Q4 2011 MFC Industrial Ltd Earnings Conference Call

Mar 30, 2012 AM EDT
Thomson Reuters StreetEvents Event Transcript
E D I T E D   V E R S I O N

MFCB - MFC Bancorp Ltd
Q4 2011 MFC Industrial Ltd Earnings Conference Call
Mar 30, 2012 / 02:00PM GMT 

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Corporate Participants
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   *  Michael Mason
      Allen & Caron - IR
   *  Michael Smith
      MFC Industrial Ltd. - Chairman, President, & CEO
   *  Rene Randall
      MFC Industrial Ltd. - VP

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Conference Call Participants
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   *  Graham Tanaka
      Tanaka Capital Management - Analyst
   *  Joe Pratt
      Wells Fargo Advisors - Analyst
   *  Bill Horn
      First Angel Capital - Analyst
   *  Jeff Geygan
      Milwaukee Private Wealth Mgmt - Analyst
   *  Russell Lynde
      Park West - Analyst
   *  George Burmann
      J.P. Turner and Company - Analyst

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Presentation
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Operator   [1]
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 Good morning, and welcome to the MFC Industrial fourth-quarter 2011 results conference call. All participants will be in a listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. Now I'd like to turn the conference over to Michael Mason. Please go ahead.

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 Michael Mason,  Allen & Caron - IR   [2]
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 Thanks, Emily. Good morning and welcome to the MFC Industrial Ltd. investor conference call to discuss the results for the year ended 2011. I'm Mike Mason of Allen & Caron Investor Relations. Before we start the call, there are a couple of items I need to cover. Many of you received a copy of the press release; it was released this morning, March 30, at 7.30 AM Eastern. If you did not receive a copy of the press release, it is posted on the MFC website and in the client section of our website at allencaron.com. You may call our office in New York at 212-691-8087, and we will e-mail it to you right away. It is also posted on Yahoo Finance and other numerous sites. A replay of the call will be available through April 7, and may be accessed from North America by calling 877-344-7529 and entering conference number 10011396. International callers should dial 412-317-0088. This call is also being broadcast live over the Internet and may be accessed on the Company's website at mfcindustrial.com. A replay of the webcast will be available immediately following the call, and will continue for seven days.

 Certain statements in this conference call will be forward-looking statements which reflect management's expectations regarding future growth, results of operations, performance, and business prospects and opportunities. For detailed information about risks and uncertainties that could cause actual results to differ materially from those expressed or implied, please refer to the disclaimer for forward-looking information contained in today's press release.

 Additional information about these and other assumptions, risks, and uncertainties are set out in our MD&A, filed with the Canadian securities regulators, and filed on Form 6-K with the SEC, and our Form 20-F. The Company will make a brief presentation of the results announced this morning and then open the call to questions.

 I would now like to turn the call over to Mr. Michael Smith, CEO of MFC Industrial. Hi, Michael.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [3]
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 Thank you very much, Michael, and good morning, everybody. First of all, I would like to just review 2011, the positives and negatives to it, and then bring you forward to this year and what we see. In 2011, our revenues did not meet our expectations. This was our first full year in the commodity business, and I believe they didn't meet our expectations primarily because of the fourth quarter. The fourth quarter, we saw a tremendous amount of apathy from our clients, where no decisions were being made, and I think this was a general feeling in many, many businesses. Of course, the credit at that point became quite extreme, and still today is causing problems, even though the apathy factor has gone away tremendously.

 In addition, in the fourth quarter, we had projected more revenues from our royalty, and we were off by about 1 million tons or $9 million, and that was really through mechanical breakdowns, several of them. And that seems to be solved at this particular period of time. So we had some quite serious disappointments, but the year wasn't a total disaster. We did mark it to market, some long-term investments, which we have been targeting as takeovers. And we will probably continue to increase our positions in those targets as we go forward. We did expense our stock-based compensation one time, which we believe is the proper way of doing it, and that equaled $0.35 a share, so that was a one-time charge to earnings.

 The balance sheet itself is in good shape. I mean, our ratios are good; cash, we have $390 million; working capital is $361 million. Book value is still $546 million. Book value per share, about $8.74, and we have lines of credit of $360 million. So the Company is in a good position going forward, and now we have to take advantage of opportunities as we see them.

 The [vestment] program, which we announced in September of last year, we've decided not to go through with that. And I can give you the reasons. Number one, we have done the Pea Ridge project in December of last year, which is important for us, and I'll talk about that later. But what we are seeing now -- you know, last year our goal was to try and do three acquisitions. We were unable to complete those acquisitions. And I had a shareholder the other day say to me, aren't you disappointed that you didn't complete those acquisitions? To be frank with you, I am not disappointed. The mathematics must be there -- otherwise, we'd just be risking our capital. That's the first thing we must do, is look to protect the capital of the Company, and then see if we can do acquisitions that make some sense.

 But I will say one thing. Now we are seeing, not the end of acquisitions -- we can actually foresee some acquisitions where we can see the light, where they start to make some sense. Acquisitions do take time, and you could -- if you rush it, lose patience, you will make mistakes. The Pea Ridge project, I think, took over two years, 2.5 years. Other projects the same.

 But I'm feeling better now. I think it's best that we keep our capital intact. Because what we foresee now, we believe we can get a greater return and -- all the shareholders. One of our shareholders suggested a while ago that we do a buyback for common shares. And we've done that. We've now announced that, and we are now proceeding with that. This just makes very good common sense for the Company -- the cost to do it, we've hired Georgeson to act as our agent with this buyback, and it's negligible. But it does give an economic benefit to our shareholders, and there's thousands of them that who have odd lots that have occurred over the years, because we've done so many spin-outs and dividends and shares. This is a good boon for them, and I think believe, comfortably, it will be a good mathematical savings for our Company.

 During the year, we did announce an increase in our dividend by 10%. We think this is appropriate. And we are hopeful we will attract additional shareholders who are looking for growth in dividend. So the dividend -- I think one of the dividend payments is paid today, which will be positive for all. And, hopefully, in the ensuing years, we can also increase that dividend.

