Colorado Springs Jul 24, 2015 (Thomson StreetEvents) -- Edited Transcript of Westmoreland Coal Co earnings conference call or presentation Friday, July 24, 2015 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Keith Alessi Westmoreland Coal Company - CEO * Kevin Paprzycki Westmoreland Coal Co - CFO ================================================================================ Conference Call Participants ================================================================================ * Brett Levy CRT Capital - Analyst * Mark Levin BB&T Capital Markets - Analyst * Lucas Pipes FBR & Co. - Analyst * Allen Jacobs Private Investor - Analyst * Tim O'Brien DG Capital Management, LLC - Analyst * Brian Taddeo Robert W. Baird & Company, Inc. - Analyst * Justin Van Emblack Daily Advisors - Analyst * Michele Puri GoldenTree - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen, and welcome to the Westmoreland Coal Company's and Westmoreland Resource Partners, LP Investor conference call. (Operator Instructions) As a reminder, this conference is being recorded today and a replay will be available as soon as practical on the investor portion of the Westmoreland site through October 24, 2015. Management's remarks today may contain forward-looking statements based on the Company's projections, current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The Company's actual results may differ materially from the projections given and results discussed in any such forward-looking statements. Any forward-looking statements we make or comment about future expectations, are subject to business risks, which we've laid out for you in our press release today, as well as our previous SEC filings. Any forward-looking statements represent the Company's views only as of today, and should not be relied upon as representing its views as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. Even if its estimates change and therefore you should not rely on those forward-looking statements as representing the Company's views as of any date subsequent to today. Mr. Keith Alessi, Chief Executive Officer of Westmoreland Coal Company and Westmoreland Resource Partners LP, will be delivering today's remarks. Thank you. Mr. Alessi, please begin. -------------------------------------------------------------------------------- Keith Alessi, Westmoreland Coal Company - CEO [2] -------------------------------------------------------------------------------- Thank you and good morning. Joining me this morning is Kevin Paprzycki, our CFO. We look at quarter two and what I'm really struck by is that there's two different stories to be told. There's the story of the business, and there's the story of the capital markets. And while those two stories have been linked very closely for us over the last several years, there seems to have become a de-linkage, if you will, in this quarter. I know a lot of people have focused very much on what is going on in the capital markets, and we intend to talk to you about how we're viewing it. But what I prefer to focus on are the things that are inside of our control. Your management team is focused on a daily basis on delivering results. I think we delivered a very good Q2, particularly in light of the fact that summer really has not shown up in a lot of areas where we do business. We overcame numerous mine situations where weather in Texas, if you recall, there was a lot of rain going on down there, throughout this quarter. And our guys down there did a heck of a job in very tough mining conditions. Out in Ohio, our biggest customer had an unexpected outage due to an issue in one of their generators. And we overcame those tons, as well. We overcame Newcastle pricing, which still has not recovered. Once, again, the wisdom of diversifying the footprint paid off. The Canadian operation had a very strong quarter. The power plant even contributed a little towards the end of the quarter, as it was dispatched a little more than we projected it to do. So we're very pleased with the results of the quarter. We continue operationally, to focus on things like drag-line efficiency. We have now rolled out drag-line monitoring to all the Canadian mines. We'll have it on most of the drag lines in the States here by the end of the year. Everywhere we have installed those new technologies, we have seen improvements. We're very excited about the efficiencies that we're seeing across the board. We continue to look for ways in which we can deploy technology and get efficiencies that way. We just came off of our board meeting up in Edmonton over the last two days, followed by our executive retreat for all of our senior managers of the company. It was an exciting day. The initiatives that are taking place across the company, I'm just so proud of what our people are doing, and what they are delivering. As I sit here and just look at the story of the business, I'm very happy. But then I have to deal with the fact that there's been a complete decimation of the coal equity and debt markets over the last quarter. Most of that, obviously all of that is outside of our direct control. We certainly don't set the prices and we don't set the yields. I want to comment on what's going on in the external environment, and what we intend to do about it to the extent we can do anything. And what our view of it is. Clearly the filing of bankruptcy by Walter, even though everybody's known it was coming, I think sent some people scurrying to the doors. We have seen several of the larger operators and the industry's equity values plummet to close to $1. Companies that had multi-billion dollar market caps as recently as 12 or 18 months ago, are now down in the $200 million or $300 million range. Every time we look at that, at Westmoreland, I think we understand why that is occurring, but it's puzzling to us that we get dragged down with them because our business model is so different. It's the reality of the marketplace and I believe that, you know, the overwhelmingly negative sentiment towards coal has certainly had an impact on our equity value. It's very difficult for me to justify where our stock price is on any metric basis. It's actually more like theater of the absurd from where I sit today. Conservatively, and I know people look at this number differently, what you add back. Do you add back MLP distributions, this, that or the other? But when you have an unlevered free cash flow of something north of $6 a share, that's like a 40%-something yield, and that does not make much sense to me. My economic mind has a hard time grasping that. But that is what we're looking a today, and we're going to keep our heads down and continue to generate cash and tell our story. And use that cash in ways that we think ultimately will create value when, and this is a big when, the market returns to some sort of rational market metric. As much as I'm baffled by our stock price taking the hit that it took, in light of the fact that nothing has changed in our business, we have seen similar declines in our debt price and that same metric fits there. I don't believe it's being caused by any fundamental shift in the business. It's being caused by a fundamental change in the perception of our business, or the industry, if you will. I think there are many portfolio managers that just are saying, we don't want to be in coal. And then you have disruptions in supply and demand. On the equity side, we have seen our short position build, which is not surprising. Given that our volume has built somewhat over the quarter. It's also not surprising, given the fact that anybody who would have shorted equities in this industry over the last couple of years, probably did pretty well. Some of the folks who made money, shorting some of the other bigger companies may look at our chart and think this is an easy short. I would caution that may not be a real bright long-term strategy, but I can't argue that it has not worked for some folks in the shorter run. We are blessed to have a very good group of shareholders who care about this company. Over the last 60 days, Kevin and I and Jason Veenstra have spent a lot of time on the phone and face-to-face with many of those shareholders. It's interesting to me, as we have the conversations, the different directions that the conversation goes. People are asking very good questions and they are asking very deep questions, but at times it seems that we go down a path of people trying to figure out mathematically how the decline is mathematically based. I'm going to make a couple of statements here to give you my point of view on this. We're certainly going to take questions at the end of the call, but I really don't want to use this call to explore conspiracy theories, or things of that nature. Because some of the conversations we get into really almost border on the bizarre in terms of people trying to figure out what might happen 15 years from now. We certainly looked at a future, but my crystal ball 15 years from now is not particularly good and we're certainly not running our business today based on what might or might not occur 15 years from now. Let me tell you the answers I would ask -- give you, to the following question, because these questions keep coming up. Do I believe that any of our major contracts won't get extended when they come up? The answer to that is unequivocally no. The next question we get always asked is, are there any major changes to your customer base and are any of your customers under threat of closure? Again, our answer is no. We don't know anything different than what we have been telling people all along. I think the only plant in our portfolio that's a gas conversion is the Naughton 3 Unit, which is to occur in 2018/2019, and that's one that's moved back a couple of times. We've been open about it and we think we have the home for the million tons or so that unit won't burn. So we don't see any fundamental change in our customer base. Some people cheered the Supreme Court ruling on MATS. I don't think that has direct impact on our business, in that most of our customers, if not all, were compliant with those MATS regulations anyway. There's one, the Lewis and Clark Plant, that's getting fitted out here in the short term, to be compliant with it. Our read on the MATS legislation is not that it is going to have a direct positive impact to us today, but I think the precedent that verdict brings, is that as this administration comes up with new and creative ways to try to attack our industry, they are clearly going to have to do a cost benefit analysis. So, we're all sitting here waiting to hear what, in August they are going to come out with on the clean power plant front. It will certainly mean that they're going to have to do more in terms of economically justifying what it is they want to implement. I think that's a positive. We don't see the MATS legislation in and of itself, having any material impact positively or negatively on our business. Another question we get all the time, are we aware of any new rules coming? The answer to that one again is no. We all know that there will be these rules or proposed rules coming out