Q3 2023 Alcoa Corp Earnings Call

Good afternoon, and welcome to the Alcoa Corporation third quarter 'twenty twenty-three earnings presentation and conference call all participants will be in listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your phone.

To withdraw your question. Please press Star then two please.

Please note this event is being recorded.

I would now let's turn the conference over to James Dwyer, Vice President Investor Relations and pension investments. Please go ahead.

Thank you and good day everyone.

I'm joined today by William Oplinger, Alcoa Corporation, President and Chief Executive Officer, and Molly Behrman, Executive Vice President and Chief Financial Officer.

We will take your questions after comments by Bill and Molly.

As a reminder, today's discussion will contain forward looking statements relating to future events and expectations that are subject to various assumptions and caveats factors.

Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation and in our SEC filings.

In addition, we have included some non-GAAP financial measures in this presentation.

For historical non-GAAP financial measures reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today's presentation.

We have not presented quantitative reconciliations of certain forward looking non-GAAP financial measures for reasons noted on this slide.

Any reference in our discussion today to EBITDA means adjusted EBITDA.

Finally, as previously announced the earnings press release and slide presentation are available on our website.

With that here's bill.

Thank you, Jim and thanks to everyone for joining the call today before we get started I want to acknowledge the important contributions from our former CEO Roy Harvey where he played a key role in our evolution into a stronger and more resilient business and he was pivotal in our 2016 launch as a pure play upstream aluminum company led the company through.

Some difficult market environments, including Covid and its commitment to making a call a successful never wavered. He is serving as a strategic advisor to me for the remainder of the year and I appreciate his counsel.

I've interacted with many of you over my 23 years to Alcoa, Inc. And alcohol Corp. Both in my CFO and CLO roles and I'm glad to be with you again today.

In my first few weeks in this role Ive met with employees customers and industry participants.

Several questions keep coming up in those conversations such as what are our priorities and water alcoa's key challenges.

First to address the constant in our company our values at Alcoa, We act with integrity operate with excellent care for people and lead with courage. These arent statements simply live on a plaque. These are the values. We expect every alcoa to live daily I'm proud to lead a company guided by strong values, our relentless focus on the safety of <unk>.

Our employees contractors and visitors to our sites will continue as will our efforts toward our sustainability targets.

As I step into the CEO role I want to make it clear that I have ambition for this company.

The ambition manifest as an expectation of excellence in everything we do from EHS operations maintenance and commercial excellence.

Alcoa has an impressive history of innovation and leadership in the industry and we plan to further build on that and strengthen our market connections.

We will be action oriented and make decisions guided by our values sound business principles and with a focus on creating value for our stockholders.

We've made good progress this year across our system, we've improved stability and we intend to build on that operational momentum. So.

So for the near term the focus will be gaining approvals for bauxite mining in Western Australia.

This is our top priority, we are making progress we have the right team in place for success and we understand the improvement that our stakeholders are expecting.

We'll be driving for further operational improvements in Brazil, the ongoing startup at the IMF smelter in San Louise Hasnt gone as planned we now have conditions in place for a successful restart from here forward.

Next we will be focusing on productivity across our system with every site focused on margin improvement through operational productivity going into 2024.

And we have action plans in place to improve the financial results of certain locations in the system that had been underperforming.

Each operation is working to become more globally competitive.

And the long term, we remain bullish on aluminum as the material of choice.

Trends continue to drive increased aluminum usage globally from further EV penetration to the substantial future demand and solar installations.

Alcohol is uniquely positioned in the aluminum industry for a world focused on carbon emissions and other sustainability issues.

We are addressing from three vectors primary metal production with our joint venture Ellis's post consumer scrap usage with our Australia technology and carbon residue emissions with our refinery of the future initiative.

Before I address the third quarter results, let me reemphasize, we are laser focused on improving the short term and we are working on developing unmatched industry, leading technology for the long term.

Let's begin with safety I'm disappointed that we had one serious injury with life altering implications in the third quarter a worker at our surety bauxite mine loss portions of two fingers, while performing maintenance on a bulldozer. While this event is unacceptable overall, we're making progress on preventing fatalities and serious injuries. So far this year.

Year, our total recordable injury rate has improved by 16% and days away and restricted time injury, our dart rate is 27% better on a year over year basis.

Also we are increasing the number of onsite field verifications for leaders to evaluate the effectiveness of critical safety controls and coach workers on safety improvements.

Now moving to the financials, we reported an adjusted net loss for the third quarter of $1 14 per share and $70 million and adjusted EBITDA, Excluding special items, driven by lower average realized prices for both alumina and aluminum improve.

Improvements in both raw material and production costs did not fully offset the impact from lower realized pricing in both of our segments.

We ended the quarter with a strong balance sheet and a cash balance of $926 million we've.

We've made meaningful progress on our approvals for bauxite mining in Australia during the quarter and have more visibility on the timeline for a decision from the government and regulators.

To address this more fully later.

In our operations, our Quebec smelter system set production records in the quarter and were investing there to increase our casting capabilities for value added products.

From a commercial perspective, we also continue to be encouraged by the reception from customers for our sustained align low carbon products, which includes <unk> metal and eco source alumina.

And while demand in some key end markets remained soft there are signals for a rebound in 2024.

We will talk more about that macroeconomic view of the market in a moment, but first let me turn it over now to our CFO .

Molly Please go ahead.

Thank you Bill revenue was down 3% to $2 $6 billion as higher shipments only partially offset lower realized prices for both alumina and aluminum the net loss.

Attributable to Alcoa increased $66 million to $168 million and a loss per share increased from 57 cents to 94 cents.

On an adjusted basis, the net loss attributable to Alcoa increased $140 million to $202 million.

And net loss primarily related to the reversal of a valuation allowance on deferred tax asset Iceland.

Adjusted EBITDA declined $67 million to $70 million as part of the decrease in revenue was offset by lower costs.

Let's look at the key drivers of EBIT.

Yeah.

Okay.

Third quarter 2023, adjusted EBITDA declined $67 million to $70 million and lower metal and alumina realized prices were only partially offset by lower raw materials energy and production cost.

Alumina segment, EBITDA increased $20 million sequentially.

Raw material costs, primarily caustic soda and lower production costs in Brazil, and Spain more than offset lower alumina index prices.

We also saw the benefit of lower raw material and production costs in the aluminum segment as well as energy improvement, but not enough to overcome the impact of lower metal prices.

Other costs outside the segments more unfavorable $56 million and reflect unfavorable inter segment eliminations.

Our transformation demolition costs and higher other corporate costs.

Here's a deeper dive on raw material costs.

This year, we've seen substantial improvement in our segment EBITDA due to lower prices for our key raw materials.

Prices for caustic soda calcined petroleum Coke and coal Tar pitch continued to decline in the quarter and are expected to improve further.

Company wide, we haven't seen an $86 million EBITDA improvement over the first nine months $32 million in the alumina segment and $55 million in the aluminum segment. These lower raw materials market prices worked through our financials on a lag basis. So we expect further improvement in the fourth quarter.

Let's now move to other key financial metrics.

Our key financial metrics are consistent with our earnings results year to date return on equity is negative eight 7%, our third quarter dividend at an $18 million to stockholder capital return, which totaled $54 million year to date free cash flow less net NCI contribution.

<unk> was negative $36 million in the quarter, increasing proportional adjusted net debt by $1 billion and decreasing the cash balance by a similar amount.

Year to date capital expenditures and cash income taxes remained our largest use of cash in.

In the third quarter days working capital improved five days to 50 days on lower inventories.

Working capital performance provide a significant source of cash in the third quarter entirely offsetting the previous year to date working capital cash yes.

The working capital improvement is evident on the next slide.

Cash balance declined $64 million in the quarter, our largest source of cash was a working capital reduction of $183 million, primarily from lower inventories followed by EBITDA of $70 million and net noncontrolling interests contributions of $40 million we.

Back working capital to be a source of cash in the fourth quarter.

Capital expenditures were the largest use of cash at $145 million as capex typically increases as we move through the year.

Notable this quarter, where settlement payments of $75 million to former workers at two smelters that I'll call. A previously owned in Spain, as well as environmental and Aro spending $52 million.

Let's turn to the outlook for the final quarter of 2023.

Our full year outlook has one favorable adjustment, we expect other corporate expense to improve $10 million to $120 million.

At the segment level.

And alumina, we expect an improvement of approximately $50 million due to lower raw material prices that our production costs and higher volumes, partially offset by approximately $10 million and higher energy costs and.

In addition, we expect impacts related to lower bauxite grades in Australia to be consistent with the prior two quarters.

In the aluminum segment, we expect unfavorable energy impact of approximately $30 million, mainly due to C. O two compensation changes in Norway.

Additionally, we expect $35 million and raw material price improvement to be offset by unfavorable product mix and higher production costs.

Finally, alumina cost in the aluminum segment are expected to be favorable by $5 million.

Hello, EBITA note that the third quarter. Other expenses included onetime negative impact of $35 million, primarily foreign currency losses, and we expect the fourth quarter operational tax to range between 10 million to $20 million.

Now I'll turn it back to bill.

Thank you Molly next I'd like to recap some key items from our global operations each of the three smelters in Quebec.

Thanks, Omar and <unk> core is that year to date production records for tons per day when total together they performed the best since our 2016 separation. This week one of those smelters, a b I announced the planned investment to further improve its casting capabilities for a broader array of alloys for value added products the new.

<unk> should enable us to deliver products with additional sizes smoother surfaces and better dimensional control for the automotive and packaging markets.

We are also focused on operational improvements from assets across our global system driven by productivity enhancements. We took our first action last month at our <unk> refinery in Western Australia with a restructuring plan that is intended to improve that facility and save $10 million annually with more improvements under consideration in Brazil.

Employing a deliberate and methodical approach to the AOI more smelter restart which is now operating at approximately 65% of the site's total capacity is restored stability to the parts that had been restarted.

Finally, we are committed to conformance with the global industry standard on tailings management Alcoa has voluntarily disclosed information from all of our global tailings and we've worked with the International Council on mining and metals, where I see them M to improve the industry's management of tailings. This has been a significant undertaking and we work diligently.

Leading with third party reviewers to provide additional information about impoundments with the highest classification ratings before in August deadline set for ICM M. Members now, let's turn to an update on our mining approvals in Western Australia.