 Let me move on to Pea Ridge. I think one of the most important things today, which you can see, is that we have completed a compliant technical report for the historic resources, done by Behre Dolbear, who are a major, high-reputation mining consulting firm in the US. And what they have said in their consulting report is that there is still substantial mineralization for production at the mine site. And that's the most important thing for us. The work that we have done to date -- they have concluded, as well, that there is mineralization there. And that's the first step in the step now to rationalize these assets and get some returns.

 But let me back up. The reason we did the Pea Ridge project was for several reasons. One, when we first saw it, it had lots of problems -- international shareholders, creditors, older guards, everybody fighting, Chinese in there. It was a typical type file which we like, and slowly we went into that project. We were bought out once, made a profit, went back in. And, eventually, with the help of our partner, sold it and took over the project in December of last year.

 The project is interesting for several reasons. One, it is in the USA, which, to us, is almost always a positive. The actual infrastructure is really close to the Mississippi, which will allow eventually distribution of any product down the Panama Canal for China trade --f that's what we decide is the right market for the product. But what mine -- the historical mineralization in the mine shows that it has a high grade of magnetite. And that high grade of magnetite could be as high as 69 FE. And that allows us then to sell that product into different markets, which are valued high in excess of the average iron ore price. So that gives us a great goal to work towards if -- when we put this into production.

 And I should tell you, this mine produced, until 2002, highest per ton of iron or just regular 62 FE at the at that time, was about four -- about $12.50. Iron ore didn't really pick up until 2007, when it was $36 a ton. And yesterday, it closed, I think, at $147 a ton for the 62 FE. And of course, our magnetite is rated higher than that, in our belief, from our historical information, which we have published. Those reports, by the way, are also available on the SEDAR system. But you can call our office and we can send you one, as well.

 With this Pea Ridge project, we have a partner. He's an equal partner, but also a working partner, and we need a working partner. It's really delightful to have somebody in the area who can handle the permits, some construction, and other items. And with him and with our professional consultants, and our people, I think we can expedite this project in a much more rapid manner. It couldn't be done without his talent.

 And right now, what we are doing -- we are proceeding to make sure all of our assumptions are correct. We are proceeding to dewater the mine, and of course we have the tailings. The tailings are an extra, which we will look at individually to mine. And probably -- but who knows yet? -- those tailings might be mineable in the near future.

 Pea Ridge is a very, very serious investment for MFC, and it's a major project, so we will be spending a lot of time on it. Please bear in mind, this type of project is the type of project which we need to do and have done in a smaller way elsewhere. The idea here is that MFC will, by way of an offtake agreement, will sell a commodity in the marketplace. And it would make a profit from doing that. At the same time, with this partner, it would enjoy an investment on -- a return on its investment for the actual operations of the mine.

 This is really the way most companies in our business operate. They have a continuous source of supply of production. To us, this fits very much into our mandate. And if we do this and we provide service to our clients, logistics, and especially finance, I think that's a big start in a direction creating global supply-chain company.

 We have to say, how do we want to be in the future? And I think I mentioned to you before, the Company which we would like to be appear to is a Company called Noble Commodities based in Hong Kong. Noble is the most phenomenal company as far as growth and return is concerned. Noble's sales in '97 was $866 million. 10 years later, their sales were just $24 million --$24 billion. Last year they were $81 billion. So you can see -- and they did the same thing. They have production, they have logistics, they have finance, and they provide service to clients. And we would like to be like them, and some day to be a peer.

 The stock market has appreciated what they've done. In the last five years, I think, the return in the stock market has been over 450%. And if you go back to the day of that public issue, it's been into the thousands and thousands and thousands of their return to the shareholders. So if we can somehow get a following as a junior Noble, or as a potential Noble, and become its peer, it would be great. And that's our long-term goal.

 To get there, though, we definitely need more people. And we have identified some people now. I should not be in the CEO role or the CFO role. We need, for that rapid growth, to obtain those people, and that's a major thrust as we go forward.

 I think that is all of my little speech today. And we would like to throw the phones open to questions.



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Questions and Answers
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Operator   [1]
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 (Operator Instructions). Graham Tanaka, Tanaka Capital Management.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [2]
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 Congratulations on the progress you've made. Just to start off on the big picture, and there's so much you're doing, but I'm just wondering how many targets you have now and kind of relative size? And you seem to suggest that they might be closer, or you're more optimistic about the returns. I wonder if you could talk about that.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [3]
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 I think, Graham, last year I could see the target, but I couldn't see the light at the end. But I could see the end. Now I can see the light at the end. And we had two of substantial size. You know, our targets are always problematic, right? Because we're looking to pay the minimal amount for them. But we must be very careful on the underwriting, and be patient. And we are working hard in that area.

 And those targets, you should know, also just are a complete complement to the Noble dream, if I could say it, or the Noble concept.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [4]
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 So they are in the -- are they in the sort of the logistics or the natural resource part of things, or both?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [5]
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 Both, they are in both. So they would fit perfectly into the Noble concept.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [6]
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 Hopefully, do they -- would they diversify the Company in terms of being not just in the iron ore chain?.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [7]
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 Yes. Yes. They are in other products as well.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [8]
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 And what kind of timing to you think that might be? Is it still too far away to talk about that? Or are you -- how many years are you in on these projects, and discussing them? And how far out do you think that might be?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [9]
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 You'd love it, Graham. The other day I met -- a meeting with bankers in February, and there were 18 bankers there. And I said, guys, you know, this is really good. Because we met once before, last year in February, and now we're meeting again this February. So that means we should be about six months away from closing. It takes a while for them to face reality, right? Plus, they had to get over their year-ends, which are very difficult for bankers, as you know, around the world to bridge that year end.