in August. The other benefit of the MATS ruling at the court, is I think that many states are going to be emboldened to challenge that, given the tone of the MATS ruling. I'm not sitting here today feeling any worse about my business than I was 90 days ago. I feel just as good about my business as it was 90 days ago. We have a unique model. It's based on long-term contracts, it's based upon a fairly predictable range of outcomes. We're not immune to weather. We're not immune to market forces, but we've always been able to operate our business responsibly, with low overhead, within a very predictable outcome. And we expect to continue doing so. The next conversation I want to talk about is the MLP. On the MLP front, just as we have seen decimation in equity values across the coal sector, you folks are probably as familiar as I am with I am with what has happened with the yields of coal MLPs. I consider the yields of the coal MLPs in the marketplace to be reflective of the underlying business model, not based upon how people view MLPs versus C corps. Historically MLPs, and let's not talk about coal MLPs, just all MLPs. Historically MLPs have been a mechanism whereby companies can lower their cost of capital because of the tax advantaged distributions that MLPs provide. And it's access to a different type of capital that's typically more attractive and it typically is at higher EBITDA multiples. We all know the advantages having general partnership rights and having units and whatnot. About 90 days ago it was our plan as part of the drop of the Kemmerer Mine, to go out and raise $75 million in LP units at the MLP. We were progressing down that path, when others were tapping the marketplace. And watching what happened when there was the large IPO here several weeks back, we decided that we have the luxury of not having to do that. I really like the assets that we own. I'm not willing to give them away in the public marketplace. I don't have to, and I'm not going to. We believe that the market will return to some rationale state. Why people chose to move forward with the yield on the MLP that went forward is beyond me. You can't tell people what a great asset you have and then give it away at a 13% yield. That's doesn't make a heck of a lot of sense to me. We're not going to engage in that kind of behavior, and we don't have to. That's why we will not. That said, we expect to keep moving forward on the Kemmerer drop. We have a delayed drop facility at the MLP, that will allows us on a 9% coupon, albeit it has a PIC feature associated with it. We can do it with the cash available down there. We are very happy to take back LP units at the numbers that the market is giving us today. We think that's a wise decision over the long-term, and will reward us over the longer term. We intend to keep going down that road, and we intend to provide liquidity into the MLP at the appropriate time when the math works. One thing we have always done is we do things when the math works. If it makes sense, we'll do it. If it doesn't make sense, we will not. That's the strategy moving forward there. The final topic I'll talk about now and then I'll turn it over to Kevin to talk about the results of the quarter, people are asking us on the M&A front, what we intend to do. The tone of the conversation has changed from valuation conversations more to, do you think you can get deals done in this marketplace? I'll address the first one first, and that is there's numerous, as we talked about last quarter, there are numerous M&A opportunities available to us. We continue to evaluate them. Some of them require capital and some do not. Several are contract mining situations where you just go in and operate at a margin, the mine, so you don't have to put any appreciable amount of capital in. Some would require capital. Some could potentially be bought for assumptional liabilities. We look at all of those factors as we evaluate them. If we believe them to be accretive and strategic and long-term and sustainable and they meet our criteria, we certainly will be at the table and talking. The silver lining to the cloud over the industry is that valuations on certain of those assets has certainly come down. That's a positive over the longer-term. I'm not naive. I think our borrowing costs are likely to be higher than they might have been six or eight months ago, but several of these situations could be purchased at numbers that, even at higher rates of interest, makes sense. For those of you who weren't here in 2012, back then the big guys were borrowing at 5%, 6%, 7%. We borrowed at 12.75% back in that market to do the Kemmerer transaction. A lot of people don't remember that, but that turned out to be an incredibly good deal because we were able to improve the operation dramatically. We basically paid that money off in three years, so that higher interest rate did not penalize us because we got to pay it back so fast. And I'm not suggesting by any means that's the number we would expect to borrow at these days. I'm just using it as an illustration of how we would view things. As far as the capital markets go, we're comfortable that we could borrow to get the deals that we're looking at done. It's a theoretical exercise until we come to the table with one of those anyway. That's my outlook on the business. We're pleased with the quarter. We had good job done across the board and I'll give it to Kevin here to give you more detail on how the numbers built up. -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [3] -------------------------------------------------------------------------------- Thanks, Keith. Good