Q3 2022 Algoma Steel Group Inc Earnings Call
[music].
Greetings and welcome to the Algoma Steel third quarter 2022 earnings call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Michael Morocco, Treasurer, and Investor Relations Officer, you may begin.
Good morning, everyone and welcome to Algoma Steel Group, Inc. Third quarter fiscal 2022 earnings conference call.
Leading today's call are Michael Mcquade, our Chief Executive Officer, and Roger Milwaukee, Our Chief Financial Officer.
As a reminder, this call is being recorded and will be made available for replay later today in the investors section of our Goldman steals corporate web site at Www Dot Algoma dotcom.
I would like to remind you that comments made on today's call may contain forward looking statements within the meaning of applicable securities laws, which involve assumptions and inherent risks and uncertainties.
Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IRS, which differs from U S. GAAP and our discussion today includes references to certain non <unk> financial measures.
Last evening, we posted an earnings presentation to accompany today's prepared remarks.
The slides for today's call can be found in the investors section of our corporate website.
With that in mind I would ask everyone on today's call to read the legal disclaimer on slide two of the accompanying earnings presentation also referred to the risks and assumptions outlined in Algoma Steel's third quarter fiscal 2022 management discussion and analysis.
Please note that our financial statements are prepared using the U S dollar as their functional currency and the Canadian dollar is a presentation correctly.
Fiscal year runs from April to March 31, and our financial statements have been prepared for the three and nine months ended December 31 2021.
Please note all amounts referred to on today's call are in Canadian dollars unless otherwise noted.
Following our prepared remarks, we will conduct a question and answer session.
I will now turn the call over to our Chief Executive Officer, Mike Mclamb, Mike.
Thank you Mike.
Good morning, welcome and thank you for joining up Goldman's earnings call for our third fiscal quarter ended December 31 2021.
Our second quarterly earnings call since returning to public markets.
I will start my comments as always by addressing what truly matters most to us.
Safety of our employees.
And Oklahoma Steel, we believe in safety without compromise.
Our continued focus has resulted in substantial improvement over the last decade, and our lost time injury frequency rate.
I'm proud to say the calendar year 2021 was one of our safest years ever.
Safety performance is our top priority at Algoma and I commend our entire team for their collective success and continued diligence as we relentlessly pursue our goal of achieving zero workplace injuries.
Yeah.
Before getting into the specifics of our strong results for the quarter I'd like to spend a few minutes discussing the remarkable transformation underway, how it positions algoma in todays North American steel industry, and how it will shape our path forward.
We are laser focused on creating long term value for our shareholders through a combination of prudent financial management transfer.
Transformative capital investment.
And safe and efficient operations of our facilities.
Steel markets are cyclical and pricing can be highly volatile as evidenced by what we've seen over the last several quarters.
Prudent financial management means focusing on cash that we have.
Not cash that we expect to realize at some point in the future.
Too much work has gone into putting us in the enviable balance sheet position we are in today.
With the cash we had on hand at the quarter end and the $420 million of financing commitments, we obtained from the Canadian government.
Construction of our transformative AAF project is underway.
Our primary focus is preserving our ability to bring the facility into production.
On time and on budget.
Our facility, which is designed to modernize and expand our steelmaking capacity, while lowering our carbon intensity and enhancing long term stakeholder value.
Let me give you a quick reminder of why we are so excited about the <unk> project.
The project entails dual furnaces that are designed for a combined annual raw steel production throughput of $3 7 million tonnes matching our downstream, finishing capacity, while lowering our carbon emissions by approximately 70% when fully operational.
This level of C O two reduction.
[noise] would represent 11% of the federal and 100% of the provincial 2030 targets for industrial emitters as set forth under the Paris accord.
We expect the two apps to come online in 2024, following a 30 month construction phase.
This will be followed by a transition away from blast furnace steel production has increased power supply becomes available from the grid with the support of the provincial government.
The project will fundamentally transform who we are and how we operate.
Positioning the company as a next generation steelmaker focused on sustainability and poised to be successful across all phases of the steel market cycle.