 And so it's -- once you've been through it for a year and a bit, I think you're getting closer. And I don't want to promise, but I want to say that reality comes to everybody, and we are realistic, and they enjoy that.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [10]
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 Okay. So the structure of these deals, if you were able to do them, would be similar? In other words, it would be small amounts of capital? Or would they be structured, maybe, possibly differently?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [11]
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 It just depends upon -- you know, Graham, I'm a person who likes to put money in a project, not enrich shareholders to take out of a project. That's our first rule, right? So it just depends. It just depends. But that's my general method over all these years, is don't enrich the people up front.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [12]
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 These appear to be deals in which you would be taking over distressed assets and services with not a lot of capital up front. Would it require capital later? And I was going to relate that to how much capital might have to be spent at Pea Ridge, if you could put a -- segue into that?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [13]
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 Right. I can't see the amount of capital for the acquisitions, Graham. All I can say is that we will spend it properly, and we will not enrich other shareholders with it. The capital required at Pea Ridge -- we can't determine that. But I can tell you, I am very comfortable I can finance it if I need to. I've had lots of people who would like to become our partner, but I have a partner now. So there's no pressure, financially. We are going ahead with Pea Ridge, and doing everything that makes business sense. And we're doing it as most rapidly and logically as we can.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [14]
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 How long might it take on the Pea Ridge issue, then? How long might it take for Pea Ridge to be producing and selling tailings? In other words, once you make that decision, how long would that take, to go to production?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [15]
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 I cannot say that now. Unfortunately, we need -- especially under our rules, we need to come out and say, here is another compliant report that says this, this, this. We have internal planning, but our internal planning -- we are not allowed to make that public. But we will update you every quarter as we go now, as Pea Ridge, as I said, is two things. It's a very serious project for MFC, and it's also a major project.

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 Graham Tanaka,  Tanaka Capital Management - Analyst   [16]
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 I think you did say that it could be in production fairly soon. I assume, then -- could you say sometime this year?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [17]
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 I shouldn't define the word soon. But tailings are a lot easier than the mine, right? Rewards are less, but the timing will be shorter, for sure.

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Operator   [18]
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 Joe Pratt, Wells Fargo Advisors.

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 Joe Pratt,  Wells Fargo Advisors - Analyst   [19]
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 I'm looking at the January 4 announcement, and then I'm looking at your announcement today. And I'm wondering, has the NI 43-101 compliance been moved forward with the filing of the technical report on SEDAR, which I actually -- I can't find at SEDAR. I see three press announcements at SEDAR, but I don't see any more than that. Maybe I'm not going to the right place on SEDAR. But is the technical report that was filed different than that which was available on January 4?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [20]
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 Yes, Joe. Here's the difference. We believed, and we had some historical estimates on January 4. To make them compliant under the rules, you have to have a professional firm of high repute, like our firm. And they, in essence, certify and come up -- that that was proper. And we've got us now a compliant a report, as they call it. And that is filed on SEDAR. If you can find it, Joe, let's let Rene know, and he can e-mail it to you.

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 Joe Pratt,  Wells Fargo Advisors - Analyst   [21]
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 Yes, sure.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [22]
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 But it is filed, and it is in a certified form where the consultants have certified it is true and correct. I think the most important thing for us -- we know there's mineralization there. So we believed that before, but we now have an independent third-party saying, yes. So now, how do we go about rationalizing that and turning that into money? Well, we have a plan, and so now the next steps of that plan must go forward. So it's a very positive from our point of view, and this is a very active product.

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 Joe Pratt,  Wells Fargo Advisors - Analyst   [23]
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 Well, and using the oil and gas industry, did it move it from sort of probable reserves to proved reserves?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [24]
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 So what happens now, Joe, is this is -- we have historical mineralization now been determined. Now we must move it to current, okay? And that we don't think, we believe, will not be too difficult.

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 Joe Pratt,  Wells Fargo Advisors - Analyst   [25]
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 Okay. So that's the big change coming forward, is to move it from historical, which is where it is now, to current?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [26]
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 Correct. That's the next step, or one of the next steps. At the same time, you know, we are doing the things at the mine site which we must do. We must get some of the water out of there; we need to examine some more cores; must do more of a mining plan; finish the tailings. And we must do a lot of other things. It's quite active at this particular period of time.

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 Joe Pratt,  Wells Fargo Advisors - Analyst   [27]
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 Do you need -- can you and Alberici go it alone? Is that prudent business? Or do you need a strategic partner who is experienced in iron ore mining so that you don't -- because you are first-time guys -- make a mistake?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [28]
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 I am hoping that our mining consultants can help us in this area. You know, Joe, the most important thing is that we admit right up front that we don't know very much. And so we look to hire, on every project in every industry we've been in, some consultant who we've trusted. In this particular industry, we have a consultant who actually represents just us, doesn't represent Alberici. Alberici has their own. And together we are working at this stage quite comfortably, technically.

 As we go forward we are going to have to bring in much more professionals, and our people will hire them. Can we go it alone? Yes, we can go it alone. Right now the plan is to go it alone. But if it makes some sense that one of our Chinese clients, who we know very well, want to become a partner with us, can create more value for the project, we would look to sell a strategic interest. We would be foolish from a shareholders not to. But right now, that's not a need, and it's not a need for money.

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 Joe Pratt,  Wells Fargo Advisors - Analyst   [29]
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 Okay. And when will the so-called feasibility report be ready for release?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [30]
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 Can't say. You've got to get through the current next. But I can say to you is that we are working every day towards that. It's obviously in our best interest and our partners' best interest to produce and do work on the property. But we are not just working to produce reports. We are also working on the property itself.

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Operator   [31]
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 (Operator Instructions). Bill Horn, First Angel Capital.

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 Bill Horn,  First Angel Capital - Analyst   [32]
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 Just had a couple of questions here for you. In the press release, you had indicated that throughout 2011 you had eliminated some product lines. Can you expand on that as to what product lines were eliminated or downsized?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [33]
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 Yes. Predominantly in the wood areas, and some of the plastics -- not all the plastics, but certain of the plastics.

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 Bill Horn,  First Angel Capital - Analyst   [34]
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 Of -- I mean, I thought plastics was a growing division of yours. What aspect of the plastics areas is no longer enticing to MFC?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [35]
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 I think we saw some margins disappear on some of our more popular plastics. And so, when the margins disappear, we get out and stay out until the margins come back. But plastics is still very active with us, but certain parts of the plastics. And Bill, sorry, you can't ask me the specifics. I'm just definitely not a plastics guy. But I could find out for you. It's probably one of those PVC types.

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 Bill Horn,  First Angel Capital - Analyst   [36]
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 Okay. No, I appreciate that. Can you expand a little further on the impairment charge? You indicated an impairment charge of about $12.4 million for 2011, on marking to market the long-term -- some long-term investments. Can you be a little more specific on what those impairment charges were?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [37]
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 Yes. You know, if we buy shares in a company and the share price goes down, and it's long-term, we still have to after a reasonable period of time, mark it to market. And we did. We have not sold those positions, and we would look to increase those positions, depending upon circumstances as we go forward. These are not shares of Google that we are trying to make money on. These are companies where we are looking to acquire strategic stakes.

