Good evening. Thank you for attending today's Century Aluminum Company Fourth Quarter 2021 Earnings Conference Call. My name is Hannah, and I will be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to our host, Peter Trpkovski with Century Aluminum. Please go ahead.

Thank you, Hannah. Good afternoon, everyone, and welcome to the conference call. I'm joined here today by Jesse Gary, 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 be happy to 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. And with that, I'll hand the call to Jesse.

Thanks, Pete, and thanks to everyone for joining. I'll start today by updating you on the status and impact of the cyber-attack we suffered last week before turning to some highlights from our 2021 performance and then reviewing the strong current market condition. Craig will then take you through the details of the fourth quarter and 2021 results, and then I'll finish with some outlook for 2022 and beyond. Early in the morning of February 16, we detected unusual server activity that was the beginning of a sophisticated encryption-based ransomware attack. We immediately began taking actions throughout our global systems to minimize the impact, including disconnecting servers, PCs and other information systems and implementing our internal response procedures. Despite our best efforts, a significant amount of our information systems were affected. Since the 16th, we have been focusing on containment and reestablishing the security of our information system. As we have been able to do so, we are gradually implementing recovery or replacement of defective information programs and systems with a focus on safety. While we're disappointed that we were not able to prevent the attack, our preparation procession event did allow us to largely shield our operations and financial systems from significant damage. On the financial side, we continue to expect that we will file our Form 10-K and audited financial statements on time. On the operations side, each of our locations have been able to continue production without significant disruption. Where necessary, we have been able to implement manual procedures or other workarounds to ensure that production continues, and we are able to continue to ship and invoice our customers. I'd like to thank everyone throughout the Century organization who has stepped up and worked tirelessly to get us through this event. While it is still too early…

Thanks, Jesse. Let's turn to Slide 6, and I'll take you through the results for the fourth quarter. On a consolidated basis, Q4 global shipments were up about 3% quarter-over-quarter, primarily driven by Mt. Holly as the rebuild starts to materialize in our financial results. Realized prices increased substantially versus prior quarter as a result of higher lagged LME prices and delivery premiums, driving a 13% increase in sequential net sales. Looking at operating results. Adjusted EBITDA was $82.2 million this quarter, which represents the highest quarterly result we've achieved in nearly 7 years. We had an adjusted net profit of $17.2 million or $0.17 per share. In Q4, the major adjusting items were $53.8 million for the unrealized impacts of Florida contracts and $9.9 million for share-based compensation. Liquidity at the end of the quarter was $100 million, comprised of a mix of cash and credit facilities. Additionally, we have expanded our liquidity by increasing our borrowing capacities under each of our domestic and Icelandic credit facilities. A significant portion of this increased liquidity became available in January of this year. Turning to Slide 7. We'll go through the $12 million fourth quarter sequential increase in adjusted EBITDA. As we forecast on our last call, the Q4 realized LME of $2,605 per tonne was up $230 per tonne versus prior quarter, while realized U.S. Midwest premiums of $720 per tonne were up $50 per tonne and European delivery premiums of $345 per tonne were up $100 per tonne over the same period. Both domestic Indy Hub and European Nord Pool energy prices increased steadily throughout the quarter. Indy Hub prices in Q4 averaged $55 per megawatt-hour or up about 30% versus Q3, while Nord Pool prices averaged $110 per megawatt-hour or up 35% versus prior quarter. Lagged alumina was…

Thanks, Craig. Let's turn to Page 11. The hard work by our employees and the investments that Century has made over the past several years has placed the company in excellent position to perform in the strong market environment that we see today. Aluminum's key role in energy transition and other strong demand fundamentals, paired with increasingly difficult global operating conditions that have significantly impacted supply, have caused aluminum prices to reach record high. In addition, the supply shortages in the U.S. and EU caused by years of overcapacity in China and elsewhere, have now led to record regional delivery premiums necessary to balance these short markets. Since 2015, our focus on internal growth and investment has resulted in Century rebuilding, restarting or adding nearly 400,000 tonnes of production in these regions. -- which now allows us to provide nearly 900,000 metric tons of this strategic metal into the 2 shortest markets in the world. Because our operating locations are inside of these deficit markets, we are able to provide nearly unrivaled supply chains to our customers and directly benefit from the strong Midwest premium and European Duty Paid premium. We continue to believe that we have a number of attractive organic growth opportunities to capitalize on this position. Our geographic location is also an advantage in the value-added marketplace, where our customers are increasingly focused on derisking the length and reliability of their supply chains. As you can see in the appendix, each of our smelter sells an increasing proportion of their metal with product premium, whether that be billet Sebree in Mt. Holly, High Purity in Multon and Hawesville or foundry alloy and Natur-Al at Grundartangi. We are working to expand these product lines, most recently with the groundbreaking of the billet casthouse at Grundartangi that will provide…

Thanks, Jesse. Hannah, if you could please kick off the Q&A session for us, please?

