Ladies and gentlemen, thank you for standing by. Welcome to the Century Aluminum Company First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference call over to our host, Ryan Crawford. Please go ahead.

Thank you, operator. Good morning, 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 Peter Trpkovski, Senior Vice President of Finance and Treasurer. After our prepared comments, we will 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 1. Please take a moment to review the cautionary statement shown here with respect to the forward-looking statements and non-GAAP financial measures contained in today's discussion. And with that, I'll hand the call to Jesse.

Thanks, Ryan, and thanks to everyone for joining. We made lots of progress this quarter with some exciting new initiatives. So I'll start today by quickly reviewing the improving market environment and the strong operating performance from each of our plants. Jerry will then take you through the details of our excellent first quarter results, and then I'll finish with an update on our new U.S. greenfield smelter project and our recently announced secondary joint venture with MX Holdings. Overall, strong operational performance and declining costs drove adjusted EBITDA of $25 million in the first quarter. Jerry will give you the full details here, but we are really proud of the job our team did across our locations to operate safely and efficiently through the quarter. We have seen a real improvement in the safety culture across our plants, which is reflective of strong plant leadership and the commitment that all of our employees have made to operate safely. Turning to Slide 3. Market conditions remain broadly balanced in the first quarter before an improving demand picture in the U.S. and Europe paired with continued strong demand in China drove LME prices substantially higher in April. This pickup in demand was evident in regional premiums as well with the European premium increasing most notably over the course of the quarter to be up nearly 50% from year-end levels. Alumina markets also rose during the quarter with Q1 Atlantic alumina prices up about 10% from Q4 levels driven by supply curtailments in Australia. In April, spot alumina prices have followed LME higher as production disruptions in India and elsewhere have made for a tight market. In rising alumina markets like these, we can see that most clearly the strategic value of our Jamalco acquisition and the captive supply of high-quality alumina…

Thank you, Jesse. Let's turn to Slide 7 to review first quarter results. On a consolidated basis, first quarter global shipments were approximately 175,000 tonnes, up slightly from prior quarter despite the power curtailments in Iceland. Realized prices, however, decreased versus prior quarter due to lower value-added and regional delivery premiums, resulting in net sales of $490 million, a 4% decrease sequentially. Looking at Q1 operating results, adjusted EBITDA attributable to Century was $25 million. This was a sequential decrease of $32 million primarily driven by the recognition of the full year 2023 IRA Section 45X credit during the fourth quarter compared with 1 quarter of 2024 credit recorded in the current period. Normalizing for the timing of the recognition of the Section 45X benefit in the prior quarter, adjusted EBITDA improved due to lower energy and raw material costs, which were partially offset by the anticipated lower value-added product premiums. During the period, we finalized purchase accounting for the Jamalco acquisition and recorded a bargain purchase gain of $246 million. Adjusted net loss was $3 million or $0.03 per share. The main adjusting item is the deduction of $246 million related to the bargain purchase gain. As a result of finalizing purchase accounting, we have now updated our 2024 outlook for depreciation and amortization to between $100 million and $110 million for the year, as you can see on Slide 19. We maintained strong liquidity of $302 million at the end of the quarter, consisting of $93 million in cash and $209 million available on our credit facilities. Now turning to Slide 8 to explain first quarter sequential improvement in adjusted EBITDA on a normalized basis. In total, adjusted EBITDA for the first quarter was $25 million. Realized LME of $2,190 per tonne was up $8 versus prior quarter,…

Thanks, Jerry. Turning to Slide 11. I'm pleased to present our 2 new exciting growth projects that we announced this quarter. One of our core strategies at Century is to capitalize on our position as the largest user of primary aluminum in the U.S. market, which is the shortest target for aluminum in the world. Our production footprint in the U.S. is close to our customer base, allowing us to offer unmatched flexibility and service to our customers while benefiting from strong regional premiums and long-term trends towards near-shoring supply chains and critical mineral production. Both Sebree and Mt. Holly are well known in the marketplace as Tier 1 suppliers of billets and other value-added products. Demand for aluminum products in the U.S. has continued to grow as long-term trends towards renewable energy and electrification called for increasing amounts of advanced aluminum alloys and green aluminum products. And in order to capitalize on these trends, we have looked for ways to build on our leading position and meet this ever-increasing demand from our customer base. Turning to Slide 12. The first of those opportunities is to make a more substantial foray into secondary aluminum production. This has long been a priority for us. And as we've discussed in the past, we have engaged in some small amounts of secondary production in our existing U.S. casthouses. Through this experience, we were engaged with our customers and see the growing demand for green recycled billet production in the U.S. Given the differences in supply chain and operational expertise necessary to build and operate a secondary casthouse, we quickly realized finding a partner with experience in this space would be key to successfully entering this new line of business. And as we announced in March, we were thrilled to find the perfect partner…

[Operator Instructions] The first question comes from the line of Lucas Pipes of B. Riley Securities.

