MMG Ltd

HKEX:1208

Earnings Call Analysis

Earnings Call Transcript 2022-Q2

[Operator]

Good morning, and welcome to MMG's 2022 Interim Results briefing. Presenting today are MMG interim CEO Li Liangang and CFO, Ross Carroll, together with other [indiscernible] members joining us as well. The slides for today's presentation are being webcast in both English and Chinese. They can also be accessed from the investors and media section of the MMG website. I will shortly hand over to the Liangang and Ross to take you through today's presentation at the end of which we will open the line up for questions. For those wishing to ask questions, please ensure you're accessing this presentation via the teleconference details that were included in the invitation for today's session and not just the webcast. I will now hand over to Liangang.

[Liangang Li, executive]

Yes. Thank you, Andrea, and good morning to everyone, and welcome to MMG's 2022 interim results briefing. As always, at MMG, our first value is safety. We are consistently pushing to eliminate all injuries from our workplace. Our total recordable injury frequency rate of 1.09 in 2021 was the lowest of all ICMM members. And for the 6 months ended by 30th of June 2022, our total recordable injury frequency rate was 1.49, continuing to rank right at the bottom of this index when compared to our global mining peers. Besides the outstanding safety performance, as a member of the ICMM and through our commitment to global sustainability related initiatives, MMG remains committed to delivering sustainable development. For more of our sustainable performance, including our 2022 sustainability report and a summary of our work on environmental, social and government initiatives, please attend briefing at 1:00 p.m. Australian Eastern Standard Time today.

Now I will provide a brief overview of the first half 2022. I will shortly hand over to Ross to discuss the financial results in more detail. The first half of 2020 provided some significant challenges for MMG. Despite copper and zinc prices reaching multiyear highs earlier in the year, operational disruptions across the business weighted heavily on the financial performance. Profit of USD 80 million attributable to shareholders was 80% below the record level set in the same period of 2021. Copper equivalent production was around 184,000 tonnes for the half, a decline of 28% of the period -- on the prior period.

I will discuss each of these operational challenges in more detail throughout my presentation. However, it is important to note that MMG is still focused on growth and significantly improving upon financial and operational results that were delivered in this period. We are advancing products that will enable the current portfolio to deliver well in excess of 550,000 tonnes of copper equivalent production, and we also have a strong balance sheet to pursue external growth opportunities as they arise.

We are extremely positive on the outlook for our core commodities of copper, zinc and cohort. We view the recent price correction as temporary and note that each of these commodities are facing chronic supply shortfalls across the next decade as the world pursues a lower carbon future. Looking at our operating performance and one of our core values is that we want to do better. Improving our operational and financial performance is a challenge that we must meet for our shareholders. At Las Bambas during the period, we reacted quickly to optimize mining activities from Ferrobamba while community actions disrupted our mine plan.

Through ongoing improvement programs, we are able to deliver higher production rates in the first quarter when our operation was not impacted by these community actions. At Kinsevere, we are confident that production will return to higher levels in the second half with the improved grade and recovery now that many activities have resumed in June of this year. As we look to the rest of 2022, MMG will continue to drive a culture of operational excellence.

We expect continued strong plant performance at all our operations with less disruption to our mining activities than the first half. Our ongoing focus on cost control will also be a feature with even greater importance in this current inflationary environment. We saw considerable macro volatility during the first half of 2022, with the Russia and Ukraine conflict rising energy costs, China lockdowns, supply chain pressures and higher inflation. These factors have weighed on our prices in recent weeks, but we view this as temporary presence, and our investors will understand that mining is a long-term gain.

The period from now to 2050 will be dominated by the shift from nonrenewable high-carbon energy to renewable lower non-emission technologies. Likely in the shift to electric vehicles, the development of static storage to smooth the peaks and troughs of wind and solar generation or the shift to renewable supply chains for materials, copper, zinc and cobalt will be in higher demand. MMG is delivering with commodities that are essential to the world's transition to a low-carbon economy. We intend to leverage this megatrend with a portfolio positioned to outperform over the coming decades, and we will continue to focus our growth plans on these critical minerals.

Now I would like to briefly touch on the current situation in the country of Peru. As you are all aware, members of the Ferrobamba and Huancuire communities entered the Las Bamba's site on April 14 this year. For safety and security reasons, we were forced to shut down Las Bambas' production for more than 50 days and production resumed on 11th of June. Our Las Bambas' team has been working closely with the communities involved as well as the Peruvian government to review all existing commitments with each community through dialogue tables.

