Q1 2024 Century Aluminum Co Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Century Aluminum Company first quarter of 2024 earnings conference call. All lines have been placed on mute during the presentation.
Ladies and gentlemen, thank keeps stunted by.
Speaker Change: Welcome to the century aluminum company first quarter 2024 earnings conference call all lines have been placed on mute Jennifer Hudson.
Ryan Crawford: Ryan Crawford, Century Aluminum Co. I'm joined here today by Jesse Gary, Century's President and Chief Executive Officer, Jerry Bialek, Executive Vice President and Chief Financial Officer, and Peter Trpkovski, Senior Vice President of Finance and Treasurer. After our prepared comments, we will take your questions. As a reminder, today's presentation is available on our website at www.centuryaluminum.com. We use our website as a means of disclosing material information about the company and for complying with Regulation FD.
Speaker Change: <unk> portion of the call with an opportunity for question and I'm, sorry, I forget if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Now I'd like to hand, the conference call I Bopped wise.
Brian: Brian Please.
Brian: Please go ahead. Thank you operator, good morning, everyone and welcome to the conference call.
Brian: I'm joined here today by Jesse Gary Centurys, President and Chief Executive Officer.
Brian: Jerry Bialek Executive Vice President and Chief Financial Officer.
Brian: Peter Schakowsky senior Vice President of Finance and Treasurer.
Brian: After our prepared comments, we will take your questions.
Brian: As a reminder, today's presentation is available on our website at www dot century aluminum dot com.
Brian: We use our website as a means of disclosing material information about the company and for complying with regulation FD.
Ryan Crawford: Turning to slide one, please take a moment to review the cautionary statements shown here with respect to the forward-looking statements and non-GAAP financial measures contained in today's discussion. And with that, I'll hand the call to Jesse.
Brian: Turning to slide one please take a moment to review the cautionary statements shown here with respect to the forward looking statements and non-GAAP financial measures contained in today's discussion.
Brian: And with that I'll hand, the call to Jesse.
Jesse E. Gary: Thanks, Ryan. And thanks to everyone for joining us. We made lots of progress this quarter with some exciting new initiatives. So I'll start today by quickly reviewing the improving market environment and the strong operating performance needs for our plants. Jerry will then take you through the details of our excellent first quarter results, and then I'll finish with an update on our new U.S. Greenfield smelter project and our recently announced secondary joint venture with MX Holding.
Jesse: Thanks, Ryan and thanks to everyone for joining we made lots of progress this quarter with some exciting new initiatives. So I will start today by quickly reviewing the improving market environment and the strong operating performance for each of our plants.
Jesse: We will then take you through the details of our excellent first quarter results and then I'll finish with an update on our new U S. Greenfield smelter project and our recently announced secondary joint venture with Amex Holdings.
Brian: Overall strong operational performance and declining costs drove adjusted EBITDA $25 million in the first quarter.
Jesse E. Gary: Overall, strong operational performance and declining costs drove Adjusted EBITDA of $25 million in the first quarter. Jerry will give you the full details here, but we are really proud of the job our team did across our locations to operate safely and efficiently across the border.
Brian: Jerry will give you the full details here, but we're really proud of the job our team did across our locations to operate safely and efficiently through the quarter.
Jesse E. Gary: We have seen a real improvement in the safety culture across our plants, which is reflective of strong plant leadership and the commitment that all of our employees have made to operate safely. Turning to slide three, market conditions were broadly balanced in the first quarter before an improving demand picture in the U.S. and Europe, paired with continued strong demand in China, drove LME prices substantially higher in April. This pick-up in demand was evident in regional premiums as well, with the European premium increasing most notably over the course of the quarter to be up nearly 50% from year-end levels.
Brian: We have seen a real improvement in the safety culture across our plants, which is reflective of strong leadership and the commitment that all of our employees have made to operate safely.
Gerald C. Bialek: Turning to slide three Margaret conditions remain broadly balanced in the first quarter before an improving demand picture in the U S and Europe paired with continued strong demand in China drove LNG prices substantially higher in April.