Congratulations on your progress on many fronts. One of them is starting production in Iceland with the casthouse. And it sounds like you'll be ramping up over the course of this year. In Q2, I would imagine you're probably still losing money as you ramp up. And I wondered if you could maybe articulate that so I can fine-tune my model and get a better sense for the impact, especially as the facility ramps.

Sure, Lucas. Thanks for the question. You're right that over Q2 and Q3, the casted volumes will be fairly limited, mainly consisting of trial loads for our customer base in Europe. And so most of those volumes will come over the course of Q2, sent into Europe where they will be trialed over Q2 and Q3. And then you'll actually start to see the volumes ramp in Q4, as we mentioned, and should be going full out in Q1. In terms of the cost structure, that will all be included in the guidance that we gave. So there won't be anything incremental to that. It won't be significant over that period. And then you'll start to see the additional upside for the business of those billet sales starting to hit in Q4 and then full out in Q1 of '25.

Got it. So the big step up would come not in Q3, it's really kind of in Q4 versus Q3 where we would see that kind of quarter-over-quarter step-up in EBITDA, thanks to this asset.

That's correct, Lucas. There will be some sales in Q2 and Q3, but those are really pretty small and really just trial loads into the customers.

Any way to quantify the potential impact in Q4 versus Q3?

We'll, of course, give that guidance on our Q3 call. And what I would just say for now is there will still be a ramp-up period in Q4 as you start to sell into that customer base. So it won't be the full out quarter's worth of volume that will hit in Q1 of '25, but it will be substantially higher than what you'll see in Q2 and Q3, yes.

I appreciate that. And then on your new -- on the projects you outlined in the U.S., first, congratulations on that. Very exciting on many different levels. On the new casthouse, it sounds like if I read it right, we will start in 2026. And I wondered if you could maybe give us a sense for the economics around that project? What's the capital intensity? How would spending be paced over the next 2 years? And anything you could share on the return thresholds would be very helpful.

Sure. Sure, Lucas. Yes, you're right. We're really excited about this project. We've been talking for a long time about our aspirations to enter this portion of the business. And we're indeed seeing a lot of increased demand for secondary aluminum, both here in the U.S. and also in Europe and elsewhere. So it's a really good opportunity for us to enter the space. We think it's going to be very well received by the market. And as I mentioned, it's actually very complementary to our existing billet business in the U.S. because we are able to offer closed-loop supply chains to our existing billet customers. And we'll be able to offer that -- sort of that full suite of both primary and secondary products to all -- to the customer base. So we do expect that we'll be in a position to make an investment decision, hopefully, in Q2 and Q3. And once we do make that decision, we will provide everyone with an update on exactly what the project looks like and what the expected returns are at that time. We are continuing to sort of finalize the engineering work as I mentioned on the project, working with our partner at [ MX ] on that. But we're really far advanced on this one and excited about it. I think it's going to be a good project. Just in terms of very high level on spending profile and return profiles, we do think this will be an asset that we're able to secure some pretty attractive financing on. And then, of course, it is a joint venture, 51-49, with us on the small minority side. And so that will decrease the cash requirements from our side. And we think with the financing structures we're looking at, we shouldn't have much cash requirements to the project over the balance of 2024. So that gives you a little bit of sense on the timing. And we'll, of course, give more detail there going forward. And then in terms of return perspective, we talked a little bit -- without getting into specifics, we haven't finalized engineering work on the project, but we talked a little bit about our return requirements in the past when we were talking about the Iceland casthouse. And just remember there, we said we are looking for unlevered IRRs in the mid-teens. And so that gives you some sense of how we look at these projects going forward. And then finally, just one other consideration that we really like about this business and complementary to the rest of our business is the secondary business is really LME independent because you're purchasing scrap at a discount to LME in the marketplace and then converting it and selling it at LME prices to your customer base. So it really becomes a processing and margin business, which will be independent from the rest of our business, which is LME-exposed.

