Good afternoon, and welcome to the Alcoa Corporation Second Quarter 2023 Earnings Presentation and Conference Call. [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, and good day, everyone. I'm joined today by Roy Harvey, Alcoa Corporation President and Chief Executive Officer; and Molly Beerman, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Roy and Molly. 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. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today's presentation. With respect to our outlook, we have not presented a quantitative reconciliation of certain forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because it is impractical to forecast certain special items without unreasonable efforts due to the variability and complexity associated with predicting the occurrence and financial impact of such special items as described in today's presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally, as previously announced, the earnings release and slide presentation are available on our website. With that, here's Roy.

Thank you, Jim, and thanks to everyone for joining our call. I'm happy to be here today with Molly Beerman, our Executive Vice President and Chief Financial Officer. She will soon provide a detailed review of the financial results, but let's start first with safety. We always strive to protect our employees, contractors and visitors from injuries. This is the expectation in all of our daily activities and it is particularly important when we consider any modifications to our processes or when upset conditions occur. Every quarter, we report during this call any serious incidents that we would classify as an FSI-A, which stands for fatal or serious injury actual. This would involve injuries that are life-altering or fatal. I'm disappointed to report that an employee at our Icelandic smelter lost partial vision in one eye from an injury that happened when he was sampling molten metal. We have investigated the incident and we are working to prevent it from occurring at any of our locations. In the second quarter, our overall injury rates continued to decline. We also are seeing positive trends in leading indicators, showing we're proactively identifying and correcting potential risks before they result in injuries. We are focused on continued improvement. Any injury is unacceptable and we expect our teams to be constantly learning and adapting. Now, let me turn to our financial results. We generated slightly higher sequential revenue in the quarter of $2.68 billion. We increased shipments which outweighed lower average realized pricing. Still, as you can see, this quarter's challenging market conditions and operational disruptions led to an EBITDA outcome that demonstrates the need for continued improvement. We did pay another quarterly cash dividend and we finished the quarter with $1 billion in cash. We also continued to strengthen the balance sheet by…

Thank you, Roy. While both alumina and aluminum third-party realized prices declined slightly in the second quarter, revenues increased 1% on higher shipments. The net loss attributable to Alcoa improved $129 million to $102 million or $0.57 per share, primarily due to the non-recurrence of charges taken in the first quarter, the $101 million Intalco smelter closure charge, and a $41 million utility settlement charge at Ma'aden. On an adjusted basis, the net loss was $62 million or $0.35 per share, and adjusted EBITDA, excluding special items, declined $103 million to $137 million. Let's look more closely at the key drivers of adjusted EBITDA. The three largest drivers of the $103 million sequential decline are higher production costs, lower metal prices and lower volume, which together totaled $167 million. The Alumina segment was the primary source of the increased production costs and lower volume, with $45 million related to lower Australia bauxite grades, better than expected as the full impact of lower grades was not realized in the quarter and with the remainder due to higher maintenance outages and related costs at the Alumar and Wagerup refineries. Production costs in the Aluminum segment were favorable $14 million, led by improvements at both Norway operations and Alumar. The remainder of the bridge factors net to a $64 million improvement. Highlights here include lower raw material costs in both segments as well as higher API, partially offset by unfavorable product mix, primarily in the Alumina segment. Outside the segments, there was a sequential improvement of $41 million with intersegment eliminations providing the lion's share, a sequential benefit of $39 million as less profit was held from earnings when intersegment volumes declined and alumina production costs increased. Transformation cost increased $9 million coming more in line with expected levels and other corporate spending…