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 Bill Horn,  First Angel Capital - Analyst   [38]
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 But publicly traded companies?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [39]
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 Publicly traded companies. And we will still, in some ways, we hope the share price goes down further, to be frank.

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 Bill Horn,  First Angel Capital - Analyst   [40]
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 You like those depressed assets, don't you?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [41]
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 I don't know what a depressed asset is. I can still see, with those companies, some good opportunities. But they used to use those the word creeping takeovers, and I don't know if they allow that word anymore.

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 Bill Horn,  First Angel Capital - Analyst   [42]
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 All right. Can we talk a little bit about Goa? We haven't really talked about Goa and the mining operation there. Can you give us an indication as to what the 2011 production levels were, and what your expectations are for 2012?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [43]
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 It was a great year. And this season -- you know, Bill, you've been there. It goes by seasons, right?

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 Bill Horn,  First Angel Capital - Analyst   [44]
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 Oh, yes. October to April, mid-April, yes. That's the mining season.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [45]
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 We managed to get a Panamax ship in there, which I think, Rene, was 120,000 tons --

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 Rene Randall,  MFC Industrial Ltd. - VP   [46]
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 It was.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [47]
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 -- about a month ago, which was unbelievable for Goa. As you know, we were going with 40,000- or 30,000-ton ships. And just a few days ago, we got another Panamax ship in. And I think, Rene, this is going to be the biggest shipment they've ever done.

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 Rene Randall,  MFC Industrial Ltd. - VP   [48]
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 (spoken in French)

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [49]
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 And so he is doing very well. And the negatives are, there is a move on in Goa against mining, but it doesn't affect us at this particular point. It's not a move by government; it's a move by some -- I don't know what you call them -- Greenpeace type group. That type of concept. But we have no problems at this particular time except for the normal issues of Indian business, which is always something to keep on top of.

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 Bill Horn,  First Angel Capital - Analyst   [50]
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 But as it relates to production levels, can you give us an indication of what you did in 2011? I mean, I believe the mine capacity you indicated in the past is somewhere between 400,000 tons and 500,000 tons. What did you do in 2011?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [51]
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 In '11 -- sorry. Are you talking '11 calendar or '11 fiscal event?

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 Bill Horn,  First Angel Capital - Analyst   [52]
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 I was referring to your, MFC's, fiscal year calendar year, as opposed to the mining seasons.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [53]
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 Bill, I think it will be helpful if I answer it this way. On the fiscal year, which ends March 31, which would end tomorrow, I believe our production has doubled. I don't have the numbers for December on the top of my head.

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 Bill Horn,  First Angel Capital - Analyst   [54]
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 Double what though?

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 Rene Randall,  MFC Industrial Ltd. - VP   [55]
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 A little over 700,000 tons, Bill.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [56]
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 For the calendar year. That's what Rene thinks. And I believe it's doubled for the -- his mine production plan. (multiple speakers) And he's met that, right? Going forward?

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 Bill Horn,  First Angel Capital - Analyst   [57]
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 And his mine production plan for the next fiscal year is what?

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 Rene Randall,  MFC Industrial Ltd. - VP   [58]
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 Is --

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [59]
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 I don't know. I'm meeting him Monday in Hong Kong. And one of the biggest issues we have in India, of course, is their taxation. And so I have to meet with him, with our professionals on Monday.

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 Rene Randall,  MFC Industrial Ltd. - VP   [60]
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 I think where we do feel, it's going to be a very good year going forward -- even a better year than the last year.

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 Bill Horn,  First Angel Capital - Analyst   [61]
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 Fantastic.

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 Rene Randall,  MFC Industrial Ltd. - VP   [62]
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 Because, you know, with some of the other mines being shut down in the area, we now have more road time. So we can get more trucks to the port. That's always been a problem.

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 Bill Horn,  First Angel Capital - Analyst   [63]
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 Oh, that certainly has been the biggest bottleneck.

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 Rene Randall,  MFC Industrial Ltd. - VP   [64]
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 It has been. So with that closure, it's helped us a lot. That's why we've been able to do these two large shipments, and we're planning to do more of them.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [65]
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 Yes. We couldn't do those big Panamax freighters if it was in the old days, because we couldn't have gotten the goods to the ports. So that's been a very good blessing. Mr. [Matra] -- who you did meet -- my manager, is actually going to go to Pea Ridge mine very soon, and also to one in Africa; so, when the season stops. As you know, we have a six-month season stopping there. So he will be making that, too, it will be interesting.

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 Bill Horn,  First Angel Capital - Analyst   [66]
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 You had also talked a while back about opportunities in Indonesia, and I believe late last year you were beginning to do some sample drilling in Indonesia. Can you expand on what's happening there?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [67]
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 It is extremely too exploratory at this point to say anything. This is really -- Mr. Matra, as you know, has spent many years in Indonesia before joining us. So we have been doing -- we've been looking and we've been drilling, and trying to make sure that what we can do there is legally feasible under their changing rules. So it is just a work project for us at this particular point. Nothing to say that we have a commercial opportunity yet.

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 Bill Horn,  First Angel Capital - Analyst   [68]
------------------------------
 Okay. Very good. I will get back in the queue with further questions. Thank you very much.

------------------------------
Operator   [69]
------------------------------
 Jeff Geygan, Milwaukee Private Wealth Management.

------------------------------
 Jeff Geygan,  Milwaukee Private Wealth Mgmt - Analyst   [70]
------------------------------
 In the press release, you indicate that your ROE for the year was 6.2%, which was a disappointment. What would your expectation be in the future? Or what is your goal, in terms of a more realistic ROE?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [71]
------------------------------
 I think we should be at least to 10%. At least. There should be no reason.

