Good afternoon, and welcome to the Alcoa Corporation third Quarter 2018 Earnings Presentation and Conference Call. All participants will be in 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. I would now like to turn the conference over to James Dwyer, Vice President of Investor Relations. Please go ahead.

Thank you, William, and good day, everyone. I'm joined today by Roy Harvey, Alcoa Corporation President and Chief Executive Officer; and William Oplinger, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Roy and Bill. As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation and in our SEC filings. In addition, we have included some non-GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today's presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA. Also, a note on our financial statements, consistent with our first and second quarter earnings presentations our presentation today for the current period as well as prior periods has been updated in accordance with the Financial Accounting Standards Board’s recent change to the presentations of non-service pension and OPEB costs. This change resulted in Alcoa moving such costs out of the EBITDA and into other income expense. Finally, as previously announced, the earnings release and slide presentation are available on our website. With that, here is Roy.

Thank you, Jim. And I appreciate everyone joining today’s third quarter earnings call. Since we launched Alcoa Corporation as an independent, publicly-traded company almost two years ago, we’ve used our strategic priorities to reduce complexity, drive returns, and strengthen the balance sheet to position our company for a brighter future. In that time, we’ve streamlined our structure and processes, we’ve pushed our operations to drive returns, and we’ve addressed a significant portion of our liabilities. As a result, Alcoa is much stronger today when we launched in late 2016. As proof of our strategy’s success, we’re pleased to announce today a $200 million stock repurchase program. The program is a key component of our 2018 capital allocation framework and a commitment we made to stockholders. We’ll provide more details on the repurchase later in the call, but for now, let’s review our third quarter results. We reported a net loss of $41 million or $0.22 a share as we proactively continue to address our net pension and OPEB liability. In the third quarter, we used $194 million in available cash to further reduce both our net pension liability and to repay debt. On an adjusted basis, excluding special items, net income was $119 million or $0.63 per share. On an adjusted EBITDA basis excluding special items, we generated $795 million, up 37% year-over-year. And from a cash perspective, we closed the quarter with a $1 billion balance. Turning to our business update, I’ll start with safety. Our most important measure across our global operations, and as a reminder, our focus is on preventing serious injuries defined as life ending or life altering. We had one serious injury during the quarter, specifically an employee at one of our U.S. smelters experienced a life-threatening case of heat stress and after ending his…

Thanks, Roy. Let's start with the income statement. Sequentially, revenues are down 5% on lower aluminum prices. Compared to last year, revenues are up 14% on higher prices for both alumina and aluminum. In the quarter, the net loss attributable to Alcoa Corporation was $41 million or $0.22 per share on 186.5 million shares outstanding. Special items in the quarter totaled $160 million after tax and non-controlling interest, of which $174 million relates to recent pension and OPEB actions in our U.S. plants. In August annuitization, we transferred pension assets and liabilities totaling approximately $290 million to a third-party insurer, who assumed benefit payments for roughly 10,500 plan participants. Also, effective September 1, 2018, we ceased providing salaried retiree life insurance. All other items netted to a positive impact of $14 million. Our third quarter adjusted net income excluding special items was $119 million or $0.63 per share. Adjusted EBITDA, excluding special items was $795 million, down $109 million sequentially, primarily due to lower metal prices. Our third quarter EBITDA margin was 23%. Few other items of note on a sequential comparison basis, currency moves impacted several areas on the income statement this quarter, including helping drive lower SG&A and R&D expenses as well as lower depreciation. On the unfavorable side, lower foreign currency revaluation benefits netted to higher other expenses. Interest expense increased $4 million in the third quarter due to the $500 million bond offering that closed in May. Our operational tax rate in the quarter was 45.6%, as rising alumina prices changed our mix of taxable earnings and non-taxable losses, and we increased our provision by $48 million to catch up the lower rates recognized in the first half of the year. Let's take a look at the drivers of the sequential change in adjusted EBITDA. Lower…