morning, everybody. Westmoreland second quarter 2015 EBITDA, came in at $55.3 million. That is up from under $40 million in 2014 second quarter. We did benefit from an extra month's of ownership of the Canadian operations year-on-year and we did add in the MLP and the Buckingham businesses. We also saw favorable drivers in Q2 from favorable hydro conditions, that allowed us with low hydro generation allowed us to deliver more coal. We also saw just a great performance by our Canadian ops, both in terms of cost and productivity. On the challenges side, we saw challenging mine conditions at Kemmerer and as Keith impact -- commented on we saw very difficult weather and wet mining conditions down in Jewett. Probably the biggest offsetting item in Q2, was the customer outage in Ohio which impacted both Buckingham as well as the MLP. We overcame challenges here in Q2, and posted very solid numbers. These results are all consistent with our internal projections for 2015. Our second quarter 2015 net loss was $37.9 million. It was driven by a couple large non-cash charges as it has been in the past. The largest one the mark to market on the ROVA forward purchase contract. We had an FX exchange loss in there, and also non-cash income tax expense. On the cash side, we finished the second quarter with under $36 million of cash. And that was after a fairly big spend in CapEx of upwards of $25 million. Worth noting, during the quarter we also paid down about $5.5 million of capital leases at the Kemmerer mine, and that was basically to prepare Kemmerer for the eventual drop into the MLP. Turning to the MLP results, the MLP generated EBITDA of $10.2 million in the second quarter of 2015. That is down a couple million dollars from the second quarter of last year. Again, that was impacted by our customer shut-down back there. But, it's also kind of along the plan of our lower volume and lower EBITDA mine plan that we put in place to run the mine on what's best for free cash flow basis. During the second quarter the MLP did benefit from the $1.8 million gain on the sale of some land rights that we closed at the end of Q2. We also in that number had a good bit of transaction costs, probably, upwards of a $1 million, maybe a little over, of transaction costs associated with the S1 and diligence on the Kemmerer transaction. The MLP second quarter net loss came in at $6.4 million, that is up a little bit from $3.4 million in Q2 of 2014. And distributable cash flow came in just under $2.5 million for the quarter, but that brings a total to a solid $6 million on a year-to-date basis. Finishing up with guidance before I hand it back to Keith, our recent press release confirmed we see at this point no change or any update to our guidance. We are watching Q3 very closely, both to see if our customers that are in shut-down start up as projected. We're also watching the weather as Keith indicated the first few weeks of July have been fairly cool, and we're hoping a return to normal summer conditions would help and help impact our demand. Those factors, combined with the fact that there will be a heavier spend on maintenance in Q3, probably means our EBITDA this year, very similar to last year, will be more back weighted towards the fourth quarter and that seems to follow last year. That's basically an overview of the financials and I'll hand it back to Keith. -------------------------------------------------------------------------------- Keith Alessi, Westmoreland Coal Company - CEO [4] -------------------------------------------------------------------------------- (Inaudible) -------------------------------------------------------------------------------- Operator [5] -------------------------------------------------------------------------------- This is the operator. We're prepared for our question-and-answer session. Are we ready for our question-and-answer session Mr. Paprzycki? -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [6] -------------------------------------------------------------------------------- I'm wondering if we lost Keith. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Mr. Alessi are you on the line? -------------------------------------------------------------------------------- Keith Alessi, Westmoreland Coal Company - CEO [8] -------------------------------------------------------------------------------- I'm sorry I was talking into the mute button. To put some additional color on what Kevin said about the Q3 and Q4. Last year we came in the low 40%s in Q3 and in the mid-60%s, Q4. We expect to beat both of those quarters this year. Q3, as Kevin indicated, is generally a low quarter, particularly in Canada, because that's the quarter that the Canadian operations generally do their heavy maintenance of the plants because they are getting ready for the cold winter. Outages generally go longer than scheduled, not shorter. So we really have to take a good look on what goes on in July and August and then based on that, we'll probably tighten up our guidance range. As I look at things and as they are developing, we certainly look in good shape, and I don't think that there will be material deviations here as we move forward. With that, we can open it up for questions. Kevin and I are in different locations, so if you could direct the questions to one of us specifically, it would probably be helpful since we can't give each other hand signals. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you. At this time we'll conduct a question-and-answer session. (Operator instructions) Our first question today is coming from the line of Brett Levy from CRT Capital. Please proceed with your question. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [2] -------------------------------------------------------------------------------- Thank you. Hello, Kevin. Good quarter in the context of a tough market. You talked about the capital markets and a little bit of concern that they're not efficient. And yet you have some liquidity and an ability to do a buy-back program of stock or bonds. Is this something you are pondering? -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [3] -------------------------------------------------------------------------------- We've talked about this in the past. Of course the math has moved into a more compelling argument to do that since we first had the conversation. We do have baskets under our loan documents that would allow us to do it. The hang-up for us would be inside the revolver. Our revolving credit facilities do not allow us to engage in buy-backs. In order to do so, we would have to negotiate something with those banks. We have actually raised the question in recent weeks, and will continue what I hope is going to be constructive dialogue there. But it's not a trigger we can pull yet, but if it makes sense and the math gets more compelling to do so, we'd certainly consider it. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [4] -------------------------------------------------------------------------------- You said all of your contracts would be extended, when they came up and everything else like that. I think the bigger concern is that, while mine mouth close is very defensive in terms of maintaining the relationship and everything else like that. I do get a sense that there's some pressure, as -- the customers will come back and say we can get if we free equalize this price from this competitor or something like that. I think you are certainly in the position to win all ties. Can you give the renewed argument for the premise that your pricing is defensive, even in the context of lower spot markets and, the possibility that your customers will put some pressure on you as a result of that, as these things come to renew? -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [5] -------------------------------------------------------------------------------- That's a great question. You have to start by understanding that the average length of our contract is 10 years. Today's spot market really has virtually no impact on the average contract in our portfolio. The only contract that we have coming up this year is ready to be inked for a 14-year extension. The other argument is because we are mine mouth, we are delivering coal into our power plants at less than the cost of natural gas even down at these levels. Many of these facilities have no coal unloading facilities; we're attached by conveyers. They would have to make $40 million, $50 million, $60 million investments, and put in rail spurs and get service to it. The math does not work on our base business. We have one plant in Canada, where we're delivering coal in there at a $1.20 against gas. Neither gas displacement nor, quote, competitor, is really a valid argument. Particularly in our northern tier US mines, we enjoy a 600 miles, 400 to 600-mile advantage over any of the PRB operators. And these plants were built to burn the specifications of the coal that we're mining, in the western footprint, both in the US and Canada, utilities would find a coal reserve, designed a plant to burn that coal and plop the plant right down on it. They can't just flip the switch. Even if they had the opportunity to get a bid in the outside market, they can't do it with the infrastructure generally. And we operate very efficient low-cost mines. We're operating, you know, very highly depreciated situations with respect to drag lines, which is the basic capital in a big surface mine. Those drag lines have been there. So, I don't see it as a valid argument. It's almost like we're getting penalized for only having a 10-year term, which is absurd. The big slam on competition is they don't have any visibility past 18 months. We have visibility for 120 months, and people are saying well maybe that's not long enough. I don't even know how to answer that question. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [6] -------------------------------------------------------------------------------- That's a hard question. You have to think about things like potentially even taking the company private at these levels. What do you ponder in the broad brush your Company is being perceived in the same way that a lot of -- a lot less defensive coal companies are being portrayed? -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [7] -------------------------------------------------------------------------------- I would be speculating, because I spend the bulk of my day trying to figure out how to be more efficient and a better provider to my customer. I don't have the luxury of sitting around and thinking about what I might or might not do in the capital markets on a given day. I don't know why we have -- I thought we had been fairly successful in telling our story as being different. We're certainly going to keep telling the story. We're going to be here in another 10 days or so with the folks at BB&T in their St. Louis coal conference presenting. Kevin and I and Jason will probably be on the road in August or September talking to some MLP types, and talking to new constituencies and telling our story. But I think our best value creation opportunities remains running our business well. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [8] -------------------------------------------------------------------------------- The last one is on the CapEx and M&A side, there's a lot of stuff out there that clearly you could potentially look at expansion opportunities for your mines, given that other mines may close. Can you talk about 2015 and maybe even 2016 CapEx, kind of in a rough sense. -------------------------------------------------------------------------------- Keith Alessi, Westmoreland Coal Company - CEO [9] -------------------------------------------------------------------------------- Kevin, maybe you want to give the maintenance CapEx story. -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [10] -------------------------------------------------------------------------------- Over time, the rule of thumb that we've always guided to, is for surface operations like ours, they will run $1.50 a ton. Now, typically it's going to be lumpy. There's going to be years where we tear down a drag line or a truck and shovel and it's going to be a $1.60 or a $1.70 a ton. What we're trying to do Brett is sequence all the projects, really over time to just maintain consistent at that $1.50 a ton plus or minus. At this stage, preliminary targets are still in that ballpark. One of things we'll try to do is level-load the CapEx going forward, maybe smooth it out a little bit. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [11] -------------------------------------------------------------------------------- Anything M&A-oriented? Obviously the world away from you is in a world of hurt, and there's going to be some opportunities for you to, in any of your competitive markets, maybe pick up something that would be immediately accretive or something like that? -------------------------------------------------------------------------------- Keith Alessi, Westmoreland Coal Company - CEO [12] -------------------------------------------------------------------------------- Our facilities are, by and large, fully dedicated to the customer. The economics of our mine are fully dedicated to our customer. It's not as if there's a competitor across the hill that's going to go out of business and we'll benefit in any way, shape or form. The better question is, are there M&A opportunities in some of the companies that are going to probably go through processes here, there could be embedded in them an asset or two. Actually, I see a silver lining, as well, to the bankruptcies. I think what will happen is these companies will come out leaner, de-leveraged -- they are in different markets. A lot of them are met operators and that might improve sentiment around the space. But that's not going to happen. Those are complicated bankruptcies. They don't get done overnight. I suspect they are 12 to 24 month processes. I actually see a better sentiment when those guys all do what they have to get done. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [13] -------------------------------------------------------------------------------- Keith, Kevin, Jason, if you are on the line, thank you very much. I'll get back in the queue. -------------------------------------------------------------------------------- Keith Alessi, Westmoreland Coal Company - CEO [14] -------------------------------------------------------------------------------- Thank you very much. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Our next question is from, Mark Levin, BB&T Capital Markets. -------------------------------------------------------------------------------- Mark Levin, BB&T Capital Markets - Analyst [16] -------------------------------------------------------------------------------- Thank you very much. Hello. Two quick questions. Kevin, as it pertains to the BHP transaction, obviously you are expecting to close by the end of the year. I don't think we know the purchase price yet. In terms of financing that transition given, you know, the state of the capital markets. Could you rule out equity, certainly at these levels for everybody? -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [17] -------------------------------------------------------------------------------- I wouldn't rule it out. We believe we can get the deal done. That contract, because of its nature, it starts out at a higher tonnage level and steps down when the two units close. It's front-end loaded. Even at today's rates, it's a pretty compelling proposition to lenders. -------------------------------------------------------------------------------- Mark Levin, BB&T Capital Markets - Analyst [18] -------------------------------------------------------------------------------- You feel very confident in closing the transaction? -------------------------------------------------------------------------------- Kevin Paprzycki, Westmoreland Coal Co - CFO [19] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Mark Levin, BB&T Capital Markets - Analyst [20] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Keith Alessi, Westmoreland Coal Company - CEO [21] -------------------------------------------------------------------------------- From a financial standpoint, it still has not cleared the regulators in New Mexico. -------------------------------------------------------------------------------- Mark Levin, BB&T Capital Markets - Analyst [22] -------------------------------------------------------------------------------- Sure. That makes perfect sense. |