Earnings Call: Q1 2021

Apr 29, 2021

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Sherritt International First Quarter 2021 Results Conference Call and Webcast. At this time, all participants are in a listen only mode. I would like to remind everyone that this conference call is being recorded today, Thursday, April 29, 2021 at 10 am Eastern Standard Time. I will now turn the presentation over to Joe Racnelli, Director of Investor Relations. Please go ahead. Good morning, everyone, and thank you for joining us today. With me are David Cathy Sherritt's CEO Nathan Reeve, our Interim CFO and Steve Wood, Sherritt's Chief Operating Officer. Before turning the call over to management, I want to bring a couple of items to everyone's attention. We did release our Q1 financial results last night and the full package of MD and A Today, a copy of it is available from our website and we will also be making forward looking statements on safe harbor provisions. The full list of risks and uncertainties or spell out an RAIF, which we filed in March and also highlighted in our presentation. At the end of management presentation, we will have a Q and A session and will be available for any follow-up discussions. David, please go ahead. All right. Well, thank you, Joe. Good morning, everybody. It seems we are coming out again here with our quarterly results at a very busy time. 2. So thank you everyone for taking some time to join us this morning. Very strong quarter for us as you will see from the results this morning, very good production numbers out of Moa, both nickel and cobalt and strong pricing resulted in our highest quarterly EBITDA in almost 3 years. Few other highlights just on the first slide there before I turn it over to Steve to tell you give you a bit of an operational update and to Nathan for a few financial and 2. As we typically do, we did see distributions start out of the Moa joint venture for 2021, Receiving $5,000,000 there and Nathan will give you a little more context about what we're expecting going forward on that. We continue to look for opportunities to make incremental improvements to our balance sheet, buying back a few $1,000,000 worth of bonds at a discount and we continue to look to be opportunistic on that. We did see some collections in our Cuban operating receivables. That, as we had talked about a few weeks ago when we announced Q4, is a bit 2. As we sort out a number of different issues around COVID and around U. S. Sanctions and the reunification of the 2 currencies in Cuba, but we'll give a bit more context around that as well. But overall, a very good start to the year that we expect to build on over the course of the year. I will come back at the end, as I usually do and talk about nickel markets and Okay. Thanks, Dave, and good morning, everybody. I'll start my discussion this morning as we normally do in our internal meetings with a safety share. As discussed in previous quarters, we continue to devote considerable effort to fostering a strong and Strong Health and Safety Culture. This has resulted in Sherritt regularly ranking in the best quartile of safety results for our peer group. We continued that in the Q1 of this year where we had a total recordable injury rate of 0.17 and a lost time injury frequency rate of 0.10. And these compare to 0.26 and 0.09 respectively for the same period of last year. 2. In fact, both numbers have decreased in the order of 50% over the last 3 years. And We're very proud of that and think that that's a significant accomplishment. On to Slide 5 now, I'd like to point out that as As we are to employee health and safety, we're equally focused on ESG matters. For example, one initiative that we recently launched 2. In 2020, we identified a number of opportunities to increase the use of renewable energy at fleet of transportation equipment, and we expect to double the number of EV vans this year. We're also looking to replace diesel powered land Cruisers with similar EV light trucks. The electrification of our equipment is still at an early stage, 2. Now I'll turn to Slide 6 and discuss 2Q. Our production results with the from the Moa JV. On a 50% basis, the Moa JV produced 4,188 tons of finished nickel and 477 tons of finished cobalt in the 1st quarter. And these totals represent increases of 9% 19%, respectively, from the same period of last year. The growth was attributable to a number of factors. Most notably, we increased our mixed sulphide availability and improved refinery Reliability Relative TO Last Year. If you recall, mixed sulfides delivery to the refinery in Fort Saskatchewan were Disrupted in the Q1 of last year because of rail blockages in our blockades, I should say, in Canada and delays in shipping from Moa due to the inclement weather there. In addition to these factors, cobalt production also grew in Q1 of this year due to higher cobalt to nickel ratio in the mixed sulfide feed. I should point out that production in the Q2 of this year will be impacted by our full facility shutdown that we have planned to last approximately 11 days. This full shutdown is now done every 6 years, whereas previously the interval was 5 years. And we've been able to extend the interval because of