Thanks, Molly. Next, I'd like to provide some updates from our operations across the globe, beginning with Western Australia. As I said last quarter, we're continuing to work with a host of government agencies on the approvals process for our annual mine plan. Our Mine Management Programs or MMPs are normally approved annually on a five-year basis. Separately, the Western Australian Environmental Protection Authority or EPA is considering whether to conduct additional environmental review on these MMPs. The resolution of our mine approvals does not have a fixed timetable, but we are working to constructively address stakeholder needs and expectations in a timely fashion. This is a key priority for our Company and we're focused on doing what is necessary to secure approvals. We are increasing controls to protect drinking water sources, further stepping up mine site rehabilitation, and enhancing the management of social impacts. This requires discussion and action with various government agencies. So to give this complex regulatory process appropriate time, we are now mining lower-grade bauxite in previously approved areas. As Molly just pointed out, using lower-grade bauxite has a cost. It means using more raw materials and producing less alumina per ton of bauxite. In the second quarter, this unfavorably impacted Alumina segment adjusted EBITDA by $45 million. This is better than we originally expected due to slightly higher bauxite grades and good operational practices. As we look to future quarters, bauxite grades will continue to vary. We expect that it could take nine months to 12 months to transition to new mine areas once approved and improve the bauxite quality sent to our refineries. Thus, the expected impact of these lower bauxite grades will stretch into at least mid-2024. Next, let me provide some more detail on what we're awaiting from the EPA. The authority…

[Operator Instructions] The first question is from Alex Hacking with Citi. Please go ahead.

Yes. Evening everyone, and thank you for the call. I have a couple of questions, but I guess the first question would be on the environmental permitting in WA. Maybe I'm misinterpreting your comments, but it seems like you're a bit more conservative now than on the last call and anticipating that this process might be a bit more onerous than you previously anticipated. I mean is that - is my interpretation fair? Or is the process going kind of as you expected?

Yes. Alex, I think I wouldn't interpret it as more onerous or really all that different from what we talked about the last time we were - we went through earnings. I think it's - we certainly had hoped it would be solved this last quarter. And so, it is taking longer and the timeline and we reiterate that the timeline is uncertain. However, I would continue to say that we're working collaboratively with the Australian regulators. We do have - we did have the Western Australian Environmental Protection Agency, EPA. So that by the end of this month, they believe that they'll give a decision about whether the referral is valid. So we are progressing. We're not there yet, but we're certainly progressing. On the other side of that, Alex, I would also say that I think we were - I was pleased with particularly how our Pinjarra refinery, which is our largest refinery in the system in Western Australia, was able to perform with bauxite grades that they were coming through. And so that's something where we can actively work as we go through this period of uncertainty. And as we start to work towards improved grades in the future, the better and more efficiently that we can operate that facility and Kwinana as well, which has the same bauxite source, the less impact that we have both financially and operationally. So really it's a very similar situation to what we found ourselves last quarter. It wasn't meant to look more conservative, but rather to say, hey, this is three months further delayed than what we had seen the last time we talked.

Okay, thanks. That's clear and I appreciate the clarification. And then I guess on the second question, the smelters where you're operating kind of at reduced production levels, Lista, Warrick, Portland. I know Warrick has its own power source. But for Lista and Portland, are you involved in negotiations for power costs next year? Is there any flexibility there? And if there isn't flexibility, is there a potential that production there could be further reduced if aluminum prices don't improve? Thank you.

Yes. Thanks Alex. I think the answer is going to be it varies and it depends, as it's always the case. And each facility has a different situation. So take Lista as an example. We decided to bring Lista down simply because spot energy prices had climbed so high and we were able to find a power contract that covered part of that facility and that was able to allow us to drive it back into profitability, which is not an easy - not an easy thing to do in Europe right now given where energy prices stand. And so we have the option, of course, to further curtail it as we go into this next round of power contracts or we also will have the opportunity to bring it back up again. The European market, of course, is slower than it has been, but it continues to have strong premiums and we continue to see a lot of customer demand, particularly for green and low-carbon aluminum, which is something that, Lista certainly does and also have a very highly value-added casthouse. Take Portland sort of out the other side of that. Portland, we really had to bring back down because of some instability happening in the production of anodes. So that's one where we have the power available. We can scale that back up again. But we're not going to do that until we are certain that we have stability and then of course we will make the decision about whether that's financially viable, whether we continue to - whether we consume that energy or we sell it into the open market. Warrick's a little bit different, of course, because we do have our own power source. That's one where we're really trying to work through what are the strategic plans for that facility, what do we want to do as far as long-term power source and how do we make sure that we're operating that smartly and efficiently. So that's one really that we have full control, whether we start back up some of the parts that are idled or what we choose to do that going forward. I'd also remind you, we've got the San Ciprián smelter that will start to come back at the beginning of 2024. Now that will be relatively modest production capacity at the beginning, but we do have a commitment by October of 2025 to have that fully restarted and it's about 228,000 tons. And I would remind you, that is our lowest-cost facility outside of electricity costs. So we are working very hard to find a way to get those costs down as low as we can, including the renewable power contracts that we've signed, starting really as we progress over these next couple of years.

