Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter 2018 Earnings Call. At this time, all lines are in a listen-only mode and later we’ll conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I’d now like to turn the conference over to our host, Peter Trpkovski. Please go ahead, sir.

Thank you very much, Kevin. Good afternoon, everyone, and welcome to the conference call. I’m joined today by Mike Bless, Century’s President and Chief Executive Officer; Craig Conti, Executive Vice President and Chief Financial Officer; and Shelly Harrison, Senior Vice President of Finance and Treasurer. After our prepared comments, we’ll take your questions. As a reminder, today’s presentation is available on our Web site at www.centuryaluminum.com. We use our Web site as a means of disclosing material information about the Company and for complying with Regulation FD. Turning to Slide 2, please take a moment to review the cautionary statement shown here with respect to forward-looking statements and non-GAAP financial measures contained in today’s discussion. With that, I’ll hand the call to Mike.

Thanks very much, Pete. And thanks as always for all of you for joining us this afternoon. As Pete said, we are joined here in the room by Craig Conti, our new CFO. We are delighted to have him here. He has got a fantastic back ground. Great experience at ITW and before that at GE. He is going to add huge value here. We are quite confident and we’re looking forward to working with him. It's truly his -- Craig day [indiscernible] here. So we are going to give him a break. He will stay in listen-only mode for this call, but obviously you will all -- confident enjoy working with him and you will be hearing plenty from him in the months and obviously quarters to come. Okay. We can turn to Slide 4, please. I'll give you a quick rundown of the last couple of months. We think we had a really good quarter in the second-quarter. Financial results if you had a chance to have a quick look, came in consistent with our expectations and Shelly will deconstruct the numbers for you in just a minute. All the plants have been stable with strong and consistent production in that metrics and given the complexity of the capacity restart projects that are in full swing. The stability of the operations are even more important than they normally are. And I'll give you an update on the Hawesville restart program in just a minute. Peter will give you some detail on the industry environment, but in a nutshell the picture remains good both in respect to demand growth and the growing global deficit. We see this as present and continuing to the foreseeable future. The aluminum price as we talked to you about last time did come down…

Thanks Mike. If we can move on to Slide 6 please, I’ll give you a quick update on the current state of the global aluminum market. The cash LME price averaged $2,260 per ton in Q2, which reflects a 5% increase over Q1. The LME price on a 2-month lag basis was up quarter-over-quarter 2%, and averaged $2,100. As Mike discussed, the metal prices come off by 10 -- approximately 10% over the past couple of months similar with the rest of the base metal complex. Aluminum prices have averaged approximately $2,100 per ton for the month of July and are currently sitting right around $2035 per ton. In the second quarter, regional premiums averaged approximately $21.7 per pound in the U.S., up 50% quarter-over-quarter and approximately $200 per ton in Europe, a 20% increase from prior quarter. However, spot premiums are down slightly to around $20.75 per pound in the U.S. and a $160 per ton in Europe. In the second quarter of 2018, global aluminum demand grew at a rate of 5% as compared to the year-ago quarter. We saw 6% year-over-year demand growth from China, and 3% growth in Europe and North America. Global production growth was mostly flat in Q2 with the same period last year. China production was down 2%, while the world X China was up 2%. As a result, in Q2, the global aluminum market recorded a deficit of approximately 1.5 million ton and we continue to see a drawdown of inventories globally. While most industry experts predict some slowing in Chinese demand growth in Q3, demand growth globally is predicted to remain strong, resulting in a continued supply deficit globally. We therefore expect a continued destocking of global inventories which should be positive for long-term price levels. And with that, I will hand it back to Mike.