Construction of the facility and bring it online over the next 30 months is expected to be achieved without disrupting production in our current facilities as we continue to safely operate in and benefit from today's favorable steel pricing environment.
Later in the presentation, we will dive deeper into our capital allocation framework and how we see it evolving over time.
But before that I will pass it over to Roger to go over the quarter's record financial results.
Thanks, Mike.
Good morning, and thank you for joining the call.
Our fiscal third quarter results once again displayed impressive cash generating potential of Algoma.
I'll remind you again that all numbers that are expressed in Canadian dollars unless otherwise noted.
Our quarterly results were highlighted by net income of 123 million.
<unk> $457 million, which reflect debt and adjusted EBITDA margin of 42%.
And cash generated from operating activities of $318 million that was achieved despite building traditional seasonal inventories of raw materials.
We finished the quarter with $588 million of cash and full availability under our revolving credit facility.
Furthermore, we've transformed our balance sheet during the quarter, that's fully reaping all 358 million U S dollars of outstanding senior secured long term debt.
As a result, the only remaining long term debt on our balance sheet is in the form of Goldman clones linked to workout group projects.
Diving into the key drivers of outperformance.
We shipped 553000 net tons in the quarter.
<unk>, 6% sequentially, but up 1% as compared to the prior year quarter.
As we previously announced our shipments were lower than we had expected due to various issues outside of our operations, including increased holiday shutdown that customers.
Logistical supply chain constraints.
And COVID-19 related challenges.
This resulted in an increase in steel inventory levels in the quarter that we had expected to ship in the first half of calendar 'twenty two.
And at their previously agreed upon prices.
Net sales realization average 827 per ton up 15% sequentially and up 161% versus the prior to beat it.
The increase reflects the positive impact of our contract order book as higher log prices flow through of revenue.
This resulted in steel revenue of 1.01 billion in the quarter.
<unk>, 8% sequentially.
163% versus the same quarter of last year.
On the cost side cost of goods sold average $9 $46 per ton.
In the quarter, an increase of approximately 10% sequentially and 46% over the prior year quarter.
This main driver of the increase includes commodity price increases for selected raw material prices.
Increased employee based profit sharing as a result of that historical performance and higher SG&A costs related to our public listing.
Yeah.
All in all the third fiscal quarter marked our second consecutive record levels of adjusted EBITDA.
A historical milestone for Docomo.
It was a testament to the dedication and hard work of the entire <unk> team, what we were able to accomplish in Stein.
Moving from near breakeven adjusted EBITDA levels, just 12 months ago.
Religion, two generating over 134 billion in calendar 2021.
As a result, we are pleased to announce that our board of directors have approved the determination of adjusted EBIDTA for the calendar year ended December 31 2021.
Buster acquired $900 million U S dollar could trigger a full earn out event.
Resulting in the issuance of 37 5 million common shares to the eligible on outright holders and management.
We expect the non management shifts to be issued within approximately five business days.
I'll now turn it back to Mike to provide further color on current market conditions.
And to dive deeper into our balanced and disciplined approach to capital allocation Mike.
Thanks Roger.
Looking at the state of the North American steel market today, we are clearly seeing pricing levels off from the highs of just a few months ago.
Over prices still remain historically higher than any point prior to 2021 and approximately double mid cycle pricing.
We expect pricing to find a near term equilibrium.
And we remain optimistic about where that level should shake out.
This is supported by the fundamentals, we see in the market and in our order book.
We have a diverse customer base that provides selling opportunities across Canada and the U S. Traditionally servicing as many as 150 customers in the calendar year.
We strategically target a higher percentage of contract sales and currently sell approximately 65% of our steel on contract.
These volume commitments provide stability to our order book and operations and the lagging price mechanics helped to smooth some of the volatility experienced when prices shift up or down quickly.
We sell a wide range of offerings that include play products, which currently enjoy a price premium of over $685 U S per ton as compared to hot rolled coil.
