011 given a cash --a cash put at par that the whole says. And the management and the Board in the company but we've that it was prudent to address that maturity sooner rather than later.
And we've done that, we think with good success, we have contracted to repurchase a $128 million principle amount of those nodes just under three quarters of the issue. In exchange for that we have contracted issue of 11.4 million common shares.
Just a smaller amount of those transactions actually closed during the last couple of days in September is about $50 million principle amount in exchange for 1.2 million shares. And the remainder closes in the last couple of days of this month.
And we believe the net amount outstanding of the so called of stub amount of $47 million principle amount is very manageable and we'll have plenty of option to deal with that over the next couple of years. As Logan said in addition to effectively mitigating the risk of that maturity we deeply have delivered the company's balance sheet as well.
We are very pleased with the success there. Okay now on to the 7.5% senior notes and we intend to launch tomorrow morning and intend to issue a press release later today, detailed on a exchange offer that we intend propose to the holders of those notes and we discussed in quick detail on that.
Just one point difference in the exchange transactions for the convertibles that still be debt for debt proposed exchange on a part to part basis. So we will be proposing to exchange $215 million of new notes for the $215 million of existing notes.
We will be offering the holders of the current notes that the existing notes and improvement in the terms of those notes. Slight improvements in the coupon slightly shorter maturity and secondly insecurity package again this all will be detailed in the press release later today.
And it will be detailed in full obviously in the exchange of the documents that we'll file tomorrow. In exchange for those improved terms we'll be seeking some incremental flexibility that I'll summarize in a moment.
Fixed finances and invest in the company's growth activities. We believe the company has adequate flexibility today to build out our business as you would suspect we really talking about here is financing and investing in the next phase of our growth in Iceland.
But we do believe that based on the terms of this exchange offer, that will be good for all financial and that is all our company have more options by which to finance and invest in that growth. If you take through the two major areas of in debt modifications in the indenture that we'll be seeking and return to the improved terms.
The first one is that alluded to the capital project that we've been looking at for sometime there is nothing eminent there or eminently on a join board but we've got a lot studies going on. I'll remind you that the last 40,000 ton expansion that we made at Grundartangi had a capital cost of about $120 million.
So about $3,000 per ton of that is capacity which is quite attractive. And we believe that we could add a like amount of additional capacity for same amount more or less.
It be very attractive or ten project for our share owners and these eventual modifications would allow us to incur the debt down at neutral level to finance a project like that. I should note that these modifications that we're seeking are all incremental will all be incremental to the financing and investment capacity that the company has today under the current -- venture.
They are the major bucket of inventory from modification that we're seeking to effect related to the Helgavik project. Just to take a step back earlier this year under the indenture we made Helgavik an unrestricted subsidiary and the reason we did that is by doing so it gave the company increased flexibility both to incur debt down to healthy big level at the project level and to fund the non debt portion of the phase one A capital costs as we -- that are roughly $600 million.
So, what we are doing now, we are working on a non report financing as we told you led by three strong European Banks, those are BNP Paribas, Société Générale and ING. The indenture modification that we're seeking again will give us more flexibility additional option by which the finance and non debt portion of that phase 1A project.
Lastly here, we are seeking a small change in the language under the indenture that defines essence of default and all this will do help us to look at additional options as we look at the various alternatives to our US subsidiaries over the next couple of years. Just a small technical matter in addition to that proposed exchange offer we'll be going out with a consent to offer to the halters of the convertible notes and that will be almost used in just single purpose to effect that same change in the event of default language.
And for that consent we'll be offering those holders as small cash fee. Okay, if we could turn to slide 17 please I'll conclude my comments.
We figured with a very simple table looking at the actual capitalization of the company as of September 30 and then pro forma for the rest of the debt over equity exchange offers of those convertible notes that are closed here again by the end of October. We believe that they said before that both growth in net debt levels pro forma for that transaction are at a very appropriate amounts and its not on the slide, but let me just give you what the share base will be after all is said and done.