Okay. Thank you very much.

Thanks, Alex.

The next question is from Carlos de Alba with Morgan Stanley. Please go ahead.

Yes. Hello, good afternoon. Thank you for taking the questions. So I wonder if you could, perhaps Molly, quantify the cost savings that you expect to reach in Alumina from the initiatives that you have identified to sort of offset or reduce the impact of the lower bauxite that you will be mining. And in terms of the timing as to when those may kick in, is that something that you see for the fourth quarter or mostly in the first or second quarter of next year?

Carlos, we've already started to implement some of the savings initiatives. They didn't amount to a significant amount in the third quarter. So that's why we have kept the $55 million guide. But you will start to see changes related to changes in our labor, changes in our maintenance routine as well as we're looking at some modest CapEx to improve operating efficiency. So those will start to pick up some speed in the fourth quarter and then that will continue because we are continuing to identify additional opportunities to take at that savings into '24.

All right. Okay, thanks. Maybe on the products that - Roy, on the low-carbon products that the Company offers, EcoLum for instance and others, you mentioned that the clients are asking for that, and it will represent 60% of your aluminum volumes in Europe. Are you being able to monetize these lower carbon products? Are you getting a premium? And is there a way you can give us a range of how much these premium represent?

Yes. So let me take a stab at that, let's sort of break it into two pieces. The first is around volumes and continued demand. I have to say, and this really starts in Europe and we're about 40% of our value-added now is going into these low-carbon products. We're seeing more and more pull. And you can see this, for example, with some of the automotive customers where they've set some pretty aggressive targets to be able to drive to net carbon - net-zero carbon, but we also see it in, for example, electric cables and a number of different places. And so I have to say, as we progress, and I'm probably been asked this question every single quarter for the last couple years, I am becoming more and more optimistic that those volumes are going to continue to improve and we're seeing that really take root in Europe and starting to see that in North America as well. And of course, there's a lot of connections between our customers in North America and Europe so that it tends to spillover. So, certainly, seeing good volume improvements and particularly going to continue to see those volume improvements, because we've got a lot of ongoing conversations with customers. On the realizable value, so the important thing here for us is that because we've, for the most part, turned to renewable energy, a lot of these sales right now are cost free, right? It's a matter of making sure that we have the right power source. Of course, there's all the work that goes into being a responsible producer and making sure that we can line up to the Aluminum Stewardship Initiative so that we can prove our credentials. But most importantly, this is essentially driving towards the scarcity or the fact that there is a differentiated product with less carbon content inside of our products. And so it's cost free. On the premium side, and you can see some of the published indices, which I think are pretty representative of the kind of premiums that we're getting, tends to range between $25 and $50 now, which is a beginning. It is certainly not where we see this continuing to go. And I would also argue, look at our low-carbon sales, EcoLum is a very good example of that, which is our low-carbon aluminum. Look at this as sort of the first step to making sure that our market is prepared for zero-carbon aluminum down the road. For our ELYSIS metal we want it to be very clear, the unique properties, the unique characteristics and the fact that this will be truly a differentiated product. And so really this is sowing the seeds that does create value for us in the short term, but more importantly, will be the seeds that will be significantly greater value down the road.

All right. Excellent. Thank you very much. Good luck.

Thank you, Carlos.