------------------------------
 Jeff Geygan,  Milwaukee Private Wealth Mgmt - Analyst   [72]
------------------------------
 All right. Secondly, as it relates to Pea Ridge, I was hoping that you might step us through your rationale, in terms of your initial investment, clearly knowing at the time of that investment there would be some CapEx to get this mine up and running -- what you anticipated that might be, and how you really thought about the potential outcomes at the extremes. One being that you were just dead wrong, and this is going to be a zero; and number two, it exceeds your expectation -- and what would that really look like?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [73]
------------------------------
 Let me say to you that when we did the structure, we made sure that we could effectively make a tax deduction for all investments until we got to the point of commercialization. We view the mine and the assets there to have some value, regardless of what happens. And this is some value, from a physical point of view, so there is -- we can figure some salvage value there. Two -- three, we view the tailings to have the lowest risk and the highest potential return in the shortest period of time.

 So our sums are really done on that basis, as far as the downside risk is concerned. And of course, the upside risk is -- to go ahead -- is with the mine itself. We are now getting into the serious issues with the mine itself. And we've done some sums, but I'm not in a position -- I wish I could say to you, here's what I think it will be, or here's what the capital expenditures should be at this point. We are not allowed to do that until we have done, under the Canadian and US rules, these certifications or compliant technical reports, and then we can issue them to you.

 And of course, it's in our best interests that we get them done as soon as possible so we can also determine what is the right product mix for this mine? That's one of my biggest questions, because it is -- in our opinion at this time, a high magnetite mine with very high FE content. So we have to get our professionals to finish, and for them to come about with the compliant reports and give us the advice of what is truly the best products to develop at this mine?

------------------------------
 Jeff Geygan,  Milwaukee Private Wealth Mgmt - Analyst   [74]
------------------------------
 And earlier, Mr. Tanaka asked something to the effect of how much CapEx did you anticipate putting into this mine before you go into production. And I am gathering, from the answer you just gave me, you may not be at liberty to disclose that. Or you may not have a firm number. But can I risk asking that again?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [75]
------------------------------
 No, it's great for you to ask. All I can say is that I can't give you the number. But I feel comfortable that I can finance it, if I wish to finance it. I feel comfortable that money will not stop Pea Ridge from going into production at the mine or at the tailings.

------------------------------
Operator   [76]
------------------------------
 Russell Lynde, Park West.

------------------------------
 Russell Lynde,  Park West - Analyst   [77]
------------------------------
 Can you tell us what expenses are that you've incurred to date from Pea Ridge through, obviously, the end of 2011?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [78]
------------------------------
 I think the number is $11 million.

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [79]
------------------------------
 $11.2 million.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [80]
------------------------------
 $11.2 million. (multiple speakers)

------------------------------
 Russell Lynde,  Park West - Analyst   [81]
------------------------------
 That includes expenses -- that's expenses or CapEx?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [82]
------------------------------
 CapEx --

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [83]
------------------------------
 That will be CapEx, but we -- you know, I think it's the same at December 31. Is that right?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [84]
------------------------------
 Yes. It is, yes.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [85]
------------------------------
 It is, it's the same. So we actually acquired this property, I think, December 22.

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [86]
------------------------------
 Correct.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [87]
------------------------------
 And we did that through a series of notes, debts, and things like that. That's how we ended up with it. And that is all treated as capital on the books as of December 31.

------------------------------
 Russell Lynde,  Park West - Analyst   [88]
------------------------------
 So there is minimal expenses from this acquisition in 2011?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [89]
------------------------------
 I will say none.

------------------------------
 Russell Lynde,  Park West - Analyst   [90]
------------------------------
 Okay. On Wabash, when was the equipment fixed and operational again?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [91]
------------------------------
 I'm sorry. Could you repeat that?

------------------------------
 Russell Lynde,  Park West - Analyst   [92]
------------------------------
 On Wabash -- when was the equipment fixed and operational again? When did they fix the problems?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [93]
------------------------------
 I believe in December.

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [94]
------------------------------
 At the end of December.

------------------------------
 Russell Lynde,  Park West - Analyst   [95]
------------------------------
 So it will be a -- Q1 will be a full quarter of operations?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [96]
------------------------------
 It will be. But Q1 is historically their -- usually their slowest quarter, because of the weather conditions in Newfoundland.

------------------------------
 Russell Lynde,  Park West - Analyst   [97]
------------------------------
 Which was my next question; I assume the weather conditions have been helpful to them this year?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [98]
------------------------------
 It has been, yes.

------------------------------
 Russell Lynde,  Park West - Analyst   [99]
------------------------------
 So you would expect tonnage to be higher in Q1 this year than last year?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [100]
------------------------------
 I would hope so.

------------------------------
 Russell Lynde,  Park West - Analyst   [101]
------------------------------
 Well, we are two months in. Is it running ahead?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [102]
------------------------------
 We don't know. They don't give us updates, unfortunately.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [103]
------------------------------
 But I can tell you, when I saw those numbers, I had a heart attack. And we did some investigations and thoroughly, ourselves -- through many indirect and indirect means, and now I feel healthy again. They had a very unforeseen problematic time in December which they couldn't rectify on several of their lines at one time.

------------------------------
 Russell Lynde,  Park West - Analyst   [104]
------------------------------
 Can you comment on the current pricing?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [105]
------------------------------
 Yes. Could you give the pricing?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [106]
------------------------------
 The pricing fortunately, has been very good. The fourth quarter, we were ending at around the $950 a ton, and if you compare that to fourth quarter in 2010, they were only at $660. So even though tonnage was down for 2011, income from the interest was up because of the royalty rates was up considerably. And our indications is that these prices are going to hold at least in the near-term.

------------------------------
 Russell Lynde,  Park West - Analyst   [107]
------------------------------
 And in terms of tonnage for the year, do you have any reason to believe it won't go back to, revert back to, what it was prior to the equipment failures?

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [108]
------------------------------
 Yes. I think -- I mean, if you look at what Cliffs has been saying, that they are going to produce well over 4 million tons going forward.

------------------------------
 Russell Lynde,  Park West - Analyst   [109]
------------------------------
 So 4 million tons at $950, roughly, that should be good growth.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [110]
------------------------------
 It should be very good growth.

------------------------------
Operator   [111]
------------------------------
 George Burmann, J.P. Turner and Company.

