Ladies and gentlemen, good afternoon. Thank you for standing by and welcome to the Century Aluminum Company Third Quarter 2016 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for your questions and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to our host, Mr. Peter Trpkovski. Please go ahead.

Thank you very much, Tom and good afternoon, everyone, and welcome to the conference call. Today's presentation is available on our website, www.centuryaluminum.com. We use our website as a means of disclosing material information about the company after complying with Regulation FD. I would also like to remind you that today's discussion will contain forward-looking statements related to future events and expectations, including our expected future financial performance, results of operation and financial condition. These forward-looking statements involve important known and unknown risks and uncertainties, which could cause our actual results to differ materially from those expressed in our forward-looking statements. Please review the forward-looking statements disclosure in today's slides and press release for a full discussion of these risks and uncertainties. In addition, we have included some non-GAAP financial measures in our discussion. Reconciliations to the most comparable GAAP financial measures can be found in the appendix to today's presentation and on our website. With that, I'd like to introduce Mike Bless, Century's President and Chief Executive Officer.

Thanks a lot, Pete, and thanks to everybody for joining us this afternoon. If we could turn to Slide 4 please, this will give you a quick rundown of what's been going on here over the last couple of months. I'm going to ask Shelly to give you some detail in the market environment in just a couple of minutes, but let me just make a couple of quick comments to put the quarter into context. It goes without saying we're seeing mixed signals out there. This is one reason we believe why the LME price appears to be trading within a range. Most significant factor by far continues to be the excess supply in China. We began the year by seeing a relatively modest volume of capacity restarts with this pace as expected as picked up and we expect to see over 1.5 million tons of restarts year-to-date and a little bit more trickling through. The market's expectations for new capacity starts now appears to be coming true. With expectations for over 2 million metric tons of new capacity starts by the end of this year. This continues to puzzle us as most factors are not supportive of these capacity starts. We're seeing rising coal and energy prices in China, as well as most recently, rising Alumina prices, which are a bit of catch-22 as far as we're concerned as they're driven on that primarily by unnecessary increases in production of aluminum in China, both circle. With the mad picture in China, it turned a bit better than originally expected, with government's continuous spending on large projects driving demand and the spike in property values in many regions, driving residential construction as you probably read. It's clear to us and most others that these trends simply can't continue over…

Thanks, Mike. Let's move along to Slide 5, please. I'll provide some comments here on the industry environment. The cash LME priced average $1,620 per ton in Q3, which reflect the 3% increase over Q2. Prices continue to be quite volatile, shedding as high as $1,690 and as low as $1,550 over the last three months. Today, the cash LME price is close to the high end of the range at $1,682 per ton. The downward trend we saw for regional premiums over the last many quarters appears reversed. Delivery premiums in both the U.S. and Europe have strengthened recently and continued upward pressure on retail premiums as expected for 2017. The U.S. Midwest premium averaged $0.064 cents per pound in Q3, but is currently sitting just above $0.07 cents per pound. In Europe, the duty paid premium averaged $120 per ton in Q3 and has since traded up to $135 per ton. The global aluminum market was in a deficit again during Q3, with a short fall about 300,000 tonnes. We continue to see good demand growth with a 4.7% increase in global consumption year-over-year. Chinese demand growth at 6.7% was better than anticipated with continued strength from the construction sector. And as Mike mentioned, we continue to believe this growth level in China is not sustainable. As current demand is being processed, the government stimulus and other temporary factors. Global primary aluminum production was up 3.1% in the third quarter, driven by startups and restarts in China. We expect to see meaningful capacity additions from China in Q4 as growth projects continue to come online and previously curtailed capacity returns to operation despite rising cost for key raw materials. These additions to production will continue to outpace consumption, further increasing China's already over-supplied position. Most industry experts are now anticipating the 2016 would be in a lot of deficit in a global aluminum balance, but the sizable deficit in the western world being largely eroded by the ongoing surplus in China. Just a couple of quick comments on the Alumina market before I hand it over to Mike. Alumina prices have been increasing recently from $235 per ton when we last spoke with you in July. So the current level closed to $290 per ton. As Mike mentioned, the increase in price is being attributed to higher demand from Chinese smelter production growth, as well increased info cost for coal caustic soda. And with that, I'll hand it back to Mike.