Our teams have continued to work with relevant state government departments to advance our annual approvals for bauxite mining at the Huntly and <unk> mines.

Securing an approval is an absolute priority for our company and we are working toward a final resolution in the fourth quarter. We've submitted a revised mine management program or MMP for the period 2003 to 2027.

This updated MMP is now being reviewed by regulators.

We believe this revised plan meets evolving stakeholder needs as it includes numerous enhancements designed to specifically address the expectations of the government. It includes additional controls for the protection of drinking water, including increased distances from reservoirs and addresses biodiversity concerns through a plan to accelerate.

<unk>.

Separately, let me briefly discuss the Western Australia, and environmental Protection Authority process in August the agency completed a public consultation period on whether it should assess all or part of the current and next mlps. The W. A EPA has indicated that it expects to decide on this before the end of the year.

<unk>.

We have demonstrated our commitment to transitioning to a more modernized approvals framework for new major mine regions. That's why we proactively began a formal assessment in 2020 from the W. A EPA for our two new major regions for the Huntly mines, My our north in Holyoke.

But this will take some time the assessment for my our north in Holyoke is ongoing and we do not expect the first bauxite ore from these new regions any earlier than 2027, we do expect the bauxite grade from these regions to be more consistent with the higher grades. We previously experienced at the existing my our central.

However, until then we expect similar bauxite quality as compared to recent grades.

As Mollie described we are actively working to mitigate the financial impacts of these lower grades while also looking for opportunities to optimize productivity.

Next let's move to some highlights from a commercial perspective and discuss some demand trends.

First customers are increasing demand for sustain a line of products to sustain a line there is a small but growing proportion of our overall sales volume.

Sales of equal or low carbon aluminum strong in Europe and orders are being placed in North America too.

Overall, we expect our annual global sales volume for equal them to increased approximately 60% for 2023 when compared to last year.

Also in the third quarter, we made our first sale of the non metallurgical variety of eco source or low carbon aluminum brand.

Earlier this year, we started offering non metallurgical varieties. In addition to the existing smelter grade eco source.

<unk> is one of the world's largest producers of non metallurgical alumina, which is used in everything from refractories sandpaper and water treatment processes across the world.

Our sustained align has the aluminum industries, most comprehensive portfolio due to the range of products, we offer from aluminized metal.

Meanwhile, we also have customers coming to us due to our history of alloy development.

Last month, we were recognized for the second year in a row with an award from the North American Die casting Association for an Alcoa developed alloy used in Mega castings for electric vehicles.

We are selling in licensing alloys that can be used to make these one piece high pressure die casting with our alloys Oems can get a one piece casting rather than many separate pieces, creating greater efficiency.

On the cost side, our energy team signed a new nine year power agreement in August that will cover 50% of Portland smelter capacity starting in July of 2026, we continue to pursue options for the smelters remaining electricity requirements with a strong focus on renewable energy.

The global alumina and aluminum markets are both balance to a slight surplus.

At the same time aluminum inventories in terms of days of consumption remained at historically low levels positioning the market well for when demand improves in.

In 2024, there is uncertainty in the markets due to a range of geopolitical and macroeconomic factors.

One of the biggest questions revolves around demand outside of China. Our base view is for continued growth in transportation and recovery in the packaging and in the building and construction sector.

Within transportation, the automotive market typically drives the major trends.

Operator: Good afternoon and welcome to the Alcoa Corporation, 3rd quarter 2023 earnings presentation and conference call. All participants will be in listen only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero.

At this point most of the Covid related automotive supply chain disruptions have resolved while uncertainty remains due to labor actions in the United States, We anticipate year on year growth in tons of aluminum as automotive production continues to ramp up to 2019 levels.

Operator: After today's presentation there will be an opportunity to ask questions to ask a question you may press star then one on your phone. To withdraw your question please press star then two. Please note this event is being recorded.

In packaging downstream inventory levels have largely normalized and we expect demand increasing.

Building and construction high interest rates have negatively affected that sector in the last year, particularly in North America and Europe .

Relative recovery and building and construction is expected next year compared to 2023. This is based on analysts' projections or slowing inflation and stabilizing interest rates, which should provide a better foundation for increased year over year activity, although the pace of that improvement remains uncertain and reliant on economic conditions.

James Dwyer: I would now like to turn to the conference over to James Dwyer, Vice President Investor Relations and Pension Investments. Please go ahead. Thank you and good day everyone. I'm joined today by William Oplinger Alcoa Corporation President and Chief Executive Officer and Molly Beerman, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Bill and Molly. As a reminder today's discussion will contain forward looking statements relating to future events and expectations that are subject to various assumptions and caveats factors that may cause the company's actual results to different materially from these statements are included in today's presentation and in our SEC violence.

In closing we are encouraged by the positive operational momentum in the third quarter and intend to build on that performance. Our company's primary objective is to gain approvals for bauxite mining in Western Australia. We believe we're on the right path with an updated mine plan that has an enhanced commitments meant to address the government's.

Patients in.

And importantly, we now have line of sight to decision timing, which is expected before the end of the year.

James Dwyer: In addition we have included some non-gap financial measures in this presentation. For historical non-gap financial measures, reconciliation to the most directly comparable gap financial measures can be found in the appendix to today's presentation. We have not presented quantitative reconciliation of certain forward looking non-gap financial measures for reasons noted on this slide. Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally, as previously announced, the earnings press release and slide presentation are available on our website.

Across our global operations, we are focused on improvement.

We'll work to increase productivity reduce and control costs and manage our working capital.

We also are continuing work on our future focused breakthrough technology programs, which have the potential to further differentiate our company.

And finally, while some end use sectors for aluminum are softer now we remain bullish on the long term fundamentals for our markets I'm not alone in this view I attended <unk> week, where the prevailing view was that aluminum is poised for long term growth.

<unk> is well positioned for this future we had the distinct advantage of being active in all aspects of upstream aluminum production and I'm excited about our prospects and the work ahead with that Mollie and I are ready to take your questions.

William Oplinger: With that, here's Bill. Thank you Jim and thanks everyone for joining the call today.

William Oplinger: Before we get started I want to acknowledge the important contributions from our former CEO Roy Harvey. Roy played a key role in our evolution into a stronger and more resilient business and he was pivotal in our 2016 launch as a pure play upstream aluminum company. He led the company through some difficult market environments, including COVID and his commitment to making alcohol a successful never wavered. He is serving as a strategic advisor to me for the remainder of the year and I appreciate his counsel.

We will now begin the question and answer session.

To ask a question you May press Star then one on your phone if you were using a speaker phone. Please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two when called upon please limit yourself to two questions.

Our first question is from Lawson Winder with Bank of America Securities. Please go ahead.

William Oplinger: I've interacted with many of you over my 23 years.co.ink and I'll call a corp both in my CFO and COO roles and I'm glad to be with you again today. In my first few weeks in this role I've met with employees, customers and industry participants. Several questions keep coming up in those conversations, such as what are our priorities and what are alcohol as key challenges.

Yeah.

Hello, Thank you operator.

Good evening Bill in Mali, Bill Congratulations on your new role.

Yeah.

Yes, it's very nice to hear from me today.

I just wanted to ask.

Ask about quite honestly and just with the lower grades.

William Oplinger: First, to address the constant in our company, our values. At alcohol, we act with integrity, operate with excellence, care for people and lead with courage. These aren't statements that simply live on a plaque. These are the values we expect every alcohol and to live daily. I'm proud to lead a company guided by strong values. Our relentless focus on the safety of our employees, contractors and visitors to our sites will continue as will our efforts toward our sustainability targets.

Now expected to continue through 2027 at the earliest.

Is there a point at which a complete shutdown could be come a high probability to risk.

So that's going on where.

Essentially looking at all options and in the near term as you see we've announced a restructuring that takes some cost out.

In addition to that we're looking at a variety of different levers to be pulled to drive costs down and improve profitability, there, but ultimately as with any marginal asset and banana has a marginal asset at this point.

William Oplinger: As I step into the CEO role, I want to make it clear that I have ambition for this company. An ambition manifests as an expectation of excellence in everything we do. From EHS, operations, maintenance and commercial excellence. Alcoa has an impressive history of innovation and leadership in the industry and we plan to further build on that and strengthen our market connections. We will be action oriented and make decisions and guide it by our values, sound business principles and with a focus on creating value for our stockholders. We've made good progress this year. Across our system, we've improved stability and we intend to build on that operational momentum.

Well, we will consider options on the table, including curtailment and closure.

Okay, that's very clear and then in a similar vein.

<unk> had this goal of.

Reducing its costs to first quartile level globally.

With you now in the.

In <unk> C.

What are your thoughts on that goal in terms of timing and and achieve ability.

William Oplinger: So for the near term, the focus will be gaining approvals for box flight mining in Western Australia. This is our top priority. We're making progress. We have the right team in place for success and we understand the improvements that our stakeholders are expecting.

<unk>.

Thanks, a lot and I think we.

First of all if you step back and look at where our crew has us today on the cost curve. We are still first quartile bauxite mining first quartile refining.

William Oplinger: We will be driving for further operational improvements in Brazil. The ongoing start-up at the Alium-Arts Meltzer in San Luis hasn't gone as planned. We now have conditions in place for a successful restart from here forward.

And second quartile smelting.

The current situation in Western Australia puts pressure on the on the refining segment, so that could move us into the second quartile, but to answer your question very specifically.

William Oplinger: Next, we will be focusing on productivity across our system with every site focused on margin improvements through operational productivity going into 2024. We have action plans in place to improve the financial results of certain locations in the system that have been underperforming. Each operation is working to become more globally competitive.

You see in the presentation that we did today, we highlighted productivity and competitiveness a couple of times in the presentation.

We have launched a program across the company to enhance competitiveness plant by plant and so we're essentially going after that I think theres opportunities even in our best plants and we highlighted the great success that we've had in Quebec, So far this year still.

William Oplinger: In the long term, we remain bullish on aluminum as the material of choice. Megatrends continue to drive increased aluminum usage globally from further EV penetration to the substantial future demand until their installations. Alpoa is uniquely positioned in the aluminum industry for a world focused on carbon emissions and other sustainability issues, which we are addressing from three vectors. Primary metal production with our joint venture elicis, post-consumer scrap usage with our Australia technology and carbon and residue emissions with our refinery of the future initiative.

I still think there's opportunities to make those plants more competitive take cost out and and more productive so.

