Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Tronox Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Brennan Arndt, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Christie, and welcome everyone to Tronox Limited's third quarter 2018 conference call. On our call today are Jeff Quinn, President and Chief Executive Officer; John Romano, Chief Commercial Officer; and Jean-François Turgeon, Chief Operating Officer; and Tim Carlson, Chief Financial Officer. We'll be using slides as we move through today's call. Those of you listening by Internet broadcast through our website should already have them. For those listening by telephone, if you haven't already done so you can access them on our website at tronox.com. Moving to the next slide, a reminder that our discussion will include certain statements that are forward-looking and subject to various risks and uncertainties including but not limited to the specific factors summarized in our SEC filings, including those under the heading entitled Risk Factors in our annual report on Form 10-K for the year ended December 31, 2017. This information represents our best judgment based on today's information. However, actual results may vary based on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S. GAAP financial terms that we use in the management of our business. These include EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per diluted share and free cash flow. Reconciliations to their nearest U.S. GAAP terms are provided both in our earnings release and the appendix of the slide deck. Moving to slide 3, it's now my pleasure to turn the call over to Jeff Quinn. Jeff?

Thanks, Brennen. Good morning and thank you for joining us for our third quarter conference call. I'll begin this morning with a few comments on the progress we are making towards closing the Cristal transaction. I will share with you what I can which represents everything that is public, not legally privileged or not confidential or sensitive to the transaction's current status. Due to these constraints, I will not be able to make any further comments on this subject during the Q&A session. So please bear with me in that regard and thanks in advance for understanding the delicacy of the situation. That being said, I am pleased to report we have made good progress. First, in Europe. As most of you are aware, we received final approval from the European Commission back in the summer to close the Cristal transaction conditioned upon divesting our 8120 paper-laminate product grade produced at our Botlek plant to Venator Materials PLC. Consummation of this divestiture will occur following the approval of the Cristal transaction by the U.S. regulatory authorities. Just to confirm, we have a signed binding definitive agreement for that divestiture and it is not affected in any way by the status of any remedy transaction here in the U.S. Since that agreement was signed and the remedy approved by the EU, that business has been managed by an independent hold separate manager and a monitoring trustee has been in place. So effectively that business is being held separate just waiting to be sold. Here in the U.S. in late September the exclusivity period under our memorandum of understanding with Venator expired without the two companies agreeing on a potential divestiture by Tronox to Venator of Ashtabula. Upon expiration of this exclusivity period and as a result of the sales process that…

Thanks, Jeff. Moving to slide 5, I'll start with a look at revenue growth in the third quarter compared to the year ago third quarter. Revenue of $456 million increased 5% compared to $435 million in the year-ago quarter driven by higher selling prices across all major products including pigment, zircon, chloride process slag and pig iron. The pricing gains were partially offset by lower pigment sales volumes and the timing of zircon shipments that Jeff referred to earlier. Pigment sales of $315 million were essentially leveled to the $316 million in the year-ago quarter as average selling prices increased 7%, also 7% on a local currency basis while sales volumes were 6% lower and in line with what we discussed in our second quarter call. As Jeff discussed the lower year-on-year sales volumes in our view were the result of transient inventory builds in certain sales channels, primarily in Europe and Asia. Customers in those channels met their pigment needs in part by de-stocking these inventories. Nonetheless, pigment selling prices were higher in all regions. Translation of the euro was a $1 million headwind on revenue in the quarter. Our titanium feedstock and co-products sales of $131 million increased 21% from the $108 million in the year-ago quarter, driven by higher selling prices of zircon, CP slag and pig iron. Zircon sales of $72 million increased 36% from $53 million in the year-ago quarter, driven by 50% higher selling prices which more than offset the 9% sales volumes that were due to timing of shipments. Demand remains strong in pig iron, especially in the foundry and foundry-grade material. Pig iron sales of $23 million increased 28% from $18 million in the year-ago quarter as selling prices increased 8% and sales volumes increased 17%. Feedstock and other products sales of…