Thanks, Shelly. If we could turn to Slide 6, please, a couple of quick comments on the operations during the quarter. As you can see at the top of the page, safety performance was generally reasonable across the company this quarter. We do have too many incidents at Hawesville, most were relatively minor, but too many is too many. We're particularly proud of the performance on safety at Sebree this quarter. During that summer we experienced very high employee attrition and some process instability during the height of the summer heat. These factors produced a very risky environment and we're proud that our employees really focused on job number one - that's obviously keeping themselves and their colleagues safe. Turning to production volume, you can see the impact of those operational issues at Sebree into a lesser extent at Grundertangi. Both of these plants are expected to be up in production Q4 over Q3 and we have good confidence in that result based on the current state of the operations. As I said, both plants have returned to full stability very quickly. Turning now to production metrics. As you see, the operations at Hawesville have remained very strong. Just to give you a sense, almost 80% of the production at Hawesville is now high purity metal. That's a record for the plant. You see the impact of the summer pot line instability of Sebree there with current efficiency, power and raw material deficiencies all down Q3 versus Q3. Turning to conversion cost. Again, just to note, conversion cost here are all cost other than Alumina of course and these again driven by U.S. power prices. Let me just give you some details so you can see that. As hot as [indiscernible] quarter-to-quarter, again, this is all Q3 over Q2, power…

Thanks, Mike. If we turn to Slide 7 of the presentation, I'll provide some details on the performance for the third quarter. Our net sales were up almost 2% from the second quarter on the shift from home to direct sales with the exploration of the last holding contract in the second quarter. For the two-month lag basis, the average cash LME price was up 3% in the third quarter and the Midwest premium decreased 10%, resulting in a Midwest transaction price increase of approximately 2% quarter-over-quarter on a lag basis. Realized the prices with the U.S. were down 1%, reflecting weaker value-added product premiums that Mike discussed. We are expecting this continue in the fourth quarter and 2017. For Iceland, the all-in two-month lag LME and European duty paid premium increased approximately 2% in the third quarter. Realized prices on direct shipments also increased 2% quarter-over-quarter and there was an additional 10% of realized pricing attributable to the shift from total to direct sales in the quarter. On a consolidated basis, global shipments were down 2% in the third quarter of 2016, production levels were essentially flat quarter-over-quarter. Turning our attention to operating profit, we are reporting an adjusted EBITDA loss this quarter of $5 million, a decrease of $26 million when compared to the $21 million of adjusted EBITDA recorded in the second quarter. The adjustments to EBITDA this quarter include cost associated with the negotiated sales of the Ravenswood retirement medical benefits class action suit, additional impairment of the Ravenswood assets and a non-cash adjustment to the carrying value to the inventories. As Mike discussed, we reached an agreement of the set of the class action suit for $23 million. This agreement in principle remained subject to and turning into a definitive agreement with the class and…

I think, Pete, can probably move to our questions.

Thanks, Mike. Tom, if you can go ahead and facilitate the Q&A session, please?

Thank you. [Operator Instructions] Our first question today comes from the line of David Gagliano with BMO Capital Markets. Please go ahead.

Hi, thanks for taking my question. I actually just had a little bit of a challenge understanding the bridge that was just mentioned on the EBITDA from quarter-to-quarter. Can you just go through the numbers again on the driver? I got the $15 million on Alumina. Can you give me the rest of the bits and pieces that explain the delta?

Sure. If you had the $15 million on the Lumina and then the rest of it was power cost, $9 million from the Kentucky operations, $2 million from our Mt. Holly operations.

Okay. Then you mentioned there was a $5 million drag and value-added premiums. Is that correct? Quarter-to-quarter?

Right. $5 million drag on value-added premiums, but you also have to look at the higher aluminum pricing. The $5 million from LME and Midwest transaction pricing offset by $5 million on value-added premium.

Okay. And then did you quantify roughly the EBITDA ahead from the operating issues during the quarter? Not raw materials, but operating issues?

No, we didn't, David. It was a couple million dollars. It wasn't quite $5 million, but it was $5 million quarter-to-quarter.

Okay. And then last question. You said obviously Alumina's price on a roughly one to two-month lag. Given that there has been quite a bit of movement in the Alumina during the course of the quarter, what was the average price that actually flow through the cost line?

We only have the average price that flow through the cost on hand. Shelly?

Yes. The actual for Q3, its $234.

Right.

So you're going to see the places have run up significantly from there, so there's further Alumina pressure to come.

Sorry, so the actual is Q3 or Q2?

Q3 actually. Ignoring any lag with $234.