We will continue to strive for those targets.

Okay. Thank you very much I'll get back in the queue.

Awesome.

The next question is from Lucas pipes with B Riley Securities. Please go ahead.

Thank you so much operator, I'd like to add my congratulations.

William Oplinger: So before I address the third quarter results, let me re-emphasize. We are laser focused on improving the short term and we are working on developing unmatched industry leading technology for the long term.

Thank you also for taking my question.

And then I wanted to pick up.

Last question left off on the on the competitiveness.

Can you maybe add a little bit more detail on what Dallas you can you can tweak.

William Oplinger: Let's begin with safety. I'm disappointed that we had one serious injury with life altering implications in the third quarter. A worker at our Zurutvi block site mine lost portions of two fingers while performing maintenance on a bulldozer. While this event is unacceptable, overall, we are making progress on preventing fatalities in serious injuries. So far this year, our total recordable injury rate has improved by 16%, and days away in restricted time injury, our dart rate is 27% better on a year-over-year basis. Also, we are increasing the number of onsite field verifications for leaders to evaluate the effectiveness of critical safety controls and coach workers on safety improvements.

Is there capital needed to modernize plans as it streamlining.

Some of the labor relationships is in energy.

If you could maybe just just peel the onion, a little bit further would.

Would really appreciate your perspective, thank you.

Sure. So we'll peel the onion back a little bit we and the plants are at varying stages of where they sit on this.

Effort.

Probably the earliest want to undertake it was quite honestly given some of the difficulties that we're having and quite honestly, we're looking at Coronado from two perspectives. The first is an overall profitability perspective, where we were looking at are there additional.

Molly Beerman: Now moving to the financials, we reported an adjusted net loss for the third quarter of $1.14 per share and $70 million in adjusted EBITDA excluding special items driven by lower average realized prices for both aluminum and aluminum. Improvements in both raw material and production costs did not fully offset the impact from lower realized pricing in both of our segments.

Markets that we can address because quite honestly has an amended capability or non metallurgical alumina capability are there opportunities for pricing improvements for specific products, but then on the cost side, it's about labor productivity and maintenance productivity, so really getting down not the Nazis.

Molly Beerman: We ended the quarter with a strong balance sheet and a cash balance of $926 million. We've made meaningful progress on our approvals for bot-site mining in Australia during the quarter and have more visibility on the timeline for decisions from the government and regulators. I'll address this more fully later. In our operations, our Quebec smelter systems set production records in the quarter and we're investing there to increase our casting capabilities for value-ad products. From a commercial perspective, we also continue to be encouraged by the reception from customers for our sustained line of low-carbon products, which includes equilibrium metal and eco-source alumina.

But to get down to the nuts and bolts of.

Of trying to determine ROE effective on the maintenance side and can we significantly improve our wrench time. So that was the work that's being done at banana. We subsequently launched what we're calling.

Our workforce blueprint exercise.

And it started in some of our best facilities up in Quebec, and you say why why start in some of your best facilities, because I think if we can get gains are in places like Rebecca that are really really performing well, we can probably get better gains in other parts of the system. So that is actually going through and looking at.

The labor that we have and the amount of time it takes to do specific tasks and a very scientific comparison.

Molly Beerman: And while demand in some key end markets remains soft, there are signals for a rebound in 2024.

Molly Beerman: We'll talk more about that macroeconomic view of the market in a moment, but first let me turn it over now to our CSO. Molly, please go ahead. Thank you, Bill. Revenue was down 3% to $2.6 billion, as higher shipments only partially offset lower-realized prices for both alumina and alumina. The net loss attributable to Alcoa increased $66 million to $168 million, and the loss per share increased from 57 cents to 94 cents.

Of the people that we have in each plant and <unk> and whether there's opportunities across the system to streamline and and take cost out.

Thank you very much for that color I want to follow up on Western Australia.

A couple of quick questions. There first I think the company had previously guided to.

I think 2024 at the earliest in terms of the transition.

Back to higher grades now 2027 could you remind us.

Molly Beerman: On an adjusted basis, the net loss attributable to Alcoa increased $140 million to $202 million. The difference in net loss is primarily related to the reversal of evaluation allowance on deferred tax assets in Iceland. Adjusted EBITDA declined $67 million to $70 million, as part of the decrease in revenue was offset by lower cost. Let's look at the key drivers of EBITDA. Third quarter, 2023, adjusted EBITDA declined $67 million to $70 million, as lower metal and alumina-realized prices were only partially offset by lower raw materials, energy, and production costs.

What changed why.

Why three more years and then if if there is a.

And kind of formal.

Assessment at the EPA level in Western Australia.

Sure.

Could that change the timeline.

Would appreciate your thoughts on that thank you.

Sure.

If we just address kind of the suite of questions that you have.

I think we made good progress in the third quarter on this issue.

We have been working with the government and we've been working with the agencies and the government to get our annual mine approvals process.

Molly Beerman: Aluminum assignment EBITDA increased $20 million sequentially, lower raw material costs, primarily cost EXOTA, and lower production costs in Brazil and Spain more than offset lower alumina index prices. We also saw the benefit of lower raw materials and production costs in the aluminum segment, as well as energy improvements, but not enough to overcome the impact of lower metal prices. Other costs outside the segments were unfavorable $56 million. They reflect unfavorable inter-segment elimination, higher transformation demolition costs, and higher other corporate costs.

We've submitted what's called a revised mine management program for 23 to 2027 with the enhancements that we talked about in the presentation.

And essentially where that gets us to is that we expect that decisions will be taken this quarter. Both on the mine plan approvals and the EPA assessment process. So I think it's a it's a big step forward for the company, which should have some clarity this quarter now to address your question about what change.

<unk> between our prior guidance in todays guidance.

If you go back and look at our prior guidance. We were very careful to note that there was not great clarity beyond 12 months to 18 months. So we were essentially saying hey.

Molly Beerman: Here's a deeper dive on raw material costs. This year we've seen substantial improvement in our segment EBITDA due to lower prices for our key raw materials. Market prices for cost EXOTA, calcine petroleum coke, and coal tar pitch continued to decline in the quarter and are expected to improve further. Company wide, we have seen an $86 million EBITDA improvement over the first nine months, $32 million in the aluminum segment, and $55 million in the aluminum segment.

We're expecting the lower grades for a 12 to 18 month period.

Since that time with the concessions that we have made in the MMP process. We now have some better clarity we've been able to.

Work those concessions through the mine plans and the mine models.

Molly Beerman: These lower raw materials, market prices, work through our financials on a lag basis to expect further improvement in the fourth quarter. Let's now move to other key financial metrics. Our key financial metrics are consistent with our earnings results. Year-to-date return on equity is negative 8.7%. Our third quarter dividend added $18 million to stockholder capital returns, which total $54 million year to date. Free cash flow, less net, NCI contribution was negative $36 million in the quarter, increasing proportional adjusted net debt by $0.1 billion and decreasing the cash balance by a similar amount.

And we've developed the detailed plans for the most economic ways to mine. The areas that are now that we believe are likely to be assessable under the approvals.

And even with our best thoughts as far as mining and blending plans, we can't get back to the historical grades that we've seen prior time, however, as we transition to my our north we believe that the geological sampling and those new regions will support the better grades that transition will occur.

<unk>, we expect in the 27 timeframe.

I hope that addresses your question.

That is very helpful.

There are more questions here, but I'll jump back in queue. Thank you so much and best of luck guys. Thanks.

Molly Beerman: Year-to-date capital expenditures and cash income taxes remained our largest use of cash. In the third quarter, days working capital improved five days to 50 days on lower inventories. The improved working capital performance provided a significant source of cash in the third quarter, entirely offsetting the previous year-to-date working capital cash use. The working capital improvement is evident on the next slide. Cash balance declined $64 million in the quarter. The largest source of cash was a working capital reduction of $183 million, primarily from lower inventories, followed by Ibiza of $70 million and net non-controlling interest contributions of $40 million.

The next question is from Michael Dudas with vertical research. Please go ahead.

Good afternoon, Jim Molloy.

Hi, Michael Michael.

Hmm.

And just share some thoughts with you.

You were promoted to Chief operating officer earlier this year I.

I guess, maybe six or seven months and that Jonathan what did you find out perhaps moving to move so that's true about the company and then some of these implementations were two ideas and then how you can translate that as CEO too.

Hello, Alcoa to capture more of the anticipated cost reductions and likely hopefully pricing improvements that should run through the business in a more normalized environment over the next couple of years.

Molly Beerman: We expect working capital to be a source of cash in the fourth quarter. Capital expenditures were the largest use of cash at $145 million as CapEx typically increases as we move through the year. Notable this quarter were settlement payments of $75 million to former workers at two smelters that Alcoa previously owned in Spain, as well as environmental and ARO spending of $52 million.

So what I found out when I transition from a long stint as the CFO 10, 10 years as the CFO into what turned out to be a short stint in the CLO overall was a couple of things first of all.

He was happy to find that we have great people and operations.

We have people who have.

Molly Beerman: Let's turn to the outlook for the final quarter of 2023. Our full-year outlook has one favorable adjustment. We expect other corporate expense to improve $10 million to $120 million. At the segment level in Illumina, we expect an improvement of approximately $50 million due to lower raw material prices, better production costs, and higher volumes. Partially offset by approximately $10 million in higher energy costs. In addition, we expect impacts related to lower-box site grades in Australia to be consistent with the prior two quarters.

Long tenure 2030 years with the company that have tremendous institutional knowledge, but we've also brought in a lot of newer people who.

C things new ways and do things new ways. So I was really pleased to get to see that and just as an aside loved my CLO overall for eight months.

The other thing that I learned though is that there is a tremendous amount of opportunity out there and our.

People were were really wanting to do things differently wanting to aggressively address some some things and.

So I thought there was a tremendous amount of opportunity. So if I transition to some thoughts around the CEO role just to be clear and I'm sure. This question maybe it was embedded in your original question are or will be asked later on the.

Molly Beerman: In the Illumina segment, we expect unfavorable energy impacts of approximately $30 million, mainly due to CO2 compensation changes in Norway. Additionally, we expect $35 million in raw material price improvement to be offset by unfavorable product mix and higher production costs. Finally, Illumina costs and the Illumina segment are expected to be favorable by $5 million.

Our strategy and direction of the company is largely unchanged, we know where we're going from a strategic perspective.