Very helpful. And just a follow-up on the financing. Should I expect the vast majority of the capital project-level loan of either secured or unsecured?

Yes. We do expect that this will be project-level financing.

The next question comes from Katja Jancic of BMO Capital Markets.

On the green aluminum smelter, can you talk a bit about how much you think this smelter would cost in total?

Thanks. Yes, as I said on the call, we're really excited about the green smelter. This has been -- for someone who's worked in the U.S. industry for over 15 years, it's really rewarding to be talking about growth. And when you look at the overall supply situation in the U.S., it's over 4 million tonnes short. It's very clear that something like this is needed. And I think the grant that we got from DOE is really recognition that, that's recognized all the way up to the national and federal level, the importance of aluminum as a critical mineral to the supply chain. In terms of process going forward for the smelter and to your question specifically, Katja, we are focused on the process ahead of us. As I mentioned on the call, a portion of that in the near term will be site selection and also securing the energy contract. We're pretty far advanced on that front, and so we expect to make good progress there. And then as a part of that is really finishing the second phase of the engineering work for the project. And that will take several months to complete. Coming out of that engineering work, we'll have a much better sense and narrow down on what the total capital cost for the projects will be. And hopefully, at that time, we'll be able to give you a little bit better sense. But at the moment, we're really just focused on the process of moving the project forward. We're really excited about the project. We think it's going to have very attractive returns. And obviously, we find ourselves in an environment with the DOE grant, with the 45X benefits, with the shortness of the U.S. market and the corresponding premiums that we're able to recognize in the U.S. and this real opportunity to put a cutting-edge facility here in the U.S. close to our customer bases with the flexibility that we offer to them from our existing casthouse of value-added products close to them, we think it's a really attractive opportunity for us.

That's fair. But is it fair to say that it would be a multibillion-dollar project?

Yes, it will absolutely be in that range, Katja.

And maybe then on -- and I know this is very early, but would you look to potentially even partner with someone on building this project? Would that be a possibility?

Yes. We're looking at a variety of different financing alternatives. And as I said, we're pretty confident with all of those items. There will be an attractive opportunity. So we think if we did want to bring in a partner, we think that would definitely be something that would be attractive to them. But it's a little too early to talk about exactly what the financing structure would look like.

Okay. If I may, one more on Jamalco. What is the utilization rate the facility is currently operating?

So we're right around that 1.2 million tonnes of annualized volume that we originally mentioned. And what we've been focusing on and what sort of drove some of the improvements and the return to profitability in March is really the stability of the operations coming out of some of those disruptions that we had in Q4. Really proud of the guys for -- guys and gals for pushing through and reaching that stability again and returning the plant to profitability. And we're excited about what it means going forward.

The next question comes from the line of Timna Tanners of Wolfe Research.

I wanted to ask a bit more follow-up on those topics. So on Jamalco, I just wanted to be clear as far as I missed it. Is the equipment outage resolved, and you should be at a more normalized run rate in Q2? Are there lingering issues? Where does that stand?

Yes. You're right on, Timna. Equipment issue is resolved. We should be at that normalized run rate in Q2. And we do expect that the refinery will continue to be profitable over the second quarter.

Okay. Great. So this is -- you guys are busier than ever. I can't recall a time that I've covered you with quite so many projects in play. You've got the new smelter, the casthouse, Iceland casthouse, it's quite a bit. And just trying to understand high level, you're deciding to look into a new smelter and add capacity also through the new casthouse, but you also have capacity off-line at Hawesville and Mt. Holly. So first off, where do you see all the additional aluminum going? Is it taking share from imports, I assume? Or is there a really -- I mean if you're doubling capacity through the new smelter and also adding capacity, like what's the vision there? And also, how do you balance the alternatives between restarting existing capacity and looking to add new capacity and then the primary versus secondary smelters. Just want some more of your thoughts there, please.

Yes, sure. Really good question, Timna. And first, I would just like to say one of the -- I agree with you, we are just about as busy as we've been. A lot of that is driven by our excitement and our views of aluminum demand going forward from here. You see global inventories at post financial crisis lows and LME stocks themselves lower than we've seen since even before the financial crisis. And we start to see improving demand both in the U.S. and Europe and very strong demand out of China. So we are really excited about the future of the aluminum industry. We think we're the right metal to meet a lot of the macro trends we spent a lot of time talking about. And that's really what's driving all of this work from our part because we think there are opportunities out there for us. And secondly, I'd like to also just give a little bit of recognition to our operations team. We are as busy as ever on the project front. But it's because -- one of the reasons we're able to do that is because the operations have been more stable for longer than we've seen in a long time, and real credit goes to our operating team for achieving that and with, frankly, have been volatile macro environments. But they've kept their nose to the ground, and we've really done a good job there.