Thank you, JF. Moving to Slide 8 and beginning with our balance sheet. On September 30, 2018, debt was $3.17 billion, and debt net of cash and cash equivalents was $1.43 billion, including $659 million in cash restricted for the Cristal transaction. Liquidity was $2.01 billion comprised of cash and cash equivalents of $1.74 billion including $659 million of restricted cash and $271 million available under revolving credit agreements. Our blended cost of debt was 5.6% in the third quarter and on September 30, 2018, 34% of our total indebtedness was set at a fixed rate. We expect cash interest expense for the full year net of interest income to be approximately $160 million to $170 million. Capital expenditures were $28 million in the third quarter. This excludes the $25 million in loans provided to the Jazan smelter project in the quarter. As JF mentioned the Jazan loans are recorded on our balance sheet within other long-term assets, and are reported on our cash flow statement separately from capital expenditures. Depreciation, depletion and amortization expense was $48 million in the third quarter. We have fine-tuned our expectations for capital spending, DD&A and cash taxes for the year with capital spending of approximately $120 million to $125 million, DD&A of $185 million to $195 million and cash taxes of approximately $20 million to $25 million. Each estimate is on a Tronox standalone basis. With that, I thank you and I'll now turn the call over to Jeff for closing comments. Jeff?

Thanks, Tim. I'll close by summarizing the key points that we'd like you to take away from today's call regarding the status of the Cristal acquisition, the significant and differentiating benefit of our vertical integration strategy and our priorities over the next few months. First the Cristal acquisition, just to reconfirm my earlier comments. We're making substantial progress in our discussions with a potential buyer of Ashtabula. Together with Cristal and the prospective buyer we are engaged in ongoing real-time discussions with the FTC regarding the potential remedial transaction. We are optimistic that these discussions will conclude successfully in the coming days and as the FTC completes its internal processes and their review of the proposed divestiture transaction. The FTC is appropriately and thoroughly going through their internal processes to ensure that the divestive business will be a viable competitor. We are absolutely committed to assisting in that necessary and appropriate work. Our dialog has been and will continue to be constructive and productive and the parties will continue to be responsive and transparent in addressing the questions or concerns of the agency. While there can be no certainty that the FTC will approve the proposed remedial transaction, we are optimistic that the FTC will come to the conclusion that the proposed remedial transaction addresses their concerns about the Cristal acquisition and that the proposed buyer is qualified and capable. Our priority continues to be to close the Cristal acquisition in the coming days so we can get to the business of unlocking value for our shareholders and better serving our global customer base. Second, we expect to continue to derive significant and differentiating benefits from our vertical integration. We see generally favorable market conditions across our value chain with supply and demand and relative balance over the medium and…

Thank you. [Operator Instructions] Our first question is from the line of John McNulty with BMO Capital Markets. Your line is open.

Yes, good morning. Thanks for taking my questions. So I guess a couple of things. On the synergy expectations around Cristal and now that it looks like Ashtabula has to go and you've also got the 8120 move as well, I guess how should we be thinking about what kind of the net synergy number's going to be going forward.

A John, as we move into the new year and get the transaction closed, we'll be refreshing our view on synergies. We still expect frankly that all of the cost reduction synergies and everything are there. The baseline for which those synergies were originally estimated is our 2016 baseline. And so when we get the transaction closed, we'll be giving you an update of that. But all of the synergies that we see in terms of all the different buckets and everything are still there. And we'll just refresh the estimate a bit

Okay. I appreciate that. And then, when you think about the inventory issue, the kind of the speed bump that's out there, I guess how are you adjusting to that in terms of your production levels, like how should we be thinking about that? And how long do you expect this to continue to be a headwind? I mean, do we largely get through it as an industry by the end of the fourth quarter or does it drag into the first half of next year? How are you thinking about it at this point?

So when we think about, as far as production we're running our plants at regular rates. I think when I made some points earlier with regards to where volume is versus – and we're projecting in the fourth quarter versus the third quarter, there's a seasonality impact of it. And then, these transitional inventories are about another 3% to 5% on top of that. So it's not what I would describe as significantly different than what we would normally see in the fourth quarter Jean-François Turgeon: Yeah. And maybe, John, I can add that we started with a position where our inventory were lower than normal. So obviously when you have a little bump like that, it's not a problem to go back to normal inventory. And as I had mentioned in previous call, the fourth quarter is always the quarter where we put our plants in good condition. So it's the time of shutdown for our operation, and we obviously managing those shutdown in what I call a cost fashion. So we're not driving for volume, we're driving for cost efficiency and that's how our shutdown are being managed at the moment.

Yeah. And that's part of just the regular normal annual cycle where we really position things to the strong coating season that comes in the spring and that's no different than usual in terms of anything that we're doing there.

Got it. And then maybe just one last follow up on with regard to the potential for re-domiciling in the UK, I guess can you help us to think about what some of the benefits to that might be and the timing of when we might see that actually roll through?

Yeah. John, I mean there are numerous benefits, significant governance benefits, significant greater flexibility in terms of things like share buyback and things that are shareholder value enhancing and that is something that we're working on like real time and we expect to have an update on that before the end of the year and it would be something that would be consummated we believe early in 2019, sort of the first quarter of 2019. But we believe there are significant governance benefits and flexibility in terms of various actions that can drive shareholder value.