Since this process began, our Las Bambas' colleagues have participated in more than 66 meetings across the 6 communities with more than 47% of all commitments reviewed in coordination with the government and community members. The dialogue tables will continue through until late August. We continue to seek sustainable solutions for the current issues in close coordination with our stakeholders. We are also committed to reforming our current process in close coordination with communities and governments to ensure community and regional development priorities are closely linked with Las Bamba's development plans. I will now hand over to Ross to take you through our 2022 First Half financial results in detail. Ross?

[Ross Carroll, executive]

Thank you, Liangang, and welcome, everyone, who is on the line with us today. Firstly, Liangang explained the first half of 2022 has proved to be a challenging period for MMG. I will discuss it in more detail later, but the overwhelming impact on our financial results was the lost revenue due to the incursion at Las Bambas, which caused us to shut for 50 days. Revenue decreased by 42% for the period, and this was due to lower production at all of our sites, leading to a net profit after tax of $89.8 million, some 85% lower than the same period last year. The broader group NPAT includes $79.5 million attributable to MMG shareholders, with the residual profits to minorities, reflecting the 37.5% interest in Las Bambas that's held by our joint venture partners.

This slide sets out the EBITDA bridge between the first halves of 2021 and 2022 and provides investors with some detail in change in financial performance between the periods. The first point for investors to note is that despite average LME, cash prices for copper [indiscernible] higher year-on-year, the majority of Las Bambas sales contracts are on a 4-month settlement basis, which meant the realized copper prices for Las Bambas in the first half of 2022 were actually 6% below 2021 following the sharp decline in the copper price between April and June this year. This mark-to-market impact for copper offset the higher realized prices for zinc, lead, gold and moly and resulted in a negative $20 million impact to EBITDA. Lower sales volumes across all our operating sites impacted EBITDA by over $1 billion. The 50 days forced shutdown, Las Bambas accounted for over $800 million or 80% of this decline. And as you would have seen from the July [indiscernible] we had lower production at the remaining 3 sites as well.

If you exclude the impact of inventory movements, total operating expenses were $45.2 million lower in the first half of 2022. The full details of these cost movements can be found in the interim results announcement, but the break is done in more detail. Las Bambas costs were 11% or $61 million lower due to lower activity due to the site incursion, lower copper concentrate transport costs and royalty payments due to lower sales volumes. These were partly offset by increased costs caused by higher diesel and energy prices, in particular, and then generally higher consumable prices.

On the other hand, Kinsevere costs were around $17 million higher compared with 2021. The main driver here was the resumption of mining activities in April 2022 and higher sulfuric acid costs. For the Australian operations, production expenses were largely in line with the first half of 2021, with higher prices for energy and consumables and increased mining contractor expenses offset by FX movements with the weakening of the Australian dollar.

The next part at the right shows a favorable stock movement in the amount of $112 million. The main driver of Las Bambas was that there was a favorable stock movement of $140 million due to a higher net buildup of finished goods following the community disruption in the second quarter and large [ swells at the port ] in late June. We finished June with around 74,000 tonnes of copper in concentrate stockpiles at site.

Moving to the right of the chart. Admin and exploration expenses were broadly flat year-on-year and the USD 17 million increase in the other category relates to favorable foreign exchange rate impacts, partly offset by the gain we realized on the New Century Bank guarantee in the first half of 2021. The next slide gives our investors an indication of our pure earnings leverage to changes in commodity prices and FX. Copper, zinc in the A dollar, U.S. dollar have the biggest sensitivity with a 10% -- $0.10 per pound change in the copper price leading to a $65 million full year impact on EBIT, a $0.10 change in the zinc price leading to a $45 million impact and a 10% movement in Australian dollar leading to a $36 million impact.

Probably the one thing to note here is that the company has a series of commodity hedges to manage a risk of price variability and to protect the strong free cash flow generation of the business. The majority of these instruments have a collar structure that provides for price protection and retain some upside exposure should prices rise further. The hedge range for copper and zinc is broadly between $4.45 and $5 a pound for copper and $1.68 to $1.90 per pound for zinc. Obviously, anything below that range, and we have downside protection and anything above that range in our price participation on the hedge tonnes is capped.