[Operator Instructions]. The first question is from the line of David Gagliano with BMO Capital Markets.

Just on Slide 10, the first quarter outlook. So the -- when I look at it versus kind of what we were coming up, there's 2 differences. First of all, the lagged alumina price. It's a pretty big impact, and it looks like the hedges have changed, which makes sense. But obviously, but when we look at the details, it looks like hedging for alumina now is significantly more weighted to spot-based API pricing. I think last year's split, it was 80%, 10%, 10%; 80% LME percent, 10% spot and 10% fixed. This year, it looks like it's something like 40%, 50%, 10%. So 50% is spot alumina base. I'm wondering, what was the thought process behind going so far towards spot exposure on the alumina price?

Yes. Thanks, David. And just to be clear, that's the mix -- the aluminum mix going forward for 2022. It wasn't necessarily the mix in Q4. But as I think I've talked about before, whenever we go to re-up our alumina contracts or renegotiate pricing for the coming year, we'll always look at the mix of pricing available. And so we will be quoting prices both on a fixed price, an API price and an LME percentage price. And those pricings will each -- within each factor, we'll have a range. And when we look at those pricing, we'll sort of look and see what's on offer and make what we think is the most advantageous decision to us based on those metrics. So just for instance, you may see API is pretty easy to understand. It's the market-based floating price. But in some quarters, some years, you may see LME price percentage pricing that looks attractive compared to your expectations of API. But in others, you may see LME's percentage pricing that does not seem attractive based on where that relationship of API to LME stands at the time. So that's just to give you a sense. There's no sort of broad-based call on where pricing is going, but we just look at what's on offer and compare it to the current relationship.

Okay. And just to clarify, it was 10% in 2021 that was API exposed and now it's 50%, correct? I think I have the numbers correct.

That's correct. Yes, that's right.

Okay. And then on the other part of that slide, just it's not a big deal, but the value-add premiums, it says it's a $15 million quarter-over-quarter uplift. I thought the full year value-add premium uplift was somewhere around $70 million to $75 million. Does that mean it's going to sort of tick up a little bit as we go through the course of the year in terms of that sensitivity.

Yes. Yes, simply yes. There's some timing issues around turnover for the year as well as some volume issues with Mt. Holly billet coming online that will sort of impact that. But you're right, we still expect that level on a full year basis.

Next question is from the line of Robert Kirk with Wolfe Research.

This is Timna with Wolfe Research. I wanted to dig in a little bit more on thinking about the free cash flow discussion. One of the things that catch my eyes is certainly the rising alumina price even in the last couple of weeks and the sustained high aluminum price. It seems to me like that could be absorbing a decent amount of working capital going forward. So I just wanted to ask for a little guidance on how you think about that in your equation.

Yes. And you did see a little bit of a working capital build at quarter-end, Timna, as some of those higher-price alumina roll through. And so yes, I think that's right. You're right on. We will now sort of expect that to come down a little bit as we start to consume some of that. And then as -- because of our lag as it cycles back through, you'll start to see that rising price again roll through working capital as we move forward. But you're right to sort of match it to the LME price because that relationship between API and LME continues to be at very attractive levels compared to the historical relationship.

Okay. Helpful. I wanted to -- given the bullish commentary in terms of the shortages, I wanted to revisit the opportunity to ramp up Hawesville that I know you've talked about in the past. Can you just remind us about the cost and timing and any latest thinking there? I know you talked about a balanced approach to using free cash flow, but just wanted to get a little more color on how you're thinking about that further.

Yes, sure thing. Yes. And just to be clear, there's opportunities at both Mt. Holly and Hawesville to bring volume online. At Mt. Holly, we need to negotiate additional energy from our local supplier. At Hawesville, we have the ability to take the energy from the market given our market-based power contracts there. And so the question will just come -- we've just recently got back up to full production. We want to make sure that we can sustainably stay there. And then we'll look and see when it makes sense to restart that last line. As I said before, one thing to keep in mind is that the last line is usually actually a little bit more expensive than the previous line. And usually, it will take a little bit longer to restart. The reason for that is that you're restarting the other line, you tend to sort of borrow from the curtailed line. And so there are some items in sort of long lead time items that we'll need to order, which will slow down that restart once we were to make that decision to restart it. So I guess, Timna, just to wrap it up, I think you should expect it would take a little bit longer than the other line and also be a little bit more expensive from a capital perspective than the other line, which you saw us do over the past few years.