So after we issue all of these additional common shares. And after the preferred shares convert for there turns to common shares, we'll have roughly 92 million in common shares outstanding and about 8 million preferred shares outstanding and you'll see all that obviously when we'll release our fourth quarter earnings.
And, now Logan back to you.
Logan W. Kruger
Thank you, Mike. In summary, we like as other as always and this is on slide 18, we are offsetting the continued stream of economic data which is setting mixed signals.
Conditions in the western world clearly so that you can reach one and in certain regions and sectors are exhibiting some growth. China's performance has been impressive and achieves to have some length.
On the other side of the coin, the aluminum sector is burdened with significant incremental capacity, much of which could be restarted reasonably quickly as well as a class of inventory. Time will tell how quickly economic activity consult several of this issues.
In this life, we are running the company with what we considered an appropriate balance. Our first primary focus is the continuous safe and reliable operation of our plot at the current aggressive cost structure.
Maintenance of our liquidity and strengthening of the company's balance sheet is also paramount and we continue to work to release entry of the top of fixed contractual obligations, which can become quite vertical during the weak economic environment. At the same time, we are spending considerable time and effort on the Helgavik smelter.
There is of new capacity, which will be coming on stream in the Western world over the next few years. Given that multiple projects have been cancelled or severely delayed.
A prime example of this, we've recently seen the cancellation of a major product in South Africa that would have added plus to 1 million tones of capacity as its completion. Thus the farm could be an opportunity to restart this project during the next several months.
We're working hard put that in place debt structure which will allow us for a restart. While prudently protecting the company from undue risk.
Please set your time and we'll hand you over to Christopher now, thank you.
Operator
Thank you (Operator Instructions). Our first question is from with Bret Levy with Jefferies & Company.
Please go ahead sir.
Bret Levy - Jefferies & Company
Hey guys can you talk a little bit about if you proceed with all the Helgavik spending and what are your general plans are what you think CapEx looks like for the overall company for the next three or four years it's a rough sense of spacing and then it looks like you have pretty good census for what capital structure you want to have to address this. Can you talk a little bit about whether or not that involves and is now was that coming in as unsecured relative to the new second secured notes that you are going to have with consent, how much debt how much equity.
A little bit about what your general thoughts are in terms of how the financing should go?
Michael Bless
Sure, Brad thanks its Mike, its let me adjust all that. So quickly to put aside the sustaining CapEx we have put up out and estimate of about $50 million.
It's consistent with how we went the company over the last couple of years $15 million to $20 million maintenance CapEx and that's not going to change. Put that away and well as you recall we had some capital projects about which we were thinking in the U.S.
I think in the current environment its probably not -- couldn't even think about those, so can put those aside as well. So as you correctly pointed out, we are talking about Iceland and so lets go directly to Helgavik.
Logan and Wayne talked about the phase one is very difficult to answer your question on three to four years because three to four year is a in time that could include and hopefully will include more than just phase I but that in terms on a whole a lot of things. So let just talk about phase 1A I think is a cleanest and easiest way to talk about this.
$600 million, we haven't been providing any more detail yet spread on what the concept the capital structure phase that $600 million of spend will be and we are not ready to do it yet, we've done a lot of work with the European Banks, we are looking at other forms of financing but what we have said to our people. We've said that we're only looking at this point and debt structures again in that unrestricted serve that would be not rescore sale or your traditional kind of project financing with which you are very familiar.
And as I said we made great progress to date on that actually Shelly and I are going to be over with orders colleagues meeting with the banks in Europe next week I suppose and they made some great progress and then the other thing we said on the non-project piece is that we would fund that fortune in a way as Logan has consistently said that doesn't put undue risk on the parent company and so I don't have anymore detail for you at this point in time directly making it up. We don't know what its going to be, we're looking at a lot of alternatives there, but we need to strike a balance between getting this project funded which we are confident we can do, but doing it in a way that doesn't put an undue burden on the company.