We've always maintained that investments in our plate mill should serve us well, given where Canada is only producer and heat treater of discrete plate products.
Okay.
Our modernization project remains on track and we recently completed the assembly of our new Hot Leveler and commissioned our automated <unk> surface inspection unit, which is designed to further enhance our capabilities.
Yeah.
We look forward to completing this project during the balance of calendar 2022.
We have a number of reasons to be optimistic that the near and intermediate term pricing will settle at attractive levels.
These potential positive factors include underlying strong demand from the automotive sector.
And other steel intensive industries and supply factors relating to imports.
We are well positioned to benefit from these favorable market conditions operationally, even as we execute the development and construction of the AAF project, providing a real one two punch of long term value creation to our shareholders.
Now, let me talk a little bit more about our capital allocation policy.
Our primary focus is on delivering long term shareholder value by utilizing prudent financial discipline and operational excellence to ensure our ability to execute our AAF project.
<unk> in the next phase in our company's history.
In the meantime, the steps we've taken to strengthen the balance sheet and to position our operations to benefit from strong market pricing have also afforded us the opportunity to initiate a five U S per share regular quarterly dividend.
Finally, we have initiated a normal course issuer bid program that gives us the flexibility to be opportunistic and allows for the purchase of our shares in the open market from time to time.
It's exciting to have reached a point in our history, where we can produce attractive results from existing operations.
<unk> developed and built transformative new assets.
Initiated dividend and considering repurchasing our shares from time to time.
Quite a change from where we were just a few short quarters ago.
We will continuously reevaluate our capital allocation policy with the board as we expect it to be a significant generator of free cash over the longer term.
That being said I will reiterate that our focus is to live within our means not spend money, we do not yet have.
So in conclusion, our fiscal third quarter included achieving a number of major milestones in our 120 year history, including our return to public markets. The retirement of our senior secured debt.
The decision to proceed with our transformative E F development project.
Achievement of historically strong financial results and a continued legacy of safety for our employees.
We now enter a phase centered on new project development and construction with the dual facilities a generational investment designed to forever change how steel is manufactured insouciant Murray.
That algoma is well capitalized and positioned to execute.
Our team is focused both operationally and financially on this critical investments to make our business greener.
More competitive and more resilient.
We expect this transformation will create a compelling value proposition for all of our stakeholders.
Thank you very much for your continued interest in Algoma steel.
We very much look forward to what the future holds.
At this point, we would be happy to take your questions.
Operator.
Please give the instructions for the Q&A session.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Call participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question is from David Gagliano with BMO capital markets. Please proceed with your question.
Hi, good morning, Thanks for taking my questions I'll start with the.
Well it is probably the obvious question I noticed there's no near term outlook commentary in this earnings release presentation and the.
And D&A and in your prepared remarks this quarter. So I was wondering if you could just provide us some.
Thoughts around.
The current quarter, given that we're kind of halfway there given the lags in pricing given the.
The challenges on volumes in the buyers' strike that we're hearing about from the distributors can you give us a sense as to what your thinking is.
As regarding volumes in.
And lagged pricing.
It's available thanks.
Hey, good morning, David.
So I want to start we are reverting to.
Industry practices with guidance that will come later in the quarter.
What we are trying to do is strive to minimize the uncertainty that the volatility of the sector.
Brings to guidance estimates.
As you point out pricing with our lagging contracts is reasonably well understood.
And modeled.
It's really the volume that remains a variable and with more than half the quarter left to go.
The near term supply chain issues that are being experienced.
We felt that it was imperative that our guidance we provided in.
In a manner that it can instill confidence in what we say.
Okay.
Okay. So typically seasonally this is a fairly meaningful rebound from a volume perspective.
Considering these headwinds and.
The near term.
Is it reasonable to assume that there will still be a recovery in volumes, albeit muted versus the typical recovery on a quarter over quarter basis.
I think Thats fair.
Provided guidance.
Around the.
<unk> year that.
There was production that didn't make its way into the marketplace in our fiscal Q3.