some good work that we've done in the areas of asset management and operational excellence. This planned maintenance shutdown was taken into account when we issued our guidance for the year. I'll move on to the next slide, Slide 7, and talk about unit costs at the Moa JV. MPR or our mining, processing and refining costs declined 5% in the Q1 relative to last year. The decline was largely driven by a reduction in labor and third party service costs. The decline was partially offset, however, by the significant increase in input costs. In particular, sulfur costs were up 24%, while fuel prices climbed 32% over the same period last year. Another factor that offset the decline of labor costs was the purchase of sulfuric acid in advance an asset plant shutdown plan for the 2nd quarter due to maintenance work. Turning to net Direct Cash Cost, NDCC was $3.83 a pound sold And that's down 12% from the 4.33% of the Q1 of last year. The improvement was driven by lower NPR cost, Also due to the 33% increase in cobalt byproduct credits as a result of higher realized prices in the Q1. Now I'll turn to the Oil and Gas business on Slide 8. And as we discussed previously, our sole production sharing As a result of the expiration of the PSC, the production sharing contract, We do not anticipate any near term oil production in Cuba without an earn in partner or new drilling activities. I should remind everyone of our intention to make no further investments in the oil and gas business without an earned in partner. And despite a drop in production, the unit cost in the Q1 declined by 24% from last year and the decline was principally due to lower labor costs and third party service costs. The lower costs were driven by also by the effects of currency unification efforts launched at the start of the year, and Nathan will explain a bit more on this government led initiative in his remarks. I should point out that as a result of the expiration of the PSC or production sharing contract, we will No longer be reporting oil and gas results for the balance of 2021. Now I'll turn to Slide 9 and discuss our Power division, where we produced 95 gigawatts of electricity in the Q1, and that's down 38% from last year when we produced 150 2. The decrease relative to last year was driven By the scheduling of maintenance activities that had been previously deferred, these maintenance activities were concentrated 2. Our unit operating costs in the Q1 were $25.89 that's up 78% from the 14 $57,000,000 for last year and the increase was due to lower production, but offset partially by lower labor and third party costs. On to Slide 10 now. I'd like to discuss our Technologies business, which is based in Fort Saskatchewan. And it provides considerable opportunities for growth. In 2021 and beyond, we'll be focused on further developing and commercializing the Innovative Work Underway in Technologies. I thought it would be helpful to provide an update on a couple of streams of 2. Underway Technologies as examples of the opportunities in front of us. First, we further developed our patented 2. In simple terms, it now means that oil and thereby reducing costs and increasing pipeline capacity. It also significantly reduces emissions and virtually eliminates the coking waste produced by current upgrading methods. Our next step is to work on a demonstration plan in collaboration with a bitumen producer. Other projects of interest are focused on improving metals extraction processes with reduced costs and environmental impacts. For example, we're currently developing a hydrometallurgical process for high arsenic copper concentrates that will render the arsenic inert while reducing emissions when compared to current processes. Such projects will enable mining projects to meet electrification trend for many years. And we'll continue to provide updates on this exciting work and other projects in the quarters ahead. That concludes my remarks on our operational performance. So I'll now turn it over to Nathan for discussion on our financial results. Nathan? Thank you, Steve, and good morning, everyone. I'm on Slide 12. I would like to begin my remarks with a discussion of our cash position. At March 31, 2021, Our cash and short term investments totaled $158,300,000 down from $167,400,000 at the start of the year. As you can see from the cash waterfall on this slide, our cash position was impacted by a number of developments in the quarter. Chief among them was the use of $3,300,000 towards the repurchase of second lien notes with a principal value of $6,300,000 towards capital expenditures and the cash outflow of $11,300,000 from operating activities. The cash outflow from operating activities was primarily driven by changes in working capital and seasonal factors, including a build of fertilizer inventory ahead of the spring planting season and reduced fertilizer pre buys ahead of the planting season When compared to the same period last year, the amount of that impact was about $5,000,000 less in prebuys in Q1 'twenty one. Concurrent with the spring season, we do expect higher collections in Q2. In fact, just as an indicator, last year, Approximately 45% of our fertilizer revenue was recorded in the 2nd