Good afternoon. Thank you for attending today's Century Aluminum Company Third Quarter 2022 Earnings Conference Call. My name is Tamia, and I will be your moderator for today. [Operator Instructions] It is now my pleasure to pass the conference over to your host, Peter Trpkovski. Please proceed.

Thank you, Tamia. Good afternoon, everyone, and welcome to the conference call. I'm joined here today by Jesse Gary, Century's President and Chief Executive Officer; Jerry Bialek, Executive Vice President and Chief Financial Officer; and Shelly Harrison, Senior Vice President of Finance and our Treasurer. After our prepared comments, we'll take your questions. As a reminder, today's presentation is available on our website at www. centuryaluminum.com. We use our website as a means of disclosing material information about the company and for complying with Regulation FD. Turning to slide one. Please take a moment to review the cautionary statement shown here with respect to forward-looking statements and non-GAAP financial measures contained in today's discussion. And with that, I'll hand the call to Jesse.

Thank you, Pete, and thanks to everyone for joining. I'll start off today by discussing the current macro environment and our operational performance, and then Jerry will take you through our Q3 results and Q4 outlook before I wrap up. Market conditions remained quite complex in Q3 with the war in Ukraine and Russia's curtailment of natural gas flows to Europe causing significant turmoil across commodity markets. The resulting high energy prices and lower aluminum prices significantly impacted our results in Q3, driving a third quarter adjusted EBITDA loss of $36 million. In this challenging environment, our team continues to take prudent measures to guide Century through the short-term macro headwinds, while remaining focused on the stability of our operations and our long-term strategies. We made substantial progress during the quarter to lower our cost structure, reduced our exposure to spot energy prices and increased our sources of liquidity. I'll provide additional details on each of these measures in a bit. Despite current headwinds, the long-term demand fundamentals for aluminum remain excellent, and we continue to execute on our existing projects to expand our value-added product lines with our Grundartangi Casthouse project and U.S. Casthouse debottlenecking programs, all progressing on plan and on budget. As a reminder, we expect the first phase of our debottlenecking program to be completed by year-end, enabling an additional 10,000 metric tons of billet to be sold into the 2023 market. We will also enter the U.S. slab market for the first time next year and expect to sell around 10,000 metric tons of slab. This is an excellent area of long-term growth for Century, as U.S. rolling mill demand continues to expand. Our Grundartangi Casthouse project also remains on schedule to be completed by year-end 2023. Turning to slide four. You can see that…

Thanks, Jesse. Let's turn to slide seven, and I'll walk you through the results for the quarter. On a consolidated basis, Q3 shipments were down about 19% sequentially, primarily driven by the curtailment of our Hawesville facility. Realized prices were down 14% compared to prior quarter as a result of lower lagged LME prices and lower regional premiums. The combination of lower shipments and lower realized selling prices drove a 26% decrease in sequential net sales. Looking at operating results. Adjusted EBITDA was a $36 million loss for the quarter. Adjusting items include the removal of $5 million for Hawesville curtailment costs and the removal of $6 million for lower cost or NRV impact on inventory. Moving on to liquidity. As of September 30, we had liquidity from available cash and credit facilities of just over $250 million. We took actions to strengthen liquidity during the quarter, including initiating a new €40 million [ph] term facility secured by the Nord Pool in the money hedge unwind. This facility remained undrawn as of quarter end and is included in our total liquidity of $215 million. Additionally, in November, we agreed to a new $90 million credit facility secured by our Vlissingen assets. This credit facility will be available beginning in December 2022, and will further increase liquidity by $90 million beyond the $215 million we had at end of quarter. Turning to slide eight to discuss adjusted EBITDA. Again, for the third quarter, adjusted EBITDA was a $36 million loss, a decrease of $123 million from the prior quarter. This change was driven by lower LME and regional premiums, as well as higher energy and other raw material costs, which were partially offset by the curtailment of our Hawesville facility. The quarter three realized LME of $2,636 per ton was down…

Thanks, Jerry. In closing, while the market environment has become more challenging in the short term, we continue to make progress on both our short and long-term initiatives. During the quarter, Century lowered our cost structure through our OpEx and CapEx reduction programs and derisked our energy supply by converting our remaining Nord Pool exposure to a fixed price. These actions helped us finish the quarter with strong liquidity, which we have further enhanced through our new $90 million Vlissingen credit facility. Our operations remain at full production and our longer-term projects to expand our value-added product lines remain on budget and on schedule. Ultimately, we remain confident that Century is well positioned to benefit from the long-term macro trends that make aluminum vital to the world's future. We look forward to taking your questions.