And again, I know you mentioned balanced approach. But if you think about priorities, given where the market is in that opportunity versus returning cash to shareholders and any M&A, is it a top priority? Is it something that you're looking closely at given the very strong market dynamics?

Yes. We do think we have really attractive organic growth opportunities and it can both be that volume. And it could also be value-added product expansion. So there are some good abilities to expand in our cash test with some relatively low capital numbers that you get some really pretty good paybacks on. So we do think we've got a lot of opportunities. But again, just looking at sort of the strength of the free cash flow that you would see at spot pricing, we think we'll have a lot of opportunity to use that in different ways.

Okay. And then last one for me. In terms of the operational situation you've highlighted in the past with some disruptions from COVID-related absenteeism, et cetera, just want to see if that was fully behind or if there are any lingering impacts into the first quarter.

Yes. So we saw that a little bit at year-end, and we thought it continue a little bit into January, but we're now mostly through the COVID side of things. I guess, presupposing there's not another wave. And like I said, so for instance, that restart line at Mt. Holly is now fully up and running. So I think we -- most of that is behind us. Supply chain probably a little bit higher risk than COVID, but we're mostly there in terms -- at this point in terms of bringing that volume up. And so you'll see it sort of build up during the quarter. But as we entered into Q2, we should sort of be reaching those sort of annual run rate levels, unless there's some sort of significant new COVID disruption.

The next question is from the line of Lucas Pipes with B. Riley.

I wanted to ask about your capital allocation, Slide 12. And back of the envelope, it would seem to me like you would achieve your targets on liquidity and net debt sometime in Q2. Would it be reasonable to expect capital returns then? Or given your prior comments on growth opportunities, would you say maybe later this year given those conflicting -- potentially conflicting priorities?

Yes, Lucas. Thanks. Yes, I mean, listen, obviously, the prices have been moving around a little bit. And so when exactly we'll meet those levels, as I laid it out, we're sort of looking in the back half rather than Q2. So overall, I think that that's a more realistic time line for when we might get there, but we'll continue to keep everyone updated as we get closer.

And in terms of the total size of -- you mentioned you have a couple of different project opportunities. Is there a way to frame up the size of those, either on a total capital basis, NPV? Any metrics you could share on that, that would be very much appreciated.

Yes. I mean, for the restarted lines, you can look back at what we've told you in the past about the previously restarted lines. And again, this time around will probably be a little bit higher capital number than that. For the other projects, they'd be smaller. The other organic projects, those will be smaller than the restarted line numbers. So we're talking about adding incremental bill of capacity or adding incremental remelt secondary recycling capacity. Those types of projects, which will be more incremental than, say, restarting the full line, just to give you sence, maybe.

Understood. And I want to make clear, I understand the restart opportunity properly. Does that include Mt. Holly too? Or given the current power contract, that's not really on the table yet?

Yes. It includes Mt. Holly, but just to be clear, we would need to be able to negotiate for additional volume -- energy volume from our energy supplier in South Carolina. So that's something that we're working on and interested in, but we're not there yet.

Is there a sense on the timing on those negotiations? Is this a multiyear process? Or could we see something over the next 3 months, 6 months?

Yes, it's difficult to say because it's obviously a bilateral discussion. So it's difficult to really give you a clear time line. Obviously, this winter hasn't been the clearest winter from an energy perspective and sourcing perspective. So it's not something that I would see in the really near term, but something -- it's just difficult to say whether something you can see later this year or years following.

The next question is from the line of John Tumazos with John Tumazos Very Independent Research.

Congratulations on the profits.

Thanks, John.

Is the interpretation on the hedge gain that the electricity gains were larger than a little bit lost on the aluminum hedges?

Yes, John, this is Craig. Yes, pretty much, yes. I mean the easiest way to think about it is the forward stack for Midwest premium and for LME did integrate any further quarter-over-quarter. The gain that you're seeing is really from the Nord Pool hedge. And if you look at the appendix slide on Page 18, you get a sense of those values, and I think that would probably make sense.

With regard to the 4 million tonne deficit for 2022, you estimate in North America and also 4 million tonnes in Europe. Monday's IAI output was down 4.5% globally. And February comparison is tougher. That was the record output in China. It might be down 5.5%. So it would appear as though output is going to be down this year. And at the moment, it feels like the world economy hasn't completely stopped. It's still growing. So would your 8 million tonne deficit, if we were to take the whole world, be bigger than 8 million tonnes? Is it something like a 4% demand gain and 4% supply decline sort of scenario?