The next question is from Timna Tanners with Wolfe Research. Please go ahead.

Yes. Hi, good evening. Wanted to follow up a little bit on the timeline for the upstream bauxite inefficiencies that you've laid out. So, on the fact sheet that you've provided on your website or the Australia website on environmental assessment, there is a timeline that says the finalization of the ERD, environmental review document, is Q2, Q3. Is that what you're talking about that has to get finalized to kick off that nine to 12 month lag before you get kind of the optimization of the bauxite mining that you've anticipated?

Timna, two different sets of issues and I can see how it's pretty confusing. So that particular timeline refers to this next mine phase, essentially what we call Myara North and Holyoake which is the next sort of that big conveyor move that then gets to this next large field of bauxite. That is a completely separate process to what we've been talking about as far as the short term set of approvals that have been running on a five-year rolling basis. And so that runs through this full look at it as an environmental impact assessment that's run through the EPA. That represents sort of the end-state of where we're going and what we're trying to build this transition phase. And so that is a process that has a clearly set-out timeline, but that timeline can tend to change if they have additional asks as they change consultation periods, et cetera. So, that timeline pertains to that next mine phase and that will take considerable time to be able to develop that. So that's not a nine to 12 month, that will take a few years in order to prepare for the conveyor move, et cetera. The other side of that, our short-term approvals, is how do you take what is this sort of - this customized approvals process that we run today that was a five-year rolling process that we submitted every year, how do we then incorporate a lot of the same types of environmental protections, community consultations, how do we incorporate that into this current process and get to these short-term approvals that then allows us to already - that allows us to go into new mine sites that are part of the existing mine area. And so, does that answer your question, Timna?

Yes. I mean, it sounds like it's a bit apples and oranges or at least two somewhat separate instances and you did warn that it's a complicated regulatory process, so probably not great to spell it all out on the call. But I appreciate that they're a bit distinctive and we'll wait to get an update on the more immediate issues. So, shifting gears if we could, I did want to also ask you a little bit more color on the forecast you have for global aluminum and alumina. I know in last quarter's presentation, you had said that the markets were balanced. This time you're saying it's a mixed bag. And we have seen premiums fall. So I know the medium and longer term is positive, but just a bit more color on what you're seeing in the near term would be helpful.

Yes. Certainly, Timna. I think mixed bag is probably the right word for it. So, to go back to your first point, I don't see supply/demand balances being all that different than last quarter, to be quite honest. We're essentially on a knife edge and it can shift towards a very small surplus, shift towards a very small deficit. So in the end, we're really quite balanced, both in alumina and aluminum. And that's sort of where we expect it to be. What we are seeing, however, though, is that our markets, and particularly when we look at it, a lot of our sales are happening in North America and Europe, we're seeing some additional weakness than we did before and seeing some strength in things like electrical and transportation and we see that particularly outside of China, but also inside of China transportation continues to be very strong. And from a weakness standpoint, really billet which goes into construction and then slab which goes into packaging. And so you look at it, you've got some areas of strength, you've got some areas where it really hasn't lived up to the strength and where we're not seeing those increases year-over-year. And that sort of combined then with some of the supply issues that have happened. I know we have some facilities coming back up in Yunnan in China. That is not a surprise. I think we all knew some of that was going to come back up again. It doesn't take away some of the uncertainties around how much hydroelectric power they're going to be able to generate. It's not easy to shutter but - or bring back those facilities. But in the end, it all sort of comes through this this big calculation to get down to essentially a roughly balanced market. And that balanced market, of course, is waiting for what happens on inflation and therefore monetary policy that connects back with what's going to happen with the broader economy, whether there'll be Chinese stimulus. And so I sort of get back to, say, hey, it's a mixed bag, we're sort of more or less where we were at the end of last quarter, probably a little weaker demand, but also a little bit weaker supply as well.

Thanks. I appreciate the color. Thanks again.

Thanks, Timna.

The next question is from Lucas Pipes with B. Riley Securities. Please go ahead.