The thing that I'm trying to drive as CEO and you see this changing over the last year or so is really a cultural change that cultural change is.

Molly Beerman: Below EBITDA, note that the third quarter other expenses included one time negative impacts of $35 million, primarily foreign currency losses, and we expect the fourth quarter operational tax to range between $10 million to $20 million.

Making decisions at a faster pace, it's having a performance orientation and everything we do and really an expectation of excellence in everything we do and I hit upon this in my prepared remarks, whether it's operations maintenance finance.

William Oplinger: Now I'll turn it back to Bill. Thank you, Molly.

William Oplinger: Next, I'd like to recap some key items from our global operations. Each of the three smelters in Quebec, station Vogue, Bay Como, and ABI and Beckincor have set year-to-date production records for tons per day. When totaled together, they've performed the best since our 2016 separation. This week, one of those smelters, ABI announced a plan investment to further improve its casting capabilities for a broader array of alloys for value-ad products. The new equipment should enable us to deliver products with additional sizes, smoother surfaces, and better dimensional control for the automotive and packaging markets.

An expectation of really being excellent. If we then couple that with what I think are the inherent advantages of Alcoa.

So some of the inherent advantages of our company. We are we're present in all aspects of the value chain. We're a pure play aluminum company we're not.

Spending time on other parts of.

Battery minerals, where we are focused exclusively on being successful and in aluminum we have a global presence and back to that first part of the question I think we have unmatched technical expertise still in this company. We haven't really shown at the last couple of years on the operation side, but I think it's there and we are.

William Oplinger: We are also focused on operational improvements from assets across our global system driven by productivity enhancements. We took our first action last month at our quinon refinery in Western Australia with a restructuring plan that is intended to improve that facility and save $10 million annually with more improvements under consideration. In Brazil, we're employing a deliberate and methodical approach to the Aliumar smelter restart, which is now operating at approximately 65 percent of the site's total capacity and has restored stability to the pods that have been restarted.

Starting to show it now so when I combine all of that I translate that into an ambition for the company that we want to reestablish ourselves as the premier aluminum company in the World and I think we can do that and <unk>.

<unk> not to go on too long, Michael I'm really excited and really happy to be in the role that I'm in.

I appreciate those observations.

William Oplinger: Finally, we are committed to conformance with the global industry standard on tailings management. Alcoa has voluntarily disclosed information from all of our global tailings, and we've worked with the International Council on mining and metals for ICMM to improve the industry's management of tailings. This has been a significant undertaking, and we work diligently, including with third-party reviewers, to provide additional information about impoundments with the highest classification ratings before an August deadline set for ICMM members.

Looking out how quickly do you think you can implement the culture.

It kind of get best practices throughout the organization and productivity enhancements to show meaningful.

The results were.

We achieved those goals.

Is it three months six months a year.

How urgent do you see that process, even though the overall strategy has not changed.

Right so.

Rome wasn't built in a day were not going to change the culture of this company in a day a week quarter. However look at the bridge that Molly showed we saw production cost improvements.

William Oplinger: Now, let's turn to an update on our mining approvals in Western Australia. Our teams have continued to work with relevant state government departments to advance our annual approvals for box site mining at the Huntley and Willoughdale mines. Securing an approval is an absolute priority for our company, and we are working toward a final resolution in the fourth quarter. We've submitted a revised mine management program, or MMP, for the period 23 to 2027.

For the first time in a long time in the third quarter.

And just so you understand how that bridge works, that's largely because we were able to make the tonnes.

And so we were able to make the tons in the third quarter.

And.

The guidance that you gave was pretty strong guidance with the exception of the carbon change from the Norwegian government, which is totally outside of our control. So I think we're seeing some of that change today already and I think youll see more in the future.

William Oplinger: This updated MMP is now being reviewed by regulators. We believe this revised plan meets evolving stakeholder needs, as it includes numerous enhancements designed to specifically address expectations of the government. It includes additional controls for the protection of drinking water, including increased distances from reservoirs, and addresses biodiversity concerns through a plan to accelerate rehabilitation.

And everybody I talk to within I'll call out here is the story of performance culture, We're trying to drive a performance culture and it's all about having expectations of excellence and driving those expectations of excellence and I think we've seen that on the op side to some extent, we set records in Quebec were.

William Oplinger: Separately, let me briefly discuss the Western Australian Environmental Protection Authority process. In August, the agency completed a public consultation period on whether it should assess all or part of the current and next MMPs. The WA EPA has indicated that it expects to decide on this before the end of the year. We have demonstrated our commitments transitioning to a more modernized approvals framework for new major mine regions. That's why we proactively began a formal assessment in 2020 from the WA EPA for our two new major regions for the Huntley mine, Myar North and Holyoke.

We're getting better stability in places like Brazil, and the restart.

Much significantly better stability and operational performance in our Western Australia assets, even though they have worse bauxite quality.

So I think we're seeing it now and.

I hopefully accelerates into the future.

Excellent Bill Thank you.

William Oplinger: But this will take some time. The assessment for Myar North and Holyoke is ongoing, and we do not expect the first box site or from these new regions any earlier than 2027. We do expect the box site grade from these regions to be more consistent with the higher grades we previously experienced at the existing Myar Center. Control. However, until then we expect similar box-like quality as compared to recent grades. As Molly describes, we are actively working to mitigate the financial impacts of these lower grades while also looking for opportunities to optimize productivity.

The next question is from Bill Peterson with Jpmorgan. Please go ahead.

Yes, hi, good afternoon, thanks for taking the questions.

Good luck in the new role.

So I wanted to take a step back to maybe more macro supply demand. So you just have to make sure I have let me I guess what is the latest you're seeing in terms of supply demand balance I guess in the context of restarts of new non.

Relatively weak.

Macro.

Backdrop, and I guess, maybe on the end market demand side, where you're seeing most resilience and then what remains the most muted in any any sort of color between regions.

So 2023, it's going to go down is a pretty tough year for the aluminum industry.

William Oplinger: Next, let's move to some highlights from a commercial perspective and discuss some demand trends. First customers are increasing demand for our sustainable line of products. The sustainable line is a small but growing proportion of our overall sales volume. Sales of equilibrium are low-carbon aluminum, strong in Europe, and orders are being placed in North America too. Overall, we expect our annual global sales volume for equilibrium to increase approximately 60% for 2023 when compared to last year.

In 2023, we see a slight surplus on the aluminum side.

On alumina, it's fairly balanced.

And so on.

On the aluminum side, we see about an 800000 ton.

Surplus in 2023.

The reason for that is demanded in rest of world rest of world actually contracted in 2023. So some of the big demand drivers and the rest of world that we have seen this year are really a.

William Oplinger: Also in the third quarter we made our first sale of the non-metallurgical variety of eco-source, our low-carbon aluminum brand. Earlier this year we started offering non-metallurgical varieties in addition to existing smelter-grade eco-source. Alcoa is one of the world's largest producers of non-metallurgical aluminum which is used in everything from refractories, sandpaper, and water treatment processes across the world. Our sustainable line has the aluminum industries, most comprehensive portfolio due to the range of products we offer from aluminum to metal.

A reduction significant reduction in building and construction.

Actually a reduction of demand in packaging of all places.

Ever so slight.

So.

Across the board, we're seeing some some weakness in the in the end markets now you referenced.

A trip to the <unk> week pretty resoundingly, what we here amongst all the industry players is that 2023, and maybe going into 2024 can still be difficult times for aluminum, but it's just a matter of time, where aluminum has significantly better market environment. The reason why we see that as that demand continues to go.

William Oplinger: Meanwhile, we also have customers coming to us due to our history of alloy development. Last month we were recognized for the second year in a row with no award from the North American Dicasting Association for an Alcoa-developed alloy used in mega-castings for electric vehicles. We are selling and licensing alloys that can be used to make these one-piece high-pressure dicastings. With our alloys, OEMs can get a one-piece casting rather than many separate pieces creating greater efficiency.

ROE.

Starting to see even in 2020 for a rebound in in places like building and construction some of the Destocking that we saw occur.

In can sheet is now over so we should see a rebound in demand there.

William Oplinger: On the cost side, our energy team signed a new nine-year power agreement in August that will cover 50% of Portland's smelter capacity, starting in July of 2026. We continue to pursue options for the smelter's remaining electricity requirements with a strong focus on renewable energy.

And we fundamentally believe that the Chinese cap one supply will be maintained at the 45 million metric tons and we can address why why do we believe that but over time, we see that the market fundamentals for the metal itself really driven by some of the macro trends over the longer.

William Oplinger: The global aluminum markets are both balanced to a slight surplus. At the same time, aluminum inventories in terms of basic consumption remain at historically low levels, positioning the market well for when demand improves.

Period of time with Evs in solar should be significantly better than they are today, but with that said.

It's been a pretty tough year on demand in aluminum.

William Oplinger: In 2024, there is uncertainty in the markets due to a range of geopolitical and macroeconomic factors. One of the biggest questions revolves around demand outside of China. Our base view is for continued growth and transportation and recovery in the packaging and in the building and construction sector. Within transportation, the automotive market typically drives the major trends. At this point, most of the COVID-related automotive supply chain disruptions have resolved. While uncertainty remains due to labor actions in the United States, we anticipate year-on-year growth in tons of aluminum as automotive production continues to ramp up to 2019 levels.

That's great color.

I missed it but I believe last quarter, you Theres, an update about <unk> discussing planned phase restart starting at the beginning of 2024 with full restart by October 25.

And then you're obviously trying to you know.

Basically captured set the ppas in motion, but.

Can you give us an update there again I may have missed it but I didn't see that in the prepared remarks. So let me let me give you an update.

We continue to work toward really achieving long term economic viability of the site.

In Spain, and that and in the case of the smelter that allows for a restart in 2024, however, as.

William Oplinger: In packaging, downstream inventory levels have largely normalized and we expect demand increasing. In building a construction, high interest rates have negatively affected that sector in the last year, particularly in North America and Europe. A relative recovery in building and construction is expected next year compared to 2023. This is based on analyst projections for slowing inflation and stabilizing interest rates.

Basically the question that you just asked we are starting we see significant challenges that need to be overcome for that site to be viable, including soft demand for the value add products that site makes slab and billet low aluminum prices in this in the case of Europe high power costs and delay in permitting.