Hi. Thanks for taking my questions. I'm just - I'm trying to make sure I have the changes in the hedges straight. So I'm looking at the last quarter slide deck versus this quarter's slide deck, just doing a little side by side. So you flagged one. On the revenue side, you hedged an incremental 20,000 tons at an average price of like $0.96 [ph] a pound in terms of the revenue. So I just want to confirm if that's correct. That's my first question. And then related to that is, on a go-forward basis, are you going to continue to hedge LME prices or LME volumes, I should say.

Hey, David, thanks. Yeah, just turning - if you look at slide 17, you can see the totality of our fiscal '23 and fiscal '24 hedge books. So you're right on the incremental volume. I don't have a calculator in front of me to do the cents per pound, but you should be able to back into what you're looking for there. Going forward, as we said, we intend to remain and offer our shareholders exposure to the aluminum price. The one exception for that is when we are entering into large fixed price commodity contracts, cost inputs and here talking about the change from the Nord Pool energy price to a fixed price. And so the LME that we sold forward was just to match that energy - fixed energy price and to convert that to the familiar sort of LME-linked power price that you're used to seeing from Iceland.

Okay. Thanks for clarifying. And then that's my other part of the question. On the hedges for the Nord Pool piece, last quarter for 2023, there was roughly 1.1 million megawatt hours, I guess, as I said, on the 1.1 million megawatt hours that were hedged at €30 on average. And now it's 990,000 hedged at €30. So I'm assuming that, that decline went into locking in now the fixed price component. So my question there is, first of all, can you confirm if that's correct? I'm assuming it is. And then the second part of that, but I think the more relevant question is what did you lock in? What's the price, the average megawatt hour price now that's locked in for Nord Pool?

Yeah. Thanks, David. Yeah. So maybe you can just turn to slide six, that's a good slide for understanding exactly what we did on the Icelandic power contract. So you're correct that the - if you maybe toggle between six and - slide six and slide 17 the amount of Nord Pool hedges that we unwound. And again, if you referenced my comments, we unwound those for a gain of about €16 million, which will settle equally spread over 2023. That matches about the volume that we fixed with our energy supplier. So we converted contractually a portion of the Nord Pool exposure with our energy supplier to a fixed price, which put us in an over hedged position in fiscal year '23. And so rather than sit over hedge, we unwound those hedges for a gain. Does that make sense?

Yeah. Not really, but I don't really profess to understand this hedge stuff anyway. So I'm just - I'm really trying to figure out the math for what's the fixed - what's the average price that the cost per megawatt hour locked in for the Nord Pool now for 2023? You had - you had 1.1 million megawatt hours locked in at €30 per megawatt hour. Now it's 990,000 locked in 30. So I'm just trying to figure out what's the fixed price that you've locked in, what is that price cost per megawatt hour?

Yeah. Let me try on the volume one more time with you. Let me try one more time No, no. I follow you. And let me try one more time on the volume, and then we'll get around to the price at the end if that works. So if you go back to last quarter and you looked at our financial hedge book, the equivalent of the slide 17, you would have seen that we are about 80% hedged on our 2023 Nord Pool exposure. What we did this quarter was we worked with our energy supplier to convert a portion of the contract with them from a Nord Pool exposure to a fixed price. When you take those megawatts and you take the megawatt hours you're seeing on that hedge slide from last quarter, that would have been more megawatts than we'll actually consume. So that put us in a bit of an over hedged position. And rather than sit with an over hedged position, we unwound a portion of those for that €16 million gain. So that's what happened on the volume side. The same amount of megawatts we're going to consume, but because we fixed a portion of the megawatts contractually with our energy supplier, we needed less financial hedges, and so we unwound a portion of that. To your question on price, so there will be two sort of portions of this you need to think about going forward. There's one portion that will run through EBITDA, which is just the raw Nord Pool exposure that you see that will continue to fluctuate based on Nord Pool prices and of that, part of that will be totally exposed to North Pool. And if you look at slide six, that's about 20% of our energy that will consume at Grundartangi in fiscal year '23 and about 10% will be fixed. Now because of our confidentiality provisions in our energy contract, we can't disclose what that price is fixed at. But if you go back and you look at my prepared remarks, I think a good way to think about where we may have been able to fix that is to go back and look at where Nord Pool prices were pre-COVID. And so as we sought to eliminate the volatility that's been caused by COVID and the events subsequent to COVID in Nord Pool, you might use that as a good way to approximate where we would have been able to reach agreement with our power supplier. So then if you use that for the fix portion and then if you continue to use the fixed price of - in the hedge book, for the rest of the exposure, that will give you a good sense of where you need to be on the energy side.