And it is available in subsequent quarters.
Our fourth fiscal quarter in the winter period is typically.
Time, when we don't take a major outages. So again, our production is a reasonably high so you've got a couple of very positive supply side factors, it's really the demand side.
Really evolving day to day with things like the blockades that are there.
The bridges connecting Windsor in Detroit.
Okay understood and then just.
I'll I'll get off this issue real quick, but one other piece to this.
The amount can you give us a sense of the amount of volume that was kind of where that kind of was.
Deferred into this current quarter versus last quarter, and and when was that volume just from a timeline perspective, you know priced.
Yeah, David This is Roger so.
The volume is better.
Roughly around 40000 tons in the in the last quarter, which will flow through in the first six months and it was priced in.
In the previous quarter, which was December quarter. So that's how the pricing will move into for those 40000 that will be shipped.
Okay and then okay perfect. That's helpful. And then just switching gears on the buyback.
Obviously, you went the NCI be route which are.
You know, perhaps the total amount of potential buybacks I think it does kind of 5% is there is there.
Thought being given to additional repurchases as we move through the year by a different routes.
So youre absolutely right the normal course issuer bid the size as prescribed by legislation.
What it does do is provide us the flexibility to use.
Cash over the next year and that's after we've earned it.
And after we've protected the completion of the electric arc for buying our own stock.
That investment decision and along with any others will be weighed against other available opportunities that will ultimately increase shareholder value.
I direct you to slide number eight of our presentation.
And while I'm proud of what our team has accomplished in the last three years theres still more opportunities to put more building.
Building blocks, if you like in place.
That will result in long term sustainable value for our shareholders.
Investing to take further advantage of our strengths investing in the opportunities that would be accretive to the value proposition.
Investing to shore up any identified weaknesses or investing to mitigate threats to our business. So.
All of those investment decisions, including additional <unk>.
Opportunities to do things with the shares will be evaluated.
Through the lens of what creates the greatest long term value for our shareholders.
Okay, and as you know as we've seen from some other.
Public companies with this quote unquote good problem to have.
Go through this process there has been some companies that have provided ranges of sort of distribution after capital.
Requirements, you know sort of a range of free cash flow.
Targeted to be distributed to shareholders over time.
It's all going on where.
To provide that kind of information what would a reasonable range be for for that kind of approach from our expectation be for for for Algoma.
David It's a great question and I just think it's premature at this point in time again.
Our principles are to spend cash that we have I. Appreciate that you are looking for some guidance with respect to.
What that might distribution might be of that future cash and it's really as I say premature given that.
We'll evaluate the opportunities to look through.
Building on our strengths in advancing some opportunities as I said.
And the answer to the previous question, so premature to provide any kind of split in terms of cash allocation for any of those buckets until we see them, but the guiding principle will be to create long term value for our shareholders whichever path provides the greatest return.
Okay helpful I completely understand the constraints at this stage and you don't don't shoot the messenger in terms of me asking the questions.
Part of that part of the job in terms of the Capex can you give us a sense for 2022.
Calendar year or for the next 12 months Capex and then also.
Has there been any changes to the.
The capital spending needs for the for the AAF project overall and or for the for.
For the played modernization project.
Yes, so the capex.
Other than yes.
Including our fleet modernization will be in the let's say 100 $220 million Canadian range.
And that's pretty much in line with what we have been seeing in AR.
Roadshow presentations.
Maintenance Capex will continue to be in the 60 odd million dollars range and then and then comes the plate mill modernization Capex spending next year.
So uh huh.
It'll be a little from yes, Capex perspective uneven played mode. There is no substantial change from what we have what we have declared a <unk>.
In the past.
Okay last piece for me are there just to clarify the 110 or $20 million that was that is that a fiscal year 'twenty 'twenty. Two capex is that that is.
No it'll be for next year, Oh, alright.
Which includes the plate mill modernization. So we are taking the placement.
Modernization for next year, so it'll be for next fiscal that too.
Next fiscal sorry, it got it understood alright. Thank you.