William Oplinger: We should provide a better foundation for increased year-over-year activity, although the pace of that improvement remains uncertain and reliant on economic conditions, in closing we are encouraged by the positive operational momentum in the third quarter and intend to build on that performance. Our company's primary objective is to gain approvals for box site mining in Western Australia. We believe we're on the right path with an updated mind plan that has enhanced commitments meant to address the government's expectations and importantly we now have line of sight to decision timing, which is expected before the end of the year.

And construction of some of the alternative power supplies that we had been looking at we hope to overcome these challenges to allow for a progressive restart through the end of 2025.

But it's been and it remains very difficult. So that's the situation in Spain.

Okay. Thanks, again best wishes here moving forward.

Thank you.

The next question is from John Tumazos with John Tumazos Independent Research. Please go ahead.

Thank you very much for taking my question.

William Oplinger: Across our global operations, we are focused on improvement. We will work to increase productivity, reduce and control costs, and manage our working capital. We also are continuing work on our future focused breakthrough technology programs which have the potential to further differentiate our company.

Comparing to the containerboard market today.

International paper announced they were shutting 900000 tons or about two 5% of U S supply.

And the world aluminum market.

William Oplinger: And finally while some end use sectors for aluminum are softer now we remain bullish on the long term fundamentals for our markets. I'm not alone in this view. I attended LME week where the prevailing view was that aluminum is poised for long term growth. Alcoa is well positioned for this future.

So China is 59% of output.

And some of the other continents don't have very much production left.

The bigger other regions or Russia, which is hydro.

Canada, which is hydro, India, which is coal.

William Oplinger: We had the distinct advantage of being active in all aspects of upstream aluminum production and I'm excited about our prospects and the work ahead with that Molly and I are ready to take your questions.

And the Persian Gulf, which is gas.

Do you think it's possible.

To have.

2.5% supply reduction event.

Operator: We will now begin the question and answer session. To ask a question you may press star then one on your phone. If you were using a speaker phone please pick up your handset before pressing the keys. To withdraw your question please press star then two.

The world aluminum industry the way it's structured today.

Operator: When called upon please limit yourself to two questions.

Okay.

John .

That's hard question and give me just a second to formulate an answer.

Sure I'm, sorry to compare Theres never been a 10% non recessionary fall in the containerboard industry before it took that industry a long time to.

Lawson Winder: Our first question is from Lawson Winder with Bank of America Securities. Please go ahead. Hello, thank you operator. Good evening, Bill and Molly. Congratulations on your new role. I was very nice to hear from you today.

Get a grip on it.

And aluminum is down 10%, but it's just not growing the way.

Would you pay normal.

William Oplinger: I just wanted to ask about Quenana and just with the lower grades I now expected to continue through 2027 at the earliest. Is there a point at which a complete shutdown could become a high probability risk? So at Quenana we're essentially looking at all options and in the near term as you see we've announced a restructuring that takes some cost out. In addition to that we're looking at a variety of different levers to be pulled to drive costs down and improve profitability there. But ultimately as with any marginal asset and Quenana is a marginal asset at this point we'll consider options on the table including curtailment and closure.

So let me give you and you and I have known each other a long time and we've both been around this industry for a long time. So let me give you a qualitative.

Lawson Winder: Okay, that's very clear.

Historical perspective. This industry has not had a problem on the demand side with the exception of the global financial crisis, where we saw demand fall off in inventory build.

This year, we've seen demand fall off and yet inventories have not built been built significantly so inventories and whether there.

Uh huh.

They're on the <unk> or on the market or off market inventories remain historically pretty low.

As we look forward, we see a rebound of demand going into 2024.

And really see strong demand trends.

That are driven by the mega trends going out into the future. The question has historically been well the Chinese maintain the 45 million metric ton cap.

William Oplinger: And then in a similar vein I'll always had this goal of reducing its cost to first core tile level globally. With you now in the lead seat, what are your thoughts on that goal in terms of timing and a cheap ability? Thanks, Lawson. I think we first of all, if you step back and look at where crew has us today on the cause curb, we are still first quartile box site mining, first quartile refining, and second quartile smelting.

We are seeing indications that we believe that they will maintain that cap.

If they do maintain that cap and demand continues to grow that should assist the fundamentals of the industry as far as a significant and to address your question of two 5% cut in supply the areas around the world where supply is under is under pressure.

<unk> specifically is in Europe , and we know that there are some plants that have hedged that those hedges will be rolling off over time.

William Oplinger: The current situation in Western Australia puts pressure on the refining segments so that could move us into the second quartile. But to answer your question very specifically, you see in the presentation that we did today, we highlighted productivity and competitiveness a couple of times in the presentation. We have launched a program across the company to enhance competitiveness plant by plant, and so we're essentially going after that. I think there's opportunities, even in our best plants, and we highlighted the great success that we've had in Quebec so far this year. I still think there's opportunities to make those plants more competitive, take cost out, and more productive. So we'll continue to strive for those targets.

We have our own challenged plant in Europe and so.

It will remain to be seen whether the industry takes a two 5% cut out or not.

Thank you, we're all looking for demand Bill.

Yeah.

Thanks, Thanks, John and it was good to talk with you.

Thank you.

The next question is from Alex hacking with Citi. Please go ahead.

Yeah, Thanks, Jim Bill and volume.

Let me add my congratulations bill on the new role.

Doug just.

Following up on Wi right. So it seems like we're in the low grades now until 2027.

Lawson Winder: Okay, thank you very much. I'll get back in the queue. Thanks, Lawson.

As we think about you know the mine moves north that are going to stop producing a mining in 2027.

Lucas Pipes: The next question is from Lucas Pipes with B Riley Securities. Please go ahead. Thank you so much, operator. Bill, I'd like to add my congratulations. Thank you also for taking my question, and I wanted to pick up with the last question left off on the on the competitiveness. Can you maybe add a little bit more detail on what dials you can tweak? Is there capital needed to modernize plans? Is it streamlining some of the labor relationships? Is it energy? If you could maybe just peel the onion a little bit further, would really appreciate your perspective. Thank you.

One of the major risk factors around that how should we think about that.

And how should we think about the timeline because if you're going to be mining in 2027, I assume you need you know infrastructure pre stripping all kinds of things that need to be done ahead of that.

So I guess you know how should we think about the risks and timelines. Thanks.

So Molly and I are going to team up on this one a little bit.

The.

The permitting process that we have undertaken for the minor north move it's what's called a part for permitting process. It is a modernized recognized permitting process within western Australia for starting a new mine site.

William Oplinger: Yes, so we'll peel the onion back a little bit. And the plants are at varying stages of where they sit on this effort. Probably the earliest one to undertake it was Quenana given some of the difficulties that we're having at Quenana. We're looking at Quenana from two perspectives. The first is an overall profitability perspective where we were looking at are there additional markets that we can address because Quenana has an MA capability or non-menological aluminum capability?

And it requires a lot of information.

William Oplinger: Are there opportunities for pricing improvements for specific products? But then on the cost side, it's about labor productivity and maintenance productivity. So really getting down not to use a pun but get down to the nuts and bolts of trying to determine are we effective on the maintenance side and can we significantly improve our wrench time? So that was the work that's being done at Quenana.

And so we made that choice going back I think it was in 2020.

To move to that modernized process for my our north we made that choice because we recognize that the customized process that we have currently.

Really needed to be modernized and our stakeholders wanted a more modernized process. So the risk that I see is around that permitting process now.

We're doing everything that we can to mitigate that risk.

And.

When we get closer to that time period, we will have line of sight.

I can tell you we are very energized around reducing the time between when we get that permit to go and when we open up the mine face and given the fact that we've had some delays in permitting we're really trying to focus our efforts on making sure that we minimize.

William Oplinger: We subsequently launched what we're calling workforce blueprint exercise and it started in some of our best facilities up in Quebec. And you say why why start some of your best facilities? Because I think if we can get gains in places like Quebec that are really really performing well, we can probably get better gains in other parts of the system. So that is actually going through and looking at the labor that we have and the amount of time it takes to do specific tasks and a very scientific comparison, of the people that we have in each plant and whether there's opportunities across the system to streamline and take cost now. Thank you very much for that color.

That time between getting the permit and actually getting bauxite out of the ground Somali anything you want to add to that now I'll just add as far as our guidance on about $45 million impact that we're currently seeing in the quarter. We have plans to continue to mitigate that number and saw the first action announced this corridor works.

<unk>.

Severance program, there so that that will save $10 million and it's just that first bit of announcements, but we will keep moving through and finding.

Productivity enhancements, our portfolio changes to work that number down.

Okay.

Oh, hi, Thanks, that's helpful.

I guess when you talk about the permits obviously being the key risk.

Lucas Pipes: I want to follow up on Western Australia and a couple quick questions there.

If I if I remember correctly, there were some potential issues with proximity to local communities.

William Oplinger: First, I think the company had previously guided to, I think, 2024 at the earliest in terms of a transition back to higher grades now, 2027. Could you remind us what changed, why three more years? And then if there is a formal assessment at the EPA level in Western Australia, could that change the timeline? Would appreciate your thoughts on that. Thank you.

Are there other.

Major permitting hurdles that you could foresee I know this is a very kind of a generic question, but you know.

Any more color would be helpful. Thanks.

The not not forecasting any issues around the part for process per se.

But let me give you color around some of the concessions that we've made in the in the current process. The current MLP process, which we anticipate to be.

<unk> by the end of this year, we've added additional controls for protection of drinking water.

William Oplinger: Sure. So if we address the suite of questions that you have, I think we made good progress in the third quarter on this issue. We have been working with the government and we've been working with the agencies in the government to get our annual mind approvals process. We submitted what's called a revised mind management program for 23 to 2027 with the enhancements that we talked about in the presentation. And essentially where that gets us to is that we expect that decisions will be taken this quarter, both on the mind plan approvals and the EPA assessment process. So I think it's a big step forward for the company. We should have some clarity this quarter.

We have a good.

Greed on distances from mining a certain distance from some of the key reservoirs.

And we've agreed to accelerating rehabilitation and to increase the biodiversity in the near term on the rehab. So those are the three areas that we have been.

Discussing with the stakeholders.

And to try to get the current mine approvals through the process.

Okay. Thanks, and then just a quick follow up on LMR, if I may.

I think the message last quarter that was fixed the conveyor issues.

Above 60%.