I don't know Logan, if you want to add?
Logan Kruger
Yeah, just that we are really taking it into the early 2012 so in some ways this describes your question. The options aren't fully completed and until we have more detail for not just as we already to make any further comments.
Bret Levy - Jefferies & Company
All right and then with respect Mt. Holly, can you guys talk a little about what the discussions have been vis-à-vis competitiveness for that plan outside you can turn it around or what your options are?
Obviously you got the compare notes with your joint venture partner?
Wayne Hale
This is Wayne. Again to your point, we continue to work with our joint venture partner on the option that plan and the most important which is, are the power cost supplied by Stancy Cooper.
So, and discussions with our partner we're approaching Stancy to review the options of that plan.
Michael Bless
I think good, just it's traditionally been a very well run plant. We been concerned about some of the operational performance issues which Wayne has been addressing with our partners.
And we have, that will come back soon, but also corrected longer term -- and will than come up with solutions or up fronts --.
Bret Levy - Jefferies & Company
All right thanks so much guys I will get back in queue.
Michael Bless
Thank you.
Wayne Hale
Thanks.
Operator
Thank you. Our next question comes from Kuni Chen with Merrill Lynch.
Please go ahead.
Kuni Chen - Merrill Lynch
Hi. Good afternoon everybody.
Michael Bless
Hi Kuni.
Kuni Chen - Merrill Lynch
Just more of an industry question obviously you have good conversation with other folks out there in the industry I think and more of a unique situation of sort comment on some other trends out there. What is your view on sort of the momentum inventory situation at present current look sustainability of the markets can tangle and we have stabilization in LME inventories whether last few months also bit sharing potential that some materials moving into bad LME warehouses where it can't be as readily tracked, but just want to get your thought on those issues?
Logan Kruger
Let me turn back to aluminum and Wayne and Mike can add on. I think obviously the numbers launch is 4.6 million stock but its clear now above some months that a large amount of that and people talk about 60, 70% so that a product in financing deals and the contender seems to be holding up throughout the of your question.
Further the inventory off loader stocks and producer stock is not clear but the market longer discussion about. From the of general overseas the China has picked in, if you look at the numbers that's a pretty significant numbers on GDP 8.9% so this movement that its really hard the rest of the demand in North America.
Europe has come about and I think it doesn't look. There is going to be upper hand on the market but as long as the method continues to be held for financing that's going to be obviously continue to have a process.
We are obviously a bit more cautious on those issues and I don't know if Mike or Wayne would want to comment in addition.
Wayne Hale
No.
Kuni Chen - Merrill Lynch
All right. That's all I have for now.
Get back in queue thanks.
Logan Kruger
Okay thank you.
Operator
Thank you, our next question is from Wayne Atwell with Keslner Capital (ph). Please go ahead.
Unidentified Analyst
Thank you, what would it take for you to start back up and second thought would it make senses to finally pull the plug on it and shut it down for growth.
Wayne Hale
This is Wayne and I will just address the question in parts, as you know that the plant is curtailed and we hope that its short term curtailment but its based on several factors coming into alignment that being a enabling power contractor both long-term and low cost that is also requiring a long global as the United sea orders given that facility of which we have an extension of that agreement through August 2010. And than finally with of course the anatomy market with sustain our plans at strict levels.
So all the thing that has come into play them to level.
Michael Bless
I guess -- its Mike the other thing over that here partly addressing the second part Wayne to your question and partly just in general is a lot of these smelters is in the US sort of have been sort over the years in that case you seen as they restarted for long periods of time and have made nice money for their owners, this plant is from a book standpoint very heavily depreciated in terms of lot of capital to keep it running you'd obviously have to invest in working capital or restart it. But you can earn that with that investment probably back reason that we quickly.
So we're working hard on creating that conditions obviously the market is one of the conditions of over which have no control. But Wayne and his team are working really hard on power contract and discussions with the union leadership and members to create the conditions that will give us the options to restrict that plant because we would like to do it's a good plan and it's a good team.