quarter. The decline in cash position was partially offset, however, by the receipt of US5 $1,000,000 in distributions from Nomura joint venture as well as the receipt of US2 $1,000,000 and interest payments from Energas. The previously mentioned $5,700,000 in Cuban energy receipts during Q1 As you can see from Slide 12, our cash position held by Energas was down slightly at $74,400,000 at the end of Q1 compared to $75,000,000 at the start of the year. Moving to Slide 13. We continue to be focused on reducing administrative Costs. Consistent with our efforts to strengthen our balance sheet and preserve our liquidity, we took steps to reduce Administrative expenses by $1,500,000 in Q1 2021 as shown on Slide 13. The cost savings were primarily driven by lower salaries and reduced legal expenses relative to the same period of last year. While it's unlikely we'll see the same amount of savings every period of 2021, cost saving measures remain in 2. We will maintain a close watch on administrative expenses going forward. Moving to Slide 14. As David noted in his opening remarks, we experienced variability in our collections against overdue amounts owed to us Q1. We received a total of US5.7 million dollars in payments in the quarter, which was below the amount expected of $14,000,000 Cuban collections in Q1 were impacted by a number of factors, against the country and Qubit's efforts to unify its currencies, and I'll provide more color on that point in the next slide. Since the start of Q2, we have received $4,800,000 in energy payments and have received all amounts expected for oil and gas receivables. For our power receivables, we continue to work with our Cuban partners to improve collections and ensure timely receipt of expected payments. I'll provide some further color on this point when I talk about Moa joint venture distributions. Despite these ongoing discussions and collection efforts, we expect collections to be variable through to the end of the year. Moving to Slide 15. In our Q4 results conference call, I mentioned how the Cuban government began a process to unify its Given how Cuban's currency unification efforts favorably impacted labor costs in Q1, but adversely affected our ability to collect overdue amounts owed to us by our Cuban partners, 2. I'd like to spend a couple of minutes reviewing how the unification process is unfolding and what we can expect in the near term. As many of you know, Cuba had 2 currencies until December 31, 2020. The convertible currency or CUC was used by travelers and foreign businesses and was pegged against the U. S. Dollar on a one to one basis. This currency was unified with the CUP or Cuban peso, Currency and its exchange rate against the U. S. Currency will be MXN 24 for every American dollar. The rationale for the currency unification was to support economic reforms launched by the country, harmonize wages throughout Cuba, particularly for individuals not involved in the tourism industry and improve the valuation of Cuba's export goods. Our transition period is underway through June, whereby CUCs are being converted into CUPs. We continue to see no impacts to cash held at Energas All amounts owed to us by our Cuban partners. All payments made to Sherritt will continue to be denominated in U. S. Currency, including Distributions from the Moa joint venture. The only real impact that we may see in the near term relates to the timing of receipts against overdue amounts owed to us. While amounts owed to us won't be devalued or lessened by the currency unification process, As mentioned, the unification process did have a positive impact for our local operations by reducing labor costs as well as third party service costs in Q1. We will continue to monitor this development, but expect this trend to continue in the near term. We have received assurances from our Cuban partners that we will not be any worse off as a result of the unification And the long term impact maybe to the benefit of local operations. Moving to Slide 16. Largely as a result of improved market conditions and strong sales volume, the Mueller joint venture distributed $10,000,000 in Q1 on 100% basis, of which we received our 50% share or US5 $1,000,000 As you can see from the slide, distributions received in Q1 Well, below amounts we received in the same period of last year. In addition, unlike Q4 of 2020, We did not receive any redirected amounts from GNC, our Moa joint venture partner in Q1. Allow me to put some of this into perspective. The Moa joint venture board decides on amounts to be distributed to each partner on a quarterly basis. Factors that go into the decision making process include available cash, prevailing commodity prices, operational performance and costs and planned capital spend. Higher available cash balance at the end of 2019 is why We received a high distribution in Q1 2020 relative to Q1 2021. The lower balance at the start of 2021 was in part driven by the significant distributions in Q4 2020 Compared to Q4 2019, as you can see on the slide. Given prevailing nickel and cobalt prices and Moa joint venture liquidity requirements. We anticipate Moa joint venture distributions through the course of 2021. Just as important, we also