William Oplinger: Now to address your question about what changed between our prior guidance and today's guidance. If you go back and look at our prior guidance, we were very careful to note that there was not great clarity beyond 12 and 18 months. So we were essentially saying, hey, we were expecting the lower grades for 12 to 18 months period. Since that time, with the concessions that we have made in the MMP process, we now have some better clarity.

Has something else gone wrong in the last quarter or are you still on track from where you were that thanks.

Something big happened in Brazil in the quarter, there was a massive power outage NFC.

And if you follow our competitor there alliin north to I had the same issue all of our asset the same issue we lost power for a close to three and a half hours in the smelter at <unk> at <unk>.

<unk>.

And that has knock on impacts not only on the smelter, but on the refinery to now. Thank goodness, we had good stability, we had recovered stability going into that.

William Oplinger: We've been able to work those concessions through the mind plans and the mind models. And we've developed the detailed plans for the most economic ways to mind the areas that are now that we believe are likely to be accessible under the approvals. And even with our best thoughts as far as mining and blending plans, we can't get back to the historical grades that we've seen prior times. However, as we transition to my art north, we believe that the geological sampling in those new regions will support the better grades. That transition will occur. We expect in the 27 timeframe. I hope that addresses your question. That is very helpful.

We were able to get.

Get through that power outage.

And what happens in a power outage in a smelter as you stress the pot springing back without bringing them back online. We lost a few parts I think we probably lost close to a dozen parts.

The plant back online from that power outage. So that was a setback that really is out of the control impacted something like two thirds of the country.

And in Brazil, and so it was a setback for the plant they've recovered.

They are a daily action plan, it's a daily go no go on restarting parts and increasing amperage.

And as we said in our in the prepared remarks, we're at about 65% today.

Lucas Pipes: There are more questions there, but I'll jump back and cue. Thank you so much and best of luck. Bye.

Okay. That's super helpful. Thank you.

Michael Dudas: The next question is from Michael Dudas with Vertical Research. Please go ahead. Good afternoon, Jim Bill Lally. Michael.

The next question is from Timna Tanners with Wolfe Research. Please go ahead.

Yeah, Hey, good afternoon, I thought I would pivot a little bit if I could to talking a little bit about some of your strategic initiatives and our cash flows if I can so first.

William Oplinger: So we wanted to share some thoughts that you were promoted to the Chief Operating Officer earlier this year, I guess, maybe six or seven months in that job. Well, what did you find out at the moving from the finance chair about the company and I'm assuming some of these implementations were your ideas, and how you can translate that as a CEO to allow, I'll call it a capture more of the anticipated cost reductions and likely hopefully icing improvements that should run through the business in a more normalized environment over the next couple of years.

First off I just wanted to ask I know you talked about advances in ecolab and echo source, but can you elaborate a bit on the premium that you are garnering there.

So the premiums are consistent with the premiums that you see quoted on various sources.

So it depends on the product, but the premiums are anywhere between 10 and $30 a ton.

Okay. That's helpful. Thanks, and then if we look at your cash balance I know in the past you said that you wanted to keep it at or below at or above a $1 billion and.

William Oplinger: So what I found out when I transitioned from a long stint as the CFO, 10 years as the CFO into what turned out to be a short stint in the COO role was was a couple of things. First of all, I was happy to find that we have great people in operations. We have people who have a long tenure, you know, 20, 30 years with the company that have tremendous institutional knowledge, but we've also brought in a lot of newer people who see things new ways and do things new ways.

Below that I know, it's not a perfect number but if we look at that cash as sources and use year to date.

If there's not a lot of free cash flow at these commodity prices, even with the third quarter strong working capital release.

And we had from your Investor day.

A great amount of initiatives that you're progressing on I know you referred to them in the beginning.

A feature.

Et cetera, and I'm just wondering how do we reconcile again this commodity price environment with some of those initiatives and some of the cash needs too.

Sources said, the capex requirements going forward.

William Oplinger: So I was really pleased to get to see that, and just as an aside, loved my COO role for eight months. The other thing that I learned though is that there was a tremendous amount of opportunity out there, and people were really wanting to do things differently, wanting to aggressively address some things, and so I thought there was a tremendous amount of opportunity. So if I transition to some thoughts around the CEO role, just to be clear, and I'm sure this question maybe was embedded in your original question or will be asked later on. The strategy and direction of the company is largely unchanged. We know where we're going from a strategic perspective.

<unk> with its earnings environment, or how are you thinking about that.

Okay. Thanks, Timna herself. Thanks for asking me a question.

[laughter].

So let me just say on the on our cash position now are at $926 million, we still have access to significant liquidity, we have our undrawn revolving credit agreement, we have our auxiliary credit line.

So those are available to us as needed as you know we've taken action in the past working capital programs to monetize that we can take more aggressive actions on cost control and portfolio actions.

But for us if I look at kind of the short term cash preservation. It really is focusing on our operations that are consuming more cash than generating so that is the focus as bill mentioned earlier, we have key sites that we are working to improve so thats the near term on the cash management.

William Oplinger: The thing that I'm trying to drive is CEO, and you see this changing over the last year or so is really a cultural change. That cultural change is making decisions at a faster pace. It's having a performance orientation in everything we do, and really an expectation of excellence in everything we do. And I hit upon this in my prepared remarks whether it's operations maintenance finance, an expectation of really being excellent. If we then couple that with what I think are the inherent advantages of Alcoa.

On our Capex you can even see from this year instead of adding to our capex.

Project list in filling the cumulative spend the whole budget. We ended up staying just with the capital plans that were already on the agenda as they slowed spending which typically happens we allowed that to happen and so we can save some money on capex.

William Oplinger: So some of the inherent advantages of our company we are we're present in all aspects of the value chain. We're a pure play aluminum company. We're not spending time on other parts of battery minerals. We are focused exclusively on being successful in aluminum. We have a global presence. And back to that first part of the question, I think we have unmatched technical expertise still in this company. We haven't really shown it the last couple of years on the operation side, but I think it's there and we're starting to show it now.

We can do that again with the programs that are in the next Q and if you look out to our breakthrough technologies. Each of those has to meet a certain criteria before theyre going to receive funding most of those now are pointing toward funding in 2025 and later so we still have time for those and working through that.

Nancy and funding.

Got it so put bluntly then if commodity price stays at these levels you know no no concerns in terms of proceeding.

Proceeding with some of those initiatives Allison stay ever by a teacher et cetera, but if we start to get into 2025 and didn't see much aluminum price improvement than it might be needing to rethink some of those capital outlays is that is that a fair conclusion, yes, that's fair timna.

William Oplinger: So when I combine all of that, I translate that into an ambition for the company that we want to reestablish ourselves as the premier aluminum company in the world. And I think we can do that. And not to go on too long, Michael, I'm really excited and really happy to be in the role that I'm in. I appreciate those observations.

Great. Thank you for the help.

The next question is from Carlos de Alba with Morgan Stanley . Please go ahead.

Yes, Thank you very much congratulations bill.

Just.

Coming back coming back to Western Australia. So I just wanted to understand you know what what might be the.

William Oplinger: We're looking at how quickly do you think you can implement the culture and kind of get best practice throughout the organization and productivity enhancements to show meaningful results or achieve those goals. Is it a three month, six month, a year? How urgent do you see that process being involved in the overall strategy of that change?

Potentially the implications of the EPA.

Deciding to do a formal assessment of your <unk>.

Peace and mining plans would that result, primarily own just a longer process, maybe more detail analysis and requirements.

William Oplinger: Right, so Rome wasn't built in a day. We're not going to change the culture of this company in a day a week, a quarter. However, look at the bridge that Molly showed. We saw production cost improvements for the first time in a long time in the third quarter. And just so you understand how that bridge works, that's largely because we were able to make the tons. And so we were able to make the tons in the third quarter. And the guidance that she gave was a pretty strong guidance with the exception of the carbon change from the Norwegian government, which is totally outside of our control.

We will also.

Result in higher cost.

Hmm, maybe above or.

Beyond the 45 that you have but that would prevent the 45 to completely come back to zero. Once you are getting into the 2027 and mining plan or those areas in 2027, we'd better bauxite quality.

So Carlos you can imagine we completely understand what the processes at least from a legal and a tactical perspective going forward.

I really hate to speculate on what what an assessment would look like what an assessment would cover.

William Oplinger: So I think we're seeing some of that change today already. And I think you'll see more in the future. And everybody I talk to within Alkoa, here's the story of performance culture. We're trying to drive a performance culture. And it's all about having expectations of excellence and driving those expectations of excellence. And I think we've seen that on the outside to some extent, which we set records and Quebec. We're getting better stability in places like Brazil and the restart. Much significantly better stability and operational performance in our Western Australia assets, even though they have worse box high quality. So I think we're seeing it now.

William Oplinger: And hopefully it accelerates into the future.

And until we had better insight into the Epa's decision, making process.

William Oplinger: Excellent Bill. Thank you.

Around.

What what they would actually be assessing its really hard to answer that question.

We're moving forward on the path to it.

You know over the next 75 days.

To ensure that our permits get approved through the process and that's the that's the focus if we find ourselves in an assessment.

<unk>.

Part of the process, we'll have to determine what is assessed and what the impact will be at that point and we'll let you know.

Alright, Okay and before I ask a question on the smelting just on.

Bill Peterson: The next question is from Bill Peterson, which AP Morgan, please go ahead. Yeah, good afternoon. Thanks for taking the questions and you know, Bill, good luck in the new role. Thanks Bill. So we're going to take a step back to, you know, maybe more macro supply demand. So you just said you're a master at LME. I guess, what is the latest you're seeing in terms of supply demand balance? I guess in the context of restarts immune on.

Certification maybe Molly.

I saw you wouldn't you have guided to around 55 million.

Impact in the third quarter because of the bauxite issues, increasing from 45 in the second quarter.

Did better than that right.

And just just to make sure that that is based on the initiatives and the efforts youre doing to control these costs.

Bill Peterson: You know, relatively weak, you know, action macro backdrop. And then I guess maybe on the end market demand side, we're used to most resilience. What's, and then what remains the most muted and any any sort of color between regions.

Yeah, Carlos it's actually three things we did draw on stock.

Stockpiles that had slightly better quality than we expected during the third quarter.

We also see the refineries are operating very well went below our bauxite quality and then third you are right. The mitigation efforts are just starting to drive down costs.