Thanks, Bill. I'll begin with a look at our markets. We continue to expect 2018 deficits in both the alumina and aluminum markets, but now see bauxite in a larger surplus. As we've noted in our presentations throughout this year, we're likely to see Chinese stockpiles grow in 2018. While we're expecting a slight increase in Chinese demand for seaborne bauxite, it is more than offset by higher demand [ph] in bauxite supply. As has been the case in the past, Chinese customers use the surplus to bolster operational stockpiles. In alumina, the market continues to be in deficit. While alumina demand is down compared to our estimate last quarter that is being offset by ongoing supply disruptions that are keeping alumina supply at relatively lower levels. We have revised our expectation for Alumina trade flows and are now projecting that China will be a net exporter of approximately 300,000 metric tons of alumina in 2018. This is being driven by relative pricing between the two markets and continued tightness in the World ex-China. In aluminum, we continue to forecast a deficit for the year. We have reduced our estimate of Chinese aluminum supply due to curtailments and delayed expansions. However, that supply reduction has been matched by a reduction in demand growth, as a result, we have reduced by 50 basis points our 2018 global demand growth figures from 4.25% to 5.25% last quarter to 3.75% to 4.75% this quarter. The causes of this lower demand growth come from both China and the rest of the world. Data released over the past two months have shown that in China, the transportation in the electrical sectors particularly had weaker year-over-year growth than projected. Outside of China, we are forecasting lower demand growth in several countries dealing with significant economic issues,…

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And the first questioner today will be from Piyush Sood with Morgan Stanley. Please go ahead.

Roy and Bill, congratulations on a strong quarter. Good to see a large $200 million buyback plan, what was your thinking about starting with only a buyback and not a mix of a regular say, a 1% small dividend and the remaining through buyback. Just want to understand the thinking behind the decision?

Sure. Thanks for the question, Piyush. We -- since we announced the capital allocation framework over the last year, we've been talking to a lot of investors during the course of the year. And in general, we felt that investors favored a buyback over a dividend, and the reason being is that it provides the opportunity for the shareholder to take advantage of the capital return if they desire, and then also, it provides us flexibility on when to execute upon it. So we ended up going with the buyback.

Fair enough. And one more from me, and I'll get back in the queue. So the U.S. MCA has been signed, and there is a possibility that we could see Section 232 Tariffs in calendar converted into quaters. So if that happens, your import bill will come down, but what do you think that does to U.S. Midwest premiums? Should we expect to floor in the high teens cents per pound at this point assuming that it's more like a duty paid premium at this point?

Yes, Piyush, I appreciate the question. To be quite honest, we don't typically speculate on where regional premiums will go one direction or the other. We continue to be very focused on two things I'd like to highlight. First and most important is that, we're trying to deal with Chinese overcapacity, so we're trying to make sure that we can align all of our global partners around the world of market-based economies to try and ensure that we have a level of playing field as possible. When it comes to the Section 232 Tariffs, we're focused on ensuring that Canada remains tariff free for all of the exports into the United States, and we're also very focused on being able to discuss and talk with the administration in the United States, in Canada, and elsewhere, and how we can make sure that we have -- we're applying the right kind of pressure on China in order to reel in increasing production. And so, I understand where your question was going, but I also think it's somewhat unpredictable as to where this process will end up as part of whether it's part of the U.S. MCA or whether it's a separate process, where the Section 232 issues are resolved between the United States and Canada.

And sorry one more question, and this is more to just clarify a comment. Bill, when we were thinking about making a sequential bridge 3Q versus 4Q, should we exclude $60 million price mix benefit in the Alumina segment? And is there any other 3Q bridge item you think it's non-repeatable?

I think going into the fourth quarter, the price mix impact in the alumina side will vary depending on what prices end up being during the course of the quarter. And with the volatility of API prices that we've seen, it's pretty difficult to predict. With that said, out of the $60 million, $30 million was the non-recurrence of a negative that had occurred in the second quarter and $30 million was the benefit of having a positive shipments in the third quarter. So if you're going to back anything out, I would say the $30 million that occurred in the third quarter will not recur in the fourth.

All right. Thanks, guys. And once again congratulations on the quarter.

Thanks, Piyush.

And our next questioner today will be David Gagliano with BMO Capital Markets. Please go ahead.

Hi, thanks for taking my questions. I just have a -- I have a two or three, relatively minor questions, but I just wanted to cross a few off of the list in terms of the numbers here. First of all, the $30 million quarter-over-quarter improvement in EBITDA contribution from flat-rolled business versus the second quarter, is that new level of EBITDA contribution for flat-rolled reasonable moving forward?