anticipate the receipt of redirected amounts from GMC. We are currently in discussions with our Cuban partners to determine the amount and timing of these distributions. The Moa JV has been a dependable distributor of cash over the years. Just since the start of 2019, it has distributed $135,000,000 of cash on a 100% basis. Given its recent performance and the current outlook for nickel and cobalt prices, We expect this track record of success to continue. That concludes my remarks. I will now turn the call back to David for his concluding comments. All right. Thank you, Nathan. I want to talk a little bit about nickel markets here on Slide 1819 and provide a little 2. Context of what was happening in the quarter there, and then we'll take your questions. We're carrying on What we talked about in Q4 in terms of the good start to the year we've had from commodity prices picking up on where 2020 ended, that continues as you can see on the chart on Page 18 there. Cobalt has continued to perform well. It's up 40 odd percent this year. And our analyst expectations for the next couple of years We continue to grow with people now talking about $30, $32 cobalt in the next couple of years and we're obviously seeing the benefit of that in our 2. There are a number of factors that are driving that as markets come back that were pretty hard hit for cobalt Beyond the battery sector, though, we are hit by the pandemic, including aerospace, and in some cases, the hospitality industry, which So somewhat down, but we can see the orders pick up there. Again, some of that is now starting to come back. Cobalt is still a growing product in batteries The ongoing efforts to engineer down the amount of cobalt in a battery by volume, we are still seeing that Demand increase and see it is unlikely that cobalt is ever going to be completely eliminated from batteries Given the unique thermodynamic properties of cobalt that it brings to a battery and the stability it brings to a battery. So cobalt demand seems to be It's Pete again and that has obviously been helpful to us from a cost and a cash perspective. Nickel prices, we've had a very strong second half to the year and we saw the benefit of that in our Q4 distributions from the Molar joint venture. It started out the year well, but it did take and got up as high as I think it was pushing $9 towards the end of February, It has since fallen off a little bit, a bit of a retrenchment, I think, based on the run up. It was also an announcement from Xinjiang in China about their intentions to Start trying to make an intermediary product that could subsequently be processed into a battery amenable form of nickel out of Indonesia. And so we've had quite a number of questions about that. So I'm going Just talk a bit about that and give you a little context around that. Nickel today though is still about $7.80, dollars 7.90 I think to put that into perspective, this time last year, the nickel price was $5.50 an ounce, so much better position than we were 12 months ago. Page 19, you can see a few comments on Tsingshan. Let me just kind of tell you a couple of comments because when the news came out, it was Seeing this quite a revolution and I think it's somewhat because the nickel market performed pretty well, but to some extent it spooked the market and we saw some retrenchment in the price. It has Since stabilized and rebuilding a bit and I think that is what people have kind of adopted to the news and have come to understand what it actually means or does it mean There's some perspective gaining on that, but let me give you make a few comments on that. The first is the process that they announced is that they're going to try and deploy in terms of taking nickel pig iron and then further processing it into a nickel mat, an intermediary product is not I think when this first came out, this was touted as a technological process and breakthrough. The fact that that process has been around for quite 2. Sometimes it's been used by others in New Caledonia. When we were those of you who've been around a while, remember when we were looking at opportunities in Sulawesi 8 or 10 years ago, this Process to go to a map is one of the options we explored for replying in Indonesia ourselves. 2nd, it's a very Carbon intensive process, making nickel pig iron already in terms of putting the raw and lighterite ore into furnaces and Processing into NPI is a carbon intensive process. Further processing that NPI means another round in the furnaces and burning sulphur To get further reactions through our pyrometallurgical process compared to the hydrometallurgical process that we use is energy intensive and emissions intensive, 2. Cobalt byproduct credit that drives and you're all familiar with the impact that has on our indirect cash costs by being able to produce And cobalt as well, the ability to capture and produce byproducts through this power metallurgical process is lost. And in terms of the economics of it, I think there's still work to be done to actually figure out what the capital spend and the operating costs of this are actually going to look like. But because there's already a market for nickel pig iron and people getting paid for the contained nickel