William Oplinger: So 2023 is going to go down as a pretty tough year for the aluminum industry. In 2023, we see a slight surplus on the aluminum side. On aluminum, it's fairly balanced. And so, you know, on the aluminum side, we see about an 800,000 ton surplus in 2023. The reason for that is demand and rest in world, rest of world actually contracted in 2023. So some of the big demand drivers in the rest of world that we've seen this year are really a reduction, significant reduction in building and construction.

Alright. Thank you and then finally is there any update or any comments you can provide on the situation of European smelters.

At least I remains with a third of the capacity shut down.

I didn't know if there is any.

Renegotiation or upcoming renegotiations of contracts for energy at least hour.

Our motion or method in Ireland that is relevant given where prices are today.

So let's look at them independently motion is very well positioned.

And.

Has a good energy source is probably one of our most profitable plants in the system. So motion is in good shape.

William Oplinger: Actually, a reduction of demand in packaging of all places, ever so slight. And so across the board, we're seeing some weakness in the end market. Now, you referenced my trip to the LME week. Pretty resoundingly, what we hear amongst all the industry players is that 2023 and maybe going into 2024 can still be difficult times for aluminum, but it's just a matter of time where aluminum has significantly better market environment. The reason why we see that is that demand continues to grow.

However, this new carbon legislation that is potential that could be could be passed into law. In December I think we've noted the fact that we could have up to $24 million negative in in the fourth quarter associated with motion analyst on based on that new car.

William Oplinger: Starting to see even in 2024, a rebound in places like building and construction, some of the B stocking that we saw occur in canned sheet is now over, so we should see a rebound and demand there. And we fundamentally believe that the Chinese capital and supply will be maintained at the 45 million metric tons and we can address why we believe that. But over time, we see that the market fundamentals for the metal itself really driven by some of the macro trends over the longer period of time with EVs and solar should be significantly better than they are today. But with that said, it's been a pretty tough year on demand in aluminum.

Legislation that type of a change in legislation makes it really difficult to make long term decisions around investments in places like Norway. So it's one of the disappointing things that I continue to see out of the Norwegian budgeting system that are that really really makes it hard to determine that.

Trying to put a lot of capital into an environment, where there is not a.

A good structure around carbon or or at least a predictable structure around carbon in the case of list list is slightly different.

No plans at this point to potentially restart that idle capacity.

List given its size given its age given its cost structure is under a lot of pressure and so revert back to my comments from earlier in the presentation listed as an area that we're looking at very similar to point Ana every opportunity to try to make that plant more competitive and we need to give.

And some of the headwinds facing especially on the carbon side.

William Oplinger: That's a great color. I may have missed it, but I believe last quarter, there's an update about San Ciprienne, discussing the plan phase restart, starting at the beginning of 2024 with full restart by October 25th, and then obviously trying to, you know, basically capture and set the PPAs in motion.

William Oplinger: But can you give us an update there? Again, I may have missed the plan.

Alright, great.

Hum.

Especially as you have also a good contact data.

No changes.

The short term right.

We have a long term power contract in Iceland, there is a repricing mechanism that comes up later in the decade.

But but that's later.

William Oplinger: Let me give you an update. We continue to work toward really achieving long-term economic viability of the site in Spain, and in the case of the smelter, that allows for a restart in 2024. However, as basically the question that you just asked, we are starting, we see significant challenges that need to be overcome for that site to be viable, including soft demand for the value add products. That site makes slab and billet, low aluminum prices in this, in the case of Europe high power costs and delay in permitting and construction of some of the alternative power supplies that we have been looking at. We hope to overcome these challenges to allow for a progressive restart through the end of 2025, but it's been and it remains very difficult.

And the 2027 2008 timeframe.

Thank you very much.

The next question is from Chris <unk> with Jefferies. Please go ahead.

Thanks, Hey, Bill congratulations on the neuro and good luck.

So just.

Question on the WAM mining situation, so if the EPA doesn't.

It doesn't assessment on the 2022 five year plan, which is I guess, the one that youre operating under right now.

Can you continue to mine so I understand the point about low grade until 2027, when you move up to <unk>, but before that is there a risk that they would they would.

Basically not allow you to mind because they are reviewing the plan that you're currently operating under what do you do you have confidence that you'd be able to continue to mine under the existing plan.

Well I think that.

There are a variety of different outcomes that could occur.

William Oplinger: So that's the situation in Spain. Okay, thanks again, and the best wishes here will be for you. Thank you.

If they go to and our full assessment, but again as I as I answered to Carlos let's let's see what gets assessed and we will react accordingly, we're.

John Tumazos: The next question is from John Tomazos with John Tomazos Independent Research. Please go ahead. Thank you very much for taking my question. Comparing to the container board market today, international paper announced they were shutting 900,000 tons or about 2.5% of U.S, supply. In the world aluminum market, obviously China is 59% of output, and some of the other continents don't have very much production left. The bigger other regions are Russia, which is Hydro, Canada, which is Hydro, India, which is coal in the Persian Gulf, which is gas.

We're confident that we are doing all the right things to avoid Ah either having an assessment or.

Not getting our mine.

Permits approved so we're doing all the right things we have line of sight to have an answer this quarter, we believe and and if we are depending on that outcome, we will take the right actions.

And does he does the decision of the EPA makes us to whether they'll do an assessment.

Get impacted by the concessions that you are offering can make now or do they just base. It on what the existing plan basically allows you to do.

Yes.

You know I don't know the answer to that one so we would need to revert back to you certainly that okay. Alright. Thank you very much good luck.

Thanks.

And our final question today is a follow up from Lucas pipes with B Riley Securities. Please go ahead. Thank.

John Tumazos: Do you think it's possible to have 2.5% supply reduction event in the world aluminum industry the way it's structured today? John, that's a hard question and give me just a second to formulate an answer. Sure, I'm sorry to compare.

Thank you very much operator, thank you very much for taking my follow up question.

Western Australia again.

$45 million.

Order of magnitude what sort of savings could you be looking at I think $10 million at Kalana.

That would take it down to $43 million or so per quarter going forward.

They're a magnitude how much more could.

Could you be looking at thank you very much.

Lucas I don't have any I don't have a number again. These are efforts that we're going to continue until work thrill and as they are restructuring our programs that need to be announced we'll certainly do that otherwise you'll simply see the additional savings work into our outlook as we progressed through time, but I can tell.

William Oplinger: There's never been a 10% non-recessionary fall in the container board industry before. It took that industry a long time to get a grip on it. And a woman isn't down 10%, it's just not growing the way it would be normal.

We have dedicated teams on it they're working very aggressively to identify savings, it's got a great pipeline of opportunity.

William Oplinger: So let me give you and you and I have known each other a long time, and we've both been around this industry for a long time. So let me give you a qualitative historical perspective. This industry has not had a problem on the demand side with the exception of the global financial crisis where we saw demand fall off and that inventory is built. This year we've seen demand fall off and yet inventories have not built been built significantly. The demand has been historically pretty low.

So I do believe we will have meaningful mitigation to share, but I don't have a number for you today.

I appreciate that.

Best of luck. Thank you.

This concludes our question and answer session I would like to turn the conference back over to Mr. Auckland or for closing remarks.

Thanks for your questions and interest in our company.

As you can hear from my comments, it's a true honor to lead this company as we position for long term success.

I really believe with disciplined focus and you've heard a lot of our talk around this disciplined focus today will build an even stronger company for the future and look forward to talking to many of you in the fourth quarter results in January and until then be safe.

William Oplinger: As we look forward, we see a rebound of demand going into 2024 and really see strong demand trends that are driven by the mega trends going out into the future. The question has historically been, will the Chinese maintain the 45 million metric ton cap? We are seeing indications that we believe that they will maintain that cap. If they do maintain that cap and demand continues to grow that should assist the fundamentals of the industry.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

Sure.

William Oplinger: As far as a significant and to address your question, two and a half percent cut in supply, the areas around the world where supply is under pressure specifically is in Europe and we know that there are some plants that have hedged that those hedges will be rolling off over time. We have our own challenge plant in Europe and so it will remain to be seen whether the industry takes a two and a half percent cut out or not. Thank you, we're all looking for demand Bill.

[music].

John Tumazos: Thanks John and it was good to talk with you.

Alex Hacking: Thank you. The next question is from Alex Hacking with City. Please go ahead.

Alex Hacking: Yeah, thanks Jim Bill and Molly and let me have my congratulations Bill on the new role. Just following up on WA, right? So it seems like we're in the low grades now until 2027. As we think about the mine moves north that are going to stop producing a mining in 2027, what are the major risk factors around that? How should we think about that? And how should we think about the timeline?

Alex Hacking: Because if you're going to be mining in 2027, I assume you need infrastructure, pre-stripping, all kinds of things that are going to need to be done ahead of that. So I guess, you know, how should we think about the risks and timelines? Thanks.

William Oplinger: So Molly and I are going to team up on this one a little bit. The permitting process that we have undertaken for the mine north move is what's called a part for permitting process. It is a modernized, recognized permitting process within Western Australia for starting a new mine site. And it requires a lot of information. And so we made that choice going back, I think it was in 2020 to move that modernized process for a mine north.

William Oplinger: We made that choice because we recognize that the customized process that we have currently really needed to be modernized and our stakeholders wanted the more modernized process. So the risk that I see is around that permitting process. Now we're doing everything that we can to mitigate that risk. And when we get closer to that time period, we will have line of sight. I can tell you, we are very energized around reducing the time between when we get that permit to go and when we open up the mine face.

William Oplinger: And given the fact that we had some delays in permitting, we're really trying to focus our efforts on making sure that we minimize that time between getting the permit and actually getting box site out of the ground. So Molly, anything you want to add to that?

William Oplinger: But now I'll just add as far as our guidance on the about 45 million impacts that we're currently seeing in the quarter. We have plans to continue to mitigate that number. You saw the first action announced this quarter with Quinana's severance program there. So that will save 10 million. And it's just the first bit of announcement, but we will keep moving through and finding productivity enhancements or portfolio changes to work that number down.

William Oplinger: Hi, thanks. That's helpful. I guess when you talk about, you know, the permits obviously being the key risk, you know, if I remember correctly, there are some, you know, potential issues with proximity to local communities, you know, other, other, you know, major permitting hurdles that you could foresee. I know this is a very kind of generic question, but you know, any more color would be helpful. Thanks.

