Ann: Year End Profit Guidance , page-6

dan - MRE produces most of its sulphuric acid requirements on site by burning raw elemental sulphur through an acid plant. the sulphur itself is imported from canada and mre import roughly 400-450,000 tonnes per year. the long term average price for sulphur (FOB Vancouver) is about $50/mt. in june 2008 it hit $700/mt. mre pay its suppliers using a price formula derived from published FOB Vancouver contract prices - so basically an average spot price. however, the supply arrangements are underpinned by take or pay contracts (as are all of mre's major commodity inputs such as ammonia & gas). this is why i say that mre's cost structure is largely fixed, not variable. anyway, to avoid situations like 2010 where they were paying $700/mt for sulphur, it appears mre have restructured their pricing agreements with the sulphur suppliers to cap sulphur price. this must mean they have also agreed to a floor price, or a price that is above spot. therefore, i believe that sulphur costs for 2011 will be higher than they have been paying in 2010 as i believe the new arrangements kick in for 2011. i don't lknow what the current sulphur spot prices are, this is published by the likes of fertecon & cru and you have to pay to get it. but anyway, a $10 increase in the price of sulphur adds at least $4m to mre's bottom line. i'm factoring an increase in sulphur costs, either due to contractual arrangements, market tightening, or both.