Our next question is from David Ocampo with <unk> Securities. Please proceed with your question.
Hey, good morning, everyone.
Alright.
I just wanted to follow up on David's question about potential shareholder returns, but maybe approach. It a different way is there a minimum cash balance that you guys would like to keep on your balance sheet and then we can do the modeling and figure out what the potential returns could look like.
So David the way I looked at it as we approached or evaluated the December 31, we looked at our cash balance on hand.
We then looked at the requirement to.
To complete the electric arc factoring in the government financing that is available to us.
Also took in two additional factors.
Our cushion that would really address the volatility that we see in the steel market.
And then also looking at the volatility that occurs or the seasonal volatility associated with our working capital.
And worked from there so.
As we go through each and every month in each and every quarter, we'll continue to evaluate what's left to spend to facilitate the electric arc.
Implementation see where we are in that seasonal working capital position and make sure that there is cash on hand as well.
Allows us to.
You really protect ourselves through the volatility of the steel sector.
No that makes a lot of sense and then.
You touched a little bit about plate prices being around $600 higher than <unk>.
With that in mind should we think about your plate products following a similar pattern.
Your overall business for 65% is contracted 35% spot like should we see you guys participate in the appreciation of plate prices here.
Yes, so our.
Contract order book for fleet is a little bit different it will be roughly 50 50.
From from contract closest bulk perspective, so so we should see that flowing through.
And.
From <unk>.
<unk> quarterly.
You can take high level of the same split and it should flow into a flow into the books accordingly.
Raj the contracted portion of non it does it fall into kind of a similar breakdown quarterly lag monthly lag and then a fixed annual rate.
Yes.
And normally normally those are.
<unk>.
So it will be monthly and quarterly so no fixed pricing.
Perfect.
And then I guess with everything we're hearing with labor shortages and availability for parts. How comfortable are you guys still at that 30 month construction timeline for your Eas Nelson.
And I guess can you remind us if there is any.
Any leeway there in terms of cost overruns on the $700 million number.
So two parts.
To that question and answer is that the.
It's a 30 month construction phase.
Does have a critical path with some buffer built into it on the front end. So we still remain confident in delivering.
That.
That project by really the second calendar quarter of 2024, and there was a significant.
Yeah.
Cost buffer put into it as well.
The remaining piece of pieces that have yet to be contracted.
<unk> now represents more than about 25%.
The overall cost. So we think there is sufficient lead time buffer as well as financial buffer to bring that project in on time and on budget at this point.
Okay perfect that's it for me.
Thank you Dave.
Our next question is from our new pretty hard with <unk> capital. Please proceed with your question.
Hi, good morning.
A couple of questions for me first of all.
Volatility we've seen on the New Jersey side I was wondering if you could give us a bit about that.
Your interpretation as to what's driving that volatility and how you see that playing out over the next couple of quarters.
Good morning, and thanks for that question.
Certainly the volatility.
It is not new to the steel sector.
It's actually self perpetuating in many cases.
Prices have hit on.
Unprecedented highs or hot rolled coil was three times or plus or minus the mid point of the cycle certainly hit a peak and even today remain above the previous size that we're likely in the August of <unk> kind of timeframe.
A significant amount of the.
Our customer base and supply chain in North America are those that carry inventory.
<unk>.
The indexed pricing.
As exists in the marketplace.
Actually drives the.
Drives the pricing mechanism.
The demand mechanism so during periods, where prices are anticipated to fall.
Those that inventory pull back on the orders and that just perpetuates that reduced demand. So the supply demand gets out of balance until there's a call. It an equilibrium that has struck.
Where that is is really anybody's guess.
I think what's more important is that we still believe that there is very very strong fundamentals demand supply fundamentals within the north American market that will support a strong steel sector for a period of time now.
With the with the spread between plate and HR CEB. What it is right now I guess approaching $700 are you seeing customers substituting out of New Jersey and.
To what extent is that even viable.
No I think they are two very distinct markets in very different applications.