Okay. So then to your question, Timna, we do have a lot of projects in front of us. We do think there's a lot of opportunities in the U.S. to fill that 4.1 million tonne short position with U.S. production. And indeed, that would -- our design would be to replace imports and take that share. As I said, you will get growth on the demand side, but with volumes like we're talking about with the new smelter plus the secondary casthouse plus potential for Mt. Holly restart, for instance. And there is a lot of ability to come in and start to fill some of that gap. And we think when you look at the global trends, as I talked about on the call, between 232, between Russian sanctions, between Mexican tariffs, a lot of the work that's going on in the EU, what's very clear globally is that people are focused on secure supply chains. And because of our operational footprint, we're better situated to offer that to our customers than really anybody else. And we want to execute on that and continue to offer that to our customers. So we think all of these are viable, and we're looking at all of these. We're continuing to progress the Mt. Holly restart. And as I said on the call, we're doing the work upfront to make sure that we can execute once we're ready to go. But all of the -- we're indeed looking at all those projects to know.

Okay. So that was helpful with regard to how you're thinking about the aluminum market and the -- obviously, vast amount of capacity additions that you're looking at. But if you could talk a little bit about why build a new smelter? You note that there hasn't been one built primary smelter in over 40 years. There's probably a reason for that. Maybe this is a unique opportunity because of the barriers you mentioned, right, the sanctions and 232 tariffs, et cetera. But why not focus more on secondary as a green alternative? And why build versus restart existing?

Yes. It's a good point, Timna. So as you mentioned in your call, there has not been a new smelter built in the U.S. since Mt. Holly was built in 1980. And as you might imagine, there's been a lot of advancement on the efficiency side over that time period. So we're ready to build and produce for the long term here in the U.S. We think those existing sites are viable. But what -- with the new smelter, we'll be able to create a cost footprint that should be first quartile globally. And that's really a game changer for us. And you're right, putting together some of the near-shoring trends, DOE grant, the 45X tax credits, we think there's a real opportunity right now to engage in that, and that's really why we're looking at that. Maybe just secondarily, versus secondary -- looking at primary versus secondary growth, we think there will be growth in both. There are many applications that do require primary. And so we think that's a good driver here for the primary smelter. And then there's also demand growth and additional calls for secondary aluminum and its recycled nature and green credentials. So we think being able to offer our customers both of those things at home here in the U.S. is a really nice initiative and a nice suite of products that will be helpful when we're making sales to our customers.

Your final question comes from the line of John Tumazos of John Tumazos Independent Research.

Jesse, could you give us a little primary in pot lining 101? Does the $10 million do the whole thing in the second quarter? Or will it continue into the third and fourth quarters? When you reline the pots, do you reline them 1 month before you expect them to fail or 1 year before you expect them to fail? And was there a productivity loss in the first quarter delaying the pot line reline or your pots at failures and output that you lost?

Sure, John. Happy to do it and really just to talk about this generally. So as we discussed, we did have a bit of an energy curtailment from one of our suppliers in Iceland in Q1 and falling into Q2. And what you do when you get an energy curtailment like that, is you generally will take a small portion of your pots offline equal to basically to reduce your energy consumption. And so that's what happened in Q1. And as you might imagine, when we choose which pot to take offline, we take the ones that would be due for relining during that quarter anyway. So in Q1, you get a bit of a deferral because you're not relining pots because you've taken them out to meet the energy curtailment. And then as we get ready in Q2 to put those pots back online, you will reline both the pots you would have relined in Q1 and the pots you are planning to reline in Q2, which is what really drives that $10 million headwind that you see there. So that will be a onetime thing in Q2, will not repeat, and we'll go back to our normal pot relining process going forward.

Are there any other expenses that might have been delayed where you'd have a little breathing room now with the metal price rising? For example, Peter and Ryan or all the engineers working on these projects do for a 10% [ raise ]. Are there other cost catch-ups now that things are moving in the right direction?