Gerald C. Bialek: This pickup in demand was evident in regional premiums as well with a European premium increasing most notably over the course of the quarter to be up nearly 50% from year end levels aluminum markets also rose during the quarter with Q1 Atlantic alumina prices up about 10% from Q4 levels driven by a supply of supply curtailments in Australia.
Jesse E. Gary: Aluminum markets also rose during the quarter, with Q1 Atlantic aluminum prices up about 10% from Q4 levels, driven by supply curtailments in Australia. In April, spot aluminum prices have followed the LME higher as production disruptions in India and elsewhere have made for a tight market.
Gerald C. Bialek: And April spot aluminum prices have followed me higher as production disruptions in India and elsewhere have made for a tight market.
Jesse E. Gary: In rising aluminum markets like these, we can see most clearly the strategic value of our Jamalco acquisition and the captive supply of high-quality alumina and bauxite that it now provides for our smelters. Combined with our long-term commercial contracts, the Jamalco acquisition makes us roughly net neutral to API pricing as a company. Production at Gemalco also improved through Q1, and I'm pleased to say the refinery returned to profitability in March.
Gerald C. Bialek: And rising aluminum markets like these we can see that most clearly the strategic value of our <unk> acquisition and the captive supply of high quality alumina and bauxite that are now provides for our smelters.
Gerald C. Bialek: Combined with our long term commercial contracts that Jim Alco acquisition makes us roughly net neutral to API pricing as a company.
Gerald C. Bialek: Production at <unk> also improved through Q1, and I'm pleased to say the refinery returned to profitability in March.
Jesse E. Gary: Of course, the team is not resting on this achievement, and we plan to continue to drive additional efficiencies and operational improvement through the balance of the year. Turning to the global trading environment, as you can see on slide four, global inventories remain at post-financial crisis lows, with the vast majority of available metal around the world being comprised of Russian stocks, including over 90% of all LME inventories. Long-term global trends toward near-shoring strategic mineral production, including aluminum, continue to accelerate this month, with new government actions announced in the U.S., U.K., and Mexico that will impact global aluminum flows and supply into our key markets in the U.S. and Europe.
Gerald C. Bialek: Of course, the team is not resting on this achievement and we plan to continue to drive additional efficiencies and operational improvements through the balance of the year.
Gerald C. Bialek: Turning to the global trading environment as you can see on slide four global inventories remain at post financial crisis lows with the vast majority of available metal around the world and comprised of Russian stocks, including over 90% of all <unk> inventories.
Gerald C. Bialek: Long term global trends towards Nearshoring strategic mineral production, including aluminum.
Gerald C. Bialek: To accelerate this month with new government actions announced in the U S U K and Mexico that will impact global aluminum flows and supply into our key markets in the U S and Europe.
Jesse E. Gary: Most broadly, the U.S. and U.K. announced earlier this month new sanctions on Russian aluminum and other metals, including a ban on physical import of Russian metal into the U.S. and U.K. produced after April 13th. The sanctions further restrict the ability of the London Metal Exchange and Chicago Mercantile Exchange to accept delivery of Russian metal into licensed warehouses.
Gerald C. Bialek: Most probably the U S and UK announced earlier this month, new sanctions on Russia, and aluminum and other metals, including a ban on physical imports of Russian metal into the U S and UK produced after April 13th.
Gerald C. Bialek: <unk> further restrict the ability of the London metal exchange and Chicago Mercantile exchange to accept delivery of Russian metal into license warehouses.
Jesse E. Gary: We would like to thank the U.S. and U.K. administrations for taking this necessary action. We firmly believe that this was the right step, and we urge the EU to take action as well to ensure a consistent approach across Western markets. In North America, Mexico announced last week the immediate imposition of new tariffs on a number of industrial goods, including primary aluminum and other aluminum products.
Speaker Change: We'd like to thank the U S and U K administration for taking this necessary action.