So I don't see customers substituting in and out.
Okay Alright.
And in the MD&A I noticed when you were talking about the plate mill modernization. It looks like the first phase has slipped a little bit I mean, I think we're talking about March initially in our sort of pushing that back to May June .
Can you tell us a little bit about what's going on there in terms of that slippage.
It was a it was a supply chain issue for some of the parts.
It's also a more conducive environment from a from an environmental climate standpoint, I should say here in Sault Saint Marie and back last fall and I wanted to make sure that we could execute make every ensure that everything was here on time and given the market and the pricing.
It made sense for us to move it by four to six weeks.
Okay.
And then just a last question.
Given your comments on increasing input costs.
Well to assume that our.
Our unit cost for Q4 will be higher on a sequential basis.
So.
It will not it should it should start trending down and as I alluded to last time as well.
We do see.
We do see a lag on the iron ore pricing.
<unk> flowing through the points of the cost.
It's normally a six month lag so we.
Even with the price of iron ore dropping to below index dropping to below.
$100 and now coming back to 150.
You should see that fluctuation flowing through our cost in the fourth quarter, and then getting into the into the second calendar quarter, which is for Cisco look next year. So we should see a cost.
Stabilizing.
Trending in the right direction, there definitely is inflationary pressure on other other elements of cost whether it's alloys, whether it's.
Gas power.
How that plays out is to be seen.
From major raw material cost perspective that is that just won't even see the only other point I'd make which I said last time that call. It over the year will.
Will it be higher.
It's around 100 Bucks.
But on higher year over year, and backfill flowed through cost.
This year from April onwards.
When we start getting local supplies.
Into infrastructure Murray.
Okay. So just so I understand some puts and takes but.
Q4 on a sequential basis, our cost should be coming down and moving in the right direction.
As I understand it okay, great. Thank you.
Our next question is from Kirk Ludtke with Imperial capital. Please proceed with your question.
Hello, everyone.
You hear me.
Again, Kurt good morning, great well.
Congratulations on the quarter, thanks for the call.
Just a couple of follow ups on.
On the guidance you mentioned that input costs will be coming down sequentially. That's super helpful. Thank you.
And you also mentioned that <unk>.
<unk> for the March quarter is already well known.
I just wanted to confirm.
Everything else being equal.
Realized pricing should be up sequentially correct.
So.
So I think you should you should look at from.
From the construct of pricing perspective, so we do have the monthly quarterly lagging contracts, which definitely will be up when you look at quarter over quarter, because they are flowing from last quarter. When you go into the monthly contracts. They depend on last month's settlement. So thats price starts falling in.
January and into February there'll be impacting the pricing on the monthly contract and that's why the spot is concerned which is roughly 35% to 40% of our business.
The lead times have gone down therefore weeks or lower.
Mostly on the mostly on the HFC front.
That's how it will get constructed plant on the other hand as you know is different it will move in the opposite direction with the.
The contracts will be lower than the sport and sport will be filling up at higher pricing. So.
That's how to move.
So once you do it.
It will end up with the with the number that you are not giving any guidance as such but that's how it will move.
Kind of a lot of a lot of moving pieces there.
Okay, I'll I'll turn it back into something I appreciate the color.
And I just.
With respect to the AAF that's helpful that you've got those buffers built in is there a is there a milestone.
We should.
For the next milestone that we should have on our calendars, we should be thinking about happening it by a certain point in time in order to remain on track.
Tough question to answer if you look at the Gantt chart there are literally.
Hundreds upon hundreds of line items.
What we are doing is we are.
Putting out.
Press releases and the like when the mill major milestones are achieved.
<unk> seen the letting of the contracts for equipment to Daniela <unk> seen the transformer contracting let to GTI GE for the upgrade of our LSP.
<unk> I would anticipate would be contracts associated with the buildings.
We continue to prepare the site drive piles so.
There is no one major if you were looking for the next one it would be around picking our partner for the erection.
Erection of the buildings.
Okay. When do you expect to.
Announced that.
