Hello, and welcome to today's conference call to discuss Algoma Steels fiscal third quarter 2024 Financial Results. My name is Paul, and I'm your operator for today's call. At this time, I would like to hand the call over to Mike Moraca Treasurer and Investor Relations Officer for Algoma. Mr. Moraca, please go ahead.

Good morning, everyone, and welcome to Algoma Steel Group Inc. Third Quarter Fiscal 2024 Earnings Conference Call. Leading today's call are Michael Garcia, 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. I would like to remind you that, comments made on today's call may contain forward-looking statements within the meaning of applicable securities laws, 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 US GAAP, and our discussion today includes references to certain non-IFRS financial measures. Last evening, we posted an earnings presentation to accompany today's prepared remarks. The slides for today's call can be found in the Investors section of our corporate website. With that in mind, I would ask everyone on today's call to read the legal disclaimers on slide 2 of the accompanying earnings presentation, and to also refer to the risks and assumptions outlined in Algoma Steel's third quarter fiscal 2024 management's discussion and analysis. Please note that, our financial statements are prepared using the US 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 three and nine months ended December 31, 2023. Please note all amounts referred to on today's call are in Canadian dollars unless otherwise noted. Following our prepared remarks, we will conduct a question-and-answer session. I will now turn the call over to our Chief Executive Officer, Michael Garcia. Mike?

Thank you, Mike. Good morning and thank you for joining us to discuss our fiscal third quarter results. As is customary, I'll start by highlighting our top priority, the safety of our employees. At Algoma, we uphold an unwavering commitment to safety, which has resulted in a notable improvement to lost time injury performance year-to-date. While our site remains bustling with activity, it's crucial to underscore the significance of safety particularly as our EAF project progresses with increase in contractor involvement. We remain steadfast in our pursuit of zero workplace injuries. Next, I'll cover key events and milestones during our fiscal third quarter and subsequent to events, as well as giving an update on progress at our transformative EAF project. I will then turn the call over to Rajat for a deeper dive into the numbers and a discussion of our strong liquidity and balance sheet, before closing with an update on market conditions. There are a few important things I would like to get across on this call. Our long-term strategy remains unchanged and on track to successfully execute the transition to being one of North America's greenest producers of steel. Our results for the quarter were comfortably in line with our expectations. Our facilities are back online with a goal of reaching full production as quickly and safely as possible, following the coke-making utility structure collapse. And finally, the outlook for our end markets calls for an improvement in pricing relative to calendar year 2023. Now, let me give you some additional color on those key themes. Our results for the fiscal third quarter of 2024 were in line with our previously disclosed guidance on both shipments and adjusted EBITDA, and we achieved year-over-year improvements in nearly all of our key metrics. As a reminder, our fiscal third…

Thanks, Mike. Good morning and thank you all for joining the call. As a reminder all numbers are expressed in Canadian dollars unless otherwise noted. We shipped 516,000 tons in the quarter up 12.6% as compared to the prior year period. Our plate and strip operations ran well in the quarter even as we completed a normal seasonal maintenance including our annual steelmaking vessel inline. Net sales realization averaged CAD1,079 per ton down 3.3% versus the prior year period. The decrease versus the prior year level primarily reflects somewhat softer market conditions in the quarter, in particular the residual lower prices resulting from the UAW strike and due to the lagging nature of our order book. Plate pricing continued to enjoy a significant premium relative to hot-rolled coil during the quarter, driven by resilient demand particularly from spending on infrastructure projects and durables goods. Steel revenue in the quarter totaled CAD 556.9 million, up 8.8% versus the same quarter of last year reflecting the increase in shipments that more than offset lower average realizations per ton of steel. On the cost side, although most cost per ton of steel products sold averaged 10.07 in the quarter, down 11.2% versus the prior year period. The decrease versus the prior year period is primarily attributable to favorable leverage on higher volumes. This resulted in adjusted EBITDA in the quarter of negative CAD 1 million and adjusted EBITDA margin of negative 0.2%, an improvement from negative CAD 35.9 million and negative 6.3% in the year ago period. Cash used in operations totaled CAD 47.4 million for the quarter compared to a use of CAD 128.6 million in the prior year period. Our inventories at the quarter end were CAD 886.6 million, up 7.8% during the quarter due to normal seasonal build patterns ahead…

