Ladies and gentlemen, thank you for standing by. And welcome to the Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode, and later you will have an opportunity to ask question. Instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. And I would now like to turn the conference over to our host, Peter Trpkovski. Please go ahead.

Thank you, Carolyn. 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, our Executive Vice President and Chief Financial Officer; and Shelly Harrison, our 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 website at www.centuryaluminum.com. We use our website as a means of disclosing material information about the company and for complying with Regulation FD. Turning to slide 1, 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 a lot, Pete, and thanks to all of you for joining us this afternoon. If we could turn to page 3 please. We'll give you a rundown over the last couple of months. First, we have begun to see some hopeful signs in the global macroeconomic conditions towards the end of the year. This is consistent with what you're hearing from a lot of other people, including the Fed at the other day obviously. This included an improved manufacturing activity in the U.S. and in Europe, continued strength in most other sectors and indicators in the U.S. economy, and even some optimistic signs coming out of China. There was a developing consensus that perhaps we had reached the bottom of this mini cycle, a few quarters ago. All of this, of course, was going to be supported by the U.S.-Sino Phase one trade agreement reached towards the end of the year. This thesis was mirrored in our specific markets, where we saw demand beginning to firm inventory stabilizing, meetings and signs that they could begin to come off soon a healthy contango in the forwards, product premiums that look to be firming, and this was all manifest in a rising commodity price with the consensus that it had a good deal and feel further to go. Obviously, the development of the coronavirus threw a bit of spanner in the works here. At this point, it's unclear what the near-term picture will look like, but we think it's reasonable to assume that the economic impact will be short-lived and the bounce back will be rapid. This of course, would be consistent with past similar events. Going back to the end of the year, before the virus outbreak, the environment otherwise was looking quite attractive for us. First and foremost, raw…

Thanks, Mike. If we move on to slide five please, I'll take you through a quick state of the global aluminum market. The cash LME price averaged $1,754 per ton in the fourth quarter, which is flat from Q3. Prior to the development of the coronavirus, aluminum prices were trending north of $1,800 per ton to start this year and averaged $1,772 per ton for the month of January. In the fourth quarter regional premiums averaged approximately $0.16 per pound in the U.S., which was down 10% quarter-over-quarter and $136 per ton in Europe, also down 10% from prior quarter. Spot premiums are around $0.14 per pound in the U.S. and $150 per ton in Europe. In the fourth quarter, global aluminum demand was flat, as compared to the year-ago quarter. We saw a demand contraction in the world excluding China at about 4% and about 2% demand growth in China. Global production growth was down 1% in the fourth quarter year-over-year. We saw about 2% production increases in the world excluding China, while China production fell 3% year-over-year. As a result, for the fourth quarter of 2019 the global aluminum market recorded a balanced supply-demand market. Looking forward, for the full year 2020, industry experts expect to see a global supply surplus of up to 1 million tons or about only 1% of the total primary aluminum market. The sudden development of this virus has weighed heavily on the demand outlook in China, but hasn't yet translated to the supply side growth year-over-year. Thus the entire supply surplus is driven by the current near-term view on the impact of the virus outbreak. Despite the outlook industry stock levels have declined to levels we haven't seen in more than a decade. Inventory days of primary aluminum consumption have fallen to nearly 60 days, which has historically been representative of the tight market. And with that, I'll turn the call back to Mike.

Okay, Pete. Thanks. If we could just turn to slide six, the next slide. I'll give you a quick rundown of the operations pipeline. I talked about much of this already, so I'll keep it relatively brief. Again, most important, safety really was fantastic across the plants. Just to give you a little bit of detail here. Hawesville had its best performance in 10 years which we think is extraordinarily notable, given the highly complex restart activity going on in the plant during the entire year. Mt. Holly had only one recordable incident through the year. We're really proud of the teams at all of the plants. They produce excellent results and more importantly they've maintained programs in place to ensure we continue to improve in this most important area. Moving on production, as you would expect is stable at all the plants. You see the growth at Hawesville, there is expected from the restart of the curtailed cells. Production metrics flat and stable as you want them. And lastly, as I said, we're really proud of the job that the teams have done on cost control here. Just to give you a little bit more detail. At Hawesville, there a good portion of that is the volume impact. Obviously, you've got improved fixed cost absorption as you bring on the tons. We also are seeing a decline in the restart related costs themselves. At Sebree, you've seen continued excellent control of labor and maintenance costs. At Mt. Holly, as we told you on the last call there were some deferred maintenance activity that had to get done. So you see that there and at Grundartangi, controllable costs remain well under control, as you see. And with that, I'll now give you to Craig.

