J.C. Butler: Yes. I mean, it’s — we certainly are more sensitive to what’s going on with natural gas than we are with oil at this point, right? We’re working to diversify this into a more balanced portfolio, but we’re not there yet. So anything that’s happening in the natural gas world, whether it’s prices or the rate with which new wells are being developed on our reserves or workovers that are being done on existing wells to increase production, we’re going to be more sensitive to that than another minerals company that might be heavily oil-weighted. So natural gas is going to affect us disproportionately more than oil well at this point.
Douglas Weiss: Okay. And then, just from an accounting standpoint, you recognize the cost of goods in that division, but it is a royalty position. So I was just curious what is that sort of $1 million a quarter cost of goods sold there?
Elizabeth Loveman: It’s related to the deductions that we — the costs that we’re paying off of some of the royalty income.
Douglas Weiss: Okay. Okay. I mean, I can follow-up on that later, too. Okay. Are you still there?
Elizabeth Loveman: Yes.
J.C. Butler: Yes, we’re.
Douglas Weiss: Okay. So I guess moving on to the solar projects that you’ve talked about a little bit. Can you give some kind of ballpark on how much capital you think you can allocate there? And what kind of returns you’re anticipating?
J.C. Butler: Well, this is a very new thing for us. So to speculate on how much capital we might allocate to, I think, is premature. I think we’re still exploring what that might be. The returns that we’re seeing are very nice. We’re seeing returns in the high teens, low 20s, and we measure that as return on total capital, not return on equity. So we think these are pretty attractive projects.
Douglas Weiss: Yes, I know that is attractive. On Thacker Pass, you’ve said that for projection purposes, you should think about that as a mid-sized coal — equivalent to a mid-sized coal project. Can you — I guess, I’m not really sure exactly how that — what that means. Can you give a little context for that in terms of what I should think about or what that would be earning at full production?
J.C. Butler: Yes. I mean that’s not — we’ve never disclosed that kind of granular information with respect to our mines. Obviously, as you can imagine, when you look at the volumes that come out of Coteau and Falkirk, we’re getting a lot of income out of those. This is going to be more like a Coyote Creek, Sabine court sort of operation with respect to income. My advice to you would be sort of look at what we’re earning in our coal segment and divide it by tons roughly to get some averages. This is going to be a relatively small — it’s going to be a modest operation. I will say that as we’ve been involved with this project over the last several years, we have had some nice gains with respect to the work that we’re going to be performing for Lithium Americas, the Thacker Pass project.
We’re currently performing some, what I call, dirt work construction activities for them with respect to the processing plant development. And so we think it’s a good partnership, and we’re looking for ways that we can help them not only under the current scope and how we might expand that relationship in the future.
Douglas Weiss: Okay. On the Mississippi mine, I was just curious, when the contract ends in 2032, it’s — I mean, I think you — the impression I get is that’s sort of the end of the operation there. But is there not secondary buyers that would still be interested in that coal, which would encourage continued production? Could you just explain that quickly?
J.C. Butler: Well, the current contractual relationship started in the mid, late 1990s and runs through 2032. There certainly are coal reserves in the area that could be used in the future. The power plant certainly should have life that goes beyond 2032. So one of the things that we’re very interested in are looking for ways that we might be able to extend the life of the mine. Who — how that works with respect to the power plant and what the power plant is doing and what other things might happen on that location are yet to be determined. But we certainly would be interested in extending that further and are working on a number of things to that end.
Douglas Weiss: Okay. And my last question, so you’re putting a lot of capital into the mineral and mining business on the royalty side. But you have this expertise in aggregate mining, which seems to be very attractive areas, but particularly at the moment. I was curious if you’ve given any thought to direct ownership of aggregates reserves?
J.C. Butler: Well, okay, so I’m going to interpret that as two questions. One is you said aggregates reserves, but I’m guessing you also mean with respect to the processing and sales of the aggregates.
Douglas Weiss: Yes.
J.C. Butler: Yes. So we’re — we have a long history in mining. I think we’re really, really good at what we do. I think we have a great ability to improve the economics for our customers by utilizing our mining expertise. That does not translate into processing the aggregates, deciding what products you’re going to manufacture or selling those into the market. We have no experience there. We have no skills. There’s always the question of, can you go just acquire those? And we could, but we’re sort of big believers in, let’s build off the skills that we have rather than decide to go something completely different. So as far as integrating vertically into the production and sales of the aggregates themselves or processing and sales, I think that’s a big reach for us.
With respect to owning the limestone reserves or sand and gravel reserves. We’ve considered it, I’d say, not in a tremendous amount of depth, but it is something that we’ve thought about. We’ve done well over our history by owning coal reserves, and we’ve thought about whether that might be an interesting thing for us. The difference between the two is we’re sort of experts in lignite, and there are two very well-defined lignite reserves in the United States. And we knew where those are, and we focused our operations on those. When you get into aggregates of all types, they’re almost everywhere, right? So it’s just a vast amount of minerals that are out there and trying to decide which ones that we would invest in and how those would — how we could leverage that into increased opportunity in the future.
It’s harder to see the economic justification for doing that. So you look at expanding backwards into buying the reserves or forwards into getting into processing in sales. You kind of come back and say, our expertise is really in the mining, and that’s where we’re focused at this point. By the way, we think it’s — we think the mining piece is a huge market. And it’s not just — as we’ve said for a long time, right, it’s not just limestone and it’s not just operating draglines. There’s lots of minerals out there that we can mine. The lithium project is a great example of that. We’re pursuing opportunities to mine other minerals, and we can use lots of equipment. Historically, we’ve used draglines. Today, we’re also operating in some truck shovel fleets, and we’re operating a surface minor, all in aggregates and limestone.