Thank you, Rajat. Looking at the state of the North American steel market, hot-rolled coil index prices moved dramatically higher in October, as the settlement and the UAW strike became apparent and steel consumers rush to replenish their inventory needs. Over the calendar fourth quarter, pricing moved from the mid-$600 range to touch nearly $1,100 per net ton by the end of the year. Pricing so far in 2024 has come in with index prices dropping by approximately $50 and futures falling into the mid $800 per ton US average for the balance of 2024, while off from year-end highs these prices still represent a meaningful improvement from levels seen during much of 2023. As Rajat mentioned, we are also supported by the fact that plate pricing continues to demonstrate a significant premium as overall demand for plate products remains high and this in turn continues to benefit our average price realizations, especially as we ramp up operations in our plate mill. 2024 will be an important year in the story of Algoma as we continue to execute work towards the commissioning of our transformative EAF project. This will usher in the next phase of our Company that defines the future of Algoma provides the foundation for long-term value creation for our stakeholders and solidifies our leadership position at the forefront of green steel production in North America. Thank you very much for your continued interest in Algoma Steel. At this point, we would be happy to take your questions. Operator, please give the instructions for the Q&A session.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from David Ocampo with Cormark Securities. Please proceed with your question.

Thanks for taking my questions. My first one is just on a bigger picture question. I guess, when you look to 2025, you guys have always discussed being a hybrid operator and either tilting towards being a pure-play EAF or throwing in a little bit of your blast furnace there. When you think about the issues that just happened with the coke facility and even the blast furnace, does that change your tune on what you guys ultimately decide for 2025 or is it just going to come down to cost? I'm curious on your thoughts there.

Hi, David. This is Mike. Yes, I think that right now our plan still remains to operate in 2025 in a hybrid mode. That's been the plan for some time as well as we think it makes the right financial sense as well and obviously, financially we'll continue to keep a very close eye on that. Given the incident in the past two weeks, we'll have to understand the state of the assets and make sure we're comfortable with the asset integrity of both blast furnace, which we pay a lot of attention to and it features very prominently on our asset integrity and asset reliability plan, but as well as the coke ovens. But assuming nothing significantly changes in either one of those perspectives or analysis, we feel comfortable with our current plan.

Got it. And it may be early days, and maybe this one's for Rajat, but how should we be thinking about the cost structure when you guys are hybrid operator is it no cost plus type model or just curious what the added costs will be with the dual cost structure, DuPont – dual manufacturing process?

Hi, David. The best way to look at it is that we will be operating an additional facility, which is the electric arc facility. And as we indicated in the past, it probably will carry 100 to 140 people more from a mining perspective, which is -- which becomes your fixed cost then the rest most of it becomes variable in the form of using metal in the electric arc furnace or using metal through the blast furnace. So, as far as, you know the added fixed cost is concerned, it's that and the maintenance costs will not be much as it is a new asset. So we don't expect it to be substantially higher as we go through it. It definitely will be higher as we are transitioning and as the as we transition and start shutting down the facilities and start reducing the fixed costs on those facilities the costs will start coming down.

And last one for me Rajat. You gave some capital plans at least as it relates to the year I was hoping you could square up the total CapEx for this year broken down by maintenance, the plate modernization and then layering on the app on top of that?

So then when you say this year, you're talking of 2025 fiscal?

I guess 2024 calendar.

2024 calendar. So, yeah, pretty much should be should be in line. So it should be a little roughly a CAD250-odd million on year that we'll be spending from a CapEx perspective. And this is gross CapEx, not net, and then we will be spending on our maintenance. It's roughly CAD100 million to CAD120 million on our maintenance CapEx. That could be we'll be spending, so that's your total. So there is some plate mill CapEx that will be spent in the first quarter, and little bit later on -- to complete the complete replacement projects. And that's how the CapEx will run. That is the money spent on recovery of the coke batteries, which definitely will form part of the whole analysis that we're doing along with insurance, but that will be in addition.