And it could make good money for this company going forward.
Unidentified Analyst
Sure of a price that would excite you and get your cranked back up, some number some hurdle you are waiting for, or is it not that simple?
Logan Kruger
Yeah. I think whole bind you have seen the number that Mike that shows you earlier in cash break even of around 18 to 1900 we would lot some where in 2000 on a going forward basis.
Michael Bless
Yeah I think that's what is, as you know is higher than our is the highest cost capacity we have in the US. We've that's we've said that consistently and so point it have to be above that current range and so in that current range even will increase at the end of 2010.
All those seeing equal of course when the Eon support for Hawesville goes away and so we're not there today and if you look at the fourth curve and believe that the forward screen is a projector for future prices and you might have environment in which you could do that so that's why we're spending a lot of time when the operation issues that -- would because it would like to preserve the option to do that.
Unidentified Analyst
Thank you.
Michael Bless
Thanks Wayne
Wayne Hale
Thank you.
Operator
Thank you. Our next question is with Chris Dougherty with Oppenheimer and Co.
Please go ahead.
Chris Dougherty - Oppenheimer & Co.
I just want -- good afternoon, I just want to clarify couple of things here. The $600 million investments that you talk about for Helgavik.
Is that all gone be non recourse portion of it and I just was trying to clarify that the non recourse versus the non-project debt portions?
Michael Bless
Yes. So, this is Mike.
So again we haven't quantified yet what the exact capital structure would be but the $600 is the total cost for phase one as a project of which some portion which we're still working with the banks on will be non refers traditional project that, and when look at projects like this similar projects like this, but we you have seen capital structures of debt a total cap, slightly less than that, slightly more than that based on specifics of the project and then what we have said is that for whatever the portion, that whatever the non recourse debt will be we will intend to finance that portion in a way that's not overall the risk lead to that company. We're not trying to be overly mysterious about what that is going to be because we just don't we haven't decided on what that enough security selection is going to be or could be all are different things that could be selling capital down at subsidiary roll or it could be selling or doing financing level at century level it could be a wide ray.
I think as you would expect and I hope we're looking at a whole panoply of things and end of the day we help to create as many options as we can. We're confident we will never -- productions and then pick the best.
Chris Dougherty - Oppenheimer & Co.
That already struck 100 million.
Michael Bless
That's an excellent. Thank you.
We've already split little detail of that 600 by the end of this year and we've talked about this consistently in our public disclosure. We have already spent a 100 so we're solving for 500 in last six months.
Thanks.
Chris Dougherty - Oppenheimer & Co.
And also I just wanted to ask about that non-project debt could come from part of that could be the equity components which could be the cash on hand. It could be used as the cash on hand right now?
Wayne Hale
Well, I mean it could be, we have $200 million debt, but you've heard in Logan's comments that while we have watched the movement of the elevated price with interest we're not convinced that we're sort of up into the right frontier. So I think when you hear us say we're not going to unduly burden or put it with the company to build this stage when we really mean it.
And so the use of that good chunk of that cash is probably it's not something that we're currently contemplating
Chris Dougherty - Oppenheimer & Co.
And just can you it looks like the cash costs increased quarter-over-quarter in Iceland.
Wayne Hale
The only reason for that -- that's an excellent observation, the only in fact it did not the only reason for that is, if you look back at the last time we gave you this data we gave it to you based on the LME range 15 to 1700, 1500 to 1700, now we are giving it based on 17 to 1900. And yes, if you could calculate the sensitivity and bring it back to 1500 to 1700 LME you will see that the costs were exactly the same.
Chris Dougherty - Oppenheimer & Co.
And just one last thing, from the cash costs you gave us for the US and where prices are is it your expectation that the US will be breakeven or better in the fourth quarter?
Wayne Hale
Depends on the LME price, obviously at the current LME price the US is indeed cash flow positive.
Chris Dougherty - Oppenheimer & Co.
All right, thank you.