Yes, we saw good improvement in flat-rolled in the third quarter, and -- but there was really two things driving it. The first was better volumes in flat-rolled, which I think is sustainable. And the second is we did have some one-time inventory adjustments in the flat-rolled segment that were positive impacts that -- that were really catch-ups from the first two quarters of the year. I would suggest to you going into 2019 Dave that we're targeting around the $25 million run rate result in the flat-rolled business on a quarterly basis. That may vary during the course of the year. There's a little bit of seasonality in that business, and that first half is typically not as strong as the second half., but we'd be targeting around that level of performance in our flat-rolled business.

Okay, that's helpful. Thanks. And then just -- could you just give us the average alumina costs -- alumina cost that flowed through the aluminum segment in the third quarter?

I don't have that one, Dave, so you'll have to follow up with Jim after the call.

Okay, I will. And then the last one, just from the closures, the two smelters in Spain, I realize they were relatively small and likely even smaller from a profitability contribution perspective, but I was wondering if you could give us a bit of a framework around on expected benefits, however, you want to frame it perhaps relative to the most recent quarter on an EBITDA basis once those are shutdown?

Yes, Dave -- how you're doing. It's Roy. I appreciate the question, to be quite honest, for Spain, because we're just starting this consultation process and it is a very formal process of discussions with the workers' representatives. I think right now, it would simply be too early to comment on changes quarter-over-quarter. So, I think we'll leave that one for a future discussion once we reach the end of that process.

Okay. Understood. Thanks very much.

Thanks.

Thanks, Dave.

And the next questioner will be Chris Terry with Deutsche Bank. Please go ahead with your question.

Hi, Chris.

Hi there. Hi Roy and Bill. A few from me, I'm just following up on the detail from the 3Q. Can you just talk through the conversion costs in the smelting just around electricity carbon et cetera. I think that's where a lot of the break came versus analysts' expectations. So just trying to get a gauge of the numbers heading into 4Q?

Yes, it's always hard to judge against analysts' expectations, right? So as we look at it, I would say there is a couple of areas from improvement versus maybe where we're looking at it. We think the flat-rolled products business probably did a little bit better than what people had expected. The hydros in Brazil did very, very well in the third quarter. And then as far as the cost and the smelting business essentially came in line, where we were anticipating them. Year-over-year, just to be clear, we talked about raw material costs year-over-year of around $400 million, that is a little bit less, we're taking that down a little bit from where that 400 million was, but that is not in the smelting business that's more on the refining business, we are seeing a little bit lower costs in refining. But on the smelting side, costs came in about where we anticipated, coke prices have seemed -- have flattened out a little bit, pitch prices continue to go up. But, overall where we expected.

Okay. Thanks for the details there. And then just overall, thinking about the pension versus buyback versus dividend debate. What's the timing you expect to do the actual $200 million buyback and how will you actually decide when to do that? Is it realistic that you actually complete that buyback in the next year?

Well, we will start it -- we'll kick it off in the fourth quarter. I'd remind you that the buyback was an integral part of the capital allocation program that we announced over a year ago. So we committed to our investors that after having done all the various things that we had talked about including holding cash on the balance sheet of $1 billion, $300 million of sustaining capital, $300 million of optimizing the liabilities, we would do a return to shareholders, and the commitment was to return excess cash above $1 billion. And at this point, we're projecting that we'll do $200 million, haven't given a timeline on how quickly it will be done, but we'll get it kicked off in the fourth quarter.

Okay, great. And the last one from me just on the Western Australian operations, are there any -- I guess bonus payments or one-off fees we should expect in the fourth quarter coming through the result?

I'd say that we still have a road ahead of us in Western Australia. So I don't think we could speculate on any kind of bonus payments, because we still need to get to an agreement that our workers have ratified and agreed to. So still some work ahead on that one.

Okay. Thanks guys. I'll leave it there.

Thanks, Chris.

And the next question from Curt Woodworth with Credit Suisse. Please go ahead with your question.

Hi, good evening.

Hey, Curt.

So, just drilling down into your cost structure for the smelters, you do provide pie chart looking at the breakout. And it seems a little odd that the alumina cost would be flat at 42% quarter a quarter given that my numbers alike alumina price went from $380 to $520. And if you just sort of calculate the implied delta from your pie chart it’s about a $50 per ton, delta versus $142. So I have a feeling that maybe that’s part of the delta here in the modeling, can you talk to that?