Thank you very much, operator. Good afternoon, everyone. And I first wanted to ask on the cost side, you called out the $65 million in Alumina, $25 million in Aluminum with continued raw material savings. And with lags first with caustic soda but then also kind of cost working their way through inventory, is that an order of magnitude we could expect also for Q4 or maybe even greater than what you've outlined for Q3? Thank you very much.

Lucas, we're actually seeing very notable improvements in the third quarter. So within that $65 million for Alumina and the $25 million for Aluminum, we've got $20 million related to the caustic improvement. And then within Aluminum, $30 million related to coke and pitch. As we would give an early look to the fourth quarter, we are seeing notable savings. That -- the trend is continuing. So we do see a nice step down heading into the fourth quarter.

Hi, Lucas, I'm going to add one very subjective comment, but we've been waiting for this cost relief to come through for a while and it's particularly frustrating on the caustic side because it takes so long to work its way through our processes. But now to finally start to see those raw materials come through in Q3 and beyond is certainly welcome relief and it's very relevant for Q3.

Very helpful. Thank you. Then taking a step back from this and zooming out a bit. Where do you think you sit today on the global cost curve? And would you expect maybe a supply response from higher cost producers? You touched on it here and there throughout the call, but would appreciate maybe honing in on this point. Thank you.

Yes. Lucas, I'm not going to be able to give you a particularly educated view on cost curves, just because we tend to do that analysis on an annual basis and we do it next quarter. So you're one quarter early. I can give you some qualitative comments without giving you a quantitative number. I think through this part of the cycle, what we been suffering on - suffering from both on the alumina and aluminum cost curves is the fact that we have our short energy position sitting inside Europe. And so when you look at - fortunately, we have the San Ciprián smelter down so that one didn't impact us so much in this downturn. But the San Ciprián refinery has really suffered from natural gas prices and so they have drifted their way up the cost curve. Now, we'll find a resolution to that. That's a market resolution for the most part. We've also been managing the - essentially how much we're choosing to operate that plant and I have to tell you that our operators and our managers there on San Ciprián are masters of making the plant work really well, no matter what capacity they are running at. The other side of it is places like Lista in Norway, their cost jumped up because we used to have some of the least expensive spot energy on the planet and for a little while, it was some of the most expensive. We've been able to find a good middle ground, but certainly that's pushing us up the cost curve when we look at that. And so what we'll try and do when we come to our cost curve analysis is to talk a little bit about what the positioning will be, but also what are some…

I really appreciate all the detail. Thanks again and best of luck.

The next question is from Chris LaFemina with Jefferies. Please go ahead.

Hi, thanks for taking my question. So I'm just trying to basically frame the range of possibilities. So you did $137 million of EBITDA in the quarter. And you have the benefit now of raw material prices that are going to start flowing through the P&L, some higher volumes as you're restarting some capacity eventually assume you get the mining licenses in Australia and you're mining high-grade bauxite again, so those costs come down. If we ignore the impact of changes in alumina and aluminum prices and all the stuff goes right for you operationally, what does that quarterly EBITDA number go to? Does it go from $137 million to $200 million? Does it go to $300 million? Can you give me some sort of ballpark as to where you can be, ignoring any change in alumina or aluminum prices?

Chris, that's hard to do with the market impacts. I'll take you back to our guidance. Again, we're focused on the downward trend for raw materials. We are improving production costs with our improvements in stability. Getting the higher volumes out is also helping us with our cost absorption. So we will stay focused on what we can control.

Okay. Thank you.

The next question is from Michael Dudas with Vertical Research. Please go ahead.

Evening, Molly, Roy, Jim.

Hi, Michael.

Hi.

Yes. I'm not sure when normalization is coming back in the near future, Roy, I sure. I want to further discuss on the Russian metal comments you made. Do you think that the current market is being restricted from a mechanism on where pricing is today, where pressure should be either better because of what's going on? And is there a real risk of that happening in the next several weeks to months, given the distortions in LME aluminum? And where do you get a sense of where those stockpiles may be and how it's going to flow through, given all the things that you discussed on that front?

