Greetings, and welcome to the fiscal 2022 quarter 1 conference call. [Operator Instructions] As a reminder, this conference is being recorded Friday, August 20, 2021. I would now like to turn the conference over to Brenda Stenta, Manager of Communications with Algoma Steel Inc. Please go ahead.

Good morning, everyone, and welcome to Algoma Steel Inc. First Quarter Fiscal 2022 Earnings Conference Call. Leading today's call are Michael McQuade, our Chief Executive Officer; and Rajat Marwah, our Chief Financial Officer. As a reminder, this call is being recorded and will be made available for replay later today in the Investors section of Algoma Steel's corporate website at www.algoma.com. On August 19, we published Algoma Steel's financial results for the first quarter ended June 30, 2021. Algoma's financial statements and management's discussion and analysis have been made publicly available through the Investors section of our corporate website. The information that is being presented today has also been added to the requisite shareholder and lender data sites. And as a result of the pending transaction with Legato Merger Corp., a copy of the presentation has been filed with the Securities and Exchange Commission on EDGAR. Comments made on today's call may contain forward-looking statements, which involve assumptions and inherent risks and uncertainties. Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IFRS, which differs from U.S. GAAP, and our discussion today includes references to certain non-IFRS financial measures. With that in mind, I would ask everyone on today's call to read the legal disclaimers on Slides 2 and 3 of the accompanying earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel's first quarter fiscal 2022 management discussion and analysis. Please note that our financial statements are prepared using the U.S. dollar as our functional currency and the Canadian dollar as our presentation currency. Our fiscal year runs from April 1 to March 31, and our financial statements have been prepared for the 3 months ended June 30, 2021. Please note, all amounts referred to on today's call are in Canadian dollars, unless otherwise noted. Following our prepared remarks, Mike and Rajat will take questions from current Algoma shareholders. [Operator Instructions] I now turn the call over to our CEO, Mike McQuade, for his prepared remarks.

Thank you, Brenda. Good morning. Welcome, and thank you for joining Algoma's earnings call for our first fiscal quarter ended June 30, 2021. We appreciate the continued support and interest from our shareholder base and would like to welcome additional listeners on today's call. Considering the tremendous interest and excitement surrounding our pending transaction with Legato Merger Corp., we have opened the call to public listeners to provide an update on performance for our first quarter ended June 30. Optimism continues for steelmakers across North America. Continued strong demand in key end markets and record pricing are creating significant opportunities for participants across the industry. With strong cash flows, our focus on operational efficiency and the strategic advancement of our capital initiatives, we are positioning Algoma as a next-generation steelmaker, focused on sustainability with attributes that we believe will make Algoma successful across the steel market cycles. The work that our Algoma team members have completed over the past 24 months have provided tangible results. These include: The process control upgrades to our direct strip production complex; the engineering, construction and commissioning of our second ladle metallurgy furnace; and the implementation of our plate mill modernization initiative, Canada's only discrete plate mill. Furthermore, we have spent the last 20 months turning the idea of transforming to electric arc steelmaking into a structured plan, working with key stakeholders to position Algoma to make a final investment decision, a decision that we believe will position Algoma with world-class steelmaking assets to complement the investments we have made in our downstream facilities. This proposed investment in electric arc steelmaking is also expected to significantly reduce our carbon intensity and pave the way for Algoma to produce some of the greenest steel in North America while helping to build the infrastructure of tomorrow. None of this would be possible without the continued dedication and efforts of our workforce. Their continued diligence in the face of the COVID-19 pandemic to protect themselves, their families, their coworkers and ultimately our business and in the ever-changing threat of variants of concern has allowed us to operate unimpeded and delivered strong results over the past quarter. Beyond COVID-specific workplace safety, we have also seen a positive impact on all of our safety metrics. On Slide 4, you will see that our focus on safety continues to have a positive impact on our lost time injury performance, including 0 lost time injuries over the last quarter. I commend our entire team for their collective success on safety performance, a top priority at Algoma Steel. We have several reasons to be very optimistic about what lies ahead for Algoma, and I will share more details later on the call. But first, I will pass it over to Rajat to go over the financial highlights of the last quarter.