I don't think it would be bigger, right? The U.S. and Europe are the 2 shortest markets. So as you added other markets, you would see a smaller deficit. So again, we sort of spoke about 1.5 million to 2 million tonnes deficit in total global. But I think you're right on in focusing on the U.S. and Europe. And I agree with you that there are certainly supply side challenges throughout the globe in terms of production coming on in 2022. And I think what you've seen on the energy side, especially overnight, really starts to show that it's going to be very difficult for some of that curtailed European production to come back on this year. And certainly, there's a risk of more European production going off this year when you look at forward German and French, U.K. power prices north of $200 per megawatt. So it's a very difficult time on the supply side. And I think it presents a lot of advantages for Century given our position within these markets and our secure supply lines to our customers.

Your 40 days' supply inventory is a great number. I guess that suggests 9 million or 10 million tonnes of inventory if we include scrap as part of the market. I make up some inventory numbers, too. But just between friends, I'm not sure all the inventory exists. Clearly, there's the exchange inventories that are a little over 1 million tonnes. When you do your days' supply inventory number, how do you convince yourself that there is 8 million or 9 million tonnes of inventory greater than what's visible on the exchanges? You guys are smarter than me. I do the same thing, but I don't really believe myself every minute.

It certainly gets tougher to count when we start to get shorter, doesn't it, John? And so we do our best, and we look at a variety of market sources, but I would agree with you. As we get shorter, it becomes -- your margin of error becomes bigger, sort of law of small numbers here. When you're off a little bit with small numbers, it has a bigger effect. So we do our best. That's where we see it right now. But I take your point that it does get harder to count as we get shorter.

I make some estimates that there's Chinese hidden stocks, and I make some estimates that -- of what the SRB might hold separately. And then I used 2.5 million tonnes that was the last producer inventory number the IAI published 10 years ago before they discontinued the series. So that's how I make up my inventory. I'm not sure that's there. I'm just sharing with you for your entertainment. I was going to congratulate you on raising the dividend since aluminum is around $1.56 on the LME, and I think spot alumina is like 11% or 12% or just bumping along 17-year lows as a ratio. It would seem like it's sort of the best business climate we all could dream for. And I know you're a little over 100 million tonne where it's too high on your debt target. Do you think you feel good enough about life to institute a dividend even sooner given how spectacular the business climate is?

Yes, John. I think, as we said, when we look at the cycles and having been through a pretty tough decade of cycles, we want to be sure that we're going to be able to make it through without having to take actions that are maybe detrimental to our long-term interest, whether curtailing capacity or doing other -- taking other actions to preserve cash flow or margins. So we see it as prudent to sort of get to those target levels. And when we look forward, we're pretty bullish on the long-term future of aluminum here. And as you and I just discussed, the supply side certainly looks challenged. And when you look to all of the various demand-side drivers, these are pretty core drivers to energy transition and greening -- overall world CO2 output. So we're pretty confident in the long term, but we want to be sure that we're in a good spot to make it through a cycle if one were to pop up on us.

If I could just bother you with one last one, it's great that the LME hedges are down to 118,000 tonnes and the Midwest premium hedges to 150,000 tonnes. And I guess the LME hedges sort of averaged about $0.50 under today's spot, although their future prices with a different term. And the Midwest premium looks like it's around $0.20 under. I own 14,500 of your shares, and I wonder if your share price would go up 10%, 30% or 50% if you came out with a press release saying we're not going to do any more hedging and maybe we're even going to close out a fraction of the existing hedges. Maybe my bet would be you'd go up 30% if you did that press release. Why not just tell the market you're not going to hedge anymore because you're doing well and the finances to get better?

Yes, John, I think we've been pretty clear that going forward we plan to give pricing exposure to our shareholders. And I think when you compare those hedge numbers quarter-over-quarter for the last several quarters, I think you'll see us sticking to that plan. The one piece on the hedge side that you've seen us act has been on the Nord Pool side. When we saw an opportunity, given the risks in Europe, we did put some more Nord Pool hedges on. But I think we've been pretty true to that. And I think we've been pretty clear that our sort of goal going forward is to provide that exposure to our shareholders.

And we love the electricity hedges because we think that in the green world, electricity is a very scarce thing just like aluminum. It's what makes aluminum scarce.

Yes, I agree. And we talked about the supply side challenges. And certainly, those are energy driven throughout the world. So thanks, John.

There are no additional questions appearing at this time. So I will pass the conference over to Jesse Gary for closing remarks.

Yes. I'd just like to thank everyone for sticking with us through the call and look forward to talking to you again after Q1. Thanks.

That concludes the Century Aluminum Company Fourth Quarter 2021 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.