Got it. Thanks so much. I'll hand the call over.

Thank you. Our next question is from Katja Jancic with BMO Capital Markets. Please proceed with your question.

Hi. Thank you for taking my questions. First just to confirm, you expect EBITDA to be higher sequentially in 4Q?

That's correct.

And that's mostly going to be driven by pricing? Or is there any cost puts and takes there?

It’s mostly will be pricing, cost will be pretty similar and from variable cost perspective fixed cost depending on the volume definitely will be higher, but it's mostly coming from pricing.

And this currently assumes three weeks of lost production right?

Yeah, roughly 120,000 to 150,000 tons of production and shipment.

And maybe just on the blast furnace, close to needing a full reline, is there a risk that that complicates the restart?

Hi Katja. This is Mike. No not really. I think the up the blast furnace disruption, it was more related to the utility service incident at coke making, we've restarted it and are slowly bringing it back to good. I don't think the time since the last reline is really a factor into the incident that happened, or the state that we'll get it back to once we're making good metal. Does that help?

Yes. Thank you. I'll hop back into the queue.

Thank you. Our next question is from Ian Gillies with Stifel. Please proceed with your question. Q – Ian Gillies: Good morning, everyone.

Good morning, Ian. Q – Ian Gillies: Just to reconfirm on the working capital numbers you provided, do you suggesting that for fiscal year 2024 it will be call it a CAD40 million to CAD50 million release. And then in fiscal year 2025, we're looking at another CAD100 million release?

Yes. Q – Ian Gillies: And the follow on from that question is, does that contemplate and incurrence of or investing in additional working capital ahead of the EAF ramp? Because I presume, you're going to have to start buying some scrap ahead of startup and commissioning, at year end?

Yes, it does. And just for context, we will be buying scrap, but not much as we are not much by end of this year, as we are ramping up, it probably will be more in the following year as we buy. And at that point in time, our iron ore and coal inventory will go down substantially, as well. So yes it does consider whatever we will buy, for the ramp-up and we'd still be reducing that CAD100 million or CAD150 million in total by next year. Q – Ian Gillies: And Rajat, given some of I guess the timing differences now, with spending day in relation to the EAF and the use of the credit facility. Is there anything within the government loans you have right now that prevents the incurrence of additional debt or anything like that could limit your availability?

No, there are good or buckets or baskets, which are available that we can, if we have to tap the credit market we can. Q – Ian Gillies: Okay. And then I suppose, as we start looking into the remainder of this year and as we think about timing of the capital cost for the EAF, is that an update you'll provide with your typical guidance that you provide in the early part of April or will that be provided at a later date you think?

We're not sure, what you mean by or by the capital costs in. Q – Ian Gillies: Well, sorry, just to be clear, you had suggested that you think, you'll have every all the projects secured and the capital cost secured by the end of this calendar quarter, and you typically provide guidance in and around EBITDA for a quarter, call it early the following months or early April. I was just wondering if, within that release, you think you provide an update on the EAF and costs, et cetera?

Yes, sure. We will. You know as we, and we typically do, we will provide a hub where we are on the on the year on the capital cost side, the -- our expectation is the majority of our cost should be fixed by that time and we'll definitely provide an update by that time. Q – Ian Gillies: Okay. Thanks very much. I'll turn it back over.

Thanks Ian.

Thank you. Our next question is form Ahmad Shaath with Beacon Securities. Please proceed with your question. Q – Ahmad Shaath: Hey, guys. Just maybe a first follow-up. I guess what reference point, do you suggest we use in terms of shipments for Q4 relative to the 120k to 150k that you guys mentioned, just because there's a lot of variability year to date on the shipment volume?

Yes, so, typically we are at around 550k as an average for each quarter. So, you can you can start from there.

Perfect. That's very helpful. In terms of pricing, I guess you guys said that you expect directionally some stronger prices for throughout calendar '24 compared to calendar '23. As that the driver behind that is just the current futures curve or what assumptions are you driving this comment?