Yes, it’s really difficult to walk you through your model on the call, but essentially -- yes, go ahead.

Why would the cost be 42% both quarters, when you had a massive inflation in alumina sequentially.

Well, if you look at the -- just the 90 day lag of API, right. So, yes, we did have an increase in alumina cost in the third quarter associated with the 90 day lag of API. It really is dependent on some of the timing of shipments that we had in alumina into our smelters. And at this point, we saw a little bit of a jump up in alumina cost in the third quarter that are reflected in the results. We'll see a little bit more impact in the fourth quarter as we get into the fourth quarter.

Okay. It just seems like a pretty big delta. Because like the API lag is $140, so call it $280 on a cost number, say 25 -- okay, that's fine. And then I guess the second question is just thinking about the cadence of cost going forward in smelters outside of alumina. So you talked about I think Spanish power was higher this quarter, coal-fired pit flat was going up, coke flat, do you think that cost peak in the 4Q or do you get further inflation into 1Q given where the lags are? If you kind of assume that we stay flat where we are?

Let me hit that and Bill can maybe you jump in a few additional details as well. So when you look at the important components, power is one that will depend on a lot of different factors depends on what's going on in energy markets around Europe or North America and the rest of the world. So that one will depend on market conditions. Coke and pitch are two carbon materials both seem to have reached a bit of a flattening off point from where they have been in our rising environment over the last year and half. And so that means that we should start to see some stability in those costs going forward. The caveat I would make is that it depends a lot on what's happening in the general aluminum industry. If we see growth of expansions or growth inside of China, you might start to see some of those materials with additional demand for the opposite. And it's also tied over with what's happening in the pricing environment for aluminum. What I would say is that when you look at the price of aluminum today, and you think about where that sits relative to full cost structure both alumina, but then all these other components you're at a point where half of smelters outside of China are now cash negative and under water. And that simply means that there is very little incentive to continue to operate many of those plants and certainly no incentive to invest. So I think that -- I think, when you look at how the raw materials connect with what's happening in the pricing environment today there really isn't a lot of room unless aluminum prices to go up for raw materials to continue to increase without starting to see a significant supply reduction. Because plants can't continue to operate at these types of cash losses.

Totally agree.

And to put some finer point around it. When we look out at coke prices for instance, we think they've peaked largely in the third quarter, coke should come off our view a little bit in the fourth quarter. Pitch should stay around flat, pitch as Roy has said has been persistently high. And we should start seeing some of the decline in caustic prices flowing through our results in the alumina business.

Got it, all right. Well, I really appreciate it. Thanks for your time.

Thanks, Curt.

And the next questioner today will be Timna Tanners of Bank of America Merrill Lynch. Please go ahead with your question.

Yes, hey guys. Good afternoon.

Hey, Timna.

First off I was wondering if you could talk to us a little bit about how RUSAL’s uncertainty or the operating status of -- or the uncertain operating status of RUSAL is affecting you. Curious because of negotiating season perhaps if that's a factor. You are the world's largest alumina supplier and then their status being uncertain. I'm just curious how that how affected you and how you see that affecting you to the extent that you can elaborate on that near-term?

Yes, Timna, so I think there is an impact on the uncertainty around whether what will happen with sanctions on RUSAL that impacts the general market. And so much like everybody else that impacts us on how the pricing trends are going and how people are enter or not entering into contracts. When you think about where we stand I think we have a period of time where you can continue to enter into contract. However that you don't have any assurance of supply of physical supply. Because if those sanctions continue, that's going to create an inability for them to sell product into Western companies. So from our perspective, we're just at the very beginning of what we call the mating season, when we start to get into aluminum and elsewhere, some of those 2019 contract. The fact is that that certainly supports our discussions and our arguments with our customers because they see us as a reliable supplier that won't be subject to these types of sanctions. But we're still pretty early in the process. And so, I'd say that everybody's still is waiting to see what happens in these next critical weeks. From a premium standpoint, I think we've seen some increases in premiums both in North America, but also in Europe. As we go into this next season we're starting to see some opportunities in the premiums as well. Although still again, we're just at the beginning of that critical period, so more to come.