------------------------------
 George Burmann,  J.P. Turner and Company - Analyst   [112]
------------------------------
 The European marketplace has been talked about recently in the press that there is many, many financial institutions in distress that are looking to unload some assets they might have on their books, amongst them some loans, as well. Is this an area, since you earlier alluded to the fact that you like to buy debt of companies in distress, etc., etc.? Is this an area that you see opportunities in maybe putting some of your cash on the balance sheet to use?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [113]
------------------------------
 Absolutely. For sure.

------------------------------
 George Burmann,  J.P. Turner and Company - Analyst   [114]
------------------------------
 Can you expand a little bit on that? What you're looking at there?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [115]
------------------------------
 It's so much easier -- you know, we have relationships and credit lines with many of the European banks, and we know all their problematic loans that would be relevant for our management group, and maybe with some other management, which would be perfect for us to take over. There's very few companies who qualify and has a track record with those banks who they trust and have knowledge.

 One of those bankers the other day said, you know, you bought a company from us in 2001, and you paid off that loan as per the terms which you and us agreed to at a discount, but we appreciate that very much. So please -- we would treat you as the most favored person to acquire this other company, and if you could do another restructuring like that, it would be good. And this is -- we are lucky, we are lucky. So we have a bit of a track record, so this is predominately the area we're working in.

------------------------------
 George Burmann,  J.P. Turner and Company - Analyst   [116]
------------------------------
 A lot on this call was talking about the Pea Ridge mine -- I consider this, like, a done deal. You guys got it and now you're going to go to work at it. But it seems the fertile opportunities are always in areas where there is a fire burning. And with the European banks being almost prompted to reduce their leverage and their asset size, that seems to me a very fertile ground, especially since you've got such a great history there.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [117]
------------------------------
 I completely agree with you. Pea Ridge is a major and a serious project, and will really help us develop the global supply chain business. But we have other opportunities, which you were talking to about, in Europe. And that also is extremely interesting and will help us, because we want to -- the goal is clear. We would like to be a peer of Noble commodities. We are not a peer. They are huge. But that's what our goal is, and we just have that sole focus.

------------------------------
Operator   [118]
------------------------------
 Graham Tanaka, Tanaka Capital Management.

------------------------------
Unidentified Participant   [119]
------------------------------
 Michael, this is actually Sam. Congratulations on the deal. A few quick questions. Earlier, you mentioned an iron ore mine in Africa, maybe? So maybe, can you talk about the geographical mix of these opportunities that you have?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [120]
------------------------------
 You know, geographically, to us, it really -- it doesn't matter. I think there are a couple of countries that we want to stay out of. But you know, you must base the emerging markets is to be where the opportunities are. That's why we like Pea Ridge. Because it's very civilized, right? I mean, we are in America. We know the rules, the environmentalists, and the other issues. And other markets require an entirely different set of talent. So we do have some ones we are investigating in other places, but nothing that is coming home at this particular period of time. Not in the iron ore side.

------------------------------
Unidentified Participant   [121]
------------------------------
 Talking about Pea Ridge a little bit, and without talking about numbers, for exact CapEx, can you broadly say what needs to be done? I know you'd need to get a lot of water out of the -- sorry, you need to get a lot of water out, etc., but can you broadly say what else needs to be done there?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [122]
------------------------------
 Yes. You know, dewatering is just a natural thing, but we need to bring the reserves up to what we call a current status, and we have a plan to do that. That is underway. That involves analyzing some of the cores and information. One thing about Pea Ridge -- we have a library that really -- what I call a library -- of data, which gives every piece of information and every drilling result in a professional, legal manner for years and years and years. And so that's very helpful to our professionals.

 Also, with Pea Ridge, what we must do is go through a series of testing so we can see which is the best way to approach the mining issues, the beneficiation issues, and also to determine what the product should be at the end, or products. And then, of course, the tailings is an entirely different business, and should be viewed as a standalone, separately from the mine.

------------------------------
Unidentified Participant   [123]
------------------------------
 Okay. Talking about the odd-lot share buyback -- you get a little bit hesitant to do buybacks in the past. Do you have a minimum amount that you want to get out of this, say, if you don't have a couple million dollars of people participating? Would you consider buying on the open market?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [124]
------------------------------
 No. This is really something that helps the Company. Our costs are very low. I think that the amount of our target shares here we are trying to buy back is 400,000. And I think it's from approximately 5000 people. I can't remember.

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [125]
------------------------------
 3000.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [126]
------------------------------
 3000 people? Either way, it's -- let's say we get half of it. We say that the money will be back in one year in administration costs.

------------------------------
 Rene Randall,  MFC Industrial Ltd. - VP   [127]
------------------------------
 Because Sam, you realize, with all the spin outs, people have gotten very small share amounts, and it's very tough for them to sell them. But yet we are still -- the Company is required to do all these mailings. And this gives them an opportunity to sell their shares without incurring the cost of selling the shares. So it's beneficial for them and beneficial for the Company, because it eliminates a lot of extra mailing.

------------------------------
Unidentified Participant   [128]
------------------------------
 Okay. My last question for you, Michael. So you like to buy assets at 60% of liquidation value. You bought some shares of MFC in the fourth quarter. What do you see liquidation value now for MFC? Obviously, Wabash, with the higher royalty rate, is pretty significantly undervalued on the books. Where do you see it today?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [129]
------------------------------
 Your question is great. I don't have an answer. I would really feel if I gave that answer I should give it to everybody at the same time. But let me see what we could do there.

------------------------------
Operator   [130]
------------------------------
 [Greg Venit], Morgan Stanley.

------------------------------
Unidentified Participant   [131]
------------------------------
 You talked about buying assets at a discount. Am I correct that these assets are basically now in the control of banks, and that the owner of the asset is no longer in the picture?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [132]
------------------------------
 Usually not, because the owner is in the picture usually because they have some rights. We don't have a Chapter 11 in most European places, but there is some rights to shareholders. So you've got to be conscious of all stakeholders in these. But the banks, yes, can apply tremendous pressure. But our experience over the years has shown you're better off getting a company that's not in bankruptcy, that is, so it's out of the regulatory requirement. So it's a company -- the ideal company is a company I like to say is falling off the cliff but hasn't actually filed yet. We want to just grab it before it falls, and that's the company I'm working with -- the other companies we are working with at this time.