Thanks, Pete. Let's turn to Page 7, please. Couple of quick comments on the operations, as we normally provide. As you can see safety performance was mix this quarter. First and most importantly, we were really pleased with the safety results at Hawesville. As I've said a couple of times it's a large and complex project. The rebuilds and the restarts from the very beginning, the management and the union have worked extraordinarily well together to ensure that safety remains the absolute priority here. And thus far the results have been really gratifying. As I said, we got months of really heavy activity left, but we are quite proud of what the team has accomplished thus far. And we are very confident they can maintain their focus and their excellent performance. At Grundartangi you can see a reasonably steady safety environment. The other two plants performed below our expectations in this past quarter. That's very uncharacteristic at Sebree. They have had a fantastic run in the last couple of years on safety performance. We have already seen much improvement over the last couple of months. So we are assuming that's a -- that was an aberration over the quarter during the second quarter. At Mt. Holly we are concerned that the ongoing uncertainty with regard to the power contract is getting in the way of the plants historical excellent safety focus and we're watching that situation very closely. Moving down to production, no surprises here. At Hawesville you see the beginning of some incremental volume coming from the cells that we began restarting in June. Obviously, you see a lots of the single pot line at the end of May at Sebree and good stability at the other plants as we would expect. Moving down to production metrics or KPIs,…

Thanks, Mike. Let’s turn to Slide 8, and I’ll take you through the high-level results for the second quarter. On a consolidated basis, global shipments were down about 4% quarter-over-quarter primarily due to the equipment failure at Sebree that Mike mentioned. While shipments were down, realized prices were up more than 8% as a result of higher lagged LME prices and regional premium. Looking at operating results, adjusted EBITDA was $54 million this quarter and we had adjusted net income of $0.32 per share. In Q2, adjusting items include $8.5 million related to the Sebree equipment power failure and $3 million for the success related to the Hawesville restart. So let me give you a little more background on these two items. For Sebree, we expensed $1.5 million in Q2 or cost prepared in line from restart. We also had reduced production of approximately 6,000 tons in the quarter which translates to about $7 million in lost profit and fixed cost. For Q3, we have to make [indiscernible] an additional 12,000 tons of production which will translate to a P&L impact of $10 million to $15 million. As a reminder, we expect to fully recover all of these bought -- this from our insurance policies less our deductible of $7 million. However, the insurance proceeds and its associated [indiscernible] probably lack the actual loss by a couple of quarters. We continue to call out the P&L impact of this loss as well as future insurance proceeds as adjusting items in the coming quarters. For Hawesville, in Q2, we expensed about $3 million related to a restart of the curtailed lines. As we mentioned on our last call, we are capitalizing most of the spending associated with the restart and I'll talk about those costs when we get to the cash…

Thanks, Shelley. And as usual, we thank all of you for joining us this afternoon. I think, Pete, we should just [indiscernible] the questions.

Sure. Thanks, Mike. Kevin can you go and kick out the Q&A session, please?

Sure. Thank you. [Operator Instructions] And our first question comes from Jeremy Kliewer from Deutsche Bank. Please go ahead.

Hi, guys. Good evening.

Hey, Jeremy.

Thanks for the in the question.

Sure.

You guys have a strong balance sheet and you’ve it for the past year or so, under one-time [indiscernible] to EBITDA. I was curious, if you could provide some insight as potential uses of cash other than Hawesville, which is going to use the majority of that over the next three, four quarters?

Yes, so you’ve entered at least short-term, Jeremy, the question that Hawesville restart will take up. And again, as you all people know, everybody on this call knows that the cash flow is going to be variable based on commodities prices and it will be tempered, I guess is one word when I use into the alumina price revert [ph] to where it belongs as far as we are concerned and many -- most people are concerned. So until that happens, the focus is going to be on Hawesville. As I've told you -- as we told you, we are looking at some other projects to improve the company's product mix and production. We have been for some time looking at investments to enable us to produce more value-added products, to significant quantum change in value-added products at our plant in [indiscernible]. As you know we have about one-six of that production today is value-added products and the rest is standard grade [ph]. So that's something at which we are working. And then as we have talked about over the quarters, to the extent we were to see, we do agree that the balance sheet given the earnings power of the company with commodities, especially alumina had a normalized levels is strong. At that point of time, we would look hard at the return of capital to shareholders which we believe is the first call on cash against which we measure any investment.

Okay. Thank you for that. And then just follow-up as Hawesville, what type of energy-savings I guess you guys are seeing with the new technology there?