Thanks Mike. Let's turn to slide seven and I'll take you through the high-level results for the fourth quarter. On a consolidated basis, global shipments were up 2% quarter-over-quarter. This increase was largely driven by our ongoing restart activities at Hawesville. Realized prices were down 3%, primarily as a result of lower lagged LME prices. Looking at operating results, adjusted EBITDA was $13 million this quarter and we had an adjusted net loss of $9 million or $0.09 per share. In Q4, the primary adjusting item was $3.3 million for the net realizable value of inventory. Additionally, we had a $1.7 million adjustment related to insurance proceeds for the historical Sebree equipment failure. As of Q4, our total recovery has been $18.4 million and as we've mentioned previously, we will continue to call out the associated P&L impacts and cash receipts as they occur. Our liquidity remains strong with over $200 million of funds available via a mix of cash on hand and credit facilities. Availability under our revolving credit facilities remains robust at $162 million. All revolving facilities are currently undrawn. Okay. Let's go to slide 8 and I can walk you through our quarter-to-quarter bridge of adjusted EBITDA. The $26 million increase versus Q3 adjusted EBITDA was largely driven by lower alumina prices, partially offset by lower LME at U.S. Midwest premiums as we forecast on our last call. The Q4 realized alumina price of $325 per ton was down $65 per ton from Q3 levels, while realized LME prices and Midwest premiums were down $30 per ton and $25 per ton respectively. Looking ahead to Q1 specifically the lagged LME of 1750 1-7-5-0 per ton is expected to be about flat with Q4 realized prices. Lagged Midwest premiums are down about $65 per ton from Q4 levels,…

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

Hi, great. Thank you for taking my question. So I've been doing a little toggling between this year’s year-ahead cost guidance and last year's year-ahead smelter cost guidance. And I haven't quite finished yet, but I'm just going to walk through some quick ones and ask you a quick question. It looks like roughly, you've got a sort of a weighted average smelter cost improvement of about, I don't know close to $400 a ton year-over-year based on what was guided to last year. I don't know what the actual number was. Let's say it's accurate. And it looks like based on the alumina price assumptions maybe $200 million of that is alumina? Again that's a question. Can you just kind of walk me through the numbers? And also if those numbers are right, what else is improving year-over-year? And if you could quantify that, that would be great? Thanks.

Yes, sure David. I'll actually build it up for you. And we're going to do this for everyone on the phone. Why don't we -- we'll do it on a net basis David is that work?

Yes.

Okay. So if we take the midpoint year-over-year in the U.S., 2019 would have been $1700 this year $1665. So a small decrease 35 -- it'd be $35 year-over-year about $55 down in power, about $95 down between alumina and carbon, $25 down in LME. Those are for the LME-linked portions of our cost, right? That will be predominantly alumina. And then on the flip side here comes the bad news. MWP or Midwest Premium and are value-added is $140 going in the upward direction. So if you add those up you get to $35 down from the midpoint of net cash cost in the U.S. what we told you last year and what we told you this year. Did you follow that?

Yes I do.

Okay. How about I do for Iceland?

Yes sure.

All right. Great. So last year in 2019 we guided to the midpoint of $1,740. This year we're guiding to a midpoint of $1,505. The delta there between alumina and carbon is about $170 per ton down about $50 per ton down in LME and then the net of European delivery premium and value-added in Europe is almost zero. So that will get you to about $250 year-over-year increase favorable.

David, its Mike. As you heard Craig say the real difference between – maybe this is just obvious but I'll say, nonetheless between Iceland and the U.S. is that in the U.S. obviously you have the degradation in the Midwest premium and obviously you're well aware of the degradation in value-added product premiums globally, principally billet what we're talking about here. It's just the fact that we don't have a lot of that in Iceland, right? It's just about 1/5 of the production is the foundry alloy. The margins on that – the premiums on that have indeed come down but the impact in the U.S. is obviously far greater.

Okay, that’s helpful. That’s – I think that’s what I was looking for. Thank you very much. Appreciate it.

Thanks, David.

Thanks.

Our next question comes from the line of Lucas Pipes from B. Riley FBR. Please go ahead.

Hey, good afternoon. Thanks very much for taking my question. So good job on the Natur-Al initiatives. I think this has been overdue in the industry. And I think we've all been looking for that. I wanted to ask to what extent that initiative could also be a blueprint for your U.S. business? And then on the European side, there's been talk of a border carbon adjustment. What could that mean for your Icelandic operations would appreciate your thoughts on that? Thank you.