and nickel pig iron, it really only works terms of the incremental capital and incremental operating expense, if there's a gap between the realized price for nickel containing the nickel pig iron or ferret nickel products 2. We did see over the course of last year as nickel prices begin to run a bigger gap opening up between LME grade Class 1 nickel and nickel contained in iron type products like NPI and ferronickel. They were trading at a bigger discount to LME than they have in 2. By the incremental revenue from selling MPI to selling the mat. Lastly, and this is more A capacity issue that the process itself doesn't really solve and there's sort of 2 aspects to this. One, there isn't a lot of refining capacity in the world at the moment that can take a nickel mat and further process it Into a sulfate or some other battery amenable to 1 with nickel. Not that that couldn't be done, but that is incremental capital again and incremental time to do that. And lastly, in terms of capacity, it doesn't create more nickel as a whole. The nickel big iron coming out of Indonesia at the moment It's all accounted for as part of the global nickel supply for which demand is forecast to tighten up for a few years. Being able to process nickel pig iron Into a mat and ultimately potentially into some other form of nickel, does shift the supply from one column to another, But it doesn't do anything to create new nickel, new and nickel supply in the aggregate and obviously that can get done, but that takes additional capital So, I think this is a development in the nickel market and the people that we are aware of and will be and will continue to watch As nickel demand continues to grow for electric vehicles and the price continues to climb as people expect, some of these options may be more economic in terms of Meeting the future demand of nickel that we are expecting in the auto industry, but I thought it was important to give you a little context around what the impacts of that announcement actually were and how we view it as it is subject that garnered quite a bit of interest in the market and quite a number of questions from our shareholders over the last few weeks. Overall, in terms of looking what's going on in markets and looking forward, we had talked at the beginning of the year about how it could be a volatile year. Some of those risks still exist as the pandemic continues to unfold. There are obviously a few more chapters in that story to be written yet, but we have seen more confidence amongst analysts of what the year is going to look like. When Mackenzie is now talking about nickel prices remaining around the $7.50 mark for the balance of the year, and in the last few days, we've actually seen some aggressive movement up through that. We'll see that that's 2. I think we will continue to see nickel prices moving up and down a bit as depending on very short term sentiment. I mentioned earlier that we're growing optimism about where cobalt prices are going in the next couple of years now. CRU talking about $32 cobalt 2. Still all this long term interest in both cobalt and nickel driven primarily by renewed interest in electric vehicles and the announcements that we've talked about for the last couple of years continuing commitments Being delivered upon, demand for electric vehicles continues to grow consistent with the forecast despite the economic interruption of the pandemic. General Motors, for example, just recently announced its plan to spend $27,000,000,000 in the next 5 years, Ramping up the TV production and have the majority of it split by 2,035. And importantly as well, while there is lots of discussion of different battery chemistries, Nickel remains the dominant metal in cathodes in the battery chemistries that are being adopted today by automakers. And as we've talked about many times, our Class 1 nickel production, we see ourselves as very well positioned to take advantage of that. It's still true to me that to meet the Class 1 nickel demand that the world anticipates needed for electric vehicles in the next 5 or 10 years 2. It's going to require significant capital investment in the nickel industry. And to make a lot of that capital work, it's going to still take the nickel price north of where we are today. So that's what I want to tell you about in nickel and cobalt markets. I guess just to sum up, we've talked about our strong production quarter. Steve mentioned that we are going to have a more significant annual shutdown in June of this year that will impact Q2 production somewhat, but that is built into our guidance 2. And we're well on track to achieve our guidance with a strong start to the year in Q1. No other changes to our guidance. Steve talked a little bit as well about of the different drivers that are at play in our net direct cash costs with obviously growing Elevating cobalt prices helps us on the byproduct credit, but we're also seeing cost pressures on input commodities and how those two move in relation to one another will determine how Cuban collections continues to be an issue for us. Nathan expanded on that somewhat. Cuba continues to have a difficult time with having lost their tourism season this past winter. No real relief