Okay. I mean, given that alumina supply is uncertain in your supplier and assuming that this can continues to get kicked. Is it not -- can you not say that you're getting more appetite as a second supplier or as an alternative supplier to some of those aluminum smelters that used to depend on RUSAL. Or I mean, is there -- is that not a likely benefit to you, I'm just not understanding if you’re just reluctant to say because you're in negotiations if there's something else going on?

Yes, so for alumina specifically, I think, RUSAL is important but also the shortness of the market outside of China is also very important. So absolutely, we have a lot of interest in additional cargoes of alumina. And when we look forward it's typically not the same type of next year contracting period it tends to be longer term contracts. But when we have any available cargoes, and we do try and keep a certain number of cargoes that we can sell either on a spot basis or on an API basis, there is a significant amount of interest. And that's pretty typical for us because we have very high quality aluminum, but I think that is particularly important now because of the uncertainty around RUSAL, but also the uncertainty around other places where there's instabilities and uncertainty of supply over these next three, six, twelve months.

Okay, thanks. And then just my second question, just high level, I’m fascinated with this continued alumina price out performance relative to aluminum. You’ve seen it in your results we’ve been talking about this for a while. And I know you’ve also mentioned for a while the Chinese aluminum producers are not profitable. And I’m just wondering how did your economists are forecast project this playing out? And not just in China but even here in the U.S., there’s some capacity restarting despite these really high alumina prices. So I'm just wondering, do you think at some point it stifles some of the restarts that are being discussed as a new capacity, or do you think we could see a protracted period of divergence between the commodity prices? Thanks.

So in aluminum specifically or alumina. The mix between aluminum and alumina prices.

The divergence, how long can we see that vast divergence in the aluminum producers hit pretty hard and is not loss making in some cases, right? As you said in the past that that just continues to play out, I’m wondering how long can these Chinese producers be lost making, how long can these U.S. producers talk about restarting despite high alumina prices that don’t make them economic?

So remember first of all that there’s a pretty significant difference between the rest of world and the Chinese market. So again, going back to the one slide that I presented it’s -- we’re actually finding that today, it’s the rest of the world aluminum producers that are underwater and not necessarily China. Because there’s a $200 per aluminum ton difference in the cost of alumina. And so it’s creating this pull, because there is such a high price for alumina outside of China. It’s starting to create this export connection that then starts to supply the rest of world market. Now that’s all predicated upon what’s happening in Brazil also to a certain extent like you were just asking on RUSAL. So how long can that last, it’s really a question of when Alunorte they can restart again and under what conditions. And it’s also dependent on how much exports China can get out. It is a very laborious and cost inefficient process to go from a refinery to big bags then cut open the big bags to put it onto a bulk carrier. So it ends up creating inefficiencies and frictions in that whole system. So in the meantime, I think, it’s -- when you have this divergence where aluminum prices really haven’t shown a reaction to that inflation of alumina prices, it makes it very hard to be a smelter particularly outside of China. And in alumina it means that it’s an opportunity to operate, to sell, to find those spot cargos, but there is no real certainty around how long that market will stay like that, it’s really a matter when supply comes back on?

Got you. Okay, thank you.

Thanks, Timna.

And the next questioner will be from Matthew Korn with Goldman Sachs. Please go ahead.

Hey, thanks guys, appreciate you taking my question. I had a bit of a market question for you. China has been making some aggressive signals on their scrap import policy for metals non-ferrous metals in particular, where they want to go over the next two-three years. Does this change in your view the calculus for users of aluminum as they are looking at primary, the cost of primary, costs of investing these more secondary. Do you think there’s any potential to see substantial lift in the use of scrap in North America or other ex-Chinese markets. In the end, does that matter for the markets that you’re selling into?

Yes, and Matthew thank you for the question. I think the answer is yes, it does have an impact. So the less scrap that flows and take the United State specifically, the less scrap that flows from the U.S. to China as an example, it means that you’re -- there is more plentiful scrap available inside the U.S. And so you’re starting to see downwards change or an increase of the discount to what is regular prime P1020 metal. And so because that happens, it starts becoming even more attractive to use the scrap and in a time where you’re actually seeing the cost of bringing metal in, importing metal increasing, it’s starting to act as a way for them to avoid the imports and actually start to bring that into their process. So, what does it do, it helps to bring down in general the price of production for the U.S., which has been offset by the fact that metal in the U.S. is now more expensive than it is in the rest of the world. And so that have a bit of an offset to some of those impacts that are happening because of the tariff situation right now. I don’t think because of the U.S. is such a short market, because there are so many imports of metal in order to fill the consumption of aluminum in this country. It hasn’t been a significant impact right now, but the more -- the less scrap China takes the more that will end up being used in the U.S. or elsewhere. So it starts to have more and more of an impact going into the future.