William Oplinger: The, the, not, not forecasting any issues around the Part 4 process first day, but let me give you color around some of the concessions that we've made in the, in the current process, the current MMP process, which we anticipate to be decided by the end of this year. We've added additional controls for protection of drinking water. We have agreed on distances from mining, mining a certain distance from some of the key reservoirs.

William Oplinger: And we've agreed to accelerating rehabilitation and to increase the biodiversity in the near term on the rehab. So those are the three areas that we have been discussing with the stakeholders and to try to get the current mine approvals through the process. Okay, thanks.

William Oplinger: And then just a quick follow-up on Alamar, if I may. I think the message last quarter there was you'd fix the conveyor issues and, you know, above 60 percent. Have something else gone wrong in the last quarter, or are you still on track from where you were then? Thanks.

William Oplinger: Something big happened in Brazil in the quarter. There was a massive power outage. And if you follow our competitor there, Alunorte had the same issue, Albrus had the same issue. We lost power for close to three and a half hours in the smelter at Alumar. And that has knock on impacts, not only on the smelter, but on the refinery too. Now, thank goodness we had good stability. We had recovered stability going into that.

William Oplinger: We were able to get through that power outage. You know, what happens in a power outage in a smelter is if you stress the pots bringing back, bringing them back online, we lost a few pots. I think we've probably lost close to a dozen pots bringing the plant back online from that power outage. So that was a setback that really is out of the control. It impacted something like two thirds of the country in Brazil.

William Oplinger: And so it was a setback for the plant. They've recovered. They have a daily action plan. It's a daily go-no-go on restarting pots and increasing amperage. And as we said in the prepared remarks, we're at about 65 percent today. Okay, that's super helpful.

Timna Tanners: Thank you.

Timna Tanners: The next question is from Tim the Tanners with Wolf Research. Please go ahead. Yeah, hey, good afternoon. I thought I would pivot a little bit if I could, talking a little bit about some of your strategic initiatives and the cash flows, if I could. So, first off, I just wanted to ask, I know you talked about advances in equilibrium and eco-source, but can you elaborate a bit on the premium that you're garnering there? The premiums are consistent with the premiums that you seek quoted on various sources. So, it depends on the product, but the premiums are anywhere between 10 and 30 dollars a ton.

Timna Tanners: Okay, that's helpful, thanks. And then if we look at your cash balance, I know in the past, you said that you wanted to keep it at or above a billion, and it creeps below that. I know it's not a perfect number, but if we look at the cash sources and use year-to-date, there's not a lot of free cash flow at these commodity prices. Even with the third quarter strong working capital release.

Timna Tanners: And then we had from your investor day, you know, a great amount of initiatives that you're progressing on, I know you referred to them in the beginning as well, like Australia, we're finding the future, et cetera. And I'm just wondering, you know, how do we reconcile, again, this commodity price environment with some of those initiatives and some of the cash needs to source those. So the capex, you know, requirements going forward, are they compatible with this earnings environment?

Timna Tanners: Or how are you thinking about that? Okay, thanks Tim. First of all, thanks for asking me a question. So let me just say on our cash position now, we're at 926 million. We still have access to significant liquidity. We have our underground revolving credit agreement. We have our auxiliary credit line. So those are available to us as needed. As you know, we've taken action in the past, working capital programs to monetize that.

Timna Tanners: We can take more aggressive actions on cost control and portfolio actions. But for us, if I look at kind of the short term cash preservation, it really is focusing on our operations that are consuming more cash than generating. So that is the focus Bill mentioned earlier. We have key sites that we are working to improve. So that's the near term on the cash management. On our capex, you can even see from this year, instead of adding to our capex project list and filling the queue to spend the whole budget, we ended up staying just with the capital plans that were already on the agenda.

Timna Tanners: As they slowed spending, which typically happens, we allowed that just to happen. And so we saved some money on capex. We can do that again with the programs that are in the next queue. And if you look out to our breakthrough technologies, each of those has to meet a certain criteria before they're going to receive funding. Most of those now are pointing towards funding in 2025 and later. So we still have time for those in working through that financing and funding.

Timna Tanners: Got it. So put bluntly then, if the commodity price stays at these levels, you know, no no concerns in terms of proceeding with some of those initiatives, all of this, if they ever find a future, et cetera. But if we started to get into 2025 and didn't see much aluminum price improvement, then it might be needing to rethink some of those capital outlets. Fair Conclusion? Yes, that's fair Timna.

Timna Tanners: Okay, thank you for the help.

Carlos DeAlba: The next question is from Carlos DeAlba with Morgan Stanley. Please go ahead. Yeah, thank you very much.

Carlos DeAlba: Congratulations, Bill. Coming back, coming back to Western Australia. So I just want to understand if you know what might be the potentially the implications of the EPA deciding to do a formal assessment of your MMPs and mining plans, would that result primarily on just a longer approval process, maybe more detail analysis and requirements, or will also result in your higher cost, maybe above or not beyond the 45 that you have, but that would prevent the 45 to completely come back to zero once you are getting into the 2027 mining plan, or those areas in 2027, we better box a quality.

Carlos DeAlba: So Carlos, you can imagine we completely understand what the process is, at least from a legal and a technical perspective going forward. I really hate to speculate on what an assessment would look like, what an assessment would cover, and until we had better insight into the EPA's decision-making process around what they would actually be assessing, it's really hard to answer that question. We're moving forward on the path to, you know, over the next 75 days to ensure that our permits get approved through the process. And that's the focus. If we find ourselves in an assessment part of the process, we'll have to determine what is assessed and what the impact will be at that point, and we'll let you know.

Molly Beerman: All right, okay. And before I ask a question on his melting, just on clarification, maybe Molly, I saw you had guided to around 55 million impact in the third quarter because of the box side issues, increasing from 45 in the second quarter, and so you did better than that, right? And just just to make sure that that is based on the initiatives and the efforts you are doing to control this cost.

Molly Beerman: Yeah, Carlos has actually three things. We did draw on stockpiles that had slightly better quality than we expected during the third quarter. We also see the refineries operating very well with the lower box side quality. And then third, you're right. The mitigation efforts are just starting to drive down costs.

Carlos DeAlba: All right. Thank you, Molly.

William Oplinger: And then finally, is there any update or any comments that you can provide on the situation of your European asmeltors? I mean, a list remains with a third of the capacity to show down. I don't know if there is any renegotiation or upcoming renegotiation of contracts for energy in a list or motion or the matter in island that is relevant given your price out today. So, let's look at them independently. Motions are very well positioned and has a good energy source is probably one of our most profitable plants in the system.

William Oplinger: So, motion is in good shape. However, this new carbon legislation that could be passed in the law in December, I think we've noted the fact that we could have up to $24 million negative in the fourth quarter associated with motion and list based on that new carbon legislation. That type of a change in legislation makes it really difficult to make long-term decisions around investments in places like Norway. So, it's one of the disappointing things that I continue to see out of the Norwegian budgeting system that really makes it hard to determine that you're going to put a lot of capital into an environment where there's not a good structure around carbon or at least a predictable structure around carbon.

William Oplinger: In the case of Lista, Lista slightly different, no plans at this point to potentially restart that idle capacity. Lista, given its size, given its age, given its cost structure, is under a lot of pressure. And so, we revert back to my comments from earlier in the presentation. Lista is an area that we're looking at. It's very similar to Qanana. Every opportunity to try to make that plant more competitive and we need to give in some of the wind that's facing, especially on the carbon side.

William Oplinger: All right, great. In addition, you have also a good contract there. No changes in the short term, right? We have a long-term power contract in Iceland. There is a repricing mechanism that comes up later in the decade, but that's later in the 2027, 2028 timeframe. Thank you very much.

Chris Lafamina: The next question is from Chris Lafamina with Jeffries. Please go ahead. Thanks, Abelle.

Chris Lafamina: Congratulations on the new role and good luck. So, just a question on the WA mining situation. So, if the EPA does an assessment on the 2022 five-year plan, which is, I guess, the one that you're operating under right now, can you continue to mine? So, understand the point about, you know, low grades until 2027, when you move up to my RN Holyoke. But before that, is there a risk that they would, they would basically not allow you to mine because they're reviewing a plan that you're currently operating under?

Chris Lafamina: Do you have confidence that you'd be able to continue to mine under the existing plan? Well, I think that there are a variety of different outcomes that could occur if they go to a full assessment. But, again, as I answered to Carlos, let's see what gets assessed and we will react accordingly. We're confident that we are doing all the right things to avoid either having an assessment or not getting our mine permits approved.

Chris Lafamina: So, we're doing all the right things. We have line of sight to have an answer this quarter, we believe. And if we, you know, depending on that outcome, we will take the road act, and does the decision that the EPA makes as to whether they'll do an assessment get impacted by the concessions that you're offering to make now? Or do they just base it on what the existing plan basically allows you to do? You know, I don't know the answer to that one, so we would need to revert back to you.

Chris Lafamina: Thank you very much. Good luck. Thanks.

Lucas Pipes: And our final question today is a follow-up from Lucas Pipes with B-Rally Securities. Please go ahead. Thank you very much, Operator. Thank you very much for taking my follow-up question. Western Australia again, the 45 million order of magnitude, what sort of savings could you be looking at? I think you noted 10 million at Kalana that would take it down to 43 million or so per quarter going forward. Order of magnitude, how much more could you be looking at? Thank you very much.

Lucas Pipes: Lucas, I don't have the number. Again, these are efforts that we're going to continue to work through. And as they are restructuring our programs that need to be announced, we'll certainly do that. Otherwise, you'll simply see the additional savings work into our outlook as we progress through time. But I can tell you we have dedicated teams on it. They're working very aggressively to identify savings. We've got a great pipeline of opportunities. So I do believe we will have meaningful mitigation to share, but I don't have a number for you today. I appreciate that. Again, best of luck.

Operator: Thank you.

William Oplinger: This concludes our question and answer session.

William Oplinger: I would like to turn to the conference back over to Mr. Oppenner for closing remarks. Thanks for your questions and interest in our company. As you can hear from my comments, it's a true honor to leave this company as we position for long term success. I really believe with Discipline Focus, and you've heard a lot of our talk around Discipline Focus today, we'll build an even stronger company for the future. I look forward to talking to many of you in the fourth quarter results in January and until then, be safe.

Operator: The conference is now concluded.

Operator: Thank you for attending today's presentation.

You may now disconnect.