Wayne Hale
Sure thank you.
Michael Bless
Thank you, Chris.
Operator
Thank you. Our next question is from John Prumalso (ph) with Very Independent Research (ph).
Please go ahead.
Unidentified Analyst
Congratulations on getting so much worked on tough markets.
Wayne Hale
Thank you, John.
Michael Bless
Thanks John.
Unidentified Analyst
What are the strike prices of the food protections you've bought and is there any gain or loss on the 11 million share equity exchange over the convertible?
Wayne Hale
Okay. So I'll answer the this will not be detailed in love in detailed in other than one piece of your first question but on the convert, yes, we did buy those notes back at less than the face value and until there will be there is a gain on that.
You will see very little of it in the third quarter as I said because only 15 million principle amount of those exchange is actually closed in September. The rest you will see in the fourth quarter when we really saw but yeah and we will have a full gain on those because we repurchased on that at less on that phase.
As you can calculate by just doing the math. One the torque John, we are not going to its really competitive so we would prefer not to specifically detail.
We'll have in our queue what the volumes where on a monthly basis and how many months they went out but all we would say is that when we looked at what level and Logan will we have some comments here on this. At what level we are to protect.
We wouldn't want a protect at a loss if you will. So we kind of looked at where Hawesville's cash cost would predict be over the next 15 months in our calculations and then we obviously you never want to hedge to protect a loss, Logan I guess if you ....
Logan Kruger
I think that's exactly right, and I think John if you look at the timing and what we indicated to you will actually give you a fairly good idea of what range we had. As you know they have also balanced between the protection under cost of that you pay we're taking think reasonably balance you either.
Unidentified Analyst
Thank you.
Logan Kruger
Thanks John.
Operator
Thanks you, our next question is with Mark -- I'm sorry for the last name Lenama (ph) with Morgan Stanley. Please go ahead.
Unidentified Analyst
I apologize for it as well. Logan you talked about more curtailments being needed to balance the market that you wouldn't likely see them at this price, can you give any sort of comment on what price might be required?
Logan Kruger
To have more curtailments?
Unidentified Analyst
Yes.
Logan Kruger
Yeah, I'd really not like to think about that Mark, but you're asking the question. so I will think that as we've seen and this not unusual there is a problem with people hanging in there while they get paid and as you know with particularly our colleagues did segment reasonably quickly.
Obviously, trough was somewhere around 1600 restock seem banned against. I have got some agreements here I am not calling mark them maybe at -- but I would say, top of 1600.
Again we've about clear fact of everything but some of the input cost of come off common hedge also the sort of things. So we also balance that all but -- 1200 to 1600.
Unidentified Analyst
Okay. Thanks for that.
And just your comments were fairly cautious on from the state of the market may I guess they were fairly cautious last quarter as well. And the markets continued to surprise us.
What is there anything you could point to the maybe is happening that accounts for that it could be sustainable looking for a surprise to the upside, what would that be?
Logan Kruger
I think, there seems to be a couple of dynamic. We know there is a large amount of that's locked up in the LME press on financing deals we know the other that's been targeted from fall or other.
We also know that the China and India story seems to great gaining momentum again. For there is a problem, the upside is going to be the immobility or the unavailability of that inventory versus the kick up in demand in the other areas below.
I think that's the one -- that's very hard to measure. And you get it very mix signals from United Steel manufacturers to see what iron ore some other to some of the pick up.
So, I think that's a surprise. I don't know my colleagues may actually have a lot of ideas.
Shelly, Mike? I think, that's the area that its hard to measure but does surprise from the upside.
Unidentified Analyst
And you do mentioned that your saying consumer stock is very low, do you think that we, are you seeing any change in behavior on buying that you can?
Logan Kruger
Yeah, we've seen, but in the U.S. on particularly because we are one of the few suppliers of high quality, high purity material out of wholesale.
So, we seen from interested which is change over the last quarter. We are cautious, but we're less cautious and we were the second goal.