Got it. Okay, great. Thank you.

The key there is there's more negative cost to be realized into fourth quarter.

Understood. Okay, great. Thanks.

Thanks, David.

Our next question will come from the line of Brett Levy, representing Loop Capital.

Hey, Mike.

Hey, Brett, how are you?

Reconnecting from a new spot.

Yes, that's what we're seeing. Maybe closer to us than before.

Absolutely. We're in the same time now.

Great.

Although I still don't understand the move from California. I would have stayed.

Plenty of that.

No comment yet. No comment.

Yes. Especially as we're coming up on winter [indiscernible].

Thank you again.

But tell me a little bit more about Iceland, what's going on, Grundartangi, Helguvik, potential stuff like that, the pirate party.

Yes. You've been reading up. You've been reading up with Dan. Let me go through rather than reverse order there.

Okay.

Grundartangi is kind of motoring along. As I said, we had like Sebree, but less than Sebree. Some pot line issues this summer caused largely by some dusting from Helguvik quality issues. That's completely behind us now. The plant is kind of in a reasonable study state at this point in time. No movement on Helguvik to talk to you about and really the reason for that in certain respect is sort of any movement there is going to be a result of ultimately being able to secure power. As I think you know, there was an arbitration filed earlier this year in this matter against HS, which is one of the two power suppliers to Helguvik. You may remember that a similar, in fact frankly the carbon copy arbitration was filed and litigated three or four years ago with the result that the contract is found to be still in full force, HS has sought to prove and have the tribunal order that the contract was null and void. So we're waiting for the result, Brett, of that process and that will be a key determinant into sort of the next steps on Helguvik. As we said, there's no firm date, but we said we would expect given the normal timing of these things, the tribunal's judgment sometime during the fourth quarter, but there's no promises. That's the big next inflection point on Helguvik. You asked about the election really, I think in your last part of your question and speculation just like other elections, I suppose at this point is probably pretty idle. This one will be settled even before the one in this country. The Icelanders go to the polls this coming Saturday and so this will be known on Sunday and so to speculate at this point in time is probably a fool's errand. But there are more and more parties every year and this election clearly is indicative of a healthy and robust political debate in Iceland. There are plenty of parties.

Is there sort of a sense, generally whether or not more of the parties are in favor of expanding the energy available to growth projects in aluminum or anything else or anything like that and then the other piece of the puzzle is to the extent that you could hedge Alumina, aluminum, anything in North America. I know historically you've tried that. Any inclination to go back to that kind of strategy in terms of the U.S., but not the assets [ph], so I guess it's a two-part question. Is the general tone of the election going to help Century in Iceland and then anything you would do to mitigate what's going on in the U.S. right now?

Sure, Brett. We got it. I'm actually going to quick kick, I'm not going to get to the fork down here. It's really hard to tell. As usual there's a debate in two sides of that coin. There is significant support every time you see pulling for so called heavy industry in Iceland. There's a course obviously on the other side. It's really difficult to tell. You're going to have to get through the election, get through the formation of the government, of course as I think you know is a parliamentary system there. So depending upon the results of the election, it could take some time, weeks, or even longer. We've seen in various parliamentary democracies around the world for our government to be formed just depending upon how dispersed the vote is. It's hard to tell. We think we being in the industry got great support in Iceland and just how that manifests is really hard to tell - which really going to drive again the next steps on power for Helguvik by the contractual issues, not the political issues. It's this arbitration and sort of what comes out of that and what our next steps are. On hedging, the answer is yes. I'll give it in your order. Alumina is difficult to hedge. There is a new product out there from what we understand with a relatively thin market that enables people to buy and sell for the index price. That thus far, it's an undeveloped market. On the other side of course as you're well aware is a really deep LME market and the answer to your question is yes, we're trying to be patient here and calm, but we have every time we feel like the price and depth of the market is afforded. We have sulfur and LME, so I'll just give you the specifics right now for the balance of this year and for 2017. We've sold forward 5,500 tons per month at a price just shy of $1,700. There's no set bogey, but given all the factors on any given day and again given the depth of the market and whatnot, we are as you can tell in the mode of trying to - at least we believe - intelligently takes some risk off the table.

Thanks, Mike. I'll hand it off.

Thanks, Brett.

[Operator Instructions] And we will go to the line of Jorge Beristain with Deutsche Bank. Please go ahead.