from the U. S. Sanctions 2. And ongoing issues in the pandemic they're addressing with have left them tight for cash. We are seeing cash flow come out nonetheless That operator is what we wanted to tell everyone about this morning. And if you're right now, we're happy to take any questions that anybody might and your first question comes from the line of Don DeMarco. Nathan, I'm just looking at Slide 15, the unification of Cuban currencies, and I see the impacts Sherritt says all payments denominated in U. S. Dollars. Does this suggest that if there is inflation in that unified currency that Sherritt is adequately inflated from that. Sorry, could you repeat the question, please? Okay, sure. Yes, happy to. I'm just looking at Slide 15, the unification of Cuban currencies. And I see that it says all payments are denominated in U. S. Dollars. Does this suggest that If there's inflation in that unified currency that Sherritt is not exposed to any of that inflation? Yes, that's correct, Don. Okay. Thank you. And now are you seeing any signs of the U. S. Administration warming up What do you anticipate might be the benefits as expected when the Biden administration rolls out their 2. I can give a little context around that. I mean, obviously, it's also speculation to someone. But certainly during the election campaign, The Biden administration had talked about reverting back to more of an Obama era type of policy towards Cuba. And you will recall back in the final years of the Obama administration, Obama actually traveled to Cuba. Obama made quite a number of easing of various things from Americans traveling to Cuba to sending money to Cuba, making it easier for people to do business in Cuba. Back to Bomba did about as much as he could unilaterally without getting the actual embargo or the Helmsberg legislation repealed by Congress that the Republican Congress didn't have much interest in doing. Under Trump, we saw all of that reversed. In fact, There was something like 200 separate instances over the 4 years of Trump administration of them tightening sanctions on Cuba, including the implementation of Title III, severe restrictions on Americans sending cash to family in Cuba. They put Cuba back on the state sponsored of terrorism list, which makes it more difficult for financial institutions to engage in the Cuban related transactions, And we've had to navigate all of that over the last few years. What we've been hearing both from the Cubans and from the Canadian government and the interactions that have been had with the American government is that hopefully what they're going to do relatively early on is Please make a couple of gestures in terms of easing the restrictions on sending money to family and the restrictions on the Americans being able to travel to keep with them to visit family. The state sponsorship of terrorism designation complicates things and that there's quite a sophisticated elaborate process that needs to be gone through To review and repeal that again in the Trump administration, put that just in the last week or 2 of the Trump administration. The other challenge I think we have in terms of trying to predict when all this is going to happen is just at what point does this actually become a priority for the Biden administration. What we've kind of heard is that, yes, they intend to do it, but it's kind of not at the top of their to do list just yet deal with the pandemic, deal with their infrastructure bill and immigration crisis on the southern border and China and Iran and climate change. But we are expecting in time that we will see it probably starting with some of the things on remittances and travel to the U. S, travel by Americans to Cuba And then some of the other sanctions that have been put in place by the Trump administration over the full years, all of which cumulatively had the effect of choking off Cuban sources of hard currency, Which obviously flows through to an impact on us in terms of their ability to service their hard currency payables to us. So we do still expect in time that we will see some reversion back to historic policies on that, Which will obviously be beneficial to Cuba, that will ease the restrictions and make it easier for them to access hard currency and the imports they need. And that will then have a knock on effect to us in terms of the liquidity being available in the Cuban system for us to see more in some of the intentions that we Cubans had with us in 2019 2020 before being hit with the pandemic and all these sanctions in terms of paying down that overdue receivable funds. Because the timing of that is up in the air and the evolution of the pandemic is still up in the air, It leaves us with less clarity as to what the exact timing of closing on receivables are going to look like this year. All the conversations we've had, they've been very candid in terms of the position that they are in and their intention to see us repay. But they've obviously got competing priorities down there as well for We continue to work through with them the levers we have in terms of the FX transactions between Moa and Energy Gas and the generating capacity of Moa to find ways to make sure that we're going to see some cash