Yes. Michael, so what I would say is that I don't necessarily see pricing broken right now. And you can essentially chart that back and say, how is - how are aluminum prices, in fact, set. And it's the exchange of warrants on the LME. And that exchange of warrants essentially represents people that are holding that material and then choosing to either continue to hold it or to sell it. And so that changes over on a daily basis. And that changeover from buyers to sellers is what sets the basis for the entire aluminum market. Now as you compare that with what's happening with headlines, what's happening with supply/demand, et cetera, we continue to see what appears to be an orderly market. LME metal is meant to be the metal of last resort. So if I'm selling metal, I only sell it to the LME because I can't find another buyer. So a great example is a lot of this Russian metal that came on warrant that came into the LME because they couldn't find another buyer, because nobody wanted to buy Russian metal. That's how the market - that's how that market of last resort works. On the buyer side, when somebody is going out to look for metal, it's also the market of last resort. Someone would prefer to buy from a producer because then you are giving those tons where you choose to buy them from a particular plant, from a particular producer, and you can understand what the logistics are going to be. Whereas when you're going - when you're sifting through warrants, when you're buying from the LME warehouses, you get it where you get it. You get a commodity-grade metal that's located in some place where LME has warehouses. So it truly…

It did, Roy. Yes. That's very helpful. Thanks so much. Good luck with that.

Thank you, Michael.

The next question is from Katja Jancic with BMO Capital Markets. Please go ahead.

Hi, thank you for taking my question. Maybe going back to more near term, pricing has softened. And if this soft environment persists, Molly, you mentioned that you're focusing on what you can control. What are the cost - or what is the magnitude of cost savings you could potentially generate if this softer pricing environment persists and outside the raw material price declining?

Katja, let me start with we've spent the last several years really improving the portfolio, strengthening our balance sheet. Right now, we have a lot of liquidity, excellent $1 billion in cash, we have a revolver undrawn at $1.25 billion, no long-term debt maturities until 2027. We do have high working capital now. That will generally convert to cash, be a source in declining markets. So we will stay focused on operations. We'll adjust our spending and our operating levels as needed really to safeguard our assets and protect the long-term value for the shareholders.

Katja, I'll add one comment on to Molly's as well because she is exactly right. If prices continue to soften, it drives a review of the portfolio that we're operating. And so we - that's sort of in the Aluminum business. We're always doing portfolio reviews. It seems to be just part and parcel to what our business looks like. But in the end, we need to make sure that we're running the portfolio and to set up facilities that can create value in the part of the cycle that we're in, but also in the future parts of the cycle. We've, for the most part, walked away from savings that are good today and bad tomorrow. A lot of times, maintenance, you can save money today and then you end up having failures six months from now. So we don't spend a lot of time on short-term savings programs, but we do make sure that we can operate our plants to their best. And so that - when we look at where our facilities sit, we have a lot of levers that we can pull in order to make sure that they are working well. We have, a lot of times, support from national and local governments. But in the end, as conditions continue to move forward, we really need to think about how do we make sure that we have the right portfolio and continue to have the right portfolio. You've seen this in the decisions that we've made over - since we've been a standalone company and really over the last few years. And hopefully, we've built the analytical model so that we can understand that. We have a good understanding not just of today's markets, but where those markets we expect them to go. And so we tend to make those decisions not just for the next three months, but for the next 18 months.

Thank you.

Thanks, Katja.

The next question is from Bill Peterson with JPMorgan. Please go ahead.

Yes. Hi, good afternoon, and thanks for sneaking me in. My first question is on CapEx. You discussed deferring some growth in sustaining CapEx. Can you provide a little bit more color or detail on what type of projects or regions you're deferring this CapEx?

So Bill, this really applies to the whole portfolio of capital projects. So typically, as we're running the projects through the year, if we have projects that have maybe naturally slowed, we might fill the queue. We're just not doing that. We're going to keep the projects that we had in the plan on the time line. And so we'll just allow the projects to run a bit longer. So there's nothing really being deferred. It's just the open projects that we have are extending.