------------------------------
Unidentified Participant   [133]
------------------------------
 Okay. So these are ones where the bank is applying pressure to the existing owner to sell or merge or joint venture with someone like you?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [134]
------------------------------
 Yes, and not applying pressure -- sometimes it's quite -- they are using sticks and stones.

------------------------------
Unidentified Participant   [135]
------------------------------
 Okay. Would these companies -- would you want to take over the operator, or would you want to keep the operator there, possibly?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [136]
------------------------------
 Usually you never keep the operator there.

------------------------------
Unidentified Participant   [137]
------------------------------
 Okay. The ones that you're looking at, talking -- going back to Noble, would it be safe to assume that they are not in the iron ore area, that you want something to diversify your portfolio of commodities?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [138]
------------------------------
 That would be a good assumption.

------------------------------
Unidentified Participant   [139]
------------------------------
 Okay. And are they -- well, I guess you can't tell us what continent or where -- are any of these in the United States?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [140]
------------------------------
 One of them has operations in the US, but not more than as just a facilitating for their other products. The commodity business and the resource business is such a global business now.

------------------------------
Unidentified Participant   [141]
------------------------------
 Okay. So you've been dancing or dating for a year now with these banks. The suggestion is, I guess, in the meeting that you had in February, that you feel like you're much farther along for the banks in the existing owner possibly to make a decision?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [142]
------------------------------
 I just feel that there's very few companies in Europe that could be willing to take on the complete problems of a company, rationalize it, and we are in a position to do it, and we have the cash, we have the credibility, we have the rating. We are an insured credit, and there are very few like us. So we are lucky. But we are also know that we can be of benefit to those banks and a benefit to all stakeholders.

------------------------------
Unidentified Participant   [143]
------------------------------
 Second question -- the mark to market -- am I correct, when you market your portfolio of investments down the market -- am I correct, you only mark them down? You never get to mark them up after that point, unless you actually dispose of that investment. That's a permanent markdown until you that asset is disposed of?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [144]
------------------------------
 Yes, yes.

------------------------------
Unidentified Participant   [145]
------------------------------
 Okay. So the impairment that you just gave us is permanent until there is a transaction that you sell or you buy the whole company or whatever?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [146]
------------------------------
 Yes. If we get to consolidated, of course, or we now equity accounted, it would be different.

------------------------------
Unidentified Participant   [147]
------------------------------
 I think this is my final question. It seems like with Pea Ridge, from an outsider's point of view, the most logical and fastest way to monetize is to utilize the tailings. The tailings involve some sort of, I guess, processing or refining, I would think? Is that correct?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [148]
------------------------------
 Yes. It requires processing.

------------------------------
Unidentified Participant   [149]
------------------------------
 Are there processing plants for tailings in the United States, or near Pea Ridge?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [150]
------------------------------
 I'm sure -- I mean, processing tailings is quite a common thing all over the world. Because as the commodity prices have come up, usually, in general, all commodities has been tailings. We've been involved with tailings for a long time. And, of course, we will look very hard at the tailings project here in Pea Ridge. Because I agree with you, we would assume -- and I think our professionals are taking the assumption -- it will be the fastest way to cash flow. But I want to make sure what we do -- we mustn't be penny foolish, right? We must -- the ultimate, or the end, is for the mine. And if we can get happy (technical difficulty) that, great. And we'll try.

------------------------------
Unidentified Participant   [151]
------------------------------
 So it sounds like to me like the initial CapEx could be to try to monetize the tailings. Does that mean building a plant, that you might be building a processing plant for tailings? Or can you just ship these down the river as-is, and spin them to someplace that already has a plant for tailings? Or ship them to China and let them process them?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [152]
------------------------------
 No, I think they have to be processed on-site.

------------------------------
Unidentified Participant   [153]
------------------------------
 On-site.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [154]
------------------------------
 I'm sure they're going to recommend that.

------------------------------
Unidentified Participant   [155]
------------------------------
 What would a permitting process -- I would think in the United, States in this day and age, to build a plant to process tailings would be a long, long time to get through, with environmental impact statements and all that, or is that not correct?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [156]
------------------------------
 We are very lucky. One of the reasons we have our partner, the Alberici, who are local, long-time third-generation contracting firm who has been in the industrial construction business for years. They have been working on the permits here for a long, long, long time. And many of our permits are in very good shape, and are in existence today. So we see, at this point, no major problem with any permitting.

------------------------------
Unidentified Participant   [157]
------------------------------
 So you're very far along for the permitting of creating a tailing refinery there?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [158]
------------------------------
 For the specific tailing or for the whole mine, we are. Everybody is conscious of the permits. I have not been told -- my questions have always been answered that we are handling those issues, and not to be concerned. And I think it's only because -- is not because our guys are smart. It's because of the Alberici knows their way around companies that know how to do it and has been doing it. It looks good.

------------------------------
Unidentified Participant   [159]
------------------------------
 Okay. So I'm getting the impression, Michael, that if the feasibility studies were such that it made sense to monetize the tailings, that the green light to be able to actually start creating a tailings plant there -- it's just a matter of you coming up with the capital and going ahead and doing it.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [160]
------------------------------
 Absolutely. No question.

------------------------------
Operator   [161]
------------------------------
 Bill Horn.

------------------------------
 Bill Horn,  First Angel Capital - Analyst   [162]
------------------------------
 I just wanted to follow up a little bit on Pea Ridge. If we look back at the previous owner, Jim Kennedy, his grand plan for Pea Ridge was included a pig iron smelter in Crystal City and a barge terminal on the Mississippi, along with a slurry pipeline from the mine to Crystal City. It is my understanding that your partner, Alberici, gave a presentation to the Crystal City town meeting that basically outlined a project that entailed all of those components. Do you see your Pea Ridge opportunity to include that? To take the iron ore and convert it to pig iron before shipment? Or have you gotten to that stage yet?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [163]
------------------------------
 You know, when the Alberici says that, of course they are saying it in the context of our partnership. That's a major project, right? What we are focusing on is what is at Pea Ridge now, but with the potential of the rest down the road. And we are -- we control that asset pool, including leases at Crystal City, so that we could do that in the future. But right now, we've got to get through the Pea Ridge itself before going to the next step, which it is a potential. It is a potential. But we're not running until we've got at least this under way. And then, I think we could run, and determine what is the right thing to do there, Bill.