Okay. Thanks very much. I'll let somebody else ask the questions.

Okay.

Thank you. The next question comes from Timna Tanners with Wolfe Research. Your line is open.

Hey, good afternoon. Thanks for all the detail. I'm not going to profess to have that all figured out either. So maybe off-line, we can drill down a little further, but it's good to see the exposure off the books, if I understand correctly. Just wanted to take a step back and ask a little bit more about what further levers you can pull. I certainly appreciate that this all seems quite unsustainable. But in your Q, you point out that you have cash and cash equivalents for the next 12 months if conditions continue. And I'm just wondering if they do, if this terrible environment continues, what other levers can you pull? How are you thinking about managing the business?

Yeah, it's a great question, Timna. Yeah. So as we sit here today, between $215 million of liquidity you saw at quarter end, plus the new Vlissingen credit facility that we put in place. We feel quite comfortable with our liquidity levels as we look forward at the current environment, even if that environment were to continue. That said, I think you've seen from Century in the past and certainly from this cycle, there are a number of levers in the business of this size and capital-intensive other sides that we can pull post lower costs, whether that's on the CapEx side or the OpEx side and/or generate cash. And we continue to have a number of those going forward on both cost savings, but also cash generation opportunities that we can exercise. I'm not going to go into those at this point. They're somewhat hypothetical. We feel really good about the liquidity that we have today being sufficient for a long - as long as the cycle continues.

Okay. Fair. And then if I look at slide 10, kind of trying to get a sense of if this is the bottom in terms of market conditions, we have yet to see the full flow-through of lower regional premiums, it looks like for the fourth quarter and perhaps a little better alumina outlook for your consumption of it. But anything you can share with us in terms of what you're seeing in coke and pitch those are a little more opaque for us and how to think about if this is the bottom, what the delta is going forward given those lagging factors?

Sure. Yeah. I think on coke and pitch, those are much smaller markets than we see generally. We have started to see what we believe to be at the top in the coke cycle. We saw a little bit of a decrease over the past quarter. We expect that to continue. Pitch is a little bit, maybe a little bit more sticky. There's a number of drivers and reasons behind that. And so probably less near-term relief on that side. Again, but kind of going back to my comments, when you start to add it all up, you coke, pitch, alumina. And given the global nature of this energy crisis that we're seeing, one difference from this cycle versus previous cycles is the same cost drivers seem to be driving a lot of the world's supply. And so when you take that back to the cost curve and you look at how deep into the cost curve, the loss making is occurring. It gives you some sense of an equilibrium that's probably not going to be stable for the long term and that change can come in one or two ways. It can come on the cost side. Again, although alumina [ph] co-pitch, energy, eventually, we are seeing in the U.S. at least, energy prices come off quite a bit over the past few months. But it can also come on the price side, right? And we know we've seen the curtailments in Europe. We've started to see some curtailments in certain provinces in China, whether those are short, medium or long term. And so you're starting to see some reaction on the price on the - excuse me, on the supply side. And so one way or the other, the market will balance. And we don't see this continuing for the long term and feel pretty good about where we stand.

Okay. And if I could slip in one more. Just wondering, back to Hawesville, given that power costs have been a little less bad than it appeared at the time of the closure. Any updated thinking on how long that could be out or how to think about that operation going forward?