flow there this year. But There are a number of different factors at play there, including the U. S. Cuban relationship that you were asking about. Okay. Thank you for that answer. That's useful context. Yes, very useful. So the timing is uncertain, but there's reason to be encouraged. And it's just a question of when they're going to really prioritize it. Yes. I think just the issue is that Cuba from an American economy perspective is Of an order of magnitude of some of the other things they want to deal with first, which makes sense. So maybe just as a final question, What is the annual budget of your bitumen upgrading project? And just to give us a sense of the magnitude, and are you expecting any catalysts on this project in the next year? So the annual budget is not significant. I mean, it's part of the of our Within our Technologies Group, which I think there's actually more disclosure on in this year's MD and A as we've broken it out as an operating segment. It's all In that annual spend that we in our technologies group as a whole. The catalyst there will be and I don't have a sense of timing is We've actually we've obviously run tests on different sources of bitumen with different bitumen providers and we've been talking to different bitumen providers. The catalyst there which we'll be working towards is actually ideally would be from our perspective partnering with one of those bitumen producers to build a pilot plant of Call it 1,000 barrels a day or something to demonstrate the viability of the process on a commercial scale. The conversations we've had to date Quite encouraged by the results. And so that's what we'll be focusing on 2021 is to try and put something together, some way of financing A demonstration plant or a pilot plant or whatever you want to call it that would then be the precedent step to a full blown commercialization. Okay. Thank you for that. That's all for me. And your next question comes from the line of Tony Robson. Good morning. Thank you for the presentation and 2. Going from the macro level to micro, I apologize for these small accounting questions. The 11 day shutdown at Fort, which will be fully expensive, I guess, will that be capitalized? We'll see is it a CapEx item or will it be run through the P and L. That was the first question. Second question was, there was a comment about there's essentially no further This is in terms of the finance for oil and gas. You were spending about $2,000,000 per quarter on admin. Is there still some residual holding cost there 2. I'll tackle some of that, Tony. And if Nathan has anything to add or if we have any other detail that we can share with you 2. So the cost of the shutdown are all built into and the reality is there's Variety of tasks, some big, some small that all get done in the course of the shutdown. Some of the longer shutdown that gets done every 5 or 6 years Does involve some of the pressure vessels that need to be inspected and changed out. And so it is a bit more significant from a cost perspective as well as a time perspective. But the and elements of it are expensed as maintenance and some of them are capital depending on each of the individual activities That comprise the total scope of work for the shutdown. But to the extent they are in they're due to the That is captured in our NDCC and NPR estimates. To the extent that there are elements that are capitalized, it is 2 in our capital budget guidance for the year. So you'll see all of that and some of the variation that happens to quarter and our capital spending at the Moa JV is driven by the time of shutdowns and the time of equipment deliveries and some of that and I suspect to see some of that In Q2. So you're going to have to remind me what your second question was. Just holding costs for oil and gas. Your admin expenses, for example, were running about $2,000,000 a quarter. It's not big either way. Yes. So we've already taken significant steps to reduce that beginning last year as production was winding down and some of that was reflected in the lower operating costs that Steve told you about in the guidance there. There were further steps 2. And costs that do go away with the actual expiration of the contract. We do have some legacy admin costs, and this is actually tied in and run collectively with our In the last 9 months or so and that will flow through some of the significant reduction in that overall admin rates compared to what it is when it was actually an operating business there. And there are no more questions at this time. I would like to turn the call back over to Mr. David Pathy for closing remarks. All right. Well, I'll be very quick. Thank you once again everybody for joining us. As I say, I know there's a lot going on today and so I know we weren't able to have everybody Join us today that we would have liked to, but we are around Joe and Nathan and I for any questions and follow-up that come out for this and happen to talk to anybody. Beyond that, the next time we'll have a chance to speak to you en masse, it will be about 3 weeks' time. We have our AGM this year is to be held on May 20th. We will look forward to speaking to all of you then. Until then, have a good day. Speak to you soon.