Hey, Mike. It's Jorge Beristain with Deutsche here. Just wanted to dive more deeply on the charges of $27 million, I think. Can you just quantify how much of that was cash versus non-cash?

Sure. It's all right now non-cash. Let me just take you through all that because they're interconnected into a certain extent. The retiree medical settlement as Rick said is $23 million. That's the future value, a simple value. Everyone to say it. It's not PV. That is non-cash today, but as Rick told you, it will be cash over the next 10 years. So it will diffuse itself as you said $5 million, assuming the quarter proves it sometime in the first half of '17 and then $2 million thereafter. If you want to go to PV on that, you can use whatever discount rate you think is appropriate, but that's non-cash today, but will be cash. The second chunk of it, the rest of it is just a further impairment of Ravenswood. They're sitting on the balance sheet. It's what it's doing that's non-cash period. What we're doing there is we're writing it down to the value at which we have a tentative agreement to sell it. One way to look at this at least in our opinion is that if you look at the present value, again, whatever discount rate you wish to apply of that stream of payments for the retiree medical $23 million, you know the cash that we think we're going to get for selling the plant in the site is in the mid-teens. It's just about equal to the PV of the settlement. Those two weren't linked in terms of we didn't seek a settlement that has necessarily got us to the sale price of the plant, but they just turned out that way.

Okay. But you're saying, sorry, that what you could sell Ravenswood for is equal to PV of the settlement, not the future value?

Correct. It's about $40 million, give or take. That deal isn't finalized yet, but it's in its final phases of documentation. And so to answer your question, the long-winded answer to your question, of the $27 million, $23 million will eventually turn into cash over the next 10 years and the rest is just a further impairments charge to write down the Ravenswood asset to the cash value that we believe were going to be paid.

Got it. Obviously, I'm a little rusty on keeping up on the older MISO power changes. But you said that the bulk of $27 million or more than $27 million EBITDA that you took into cost in this third quarter is abating now. So could you just kind of give us a census to how much the power cost have come down either percentage-wise or dollar-wise so we can be bracing for what fork you could be looking like?

Yes, sure. As Rick said of that $26 million Delta reduction in EBITDA Q2 to Q3, about one-third, but $9 million of it was due to the power and - thanks, Rick - and $2 million due to the power ultimately natural gas in South Carolina because we're floating based on natural gas there. If you construct those two, the MISO prices have come at our plants delivered to our plants that come back down basically to where they were before the summer. So if those were to continue where they are now, you should see that $9 million anchor go away i.e. Kentucky power prices, all those being equal ought to be $9 million if they stay where they are now, $9 million lower Q4 versus Q3. Net cash, I'm going to have to take a guess here right now. I'm just thinking about the forward screens. It probably show about by halfway down that. We're going to say the same thing - about halfway down of that $2 million bomb you only we see $1 million - $1 million better in Q4, so putting that all together everything else equal, casting where it is today, Micelle Energy [ph] is staying where it is today, Indiana hub energy staying where it is today, actually deliver that our plans. You see $10 million of that bad news go away get better in Q4 verses Q3.

Perfect, and if I can push my luck with one more question can you walks us same Alumina ladder and is there any of the Alumina that you have contracted or are you going to be sort of recouping in any way as the months go on. If you could be facing a tail wind in other words if things could improve for Alumina it would it be sort of market to market for what we're seeing.

As we talked about earlier, you will see still some of that increase that we - that Shelly talked about during the quarter, we see some of that in Q4, as I mentioned you got to have a one to two month lag so maybe by the end of the quarter you'll start - you'll start to see some of the reduction that Shelly talked about.

Another point just to remember, so on the total amount of aluminum we buy right now, just what’s make it simple little over 700,000 tons of Finnish metal production but just call that 1.4 million tons reasons of Alumina. About 40% of that we buy on a percentage LME basis through the end of this year, so we are not chasing up or down the Alumina index that you can read every day, it's a fixed percentage of the LME price. That number hasn’t been finally negotiated for 2017, it could go up or go down but right now like I said roughly 40% of our Alumina cost is paying for the LME price not paying to the index price.

Got it, thanks very much.

And our next question will come from the line of David Gagliano from BMO Capital Markets, please go ahead.

Thanks, I just wanted to ask a couple of them and I apologize I have been jumping into conference calls here, so hopefully that been covered, but one actually one that you just mentioned that 40% of your Alumina costs are paid to the LME price, can you just remind me - can you give me the tons that are exposed to just that actual tons on a quarterly basis.