It's a great -- yes, that's a great question. So based on again divided into -- let me answer the question once the project is done, i.e., the phase -- we call it the Phase 1 technology improvements, which as I said are more modestly in the Phase 2. Phase 1 being a new cell lining design and Phase 2 -- I mean, Phase 1 [indiscernible] the new cell line design, Phase 2 being the new [indiscernible] material that hold the [indiscernible] to the cell design. So when you get through all that, it's going to be upwards of 10%, which is -- this is a significant improvement and it's one other things again going back to the tariffs that the administration has said from the beginning, it was their hope that this would accomplish would be not just bringing capacity back on for the sake of bringing it back on, but investing in these assets so that they can be more competitive over the long-term. So that's the modeled answer to your question and thus far in the test cells that's what we're seeing at the very least.

Okay. Thank you. Good luck.

Yes. Thank you very much.

Thank you. And now to line of Lucas Pipes from B. Riley. Please go ahead.

Hey, good afternoon everybody.

Hi.

Maybe to follow-up on that last point quick, just clarification when you said upwards of 10% improvement, is that on the electricity cost at Hawesville or did I miss something?

No, no, not the cost. The cost doesn’t change. We are -- we obviously are a buyer of power in the wholesale market. So we're talking about here is what in the industry is, [indiscernible] power efficiency. So the unit of input of electric power required to make a 1 kilogram or one metric ton of electricity, it's a standard measure in the primary aluminum industry.

Got it. So we should think about once those improvements are completed, you will consume 10% less electricity?

Correct.

Got it. Okay. Thank you for that.

No problem.

And then obviously there has been a tremendous amount of volatility in the alumina market. And I wondered if this is altered maybe in the short-term of your purchasing activity and hopefully of course this volatility and elevated alumina prices will all subside and return to more normalized prices in a reasonably short order, but anyway I would appreciate your perspective about managing that risk and that exposure. Thank you.

Thank you very much. So just before answering your question, I will [indiscernible] and agree with the statement at the end of your question. If we look at all the fundamentals, we look at industry balance of supply and demand, capacity coming on as we said. The implicit cost of refining bauxite into alumina et cetera, et cetera, et cetera. There has been no fundamental changes in the macroeconomics of the alumina market over the last year. All that's happened of course, is these major disruptions as you recall just winding up the way that machine way back in commodity I suppose six months ago. Alumina was trading as we expected it in the low to mid 300. I think, Pete, it came down to 330? And then of course the excursion in Brazil occurred and that was compounded some time later of course by the sanctions on Russo. And so nothing has changed since back in January from a fundamental basis. So we remain convinced the market will revert to where it belongs once these temporary things will settle. Now to answer your question, it's a tough one. Obviously, you need safety stock in a smelter. Standard industry practice is anywhere from, Shelley, 20 days to maybe 30 days of alumina on hand. In the US, frankly we’ve been carrying a little bit more than that to be mitigate. I'm sure you have read in just the general press the severe problems that the Army Corps of engineers has been having with log 32 [indiscernible] 52, 53 on the Ohio River. And so until that our replacement is fully up and functioning, scheduled I believes and hope for the third quarter of next year. 2019 you have to mitigate that risk because the one thing you can't do is to allow alumina smelter drive alumina that’s catastrophic. And so that's been push a little bit the other way. So in answer to your question is in the US at least for the Kentucky plants we just have the risk rewards trade is just wrong there to run those ducts down. At the other plants to your perceptive point, we're running a little bit linear than we would. They normally do from a units of volume standpoint. But as Shelly said, the real driver in that alumina balance that you see on the faces of balance sheet is the price. As we discussed many times, you see the impact of alumina pricing roll through our cost of goods sales and that's through a profitability on a lagged basis because of course of a [indiscernible] accounting and b, the fact that we paid for our alumina on a lagged month basis. But you see the impact on our cash and thus our balance sheet immediately as soon as we pay for the alumina. So it's a bit complex.

Got it. Got it. I know that's helpful.

Good.

Maybe one other one here …

Sure.

Just in terms of capital allocation, one option would be from a longer term perspective, so different from the question before, which focus more on the immediate term here. But from a longer term perspective, you could argue vertical integration might be a solution. Are you spending much time thinking about that or is it I really just happy kind of with where you’ve -- with -- where you sit in the value chain and you mentioned to earlier question, returning capital to shareholders is a priority. So how do you balance that those factors? I appreciate your perspective. Thank you.