Moving on to our debt reduction. As the chart on the left shows, over the last 6 years, we've been successful in reducing our overall debt levels since developing Las Bambas and Dugald River. Recently, reducing our gearing to upto just over 50%. In the first half of 2022, however, our net debt temporarily increased by $173 million to just over $5.25 billion due to the forced production shutdown at Las Bambas. Importantly, this excludes the cash flow impact of around 74,000 tonnes of copper that was stockpiled on site at the end of June, which is worth approximately $600 million. The right-hand side chart shows our updated term debt repayment profile. Despite the operational disruptions and disappointing financial performance in the first half, we were comfortable enough in our liquidity position to make a prepayment of $500 million on the Las Bambas project facility. This will result in gross interest cost saving of around $180 million over the life of the facility.

And pleasingly, we've maintained very strong relationships with our funding partners. These partners are very supportive and flexible in their approach to funding MMG and helping us to grow in the future.

Now to our capital expenditure outlook. We now expect total capital expenditure in 2022 to be between $650 million and $750 million. This includes $400 million to $500 million of Las Bambas which is subject to receiving timely access to Chalcobamba and having continued access so that we can progress our other projects.

At Kinsevere, the capital expenditure plan in 2022 is approximately $100 million to $150 million with the majority of that to be spent on the KEP project. With the ongoing development of these 2 projects, CapEx is expected to peak in 2023 and 2024 at approximately $850 million to $900 million per annum.

Despite the increase in CapEx over the coming years, the chart on the right demonstrates our projects will deliver significant value for shareholders when compared to recent greenfield copper developments and copper M&A transactions. For all greenfield copper developments that took place between 2010 and 2020, the average cost per tonne of yearly production was around $15,000. To acquire new copper production, you're probably going to have to pay upwards of $15,000 to $20,000 per tonne based on recent precedents, contrasting to the cost of delivering incremental production from Kinsevere and Las Bambas, and the capital intensity is around $7,000 per tonne and $10,000 per tonne, respectively.

I will now run -- quickly run you through a few of the key points in relation to our 4 operating sites.

In the first half of 2022, we've already discussed how Las Bambas production was impacted by community protests. This resulted in a 44,000 tonne reduction in copper production from the first half of 2021. EBITDA was 65% lower due to lower copper and moly sales. And C1 costs increased to $1.27 per pound compared to $1.08 per pound in the same period last year. The increase in C1 was a function of higher energy and consumable prices, lower copper production and higher selling expenses per unit sold.

As some Huancuire community members are still in the Las Bambas property, the Chalcobamba development continues to be suspended due to safety reasons. MMG remains committed to working closely with the government of Peru and the community members to deliver its commitments and to engage in transparent and constructive dialogue with the aim of reaching an agreement. When an enduring agreement is reached, Las Bambas will continue with the development of the Chalcobamba pit. We now expect Las Bambas to produce around 240,000 tonnes of copper and copper concentrate in 2022. In the second half of 2022, we will focus on optimizing mining activity at the Ferrobamba pit to access the high-grade ores.

Full year C1 costs are now expected to be between $1.50 and $1.60 per pound. The increase is a result of lower production rates due to operational disruptions in the first half as well as the impact of broader mining industry cost pressures. Looking towards the medium term, however, the Chalcobamba development is expected to support a production increase at Las Bambas to around 380,000 to 400,000 tonnes of copper in concentrate per annum. And accordingly, unit cost performance is expected to benefit from the higher production rates as well.

Moving to Kinsevere, where copper cathode production fell by 3,000 tonnes compared to the first half of 2021. This was due to the processing of lower grade stockpiles and third-party ores in the first quarter. However, with the resumption of mining activity in April as well as the supply of high-grade ores from third parties in the second quarter, we have seen a production increase in the second quarter that is expected to continue for the remainder of 2022. Processing plant performance was strong with an increase in recovery rates despite the lower average feed grades. And EBITDA was $53 million in the first half of 2022, 36% lower than the same period for last year. This is the result of lower production, higher mining expenses with the resumption of mining activities and the broader impacts of cost escalation across the mining industry.