Got it. Let me follow that up with another question on China then. There has been a lot of mix messages coming out of the government arguably on the way that the pollution controls are going to be applied over there this coming winter season. Do you see any risk around the production restrains being substantially diluted this year versus last and how might that play out for aluminum versus alumina if that indeed the case?

Yes, so first and most importantly, we incorporated into our 2018 balances and then we’ll also incorporate into our 2019 balances, our best estimate of what all the impacts have and particularly including the winter curtailment. I think your point is well taken in that, we expect winter curtailments to be less than they were last year. At the same time, I’ll also argue that winter curtailment program was the lesser important of the two important changes in China, the first being winter curtailments but the second and much more important was the enforcement of the operational permit. So, what I think has the biggest impact is the fact that there is still are serious requirement in order to bring down or shutter older capacity transfer those operating permits to any new expansions or existing capacity that is unpermitted before it can ever start inside of China. So I think that the point is yes, there’ll be less winter curtailments, it’s already incorporated into our balances, so I think that is part of what we’ve already been talking about. But again, as long as China continues down this path of enforcement of environmental controls and operational permit, it does start to create a more level playing field. And we’re now seeing a lot more action less so in aluminum was already pretty well active, but we’re also seeing a lot of work inside of bauxite that’s constraining bauxite export ensuring that bauxite mines have the permits in place. And that they are following operating practices, it tend to bring the cost of bauxite up for those alumina refiners inside of China.

Got it. I appreciate it. Best of luck.

Thanks, Matthew.

[Operator Instructions] And our next questioner today will be Lucas Pipes with B. Riley FBR. Please go ahead with your question

Thanks, for taking my questions and great job this quarter. Roy and Bill I wanted to follow-up a little bit on your capital allocation strategy. And you've made a lot of progress on optimizing your liability. So as you look into 2019, and obviously market conditions has been pretty volatile. But should we continue to think about a 50-50 split of cash between optimizing liabilities and capital returns if it is in excess of $1 billion?

Yes, Lucas, let us get through 2018 and we'll come out with a capital allocation program in early 2019 for 2019 and potentially even for longer than 2019. As we go through 2018, we still have to execute on the share buyback of the $200 million. We've talked about the fact that once they -- once we achieved all the goals of the capital allocation program we'll be returning cash to shareholders in addition to further delevering. So we still have that to do. So let us get through 2018 and see what the balances look like at the end of 2018 and early 2019 we'll let you know what the allocation program looks like.

And maybe really quickly on the balance at the end of 2018. If I recall correctly, you generate more cash in the second half of the year and I think even more in the fourth quarter. So at the midpoint of guidance, do you have a rough sense excluding any share repurchases where your cash balances would shake out December 31st.

We don't provide an exact guidance on that. But what I would tell you is that we talked about splitting excess cash above $1 billion between share repurchases and further delevering. We've announced the $200 million program. So it should give you a pretty good indication of where we anticipate cash to end before any share repurchases.

Got it, okay.

And you're right. We generate a lot of cash in the fourth quarter typically if you look back at our fourth quarter even as part of [indiscernible] we generated a lot of cash in the fourth quarter.

Okay. All right. Well, I appreciate the detail. Thank you.

Thanks, Lucas.

And our next questioner today will be Justin Bergner with Gabelli & Company. Please go ahead with your question.

Thanks guys for fitting me in. The step up in the profitability of flat-rolled, which I guess you alluded to being about $25 million per quarter run-rate in 2019. How much of that is just related to the Warrick restart and how much of that is due to other factors? Because that's obviously a much, much higher run-rate than anything in recent history.

Yes, I don't have the exact breakdown of the percentages. But I would say less than half of that is related to the restart of the smelter. We have grown and are in the process of growing our shipments out of that mill from when we got it from 600 million pounds to over 720 million pounds this year and would like to see it higher going forward. We've been able to put a lot of volume through the mill. And we'd like to see stability of returns and stability of the results out of that mill. So projecting at about that rate going into 2019. And I'd personally believe that mill has a bright future and can do better than that run-rate. So that's where we're at today.