That will be within a week or two.
My Best guess, our guys. Our procurement guys are working on it and contracts.
That would be a reasonable expectation.
That seems like a pretty low risk.
Milestone.
It is with the point being though is that it's at.
Another significant component of the cost and again would make the.
The available contingency.
That much stronger if you like for the remaining parts of the construction.
Got it okay, great I appreciate it.
And then.
And then lastly, with respect to the earn out shares I think I heard you say.
The 37 5 million shares will be issued in the next five days.
Yes, it will be the portion of the bond management shares which would it be.
Less than that $35 9 million roughly.
Shares will be issued in the next five days fantastic Great and then lastly, the buyback program be in place by then.
Oh, yes, it takes to get all the processes done with DSS.
Stag is not as complicated but for DSA and stuff. It takes a couple of weeks ago. So we should have you should have it done.
<unk> shares are issued.
Okay. So that'll be in place. So that you can whatever happens you can.
Response correct.
Great I appreciate it thank you guys.
Thank you. Thank you.
Our next question is from David Gagliano with BMO capital markets. Please proceed with your question.
Hi, sorry, just a quick follow up you gave us the capex earlier on everything other than the a F for fiscal year 'twenty 'twenty. Three I think you said it was $100 million to $120 million I believe thats right whats the expected capex for the project.
Fiscal year 2023.
I can I can give you a range a little bigger range as we are going through the sort.
Through the process right now of getting into contracts on structural and and and other media. So.
On a let's say on a net cash outflow basis.
Assuming that we will get some portion of the government money and it should be.
Anywhere from one, let's say $160 million to $220 million.
In Canadian dollars.
So it's a bigger range that I'm, giving you, but there are a lot of things thats on the go so difficult to pinpoint, but it'll be in that range.
Okay, and what does that 160 to 220 assume for the government funding portion.
Well this is net effect.
So so this assumes that I've taken government funding.
So the Capex overall capex will be.
Indeed.
Spending will be in the <unk>.
Three.
<unk> $400 million range.
And we will get some government funding and the balance will be a balance will be the key.
Cash going out of the company.
Okay, and then just on the government funding.
Apologize if this has already been addressed.
Can you remind me again are there any restrictions when you start to tap into that government funding are there caps or any kind of restrictions regarding their capital regarding capital returns to shareholders and if so what are they.
There are it.
It relates to the portion from the infrastructure Bank.
And during and there are two distinct phases during the construction phase and this is the government looking to ensure our ability to complete the project.
Capital allocations.
Theres, a one third claw back.
On the availability.
We would ultimately draw but it becomes funds that are secured and on completion would require repayments.
At that point, so consider during the construction phase one third of distributions.
To effectively reduce the availability of the government finance.
Okay. That's helpful. Thanks, and on this government funding I guess.
<unk>.
104 to 180 million or something like that is being tapped into I think rough ranges that you gave obviously I'm not you know.
We don't know but rough.
Rough range within that mix of 140 to 180.
As you know what's the breakdown is that like can you break down I know, there's two buckets.
Gonna come from one of the two or both of the buckets or we don't know yet.
It's it's a combination of both the buckets. So that's how it is right now and based on how the aldi.
The spending goes and the other thing is on the capital allocation.
If if there are changes in the capital allocation as we go along there will be changes in the in the money that we'll be drawing from the governmental.
Specifically, the two 'twenty as Mike mentioned on the CIB the infrastructure Bank.
So the $220 million of subject to Clawback risk.
Restriction.
So that is.
That will fluctuate as capital allocation plans are developed over the years.
Okay. That's helpful. Thank you.
We have reached the end of the question and answer session and I will now turn the call over to Mike Mcquade for closing remarks.
Well listen thanks again for your participation in our third quarter fiscal 2022 earnings conference call for.
<unk> for your continued interest in Algoma steel.
We look forward to updating you on our results and progress when we report our fourth quarter results. Later this year. Please stay safe and we'll talk to you soon thank you. Thank.
Thank you guys.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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