No. So the curtailment in Hawesville went very orderly, and the asset remains in good shape. And so from here on out, we'll continue to look at it. I think given where we are in the cycle today, I think you'll see us be quite disciplined and make sure that we have a good sense of where the market is going before we start to undertake the costs restarting that facility. But the asset is ready, the option is available for us, and it's just a matter of watching the overall commodity cycle and both on the price and cost side to figure out when it will make sense to restart that facility.

Okay. Understood. Thanks very much.

Thanks.

Thank you. Our next question comes from John Tumazos with Very Independent Research. Please proceed.

Thank you. Congratulations on three straight quarters with a book profit.

Thank you, John.

Into believe in miracles. Is it reasonable for your shareholders to assume that the policy of the company is to have long-term electricity supply contracts for its smelters, preferably renewable if it's available, moving away from the past strategy of buying spot power at least for Kentucky, because the energy markets have changed and are tighter and it's harder to buy the spot power?

Yeah. I think there's a lot of things going on in the energy side. It maybe isn't harder to buy the spot power, but we certainly have seen increased volatility in the spot power over the past 18 months, really since COVID, both up and down. And I think you hit on a couple of things that are for sure in our long-term plans. And one is to find a way to take some of that volatility out of our primary cost input, which, of course, is energy and you've seen that do to us - you've seen us do a little bit of that this past quarter in Iceland. But also more broadly, is to move to increasing renewable energy mix. And again, you've seen us do that, both in Iceland and in the U.S. over the past couple of years. So I would look for both those trends to continue over the short, medium and certainly long term.

Jesse, if I could ask another question. You might not be able to answer this, but I'd like to ask the question just so that the big shareholder at Glencore, may be some other advisers or attorneys just could hear that the question was asked. Is it reasonable to assume that the 42.9% shareholder would lend its balance sheet to support or guarantee a 20-plus year renewable power contract and a bridge power contract for the one or two or so years it takes to build wind farms or solar farms? And a fair consideration for such a financial guarantee Glencore's behalf might be first, preserving the value of their 42.9% equity stake and then continuing their aluminum metal sales contracts for a fee, continuing the alumina purchase contracts they have for a fee and continuing to hedge futures trading representations, which would cease if you had less aluminum output or something happened to rip up contracts like a reorganization? Big brother to able to help.

Well, of course, any contracts with Glencore will continue to be done on market and arm's-length terms, so I can maybe start there. But more broadly to your point of getting done long-term renewable energy contracts. And to your point, maybe about credit support for doing those. There are a number of ways that we've identified to get those done. I don't think those will be a limiting item to our ability to enter into long-term renewable energy contracts, whether in Europe or the United States. And in fact, I think some of the recent legislation we've seen out on the U.S. side in the Inflation Reduction Act has a lot of really great provisions that will help both build out more renewable energy in the United States for facilities like our smelters in Kentucky and South Carolina, but also help support other programs within those smelters, including increasing energy efficiency and other capital projects that will help the U.S. smelter base have a longer life. So I think there's a lot of really good opportunities there and both to green - our energy supply, but also extend the term and reduce the volatility of our energy supply, as I think you're hinting at.

So you're saying that the Inflation Reduction Act is so generous that you said you might be able to get long-term renewable power without a credit support from the shareholder?

Well, I think there's just a number of ways to get the types of energy contracts done that you're talking about. And it's certainly something that we're working on a lot of different pathways.

Thank you. Our next question comes from Lucas Pipes with B. Riley Securities. You may proceed.

Thank you very much, operator, and good afternoon, everyone. I want to circle back on the Icelandic power arrangement. And I'm curious, if we just look at the contract side, I know you can't tell us where you hedged rather locked in the fixed price component. But if we look at the formula LME-linked North pool and fixed, at today's LME prices, at today's north pool prices, what would be roughly the weighted average cost of your power in Iceland? Thank you very much perspective.

Yeah. Thanks, Lucas. It's a good question. And of course, we don't break down the individual cost structures of any of our assets. But just to give you a sense, I mean, you've seen how - maybe it just makes good sense to start back on slide six, and let's just look at the breakdown of the energy pricing going forward. So the LME-linked portion has not changed. And so that's the same 70% that you've seen for Grundartangi over the past several years, and you should have a good sense of how that performs through various cycles. No changes there. On the Nord Pool side, of course, you can continue to model that. You can see the Nord Pool market prices run through. That will be 20% of our exposure. And of that 20% of exposure substantially all of that is hedged at €30. So you'll see it continue to run through on the EBITDA side, but on the cash side, that's all hedged. It's about €30. And then the remaining 10% is that 10% that we fix contractually with our energy supplier. And that's obviously subject to confidentiality, but a small piece of the overall puzzle there. And I think you guys will have a good sense of where that may be or be able to approximate that.