Speaker Change: We firmly believe that this was the right step and we urge you to take action as well to ensure a consistent approach across western markets.
Speaker Change: Elsewhere in North America, Mexico announced last week, the immediate imposition of new tariffs on a number of industrial goods, including primary aluminum and other aluminum products.
Jesse E. Gary: The new tariffs, including a 35% duty on P1020, a 20% duty on value-added products, and 25 to 35% duties on aluminum extrusions, will apply to all countries with whom Mexico does not have a free trade agreement, including countries that exported over 700,000 metric tons of P1020 and value-added aluminum products into Mexico last year. While the full details of the program are not yet clear, including the applicability of exemptions and products re-exported from Mexico, the actions are expected to be supportive of U.S. delivery and value-added product premiums.
Gerald C. Bialek: The new tariffs, including a 35% duty on pizza and 20, 20% duty on value added products and 25% to 35% duties on the aluminum extrusion will tie to all countries with whom Mexico does not have a free trade agreement, including countries that export at over 700000 metric tonnes of pizza in 'twenty and valley.
Gerald C. Bialek: You added to aluminum products into Mexico last year.
Gerald C. Bialek: While the full details of the program are not yet clear, including the applicability of exemptions and products re exported from Mexico.
Gerald C. Bialek: Auctions are expected to be supportive of U S delivery and value added product premiums.
Jesse E. Gary: In the U.S., we continue to expect that the pending anti-dumping and countervailing duty trade case against extrusion imports will have a significant positive impact on domestic U.S. bill of demand beginning in the second half of this year. In March, the Department of Commerce granted U.S. extruders an early victory by imposing preliminary duties on the subsidy portion of the case, and in May, we continue to believe that Commerce will also impose additional anti-dumping duties on 14 countries. If so, the duties would go into effect immediately and are expected to add strong support to the U.S. extrusion and billet markets.
Gerald C. Bialek: In the U S. We continue to expect that pending anti dumping and countervailing duty trade case against extrusion imports.
Gerald C. Bialek: Have a significant positive impact on domestic U S billet demand beginning in the second half of this year.
Gerald C. Bialek: In March the Department of Commerce granted U S Extruders and early victory by imposing preliminary duties of the subsidy portion of the case and in May we continue to believe the commerce will also impose additional anti dumping duties and 14 countries.
Gerald C. Bialek: If so the duties would go immediately into effect and are expected to add strong support to the U S extrusion billet markets.
Jesse E. Gary: As a reminder, we did hold back some second half billet volumes for spot sales in anticipation of improving U.S. market conditions and a more constructive pricing environment. Finally, we continue to discuss with the U.S. Treasury Department the potential to add direct and indirect material costs as eligible costs under Section 45X of the Inflation Reduction Act. In late February, I testified at the Joint Treasury and IRS hearing regarding this issue, noting specifically the essential nature of these material costs to aluminum production.
Gerald C. Bialek: As a reminder, we did hold back some second half billet volumes for spot sales in anticipation of improving U S market conditions, and a more constructive pricing environment.
Gerald C. Bialek: Finally, we continue to discuss with the U S. Treasury department, the potential to add direct and indirect material costs as eligible costs under section 40 buybacks of food inflation reduction Act.
Gerald C. Bialek: In late February I testified at the joint Treasury and IRS hearing regarding this issue, noting specifically the essential nature of these material cost to aluminum production or <unk>.
Jesse E. Gary: Our position is in line with testimony and comments submitted from a broad set of industry participants, ranging from critical mineral producers toward downstream customers, including automotive companies seeking to ensure stable domestic supply chains. If direct and indirect material costs are ultimately added as eligible costs, we expect to recognize an additional annual benefit of $50 to $55 million for 2023 and similar amounts for 2024 and going forward. Any increases in future production at our existing or new U.S. smelting sites would also be eligible for the production tax credit and would be expected to increase our annual benefit on a roughly pro rata basis to the amount of increased production.