It's actually the future curves that we are that we are seeing, that's driving the pricing is. The other thing that's definitely driving our expectation for this year is the spending that's happening on the -- in the infrastructure and other areas of the consumption as such for the demand as such has been stable, so we don't expect big changes as such other than the sentimental changes that happened. And also, we are factoring in the cost -- the cost element which has kept the loans at a higher number and kept the average through the cycle pricing at a higher number as well. So, some of those factors are considered. But yes, the futures are also indicating where the pricing is going.

Okay. That's very helpful. Thanks, Rajat. And last one, I'm not sure if you guys touched on it, but are you guys planning maybe as we get closer to the commissioning of EAF, just update us on the potential savings and OpEx structure. It's been a while since I think the last update we had is from the data from the roadshow was going public. Just wondering, if there is a chance we get an update around those numbers this year?

Yes, Ahmad, this is Mike. We'll continue to do that, as we update information and get closer to the commissioning of the commencement of commissioning on the EAFs at the end of this year, both on where -- what are what our end state will be, as well as more information around what the short hybrid period we'll look like from that perspective.

That's really helpful. Thanks for answering my questions.

Thank you. Our next question is from Lucas Pipes with B. Riley Securities. Please proceed with your question.

Thank you very much, operator. Good morning everyone. Apologies if I missed this, but I wondered if you could maybe provide some color in terms of dollars and cents in regards to the coke incident and wondered, what was the OpEx impact this year might be? And then also from a CapEx side, what will be any additional costs from the incident in the longer term, any kind of long-term cost to consider? Thank you very much.

Sure. I'll start, Lucas. So we've completed the preparation of the repair plan using it out, both outside engineering and internal resources. So we expect the total repair costs to be in the $20 million to $30 million range and should be complete sometime in the April time period in terms of costs. Beyond that, our aim is to do a complete recovery back to full production of the coke batteries. Thankfully during the incident of none of the three batteries suffered any thermal integrity degradation, we were able to protect the thermal integrity of all of all three batteries. So once the repair is executed, our goal is to get back to pre-incident of coke production levels.

Got it. At any longer term costs that might be associated with this?

I think it's a it's too early to say, but we the way the way we have looked at it right now and the end the world that we are doing in batteries as such are okay, the walls are okay. So we don't expect much to -- much degradation there which is -- which is the key from long-term cost perspective. As far as the corridor is concerned the piping, that's the cost that we have assessed which is $20 million to $30 million. So at high-level I don't -- we don't think that there will be additional costs, but we'll know more as we restart the furnace to full production. And just some added color during that period, we'll probably be running at 30% to 40% of our production and using external coke during this quarter. So and come next quarter we should get down to our full production levels.

Very helpful. Thank you. And I'll turn to a kind of high-level topic, on M&A. I saw a very active process in the US with US Steel. And kind of I'm wondering, how you look at the M&A landscape at this --at this time? Is there something that you think strategically could it -- could possibly benefit Algoma? Or how do you expect the landscape to kind of evolve, maybe more within Canada, would appreciate your thought. Thank you.

Hi Lucas. While I'm sure will evolve, it's our policy not to -- not to speculate or comment on how we may be thinking around specific M&A opportunities. But I appreciate the question.

Anything that would come strategically maybe be the uniquely beneficial to Algoma? Or is it really just focuses on the EAF from your side?

Yeah. I mean, obviously, our short-term strategic path is clear. We believe that EAF brings a tremendous strategic value two to Algoma. We're laser focused on and executing that we're on-time, on-budget. And we very much look forward to commissioning at the end of this year, beginning commissioning.

All right. Well I appreciate that. Thank you very much.

Thank you, Lucas.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mike Moraca, for any closing comments.

Well, thank you very much again for your participation in our third quarter fiscal 2024 earnings conference call and your continued interest in Algoma Steel. We look forward to updating you our results and progress, when we report our fiscal fourth quarter results. It's scheduled for June. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.