Unidentified Analyst
Good luck with all very positive steps that you have taken to be ready when that comes. Thanks.
Logan Kruger
Thank you
Operator
Thank you our next question is a follow up question with Wayne Atwell with Keslner Capital (ph). Please go ahead.
Unidentified Analyst
Yeah, thank you and not be a dead horse, but if a price of LME in totality 2200, 2400, 2600 what do you think about as a buying puts or selling force for so you'll lock in a profit for a year or two?
Wayne Hale
Yes we were. That's one of the strategy you will deal with was -- good question.
Unidentified Analyst
So, basically that would lock in a profit, you could feel pretty comfortable crack that backup.
Wayne Hale
Yeah, I mean you can never at this point given your equity in this market here I just, I hasn't taken you can never lock in a profit because you can't lock down your cards. So that's why I emphasize, we were confident enough to go out and purchase those for Hawesville because when we know our LME cost and we know what the sensitivity is to the market.
Even though Big River is a cost base contract that's not fixed price. We think there is little amount of variability -- to the end of that, the kind of new or believe we know a lot of analysis with good predictability within a range what our cost at Hawesville are going be, even then we didn't sell for we just plan out session by some insurance.
Unidentified Analyst
Okay. Thank you.
Wayne Hale
Thanks Wayne.
Operator
Thank you. (Operator Instructions).
Our next question is also a follow up question with Chris Dougherty, Oppenheimer and Co., please go ahead.
Chris Dougherty - Oppenheimer & Co.
Mike.
Michael Bless
Hi Chris.
Chris Dougherty - Oppenheimer & Co.
And I just a couple of quick -- questions I think you mentioned in SG&A this quarter there was about $4 million of economic related to growing stuff and 2 million I think is that related to a professional fees? What was the other 2 million?
Michael Bless
Yes, the 2 million is just from market it's not number it's a non cash item I will try and give you guys a cash amount of thereby 2 million bucks of stuff that flows into SG&A that is accrual but not cash. Mostly in and other employee cards and then and then the other couple million was actual cash, but just I wouldn't count in one time items, because we're still working hard in lot of these actions, but they are professional fees well and acceptable where we were normally there given all the professional advice that we needed here financial legal and otherwise as we work through all these transactions.
Chris Dougherty - Oppenheimer & Co.
And than just one another clean up and relates in non-cash interest I think in the last 2, 4 years about 2 million there but is that still the case?
Michael Bless
Non-cash interest you're talking about relating to I'm not exactly sure what's your --perhaps you were remembering the new accounting under what I get used to be call under the new reconciliation system that tells we said it something else but the new accounting for convertible notes is what you are referring to?
Chris Dougherty - Oppenheimer & Co.
Yeah probably.
Michael Bless
Yeah, okay so you know multi talented cash that you're seeing there I don't on 250, one in three quarters percent on 175. If you that out some small fees relate on our revolver but we are not getting rather than but 8 million to backs up the LMCs and it will work out by 22 million and that's why you see the 11 million.
It's pretty much cash interest there.
Chris Dougherty - Oppenheimer & Co.
It is just more sense..
Michael Bless
No, no absolutely cash.
Chris Dougherty - Oppenheimer & Co.
The current cash interest expense, are the current interest expense is 7.7 million really is about 5.5 million or so?
Michael Bless
Yeah, that's sounds about right. Is keep going up which is nodding up and down.
Chris Dougherty - Oppenheimer & Co.
Yeah, that's right. Okay.
That's it. Thank you.
Michael Bless
Thanks -- thank you
Operator
(Operator Instructions). Management, I have no further questions at this time and if there are any concluding remarks you would like to make.
Please go ahead.
Logan Kruger
Thank you, Christopher. I'd just like to thank everyone for been on the call today.
We look forward to speaking with you guys. Thank you very much.
Operator
Thank you ladies and gentlemen; this concludes the Century Aluminum third quarter 2009 earning's conference call. Once again we would like to thank you for your participation.
You may now disconnect.