Thanks, Mike. Good morning, and thank you for joining the call. I would also like to welcome the new listeners on today's call. We believe Algoma's results underscore a compelling investment opportunity, and we look forward to sharing more details. We are certainly excited as we move closer to an Algoma public listing later this year. Before we get into those details, I'm happy to report that we had a very successful June quarter, the first quarter of our fiscal year ending 31st March 2022. On our last quarterly call, we presented guidance for the first quarter, and I'm happy to say that we met and exceeded these targets. We shipped 610,000 net tons in the quarter. Shipments were similar to prior quarter and up 47% from 416,000 net tons in the same quarter of last year, primarily as a result of a return to run rate utilization levels compared to the pandemic lows experienced last year. Our steel revenue was $765 million in Q1, up 21% from $633 million in the prior quarter, driven by higher net sales realization due to unprecedented demand. In comparison to the same quarter of the prior fiscal year, revenues increased by $423 million as net sales realization were higher by $439 per net ton, resulting in a 124% increase in steel revenue. As a reminder, both our contract and spot orders are subject to a pricing lag due to price mechanics and mill lead times. We have started to see these positive results flow through our earnings. And what is even more positive is that prices have continued to rise now for 53 consecutive weeks. On the cost side, Algoma's cost of goods sold per ton increased slightly quarter-over-quarter as some commodity price increases have an effect on selected raw material inputs. Offsetting…

Thanks, Rajat. We had alluded to the significant earnings generation that is anticipated. And on the last call, we mentioned that these record steel prices present an extraordinary cash generation opportunity, an opportunity that we're taking full advantage of. While the market certainly has provided tailwinds, it is the dedicated strategic approach we have implemented that is allowing us to capitalize. As a team, we collectively have laid the foundational building blocks for our strategic direction. On each and every call, we have highlighted elements of our strategic approach, whether it's our approach to risk management, cost management, talent building, performance management or strategic CapEx. We continue to strengthen the core, including our people and our assets, and we remain focused on building these growth platforms that are designed to create a sustainable future. We continue to reap the benefits from our Project Aurora efficiency initiatives, and to date, have produced over $42 million from our cost on a sustained annualized basis. And we're not done, targeting an additional $8 million, pursuing our goal of $50 million of annualized savings. Driven by our employees, we have implemented both operational and capital improvements that helped deliver the strong earnings performance in the past quarter and which we believe will continue to generate significant value in the quarters and years to come. Over the past 20 months, our team embarked upon a discovery exercise, exploring the potential of a transformational conversion of our operations to electric steelmaking. This proposed transformation has the potential to provide numerous benefits, including incremental capacity and improved more variable cost structure that is better correlated to market conditions, a significant reduction in greenhouse gas emissions, which substantially mitigates the increase in risk and cost to heavy industrial emitters. We are currently working through the last elements of…

[Operator Instructions] We do have a question coming from the line of [ Anton Gorbanov with AMC ].

Could you please talk about the steel price assumptions that underlie your next quarter guidance?

Sure. So I can provide some guidance on how we are -- how the pricing is flowing through. So we had mentioned earlier that it's -- we have 65% contracted volume and 35% spot volume. Spot has been running at, let's say, normally runs 6 weeks lead time, but has been running at around 12 to 14 weeks lead time. So the pricing that we are seeing in the September quarter will be based on 3 to 4 months lead time on the spot side and 1 month to a quarter lead time on the contract side. So 65% contract which is quarterly lagging and monthly lagging. And it's -- September quarter will be dependent on June quarter and the month lagging with the 1 month before. And on the spot side, it will be 3 to 4 months lag. So that may be able to help you to construct the pricing.

Got it. That's helpful. So maybe just to put another way, it sounds like the main variability from here, at least when it comes to revenue line item, is shipments, right, because prices at this point are fairly known. Is that correct?

That's correct.

[Operator Instructions]

And operator, perhaps a reminder that the questions today are being restricted to existing Algoma shareholders. The invited guests are on listen-only mode, but we're happy to circle back off-line with anybody who does have a question with respect to the presentation.

And there appears to be no further questions at this time.

All right. Well, thank you. Listen, once again, thanks for your interest in Algoma Steel and taking some of your valuable time to spend with us this morning. Please stay safe, and look forward to speaking with you again next quarter. Thank you.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.