Great. Thanks very much for taking my questions.

Thanks, John.

Thank you. Our next question is from Duffy Fischer with Barclays. Your line is open.

Yes. Good morning. I realize you guys can't give anything...

Hi, Duffy.

About the deal itself, but some stuff around the deal, if the deal gets done as you kind of laid out here with that other third party, do you have to pay the $75 million to Venator that was in the one MOU you talked about or that you signed? And two, is this smelter contingent on the actual deal happening or could that be something that if the deal actually didn't happen is completely separate and you could go one way or the other on that?

Okay. To answer the last question first is probably the smelter probably would only happen if the deal does happen because if we ended up not buying Cristal we would have significantly less incentive to help them get that up and running. But the deal could happen without the smelter part happening on the option agreement. In terms of the Venator MOU and the break fee, a number of conditions have to be satisfied for the break fee to be payable. The Cristal deal has to close, the 8120 divestiture has to close and Venator has to otherwise have complied with all of its obligations under the agreement. So that's an ongoing thing that we'll develop as the Cristal transaction closes and we move towards the end of the year.

Okay. And then just one question on the high-grade ore, so far we've had a number of the Western players talk about volumes this quarter and kind of what they're looking forward to in the fourth quarter. It looks like volumes are going to be down high single-digits, maybe low double-digits on aggregate. Western players use a lot more, a higher percentage of the high-grade ore. That plus the unplanned outages earlier this year, why wouldn't that be in a little bit of oversupply as we get into next year with lower consumption of it the back half of this year and then more supply of it in the first half of next year and kind of be at a risk from a price standpoint? Jean-François Turgeon: Look, Duffy, it's JF here. And, look, in our case as a standalone Tronox, we have excess high-grade feedstock and we obviously have seen a lot of synergy in this combination with Cristal because we'll be able to use all of that extra feedstock to alleviate the tight supply-demand situation that exists at the moment. So that's good for us and that's obviously with that in mind that we have to take decisions in the third quarter like the one John talked about where we decide not to sell ilmenite and keep it for our future need. We also had put our smelter in a good operating condition, so this year we realized one of our furnace rebuilt and we did that in between quarter two and three, so all of those decisions were done so Tronox would be in a good situation to react positively to this tight supply-demand on the high-grade feedstock.

I think there's also an element though, when you think about the inventory that we referenced going into 2017, we had I would say well below seasonal norms of inventory as Tronox and so as we move into the fourth quarter as we mentioned a bit earlier, there's not a big adjustment being made from a production standpoint on our side because we are still at a level where we're comfortable with seasonal norms on our inventory going into the fourth quarter.

Great, thank you guys.

Thanks, Duffy.

Thank you. Our next question is from Frank Mitsch with Fermium Research. Your line is open.

Hey, good morning gentlemen and I must say I can't wait for the "coming days." And just a follow-up, Jeff, you indicated that you want to give greater details around synergies, refresh the numbers as you said, I guess at your Investors Day, but is there any reason for investors to think that there's any material changes one way or the other relative to what you've previously laid out and that it simply just kind of updating numbers, et cetera, but the core of the synergies are still kind of around the levels that were talked about before, the $200 million after a few years.

Yeah. Frank, I think that's absolutely true and I certainly don't want to create any impression to the contrary. I think what I was talking about is that as we move forward we'll be comparing the synergy estimate to just an updated baseline and so the exact quantification may vary around on the margins. For example if there are positions that in the consolidated company that we would have eliminated but those positions hadn't been filled, as we update the baseline that will change the number. But I think the important thing is all of the big buckets remain unchanged and order of magnitude-wise all of the quantification we don't expect to change. So especially in that longer-term number it's still a very solid number.

All right, terrific, very helpful. And John, I think you were talking about the decline in the fourth quarter 12% to 14% of which it seemed like 3% to 5% is the de-stock. So it's really – the vast majority of the decline is just something that you see every year, correct?

That's correct.

All right.

This decline that we're talking about on de-stocking assuming not significantly different than what we saw in the third quarter either.

Very helpful. Thank you so much.

Thank you

Thank you. Our next question is from Hassan Ahmed with Alembic Global. Your line is open.

Morning, Jeff.

Hi, Hassan.