Yes great questions both. And so the answer on the U.S. and for the company as a whole is unqualified absolutely and please watch this space. We're not ready to talk about anything now. But we – you can assume there's a lot of effort focused on it. We're quite serious about this. We think it's the right thing for the company to do on a whole number of fronts. In addition to ultimately being something that for which the shareholders will be rewarded. As I said there's no – and as you can see there's no premium per se in the market today for low CO2 metal or so called green metal termed a lot of course the latter. But there could be in the future but this puts us in a better position with our customers in terms of helping them with their objectives with their customers. And it's just – it's the right thing to do in terms of all the stakeholders that we answer to. So please watch this space but the answer is yes. On the border yes, we've done a lot of thinking about that along with European aluminum which is the industry group. It's hard to tell. At this point in time I would say that the impact that we're expecting if anything were to occur is neutral. But it's possible there could be something out there. But at this point in time I think we – as we look at sort of the aftermath of this product introduction and the efforts that we're going to be undertaking we're just assuming it's a wash.

Got you. Okay. That's very helpful. Thanks for that. And best of luck on the Natur-Al initiative and pushing that forward. I think that's really important for the industry.

Thank you so much.

Yes. No it's great to see. I wanted to quickly follow-up on the more short-term market dynamics. It seems like with this virus outbreak unfortunately lots of puts and takes plus and minuses, specifically around China. And I wondered if you could maybe walk us through the market how you're seeing it evolving today? Would very much appreciate your thoughts on that matter. Thank you.

Yes sure. We don't have anything proprietary here but I'll state the obvious. It's the short-term is not a good picture for primary aluminum. There's no way to sugarcoat it. There's no direct impact for us. But part of the reason we believe you're seeing the commodity price where it is at the depressed level. It is in – is melodramatic term free fall since the beginning of the year is the sort of unique dynamics of primary aluminum smelting as you know. So smelters have to run. They don't stop. They run and run and run and run. And even if the – all the downstream activity or much of it in a locality where smelter is based has shut or partially shut, the smelter continues to run. And so the metal is piling up here a little bit. And we believe that that it will get worked through as these facilities the customer – their customers the downstream facilities are coming back on and you're starting to read now every day about more regions, provinces were re-leasing their downstream or partially re-leasing their manufacturing industries to restart. And so look, if there's a couple of weeks here of prime that it wasn't been totally, totally pilot there was still some uses for it but it's going to take whether it's a month or two to work through that. Again that's nothing proprietary Lucas that you haven't already heard. But that's what we're seeing on the ground, when we talk to people that we know who are actually on the ground.

Very much appreciate the color there. Maybe I can sneak one last one in there.

Sure. No problem.

So on the – again this is more higher levels in this case a strategy question. It appears that with some of the commodity indexes under pressure some assets are potentially shaking moves among your peers. Is that something you're looking at? Is there interest to maybe look outside your current portfolio? I would appreciate your thoughts on that. Thank you.

Sure, sure. Thanks for the question. Obviously, we never comment on specific situations. You didn't ask about one. But we always – we look at – it's our job. We look at everything, and especially assets that, if you look at the kind of things that we bought historically, I think they've been assets that others didn't wish to own, and we want to take them on and make them better. We structure them wholeheartedly, that was true. Sebree, where we only took it on because we thought we didn't pay a lot for it. We paid a little less than the working capital value, but we thought that it was a good bet that we could with a lot of work restructure its power contract, and we ended up doing that. We brought the cost structure down significantly. I mean, the power cost is down not by 50% but 40% from where we bought it to where it is now maybe even 50% on the day ahead prices now. So we look at – happily at assets that sometimes other people just don't wish to own for whatever reason. And so you can assume that, if there's something that is for sale out there potentially for sale, we're certainly going to roll up our sleeves and have a look at it.

I appreciate all the very much and continue. Best of luck. Thank you.

Thank you for your questions.

And our next question comes from Paretosh Misra from Berenberg. Please go ahead.

Thank you. Hey, guys.

Hi, Paretosh.

Hi. A question on your Hawesville project that is building the last remaining tighter line. Is there any deadline as to when you have to decide it on that project?

None, whatsoever other than our own internal sort of enthusiasm to get the plant back to full production where it belongs and you can see just – number one the plant from a technical standpoint runs best when all five lines, and from a process standpoint. But just we'll have a further leg down in the cost structure and the cash cost when we bring those tons back on, because of course most of the fixed cost is already there. And so – but the answer to your question strictly, there's absolutely no deadline of any sort other than our desire to get it done.