Following the approval of the Kinsevere expansion project in March, civil construction works commenced during the period as planned. The expansion project will extend Kinsevere's life by 13 years and take annual production up to more than 100,000 tonnes of copper equivalent. For 2022, MMG's full year guidance for copper production at Kinsevere is now expected to be at the higher end of the guidance range of 45,000 to 50,000 tonnes. C1 cost remains in the range of USD 2.50 to USD 2.80 per pound. Following the completion of the expansion projects, lower unit cost can be expected in the Kinsevere driven by the higher production levels and the significant cobalt byproduct credits.

At Dugald River, we saw production of 80,000 tonnes of zinc in the first half of 2022, 11% lower than last year. The reduction in production was a result of the lower ore mined from January to mid-February, when labor availability at the mine was impacted by Queensland's COVID-19 quarantine requirements.

Despite the lower production, Dugald River EBITDA of $124 million was 22% higher than the first half of 2021 due to higher zinc and lead prices. Via treatment charges, energy costs and diesel costs, as well as lower production volumes, increased C1 cost to $0.83 a pound compared with $0.63 a pound in the same period last year. We maintain a production guidance for Dugald River in 2022 of 170,000 to 190,000 tonnes of zinc and zinc concentrate. Meanwhile, the C1 cost is now anticipated to be in the range of $0.85 to $0.95 a pound.

The key drivers of the cost escalation include higher treatment charges and selling costs and higher energy and consumable costs as well as higher mining contracted costs. MMG is currently transitioning towards an owner mining model at Dugald River, which is expected to drive improved productivity from 2023 onwards.

And finally, moving on to Rosebery, Rosebery produced over 24,000 tonnes of zinc and 9,000 tonnes of lead during the first half. This was 37% -- 32% lower than the same period of last year. The lower production relative to the same period last year was largely due to lower mining rates and ore grades. The lower mine productivity was a function of ongoing workforce availability issues due to COVID-19 and the general tightness of skilled mining labor across the industry as well as the current phase of the mine plan, which is giving us access to lower-grade stopes.

Rosebery EBITDA of $56 million was a 47% decrease when compared to the first half of 2021, and that was due to lower sales volumes in line with the lower production. C1 costs for the first half were $0.38 a pound compared to negative $0.52 a pound last year. The higher C1 costs were mainly attributable to put lower production volumes, including lower contribution from byproduct credits and highlight treatment charges.

In line with prior guidance, we expect Rosebery to produce between 55,000 and 65,000 tonnes of zinc and zinc concentrate in 2022. C1 costs are estimated to be at the higher end of the range of $0 to $0.15 a pound due to the impact of higher treatment charges, lower byproduct credits and the broader industry cost pressures.

Looking forward, we remain fully committed to extending the life of Rosebery further. Resource extension drilling is yielding encouraging results and work continues to find longer-term tailings management solutions.

I will now hand you back to Liangang to wrap up the presentation. Thank you.

[Liangang Li, executive]

Thank you, Ross. Now we are moving on to MMG's strategy and outlook. The first half of 2022 was [ moderated ] by the combined challenges of forced operational shutdown at Las Bambas, workforce availability impacted by COVID-19, a sharp decline in commodity prices from April to June and cost pressures associated with rising energy costs and higher inflation.

In the challenging circumstances, we made a net profit attributable to shareholders of USD 80 million. For the full year, we expect to produce around 290,000 tonnes of copper and copper concentrate and 225,000 to 255,000 tonnes zinc and zinc concentrate. We will continue to advance the Kinsevere Expansion Project and develop Las Bambas as well as maximizing Dugald River and Rosebery mine life extension potential.

We'll also continue to generate strong cash flows that can be deployed towards further debt reduction, towards accretive opportunities within our portfolio, or towards external growth opportunities.

As a major supply of metal is linked to a low carbon future, we have launched our climate resilience strategy, which targets a 40% reduction in emissions by 2030 and Net Zero by 2050. From the perspective of community challenges, we look to build enduring agreements through government dialogues. Now our teams are working hard to evolve our strategies to work closely with communities and local, regional and national governments.

Copper, zinc and cobalt are critical raw materials and will benefit from rapidly growing demand for renewable energy investments, electric vehicles and urbanization. Looking beyond 2022, we remain confident about our overall market opportunities and outlook. We will continue to pursue this planned growth. Our Kinsevere Expansion Project and Chalcobamba development are expected to deliver additional copper equivalent production of more than 150,000 tonnes per annum by 2025 compared. This is nearly 30% growth on 2021 production levels at very reasonable CapEx.