Great question. So we would like to grow and it's our intent to grow and vertical integration for us, we don't call it that here, but people use [indiscernible] your term vertical integration to us is backwards looking, back into the supply chain, not for it. So bauxite and Alumina is something that the we look at a lot. And we believe that -- he wouldn't wish to be 100% covered. You have 100%, I use the term again that we don't use here, captive alumina production versus our smelting needs. But we do think there is a balance somewhere between where we are now and a 100 -- being a 100% covered. To answer you, perhaps, it's hard [indiscernible] as part of your question. To answer the other part we don’t see the utility at this point in time considering downstream investments. It's a very different [indiscernible] see in terms of the operations talent that you need and that's really how we believe we produce value here is through the -- squeezing these operations and the talent that we have in the operations. It's just so different. One is a manufacturing business downstream. One is a electrochemical process business, upstream, what we do, of course reduction. And so we just don’t see the value added that our company and our management team would bring and I guess my personal experience is that it's just -- I have seen a lot of companies and management teams destroy investor -- shareholders value by that kind of integration places that they had no business in going. And so, the standard on that, if you will, though the risk adjusted return, cost of capital, whatever fancy term one would -- wants to use, that we'd apply, does that kind of investment will be much, much higher than a investment in [indiscernible] each smelting and backwards, because ultimately we do have to compare it to returning cash to shareholders. That's the default as far as we are concerned.

It makes perfect sense to me, and I appreciate all that insight and best of luck.

Thank you so much for the questions.

Thank you. [Operator Instructions] And now to the line of David Gagliano from BMO Capital Markets. Please go ahead.

Hi. I just had a quick clarification. Shelly, you said $10 million to $15 million in the third quarter for the [indiscernible], right. Is that incremental to 2Q or is that total?

Yes, so that is incremental. So Q2 we have a $7 million of gross profit and fixed cost. In Q3 it will be additional $10 million to $15 million, and we will call that out as an adjusting [indiscernible] next quarter.

So it's a pretty simple. Let's take the midpoint just or take the high-end to do the math, just as a use of point. So [indiscernible] what we realized in "Q2", let's say it's 15 showing in Q3, that’s 23. So we would getting a check from the insurers for $16 million depending on the timing and perhaps later this year, swapping in for some of it early next year, might not all be in the same [indiscernible] quarter, right.

Yes.

And so we will adjust all that out for you. Obviously, when we received those insurance proceeds we will show you that "adjust that out" so you can see as if we hadn't received it.

Okay. Okay, that’s helpful. Thanks. And then I got on a little late, so I apologize if you covered this, but regarding the restart at Hawesville, and the tightness in the alumina market, is there any change in the commentary regarding the ability to procure alumina?

Now, that's a -- it's a good question. You didn't miss that, David. We didn't cover that. What I would say is we are looking at it closely just in terms of cash flow liquidity whatnot. I mean it's a -- it's the alumina market as we all know right now, it's not for the fainted heart, but we do have confidence within the reasonably foreseeable future, we will get it sorted out. Now the procurement of alumina hasn't been the issue. As I said -- I didn't say early in my comments, perhaps you missed is that -- that the market did reasonably quickly after the second Hawesville sales that was the [indiscernible] sanctions. The market did sort out ultimate supply lines reasonably quickly and reasonably well. So it's a price issue, a pure example.

Hello.

David?

Sorry, I thought I lost you there for a second. Then -- okay, so I think I have a bad -- sorry, one last question. You mentioned $75 million for Phase 2. Is that all capitalized or is any of that is the expense?

That’s -- most of it David will be capitalized at this point in time, at least the [indiscernible] portion of it -- the capital projects and the technology upgrade. The $40 million line we build, we’re studying the right accounting of that in the future. As you know we studied quite comprehensively the right treatment for the rebuild of the two lines that have been down. And the accounting treatment there is pretty straightforward. You sort of treated as if you’re building it for the first time just in lay person's terms. For the two lines that are currently producing, I mean, the cash flow pretty clear on the budget. So [indiscernible] cash is what principally matters, but as to whether that effort will be expensed or capitalized and I wouldn't want to conclude right now. That will take some additional work over the next couple of months.