Okay, great. And then one additional question, I think you mentioned a $27 million net benefit from the tariff regime this quarter, if I heard you correctly. How did you calculate that, or what Midwest bump did you assume to get to that?

I don't have the Midwest bump. What I can tell you is roughly on a gross basis we had roughly $56 million of the improved revenue and $29 million of higher costs on a year-over-year basis. And that's what you see the $27 million benefit. I don't have the calculations in front of me, but I'm guessing that's probably around a $0.10 benefit from the premiums, which would make the math pretty simple. But around a $0.10 improvement in premiums.

Okay, thank you for taking my questions.

Thanks, Justin.

And the next questioner today will be Alex Hacking with Citi. Please go ahead with your question.

Hi, Roy and Bill. Our main questions were answered. So I'll refrain from asking a question and follow-up with Jim later. Thanks.

Thanks, Alex.

Okay. And the next questioner will be from Paretosh Misra with Berenberg. Please go ahead with your question.

Hi, guys.

Hey, Paretosh.

Hey. So just a couple of quick ones. So one I don't know if you already said that on the call. But can you provide the caustic and all the dollar assumptions that are baked in your guidance for the fourth quarter?

Don't have the caustic number per se in front of me and I believe the Aussie dollar is $0.72.

Got it. And then second on the bauxite side, in the bauxite business, what kind of growth opportunities you have still available in Australia and what are the bottlenecks? Is it permitting or the infrastructure or what is that?

Yes, so the first and most important is that we want to for any growth project we need to make sure that we have a reliable customer at the other end that is going to pay us fair value for what we believe is very high quality bauxite, particularly at a moment where caustic prices are high. So and quite simply, there are customers out there and part of what we've been doing over the last couple years is finding ways to work with them and to build those partnerships. So that's very positive thing. In Australia, Western Australia particularly, we have the ability to increase our production. Right now we have an operating permit in order to export up to $2.5 million. We will need to renew that coming up in about a year. But also we’re able to get close to the 2.5 million tons out. But we do have some logistical bottlenecks, make sure that we can do it at an economic -- a very economic way, essentially to lower the cost of logistics from the mine to the port and then get it over to our customers. So still some growth that we can see in there. And in fact, some investments that we’re planning on making that once we finish the permitting process that makes it more attractive financially. We also have opportunities in Guinea and in Brazil. It depends a bit on what’s happening with freight rates and prices of bauxite. But again, I think the qualities that -- and the consistent delivery that we have of bauxite helps to make that a very attractive business going forward Paretosh. Thank you.

And Paretosh, I did check it is $0.72.

I see, thank you.

And our last questioner today will be Andrew Cosgrove with Bloomberg Intelligence. Please go ahead with your question.

Hi, guys. Thanks for taking my question. Just quickly on caustic, just looking at the -- how the Southeast Asia and Northeast Asian prices collapsed more recently and how they’ve compared to your costs or your aluminum implied costs back in 2017. Is it kind of fair to assume that those alumina costs might come back into play that we saw mid-2017 as we move throughout 2019, considering the drop we’ve seen?

Yes. So it’s hard to say, we have seen in aggregate caustic and this does not bifurcate between Asia and rest of the world. But caustic prices kind of peaked out at $630 a metric ton at the very beginning of this year and have trended downward from there. That’s up sharply from what we’ve seen in the third quarter and fourth quarter of last year. So that we have about a six-month lag on our caustic costs. So we will continue to see those higher prices that we’ve seen earlier in the year. But they will, assuming the prices continue to trend downward, they’ll continue to come down.

Okay. Just wanted to -- just double check that. Okay, thank you. Won’t keep you guys any longer. Appreciate it.

Good. Thanks, Andrew.

Okay. And this will conclude our question-and-answer session. I would now like to turn the conference back over to Roy Harvey for any closing remarks.

Good. Once again, I’d like to thank everyone for joining us today. As we approach our two year anniversary next month, we remain focused on our strategic priorities to reduce complexity, drive returns, and strengthen the balance sheet. Our company is much stronger today. It’s clear that our strategy is working and we will continue to build upon our solid foundation for an even brighter future. Thank you, and William, back over to you.

Thank you, and the conference has now concluded. Thank you all for attending today’s presentation. And at this time you may now disconnect your lines.