And finally, our portfolio of future-focused commodities including copper, zinc and cobalt are at the core of the world's transition to a low carbon economy, and we are very positive on their future. On behalf of the MMG management team, I thank all our shareholders, host communities, contractors and all MMG employees for their support and effort.

Thank you for your time today. I will now hand back to the moderator, who will open the line for questions.

[Operator]

[Operator Instructions] Your first question comes from [ David Wei with BosValen Asset Management ].

[Unknown Analyst]

This is David from BosValen. I just have a quick question for your like full year guidance of the C1 production cost of USD 1.50 to USD 1.60. I wonder whether this includes the $97.4 million care and maintenance cost you excluded in the first half calculation. If this is not included, does it mean the production cost in the second half will go significantly higher[indiscernible].

[Ross Carroll, executive]

Yes. Thanks for the question, David. The C1 estimate for the full year does not include the $97 million. The reason why we are starting to see the cost of really escalating in the second half is that there's sort of a couple of one-off and deferral type issues.

Firstly, we're just about to renegotiate our labor agreement, which will push salaries up in the second half, but there's also a bonus for that renegotiation. And then the other thing is that in the first half, we had less concentrate shipments. So the C1 is calculated on production, but the concentrate transport costs will be calculated on sales. So we expect to have more sales in the second half relative to our level of production.

And then the third one is because of all the disruption during the first half, we're finding that we didn't have spent as much money as what we expected on some social programs, development costs and the like. So there's a bit of a backlog from the first half to get pushed into the second half.

And then the other issue is that the inflation is really starting to hit in the second half of the year. I mean I think it started to move during the first half. But to give you an idea for -- last year, we -- our diesel prices were around $3.17 a gallon. And this year, we're expecting to pay $4.99 a gallon. So we're sort of seeing the consolidation of those price increases for a full half-ear period where, as I said, going through the first half was a bit of a transitional phase. So hopefully, that answers your question. We also expect that obviously, that C1 cost will come down significantly when we can get Las Bambas back producing to where it should be, which is somewhere between 350,000 and 400,000 tonnes a year.

[Unknown Analyst]

Sure. Understood. So in my calculation, on a weighted basis, actually, this means that cost in the second half probably will go up to 1.7 or 1.8, right?

[Ross Carroll, executive]

Yes, that's correct.

[Operator]

Your next question comes from Lawrence Lau with BOCI.

[Lawrence Lau, analyst]

Just got a few questions regarding your result. First off, as Ross has introduced, the realized price of copper in the first half was significantly lower than the market price because of all these hedging and forward agreement. I also noticed that you have still have those sort of agreements as at the end of the first half. And can you tell us more about if the, say, market price for metal remains at the same level? What do you expect for the realized price in the second half compared with the market price?

And also for the hedges, you still have outstanding as at the end of the first half this year. How much the percentage of those will be settled next year?

And second question is regarding your Chalcobamba development. Based on the current progress of your dialogue with the local community, what do you think is the realistic timetable that you can have the project start to -- start the development again, and we can see output from Chalcobamba?

[Ross Carroll, executive]

Yes. Thanks, Lawrence. Perhaps just in regard to your first question about the prices. And maybe I didn't explain that well enough. We -- the hedges we have in place were actually collars. And effectively for copper, and this is on average, the floor price was $4.40. And then the collar price was over $5. So what I meant is we had exposure within that price range.

Now the -- we -- if the price drops below the $4.45, it means we make a hedge profit. So the hedges had no impact at all on the realized price. Actually, the hedge -- they're all hedged profits. They actually helped the price. But what that comment is really about is we had most of our sales in obviously, January, February and March. And then in April, we had the incursion. But the -- with our customers, they can nominate ahead of time what is the period for calculating the price. And as it turned out, our customers were largely nominating what we call a 4-month quotation period. So that means that if we do a sale in February, it was actually settled at the average price for June. So it's just that delay in timing that can sometimes work for you or sometimes work against you that led to the lower realized prices. Does that make sense?

[Lawrence Lau, analyst]

Yes, yes, understood.