------------------------------
 Bill Horn,  First Angel Capital - Analyst   [164]
------------------------------
 Okay. In the meantime, once the mine is up and running, do you see the mine producing a concentrate? Or it is a something that would have to be pelletized?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [165]
------------------------------
 I think it's very difficult. We've got to get the studies finished, because the product development here -- don't forget, we've got a very high FE content. And we need to get the professional advice of what to do with this iron ore. This iron ore has so many other applications than steel, right? It's used in filtration and lots of other things. And the question is, do we produce some of it at the higher quality? These are issues that I shouldn't even attempt to understand until these professionals finish. I think that will -- we've got to see the economics of every one.

------------------------------
 Bill Horn,  First Angel Capital - Analyst   [166]
------------------------------
 Fair enough. In your disclosures or in your announcements, you also indicated that part of the deal included the joint venture maintaining a 30% stake in a company, with Jim Kennedy regarding rare earths. Is that something that is -- how is that proceeding? How is that developing?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [167]
------------------------------
 This is a company that Jim Kennedy and his family control. We are a minority shareholder. We are supportive and we will work with Jim. But we have no plans at this time to go after rare earths. We just want to focus on one thing, and that's the Pea Ridge mine and Pea Ridge tailings. Down the road, that's another extra that might be there for us or might not. But our focus -- we mustn't change our focus. We must just work on that at this point.

------------------------------
 Bill Horn,  First Angel Capital - Analyst   [168]
------------------------------
 Just one final question. I know MFC has been an investor, a long-term investor, in Blue Ridge refineries Blue Earth Refineries -- the cobalt producer in -- I believe it's Uganda. Can you give any indication as to what's happening with Blue Earth? Are they still producing cobalt? I know their tailings stock was winding down, and just wanted to get an update as to what might be happening with Blue Earth.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [169]
------------------------------
 It's a little too soon, Bill. I think if we talk in two weeks, I'm going to have a meeting with the manager of that, and we can chat after that.

------------------------------
 Bill Horn,  First Angel Capital - Analyst   [170]
------------------------------
 That would be great.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [171]
------------------------------
 If you would call me in two weeks, that would be good.

------------------------------
 Bill Horn,  First Angel Capital - Analyst   [172]
------------------------------
 I'm sorry?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [173]
------------------------------
 If you would come to me in two weeks, we can go through that.

------------------------------
 Bill Horn,  First Angel Capital - Analyst   [174]
------------------------------
 Just let me know where you're going to be.

------------------------------
Operator   [175]
------------------------------
 Graham Tanaka, Tanaka Capital Management.

------------------------------
 Graham Tanaka,  Tanaka Capital Management - Analyst   [176]
------------------------------
 About the tailings -- if you could describe to us, physically, what condition they're in? And I'm just wondering, how much they are in potential size.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [177]
------------------------------
 Whatever I would say would not be -- would be conjecture. What we must do is produce a historic report, like we did today, from Behre Dolbear. And we haven't done that in the tailings. It's underway now. So until we are there, Graham, we are not in a position to give an historical estimate or a current estimate what is on that product -- on the tailings.

------------------------------
 Graham Tanaka,  Tanaka Capital Management - Analyst   [178]
------------------------------
 How about your trading business? I wonder if you could describe how that's going. We were surprised (technical difficulty) was up. The category was up. We weren't sure how much of that was the resources (technical difficulty).

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [179]
------------------------------
 Sorry, Graham. Could you say that again?

------------------------------
 Graham Tanaka,  Tanaka Capital Management - Analyst   [180]
------------------------------
 Commodities trading operations -- how they did and what the outlook is going forward? Thanks.

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [181]
------------------------------
 Yes, okay. The outlook is much better than it was in November or December. We have sold -- we don't see apathy now with our customers and clients. That's good. Credit is still tight, and it is difficult. But you know, we are just more careful and conscious there. So, yes, it's much better than the fourth quarter.

------------------------------
 Graham Tanaka,  Tanaka Capital Management - Analyst   [182]
------------------------------
 But the apathy related to the concerns in Europe and the entering a recession and the credit problems there, or really something else?

------------------------------
 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [183]
------------------------------
 I think it was just, like people didn't know what to do. Remember in '08, people sat there, they didn't know what to do? They just sat on their hands. So what we had is, we had purchasing managers, people looking to do trade finance -- normal trade finance. I remember in December, we had a very large steel order coming out of the Ukraine that we were selling into India, and they said, no. Let's just wait until next year. And we were ready to go. It's just that nobody wanted to make a decision, and that's what I call apathy. And I think we're through that now. Everyone is walking around smiling. I don't know why, but they are smiling now where they didn't in December.

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Operator   [184]
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 Joe Pratt, Wells Fargo Advisors.

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 Joe Pratt,  Wells Fargo Advisors - Analyst   [185]
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 Michael, I'll just bring up the stock buyback issue. Many observers and shareholders of MIL say, gee, with all that $400 million in cash, why doesn't he take some of it and do a meaningful buyback, given that the stock is below book value? Can you tell us about your philosophy on spending a substantial portion of that $400 million on such a potential buyback? And obviously, why to date you've decided not to do that?

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [186]
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 You know, Joe, we did some studies in this area. And we found, number one, that companies usually bought back in a illogical manner. And subsequently, they overpaid for the shares, and the share price went down after an initial surge in the price. But then, we also went further into it and found that if we bought back approximately 5% of the shares, and we did it over X period of time, it could be incrementally beneficial.

 So that, I think, is the last study we looked at, and so that was a positive. But the most important thing is, do we now, today, foresee needs for our capital? Do we, today, foresee needs for our credibility with our financial statements that will be in excess of the value of the buyback? I think if you'd just talked to me last year -- October, November -- I would say I don't foresee. But, today, I do foresee. So until we can get clarity on our capital needs going forward, we should just not look or talk about a buyback, and go back into that if it doesn't work.

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Operator   [187]
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 This concludes our question-and-answer session. I would like to turn the conference back over to Michael Smith for any closing remarks.

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 Michael Smith,  MFC Industrial Ltd. - Chairman, President, & CEO   [188]
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 We sincerely thank you very much for attending today. And please call or ask Rene if you need any information that we can help you with your review of the Company. Thank you very much.

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Operator   [189]
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 The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.






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