Okay. That’s it for me. Thanks.

Thanks, David.

Thank you. And now to the line of John Tumazos from John Tumazos Independent Research. Please go ahead.

Thank you. How do you expect the Chinese push and restrictions to work this winter? They restarted all their steel output and more, but their alumina output appears to be about the same, maybe a little less this year.

Yes. Good question, John. We are watching that closely. You may have seen some of the data that we are getting more and more data, this is kind of we are in the belly of the beast right now, looking forward to that season. So maybe you’re seeing a lot of the same data as [indiscernible] some fresh information last week. People running around, counting those [indiscernible] smelters in refineries in this case. We think at this point in time, and it's really difficult to predict at this point in time. As you have seen the government has on all of these industries, not just ours and steel, all the so-called polluting industries I think it's the term as it translates into [indiscernible] English has really been clamping down. And so, we do see when you look at last year at least some consistency with last year in both smelting and refining. But John, I wouldn’t want to call it and I certainly wouldn’t want to behave in the marketplace consistent with a strong opinion, because it's just -- it's too volatile and too difficult to tell us this point of time. There is too much else sort of up in the air. I know that sounds like scooting [ph] around the question, perhaps it is. That's an honest answer.

We have the same problems in all the markets we study. Thank you.

Thank you, John.

All right. Thank you. And now to the line of Jeremy Kliewer from Deutsche Bank. Please go ahead.

Yes. I’ve a follow-up question here.

No problem.

On your prepared comments you stated, you guys are trying to plan from a [indiscernible] capacity at year-end kind of cut off your electrical supply. So can you just confirm that if it does go into 2019, would it be on that same 75% market rates or do you guys still have to work that out with Santee Cooper or how is that pot going forward?

The latter still have to work that out. The current contract expires on 31 December. And so that needs to worked out. Good question.

Okay. So, I guess, if your contract negotiations are ongoing, would you still give that 60 day heads up notice or how …?

Now you’re fast forwarding, let's see we are 1 August right now and you’re fast forwarding to 1 November. So you’re fast forwarding three months, a lots going to happen between now and then. I wouldn’t want to predict. It will be fair, again, this will sound like scooting the question, Jeremy. It will be fast in circumstances at the time if it feels like we’re close to something that makes sense, i.e. something consistent with where we've been. I certainly wouldn’t want to do that. There is a lot of implications in doing that the constituencies, the two constituencies I care the most about are our employees and our customers. And so those are the constituencies that you're thinking about when you make a decision like that. But I’m going to be reasonably optimistic that we will sort it out before the 1 November.

Great. Thank you.

Thanks, Jeremy.

Thank you. And now to the line of Lucas Pipes from B. Riley. Please go ahead.

Very good. Thanks for taking my follow-up question. I wanted to ask you a little bit about the tariff situation and it appears that there's some background negotiations just picking up headlines from the press in regards to the tariffs in our allies. I wondered if you have a perspective on that and if hypothetically Europe or Canada would be excluded, what do you think would be the impact to the Midwest premium?

Yes. We don’t -- I will give you direct answer on the second part of your question in just a sec. On the first part, we don’t know. We don’t know any more than anybody else does. We read the press, we talk to the same folks in Washington, everybody else talks -- it seems like those negotiations are ongoing. Obviously there were some -- it looks likes positive developments with the last -- just last week now and [indiscernible]. On the second part of your question, we believe there would be no impact, because we are quite confident, very confident as we said in the past that if there are any further additional country exceptions granted, that they will come with quarters that really bite. That there's a net impact of all that will be that there will be enough -- a significant amount of imports that are still subject to the quarters that will have no impact on the Midwest. And that’s what you’ve seen the administration from the highest levels of the White House and trade experts and responsible persons say very directly over and over. So that’s why we have such confidence there.

Got it. Great. Thank you very much.

Thank you very much.

Thank you. We have no one else in queue. Please continue.

We very much appreciate your time and interest and look forward to speaking with you in a couple of months if not before. Take care.