Sure so 1.4 million tons is our total Alumina and somewhere around 450,000 tons again on an annualized basis for the balance of this year, our page to the LME and the rest is that we find index basis and again that David, on a negotiation right now as to what that split will be for 2017.

And David, this is a reminder we put out our sensitivities beginning of the year, so for the exposure we have the spot price for every $10 change in that annually that $9 million in EBITDA.

That’s a very good point Shelly that takes into account the amount that we buy obviously index verses LME base.

Sorry, you said a $10 change in the Spot price is a $9 million change in annual EBITDA, is that what you said?

You got it.

Okay a great thank you. Then I'd have another question I think I heard you say that you sold for some of the aluminum. If I got the numbers right it looks like it's about 10% of the volume, sold for something like.

5,500 no - 5,500 tons a month, so for 2017 to just do the math 66 divided by 7 yes maybe 8% have 9.5% just off the top my head David.

Yes. And just conceptually I'm wondering what the thought was behind selling for the aluminum while leaving yourself exposed to Alumina.

As we said no there's no perfect philosophy to be more worried about this. I will just say the simple terms we liked the preferred price in terms of selling for that reason modest amount, and Alumina as I said is just known good liquid Ford market, for buying it or selling Alumina as pointing time, you have may been off, there has been some market opened up here, organized markets, but they are really - if you look at the open interest, the volumes there really, really thin at this point in time. So it is just - not an economic ability to address Alumina at this point in time.

Okay. And then just one really last question; the 40% of Alumina cost that are picked through the end of this year, obviously that's under negotiation. Is the hope that that number is high - that percentage has picked LME higher or lower than the 40% next year?

That's a good question. There's no right answer, I suppose, David, as to that question. That depends upon one's view of the LME price. Ultimately it depends upon your ability to achieve - let me just be blunt - a percentage in your negotiation on the one hand or a deal around an index price on the other hand and you have to compare those, too. I'm sorry to be so opaque here.

I understand, but do you negotiate now? It's Century's position they want that note, that percentage to be higher or lower at this point given all everything that we know. Would Century rather have that number be higher or lower?

David, I'm sorry to evade, but it's really hard. Let me just give you an example. If you told me my LME reference price that I could buy was going to be 12% on the one hand or 19% on the other hand, just to give you the two extremes of where the market has been since I've been in this business for the last 11 years, my answer would be really different. And so it's really hard to answer that question in that respect. We want the lowest price that we can. Again, we've taken a risk on the one hand on the index, on the other hand on the LME that you're multiplying that percentage if you can negotiate. It's so variable to answer to your question based on what the market is for LME-based contracts at the time that you're agreeing with your counter party.

All right, got it. Thank you very much. I appreciate it.

Thanks, David.

Next, we'll go to the line of Tony [ph] with Collin & Company. Please go ahead.

Hey, Mike. I'm sorry, I don't mean to be the dead horse here.

Lead the way.

Just on those LME-based contracts, I typically think about it. You mentioned that range. I think about a little bit tighter range, maybe 15% to 17.5% range and then you indicated - so are we to think that going into the fourth quarter into '17, 60% will continue to be on the one to two-month lag?

The convention, Tony, is increasing whether you're buying on an index basis on the one hand or on an LME reference basis on the other hand. The convention is increasingly to have the reference price be a lag either one or two months. I would say to your question either on expanded EBITDA, 60% or the 40%, assuming that those percentages don't change and just going to '17, I would say the answer is - I'm looking at my colleagues here - yes. Again, subject for negotiation, but it's increasingly the convention that metal is sold on and aluminum is bought on a lag of a month or two, or sometimes even three.

Okay. And you guys mentioned the figure there and I didn't write it down quickly enough. But for each $10 where it's on change, you mentioned the impact and I didn't get that down. Could you repeat that?

Don't worry, Tony. It's $9 million annually on EBITDA.

$9 million, okay. And then one question, a follow-up on Ravenswood. I would assume that there's going to be no environmental reclamation that you will be responsible for going forward?

That's correct. The sales proceeds that we're estimating here, it's a net pros of the buyer, it's assuming all of those liabilities. Correct.

Okay, all right. Very good. I think that's all I've got for right now. Thank you.

Thanks, Tony.

And there are no other questions queuing up at this time.

Okay then, we again greatly appreciate your interest and time. We look forward to talking with you in the new year, if not, before. Take care.