Not really, John. As we go through the cycles, we do try to maintain and run our sustaining CapEx programs on a steady basis. One thing you learned being in this business over long periods of time is while the market is cyclical, you really want to keep these plants operating as stable as possible through the cycles. And so we try not to defer large amounts of that sustaining CapEx over time. So not a whole lot of items that I can think that would fall into that category, should be pretty clean going forward from that perspective.

I want to complement you on working so hard with the secondary aluminum expansions in the greenfield smelter. The market needs it. And it's great that you guys burn midnight oil and do all these things.

Thanks, John. We really appreciate that.

As there are no additional questions waiting at this time, I'd like to hand the conference call back over to Jesse Gary for closing remarks.

Thanks, everyone, for joining the call today. Just before I end the call, I would just like to take a little bit of time to talk about the recent run-up in LME prices and as Jerry mentioned, how those will impact our outlook going forward. So as Jerry mentioned, if you just adjusted -- well, maybe first to start, if people will remember, we do have lags with our customers and as how LME runs through our results and also how regional premiums run through our results. So when you look at that, for our U.S. volumes, we've got a 1-month lag for 50% of the volumes and a 3-month lag for 50% of the volumes. And Iceland primarily runs on a 3-month lag. So you do get a little bit of a delay of the benefit of rising LME running through our results. Similar on the premiums. You have a 1-month lag on Midwest premium, and you've got a 3-month lag on the European premium. And you can see all these lags on our financial information that's on Slide 20 of the slides. And so as Jerry mentioned, if you did just assume for a second that those lags didn't exist and instead look at the second quarter outlook with spot LMEs, you get a much higher estimated results of somewhere between $75 million and $85 million. And that's before additional upside opportunities that we have. So for instance, EDPP, if you look at where that is today versus where it is in our Q2 results, it's about $50 higher. And if you look at regional U.S. Midwest premiums, if you look at the forwards, those are trading $0.04 to $0.05 higher from what they were in Q2. So both of those represent additional upside for our business. And we continue to see and expect that the value-added market will continue to improve over the course of 2024 as well, and certainly into our 2025 contracting season for both the Grundartangi billet casthouse but also the existing U.S. casthouse. And then finally, we continue to wait on 45X for the updated guidance. But if we do get the broader interpretation of eligible costs there, that would be additional upside to the guide that you see in Q2. So we're really excited about the business. We think there's a lot of opportunities. And we think the business will perform really well and help us produce great results and also as we look to execute on these expansion projects. I do see Lucas has one more question. So happy to take that.

[Operator Instructions] So this question comes from Lucas Pipes of B. Riley.

So I was a little late there in getting back in the queue. And just your comments just now were actually answering some of my follow-up questions. So I really appreciate all those remarks. One of the -- ones I wanted to touch on was just how you think about the balance sheet. In the release, you flagged it as a priority to reduce debt. Your shares have traded much better. How do you think about kind of your cost of equity, cost of debt, optimizing the balance sheet in this environment?

Thanks, Lucas. Just very simply there, that's really not something that we're considering at this time. We think there will be plenty of cash flow in order to allocate towards reducing net debt. And so that would be our plan on that, really prioritizing the cash flow we expect for this business, which, as I just went through, we think there's huge opportunity for significant cash flows over the course of the next few quarters and not really any need to go to the equity markets at this time.

Very, very helpful. And then just at the very end of your remarks, you commented on the additional opportunity around 45X. And that was -- there was a lot of detail that you provided as to your earnings power in this environment. Very helpful, as I said. And just going back to 45X, if you were to get the full benefit today, what would be the additional contribution? It would be great to have an update on that.

Sure. And we went through this on the last call in some detail and the slide on that on Slide 26 in this investor deck. But you can see if direct and indirect raw materials are included, that would be about an additional $50 million to $55 million uptick in our 2023 credit and similar sort of uptick going forward for 2024.

And again, this is kind of backwards looking as to that 2023 utilization rate. So with a full Mt. Holly restart and maybe [indiscernible] coming back, we could kind of scale that up proportionately.

Yes. Absolutely. And obviously, the greenfield is some distance away, but that would also be eligible for the credit.

There are no additional questions waiting. So Gary -- Jesse, I'll hand the call.

Thank you very much, everyone, for joining. We look forward to talking to you later this summer for our Q2 call.

Ladies and gentlemen, I'd like to thank you all for joining today's call. Have a great rest of your day. You may now disconnect.