Got it. And then just looking at your alumina pricing formulas for next year or for this year did you consider buying any alumina at any – some sort of fixed price contract? And if they were available could you maybe talk about that?

It's very – we looked hard at this last year. It's a great question. And especially, when the market was constrained over the 2018 and the first half of 2019, it's hard to do. People are willing to – some people are willing to entertain discussions about the fixed price, but it's usually at a fixed price that guarantees and sort of a lot of headroom above the market. Any fixed price – you can assume that any fixed price that we did rather than take the risk we'd likely synthetically convert it into a percentage LME contract which is easy to do just by selling a metal position, again a pro rata metal position against, it very easy to do. And so, if we did that, or if we had done that you would see – where you'd see it is in that 50% bucket that Craig described of percentage LME reference. With that, bucket when he describes it is either direct percentage LME contracts you're signing with the supplier or to your very good question, very good question a little bit of fixed price material that we've synthetically converted into percentage LME.

I see. I see. Thanks. And maybe last a quick one. You – I think you described some hedges on the power side. Are you incorporating that when you're calculating this breakeven LME price, or I just want to make sure I understand the accounting perfectly?

Yeah. That's – we're glad you asked that because, it's – Craig go ahead.

Yeah. So the – this is all – and anything hedge-wise, just before we're talking about hedge is completely immaterial as the way that we look forward in our stack today. So, just to be clear on that but they are all outside of EBITDA. So the answer to that would be no.

The cash costs are independent of the hedges. So what we wanted to do just to make it simple and trackable by you guys is we wanted to give you all the estimates, all the cash costs, all the breakevens, all of that consistent with the way we will report in GAAP. So that's exactly the way, it will come again. We didn't want people to have to convert it from one to the other. So it's exactly, the way our results will be reported every quarter is that the actual market prices run through, the cost of sales and that's EBITDA and then you know where the line is on our P&L and our income statement, where they in essence the mark-to-market occurs of that position every quarter. And as Craig said, -- I said, first, if you actually netted all that down. It's a slight asset for us at this point i.e. a positive mark-to-market position. And as Craig said, it's just -- you can never see, market volatility. But even as we -- as you would expect in our risk mitigation and risk management procedures, as you look at sort of a couple of standard deviations of changes in any of these positions. It's unlikely that this would ever be something that would be material. But as Craig said, if it gets close to that point, we'll give you -- we'll certainly give you a heads up on it.

Okay, guys thank you.

[Operator Instructions] We do have a question from the line of John Tumazos from John Tumazos Very Independent Research. Please go ahead.

Thank you. Mike, you expressed some optimism concerning the conclusion of the virus which I share. In the U.S. the virus effects are small. Last year, beverage can demand rose 3.5%. Housing starts rose 3.2%. Auto sales, I think, fell 1.6%...

Yes.

…but the mix might have been heavier on aluminum,…

Yeah.

…with big cars. How should we understand the 7% drop in Aluminum Association North American orders last year? Was it just an inventory reversal, after stocking with the tariffs in 2018? …

Yeah. I think ….

…The orders should have been up?

John, I think, that was -- number one -- thanks for the question. Number one, I think we think it was some of that as people cleaning out inventories. And just taking a less robust confident whatever word you want to use, sort of position about their balance sheet and inventory management, sort of in the uncertainty that existed for a lot of last year. So that was a good portion of it. Look, in terms of the fundamentals to what you're referring, like the real flow good stuff you use some good examples obviously, beverage containers and such. That business we see is continuing to blip along. And you -- I'm sure you've read the Fed not the Fed always gets it right. But the Fed's comments the other day, sort of rang true with the way we were seeing the data flow through towards the end of the year which we -- looked like things were getting sort of stable with a positive bias. And then, this thing hits. So, it's hard to tell. But -- and it's easy to say, look, we'll get through this bubble. And then, we'll be back on an upward to the right slope. But we really do believe putting aside any potential that this thing can get much, much, much, much worse. We really do think that, this thing should generally revert and it should be. Now to your point, I'm sorry for the wind-up. But the pitch is -- to your point is to see the orders more closely resemble the growth in those important end-markets that you referred to John.

Thank you.

Thanks.

There are no further questions in the question queue.

Okay. And as usual, we really -- we truly appreciate your interest. And we look forward to talking with you. And I guess, it's only two months now. Everybody take care.

And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T conferencing services. You may now disconnect.