[Ross Carroll, executive]

Yes. And then with the hedges, we've still got the overall, will all sort of be completed this year, but all those hedges are in the money at the moment. So -- and for instance, I think the only way we would start to lose money on those hedges is if the copper price went over $5 or the zinc price went over $1.90. So yes, so it -- I mean, probably be a good problem to have because the hedges aren't of at significant volume. So yes, so -- but -- so it's unlikely we would ever see losses in those particular hedges, very unlikely.

And then just in regard to Chalcobamba. It is very difficult for us to estimate when we'll be able to start -- restart the development there. We're hoping that the dialogue tables is successful, and we can start this year. But at this stage, it's -- we can't guarantee that -- and as we've said before, not having Chalcobamba is hurting us because we really needed the high-grade ore from Chalcobamba to offset the decline in the Ferrobamba ore grades.

[Operator]

Your next question comes from Chris Shiu with BosValen Asset Management.

[Chris Shiu, analyst]

I've got a few questions. The first one is, well, we don't know the outcome of the negotiation yet. And I'm just wondering, so I mean, assuming that in case, I mean, there is any disruption again, what is the cash burn rate per day or maybe per month if we don't have any production as in the case of May 2022?

[Ross Carroll, executive]

Chris, but your cash operating costs are about $100 million a month at Las Bambas. And it certainly depends on how prolonged any stoppage uses to how much we can reduce those costs. Obviously, if it's a longer stoppage, which we obviously don't want, it gives you more opportunity to reduce those costs.

But on a -- realistically, we sort of -- cost is basically $3 million a day to run the mine. And if we do have a stoppage, you can probably reduce that to $1.5 million to $2 million. But it very much depends on the length of the stoppage.

[Chris Shiu, analyst]

Got it. And the second question is, so since the illegal entry into your properties by some of the community members in late April, actually, copper prices have fallen by close to like 20%. And I'm just wondering, I mean, has the attitude of the different parties, including the communities, the government, I mean, has it changed to any extent? I mean, has the government become more proactive in promoting the dialogue?

Because I mean, copper prices are going down and they really need the production. And I mean, has the community sort of become maybe slightly less demanding because you see that copper prices have gone down and so on. So any comment on that front?

[Liangang Li, executive]

Yes. Thank you, Chris. We will have try to take your question twice in the AGM for stakeholders relations.

[Ross Carroll, executive]

Thanks for the question, Chris. It's a hard one to respond to. You will always see [ projected ] demand go up as copper prices rise. And therefore, you expect that to go down a little bit when you see the prices start to fall. We much more like to focus on getting the dialogue process constructive, getting the role of governments involved and running a very good and open process through the last couple of months. And that's where I think we're getting more cooperation. So it's not necessarily that the -- I'm sure that the price dropping is making everybody a little more worried than they were. But what we're really heartened by and encouraged by is the quality of the dialogue we're having, the role of government getting involved.

We're now a couple of months into this process, and it still remains constructive and with great support. And I think we're all feeling better with each passing week around our ability to come to an agreement. There is still very complex. There is still a lot of work to do. But the challenges on the table, we're working through them. And it's great to see the government really focusing on its development role as well because we can't do this alone. We need their help.

[Chris Shiu, analyst]

Got it. And my last question is regarding the logistics and also the speed of transfer of the stockpile at Las Bambas. So if I'm not mistaken, as of the middle of the year, June 30, the stockpile was like 74,000 tonnes. And then as of the date of announcement of the second quarter operating results, which was July 25, it was 66,000 tonnes. And as of the latest announcement date, I mean, yesterday is 60,000 tonnes, right, if I'm not incorrect on these numbers.

So it looks like the run rate is around maybe 6,000 to 8,000 tonnes per month, around that number? Is that the right number for the speed of transport for the inventory? And if that's the case and if we try to annualize that number for the remainder of the year, then we will still likely have quite a bit of inventory as of the end of 2022, right?

[Ross Carroll, executive]

Yes, Chris, I think your analysis is right. It's just a little bit hard to predict because we don't know if we're going to get other roadblocks. And then it also depends on our production levels as well. So obviously, the more we produce, which is a good thing, the less quickly we can run down the concentrate stockpiles. But I think at this stage, yes, we expect that it will take us into the first half of next year before we get the stockpiles at site down to a low number.

[Operator]

[Operator Instructions] As there are no further questions at this time, that does conclude our conference for today. Thank you for participating. You may now disconnect.