Jeff, obviously fairly favorable comments on the mineral sands side of the operations and as one thinks through sort of past cycles it seems to be playing out in line with that where obviously you see a run-up in utilization rates/pricing for TiO2, and then there tends to be a two- to four-quarter lag between all following suit. So, it seems that it's moving in that direction. So, as I sort of sit there and think about 2019, a two-part question: one is, is it fair to assume barring any sort of meltdown in global GDP and the like that the earnings contribution from the mineral sands side of the operation in 2019 will be higher than 2018? So that's one part of it. And then secondly, let's assume for a second that this inventory de-stocking on TiO2 is done and dusted as we go through the seasonally stronger period next year. And in that environment, in a higher sort of ore pricing environment, would that not provide sort of a landscape for higher TiO2 prices as well?

I think the answer to probably both of your questions, the simple answer is yes. Clearly, the mineral sands contribution to our overall profitability as an integrated producer will be higher during that period of time as others in the space see compression will benefit from our vertical integration. And that relative contribution will – although we manage this business as one integrated business, the relative contribution does change a bit during certain market conditions. And then secondly, I think as John said in his comments a little bit I think, we believe that the return to more normal inventory levels and the elimination of de-stocking it's kind of when over the next few quarters. And I think as that plays out and we move into what is traditionally a stronger period of the year with typical seasonality, I think it does create a strong environment in which supply-demand being better balanced may lead to a more favorable pricing environment.

Understood. And as a follow-up, Jeff, obviously valuations in share prices across the space have come down tremendously. And I think as I talked to a variety of investors, the hangover from call it 2012 to 2016 is sort of fresh in their minds as well. It also started with pricing going up, the downturn of 2012 to 2016, pricing going up,the inventory bloated nature thing sort of caught a lot of people by surprise. What gives you guys confidence that this time around it's different? And again I'm not looking for a sort of global GDP or economic forecast, but just looking at it through the lens of TiO2, looking at it through the lens of what you see in your inventory level, customer inventory levels, because some of the chatter is the same, right? I mean, coatings volumes aren't great, some of the coatings companies are talking about conservation and the like, so I would love to hear your views about what may be different this time around.

Yeah. And we believe as a company that it is very different this time around. When you go back and look at sort of 2012, there were a number of factors that just aren't present right now. You had the fact that in the 2011-2012 timeframe that the price of 1 million tons of Chinese capacity had been brought on, you had the fact that there was significant feedstock capacity that had been added leading up to that period, you had sort of significant double-digit global demand declines and you had a pricing level that was way above anything we're talking about now where you reached $4,000 levels versus the current level which is – was about $1,000 a ton less. I think now as you look back at it, you look at 2018, capacity is generally flat with some sulphate closures expected and some moderate core capacity increases. You see not a lot of new expansion projects being on the drawing board to come online and the quality of those new projects may be somewhat declining. You see modest demand declines rather than the double-digit type declines we saw in 2012 with the U.S. market being very, very stable and you see in your probably inventory levels just in general not being near what they were as you went into the 2011, 2012 timeframe. So we do think that the situation is much different. It's – this is always going to be a cyclical industry that has little – some topsy-turvy movement but overall the industry structure and some of the other things going on we believe will contribute to more modest volatility compared to what we saw before.

Very helpful, Jeff. Thanks so much.

Thank you. Our next question is from Matthew DeYoe with Vertical Research Partners. Your line is open.

Good morning, gentlemen. I think in the past you stated more normal pigment inventory balances of like 30 or 40 days or I guess four to seven weeks, something like that. But the color I've received puts inventory balances closer on a global basis to like mid-50s as of the end of 2Q on a days basis. Where do you see global balances at the end of 3Q? And do you have any read on inventory balances by geography? I mean, anecdotally it sounds like Asia and Europe were higher which makes sense given price pressure, but if it's mid-50s globally, what was it in Asia and Europe versus where was it in North America where presumably it will be lower?

So when we think about our inventory, it is global and we don't typically break it out by region. We're trying to keep our inventories suitable to meet our customer demand in every region. So the numbers that you're referring to at the end of Q3 are not far take off from where we are at this particular stage. The 30- to 40-day number that you referenced earlier kind of goes back to the comment I made earlier going into 2018, we were below seasonal norms and we're getting back up into that seasonal norm range and would expect to exit 2018 at about that range.

Okay. And then, I'm not certain if you'll be able to answer this, but can you talk a little bit about potential tax hit on the sale of Ashtabula and whether you'd be able to use your domestic NOL balance to offset all of it, most of it? What's the thought there?

Hey, Matthew, it's Tim. Just given the structure that we're looking at from a stock sale standpoint, we don't anticipate any negative tax consequences from that transaction.