That's helpful. Thank you. Then as a follow-up question, the LME-linked component, intuitively make sense, you pay more for power when LME prices go up, but now we've had an environment where LME has gone up and still have a number of our input factors, not just energy. Does it make sense to rethink that construct and linked to LME pricing given what happened to the global cost curve? Thank you very much for your color on that.

Yeah. Yes, it's a good question, Lucas. It's a structure that has worked very well for us over long periods of time through many different cycles. Obviously, you know, creates a smelter like Grundartangi, which has made money through the depths of the financial crisis to the more recent higher LME prices and back down to where we are today. So it's a nice way to minimize the impact of a cost that can vary quite significantly. So I think from our perspective, of course, we'll always be looking at what makes the most sense long term on the energy side, given the large portion of our cost base energy will always be. But it's not something that we're willing to discard easily given how successful it's been over decades now at Grundartangi. Of course, for Century as a whole, when you pair Grundartangi, which has that large LME-linked price exposure with the U.S. smelters, which have either market-based power prices and/or some fixed price power for instance, at Mt. Holly, you get a nice mix of all three different types of pricing mechanisms across country as a whole, which serves you well, both in higher LME environments, but also lower LME environments and conservative balance each other a little bit. So overall, we like that sort of mix of energy pricing and think we're well situated to sort of make it through various different pricing environments.

And when would this be up for renegotiation, if you could remind me, I would appreciate that. Is it may be possible to set the base higher, for example, on LME pricing? Or is that automatic?

Yeah. So there's the Grundartangi power contracts run through 2026 to 2036. So there is a variety of contracts there that are spread over that time period and will come up for renewal during that period.

Thank you very much for that color. And then switching topics to the alumina side. Could you remind us what percent - what percent of LME, the alumina pricing is fixed during the coming year? Would very much appreciate your color on that? Thank you.

Yeah. So we have a mix of aluminum pricing in 2023. The mix is a portion, which is LME-linked, a portion which has continued to link to API and a portion that is fixed. So we're about 60% LME-linked for 2023, 25% API and about 15% fixed.

Okay. And the LME-linked portion at what percent of LME would that be on average?

Yeah. We don't break that out specifically, as you might imagine, that's pretty commercially sensitive information. But that's - and just to clarify, that's our mix for 2022 - for 2023, prices something approximating that a similar mix to that in 2023. But we don't disclose the specific percentage given its commercial nature.

All right. I appreciate it and best of luck.

Yeah. And Lucas, maybe just - what we have said before is that percentage tends to be between 15% and 17% of the aluminum price with some periods outside of that range depending on the general relationship between API and LME whenever those contracts were struck.

Thank you. It appears we have a follow-up from David Gagliano with BMO Capital. Please proceed.

Hi. You've addressed a lot of the questions already. I just wanted to come back to try and ask the same question again in a different way. So for example, if you look at slide 10, the Q4 outlook slide, power prices Nord Pool assumption $105 per megawatt hour and the Indy Hub power price $60 per megawatt hour, and that's a $50 million tailwind. So when we go to Q1 2023, we see the same slide, and we assume those same prices, Nord Pool 105, Indy Hub 60, what will be the change in the power quarter-over-quarter in that - now that the hedges flow through and everything like that in Q1 '23?

The power pricing should be pretty much unchanged under that scenario, David, other than obviously, there's LME dependency for 70% of the Grundartangi power pricing.

Okay, okay. All right, that's helpful. Thanks very much.

Thank you. There are no further questions at this time. So I will now pass it back to the management team for any closing remarks.

Thank you, everybody, for joining the call today. We look forward to speaking with you again in the New Year. Thanks.

This concludes the Century Aluminum Company third quarter 2022 earnings conference call. Thank you for your participation. You may now disconnect your lines.