Okay. Thanks for that. And maybe, I guess, another one on capital allocation. So there are no buybacks in the quarter. I guess how should we think about capital returns and buybacks in the coming quarters? Are you looking for improved pricing in the marketplace, more clarity on operational improvements, working capital improvements? Just trying to get a sense of how you're thinking about the returns from here.

Yes. So Bill, our capital allocation framework remains the same. We position for growth, we manage our portfolio and then we do returns to shareholders, and all of those depend on us having excess cash. So right now in the operating environment, we're going to stay with our dividend. It's appropriate for this market cycle. And so we continue to review this actively with our Board. But for right now, we have nothing to announce there.

Okay, thanks. I look forward following the progress.

Thanks, Bill.

The next question is from John Tumazos with John Tumazos Independent Research. Please go ahead.

Thank you. I wouldn't expect that you would draw down the revolver, increase the $1.8 billion of debt, increase the $3 billion of other liabilities to fund a tough market or the losses that we have much comfort from $990 million of cash balances. Maybe we improve on the $63 million a month cash drawdown of the first half. But a year from now, the cash in these conditions would be less. Should we expect a year from now to look for asset sales, inventory reductions, stock offerings, plant closures? Or how comfortable are you drawing down the cash to get through each successive tough month?

So John, just as you said, we're not going to leverage up in the near term. We do believe that we're in a very strong position now with our cash where it stands. And again, we have a lot of liquidity options should they be needed. I'm going to take you back to 2020 when we faced the pandemic and we did put in a very active cash management program. I mean there, we were able to cut CapEx, reduce working capital. We had a very robust program. And so if the market turns and goes further down, we will be looking at those types of programs to reinstitute them.

What's the lowest level of cash balances that you're comfortable with, given the needs to manage raw materials between plants all around the world?

Yes. John, we've really not shared our cash levels because they differ depending on the market cycle what we're comfortable with and what we're not. So we don't kind of set an external target for cash.

Thank you.

Thanks, John.

The next question is a follow-up from Lucas Pipes with B. Riley Securities. Please go ahead.

Thank you very much for all the time and really helpful discussion. I wanted to follow up on Michael Dudas' question on the Russian situation. And Roy, if I understood you correct in your prepared remarks, you called on LME to act. And I wondered, do you act in your commercial agreements? Do you consider something else besides LME as a basis? I appreciate your thoughts on that. Thank you.

Yes. Lucas, it's a good question. I think today, there is no good alternative to the London Metal Exchange. And so what we truly hope is that we can influence, number one, the LME because we think there's just no reason that they can't make a decision immediately to no longer list Russia as deliverable metal. And also, number two, to work to - to work with our host governments, and particularly the European Union and the United States, to try and make sure that Russian metal is sanctioned, which then makes it very easy for the LME to no longer have that as a listed commodity. So there's a few routes to get there. We're not yet at the point where we say, hey, pricing has fundamentally broken down and we need to find a different pricing mechanism just because there's just not a lot of really great alternatives that sit out there. And so the market continues to function. We will continue to look at that. What we're trying to do is to prevent the need to try and find a different pricing mechanism, which then could be more volatile, but require just a bunch of different changes. So I think we've got some routes to not have to do that.

I appreciate it. Thanks again. And again, best of luck.

Thanks, Lucas.

That being our final question, this concludes our question-and-answer session. I would like to turn the conference back over to Roy Harvey for closing remarks.

Thanks, Gary, and thanks to everyone for joining our call today and also very much for your continued interest in Alcoa. We're focused very clearly on driving improvements for the future. And we're focused on a future where aluminum will continue to be an important metal, an important metal for decarbonization, an important metal for across all the applications as our economies continue to improve. We've got a lot of advantages built into Alcoa. We're a pure-play aluminum company and we have tried to demonstrate that, we take actions so that we can make this Company better each and every day. I look forward to talking to you again in October where we'll report our third quarter results. And in the meantime, please all be safe. Good night, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.