Perfect. Thank you, gentlemen.

Thank you. Our next question is from John Roberts with UBS. Your line is open.

Thank you. I understand there might be some recoveries at your sand from their E&C providers. Does your loans to them have recourse to that or you're comfortable with the credit quality there that there's no risk to the loans even if they don't get recoveries?

John, I don't think it would be appropriate for us to speculate on recoveries and that's absolutely a Tasnee AMIC type issue, but we are and remain confident of the recovery of our loan balances at this point.

Okay. And I apologize I jumped on late, did you comment on whether you've been able to move significant volume into longer-term contracts with some price stabilization in them?

John, you want to address that?

Yes. Look, as we mentioned on the last call, we're working collaboratively with our customers on margin stability initiatives that are designed to minimize the volatility and pricing. And quite frankly, as we move into the fourth quarter we believe that those initiatives are going to do just that. To the extent we actually can migrate to more of our volume on that as we close the transaction we'll be migrating in that direction.

Yes. And John, I think it's fair to say that some of the progress that we will have in that has probably been deferred a little bit as we've gone through this final stage of the Cristal process, because obviously with some of these big customers, our presence of those customers changes pretty dramatically depending upon the closing of the Cristal transaction and what was included and what's not included and that type of thing. So, as you can imagine some of those longer-term stabilization features are a little bit easier to work out once you really understand what your full presence at a customer will be.

Okay. Thank you.

Thank you. Our next question is from Christopher Perrella with Bloomberg Intelligence. Your line is open.

Good morning. A quick one. Is there anything that would preclude you from buying shares directly from Exxaro down the road? And would that be impacted by or facilitated by the redomiciling to the UK?

Christopher, a great question. That absolutely is facilitated by the redomiciling. Under Australian law, there are significant limitations on share buybacks in general. And as we said as in the days to come, we hope to be able to give you an update on our discussions with Exxaro as well as the redomiciling transaction and those two are related and intertwined.

All right. And then pending the Exxaro and maybe this is one for the Investor Day, would any of that change in the Exxaro holding, change the BEE requirements for the operations in South Africa?

No, Christopher, it wouldn't. And that again kind of relates back to JF's comments earlier about the new mining charter and the whole finalization for once and for all of that kind of once empowered, always empowered issue. And obviously until that happens, Exxaro has an obligation continuing for a number of years still to ensure that we're empowered. But we will definitely address that fully at the Investor Day because that is sort of a long-term strategic issue in South Africa, especially as we look at development of new resources there and new projects continuing to be BEE-certified will be important for us as we move forward there and we continue to plan on being a significant presence in South Africa for some time to come.

All right. Thank you very much. That was it on my questions.

Thank you. Our last question is from Karl Blunden with Goldman Sachs. Your line is open.

Yes. Thanks lot for taking the question. One of your peers had commented on price stabilization contracts reaching 50% a little bit above that of their portfolio. Is there any color you can give us on how far along you are now and where you'd ultimately like to get to?

I think I made a reference on the last call that our goal would be to get to somewhere in the range of 50% in 2019. But to the point that I made on the last question as well as Jeff's comments because of where we are with the transaction and the fact that we haven't closed yet some of those negotiations with customers are a bit delayed more so than we would have expected. So we're working towards that, those stability initiatives are in place kind of as an add-on to our value proposition and they're designed to help us grow with our customers so as soon as we close that transaction, which is to Jeff's point in the coming days, we will have an opportunity to start working on that, I guess, on a more wholesome way.

That's all understandable. In terms of length of the contracts as you've kind of seen and had discussions so far with customers, what's a typical or target length to think about?

Three to five years.

Great. Thanks very much.

Thank you. And that does conclude our Q&A session for today. I'd like to turn the call back over to Mr. Jeff Quinn for any further remarks.

Thanks, Christie. I would just like to conclude today by saying a thank you and that's a thank you to my colleagues here at Tronox and our future colleagues at Cristal. It's been a long process, but the dedication and the focus that the collective employee group has shown has truly been extraordinary and inspirational. Our employees have continued to operate the business professionally and in a safe manner. You have my sincere gratitude and appreciation for that and also my thanks to the respective leadership teams of the two organizations for the tenacity and the perseverance that they've shown during these many, many months. As we enter the holiday season, the end of the year, the end of this transaction process, I just urge our colleagues around the world to continue to operate safely and to really focus on each and every day because that's the most important thing. So, thank you very much for your time today, your continued interest in Tronox. This ends our call, but we look forward to reporting progress to you in the coming days as well as speaking with you next quarter. Thank you very much and have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a great day.