Gerald C. Bialek: <unk> is in line with testimony comments submitted from a broad set of industry participants ranging from critical mineral producers to our downstream customers, including automotive companies seeking to insurers stable domestic supply chain.
Gerald C. Bialek: If direct and indirect material costs are ultimately added as eligible costs, we'd expect to recognize an additional annual benefit at $50 to $55 million for 2023, and similar amounts for 2024 and going forward.
Gerald C. Bialek: Any increases in future production at our existing or new use smelting sites, but also be eligible for the production tax credit and would be expected to increase our annual benefit on a roughly pro rata basis to the amount of increased production.
Jesse E. Gary: During the operations, we saw strong and stable performance across our smelters in the first quarter, and our Jamalco refinery returned to stable operations and reached profitability in March. In Iceland, the previously announced 20-megawatt energy curtailment didn't drive lower volumes from Grindeltonian in Q1 as expected.
Gerald C. Bialek: Turning to operations with a strong and stable performance across our smelters in the first quarter and our <unk> refinery returned to stable operations and reach profitability in March.
Gerald C. Bialek: In Iceland, the previously announced 20 megawatt energy curtailment didn't drive lower volumes from <unk> in Q1 as expected.
Jesse E. Gary: When the power curtailments were initially announced, they were expected to finish by the end of April, but we now expect that they will continue until the end of May, as ice has continued to experience an abnormally cold spring, leading to lower snowpack melt loss and reservoir levels. This impact is included in our Q2 guide. And better news, the Guru Natangi: we did cast our first billet out of our new green billet cast house earlier this month.
Gerald C. Bialek: And the power Curtailments were initially announced they were expected to the finished by the end of April but we now expect that they will continue until the end of May as iPhone has continued to experience an abnormally cold spring, leading to lower snowpack melt loss and reservoir levels.
Gerald C. Bialek: This impact is included in our Q2 guidance.
Gerald C. Bialek: And better news agreement, we did cast our first bill it out of our new Greenville, a cast house earlier this month we.
Jesse E. Gary: We are now producing trial orders for our European customer base and expect to qualify with our key customers over Q2 and Q3 before ramping production for normal commercial sales in the fourth quarter and beyond. We are very excited to begin supplying this much-needed, natural, low-carbon billet to the European marketplace. Finishing out the energy picture, energy prices in the U.S. continue to be constructive, driven by a moderate spring and natural gas prices below $2.
Gerald C. Bialek: We're now producing trial orders for our European customer base and expect to qualify with our key customers over Q2, and Q3 before ramping production for normal commercial sales in the fourth quarter and beyond.
Gerald C. Bialek: We are very excited to begin supplying much needed natural low carbon bill it into the European marketplace.
Gerald C. Bialek: Finishing out the energy picture energy prices in the U S continued to be constructive driven by a moderate spring and natural gas prices below $2.
Jesse E. Gary: Given the continued constructive energy markets and recent uptick in the LME, we did make the decision to de-risk our Seabreeze energy exposure a bit and hedge forward a small portion of Seabreeze's power price exposure, as well as a corresponding amount of metal price exposure over the next 12 months. On the raw material side, we have finally begun to see many of our raw material imports reach pre-pandemic price levels, with Coke and Cossack soda prices both falling below $400 per metric ton.
Gerald C. Bialek: Given the continued constructive energy markets and recent uptick in <unk>, we did make the decision to de risk our CVA energy exposure a bit and hedge forward a small portion of the <unk> power price exposure as well as a corresponding amount of metal price exposure over the next 12 months.
Gerald C. Bialek: On the raw materials side, we have finally begun to see many of our raw material imports reached pre pandemic price levels with coke and caustic soda prices, both falling below $400 per metric ton.
Jesse E. Gary: Due to our contractual and physical inventory lags, the benefits of these price decreases will take some time to roll through our results, which Sherry will give you a bit of more detail on in a bit. Finally, at Mount Holly, we made good progress during the quarter towards completing the necessary engineering and procurement plans to enable the potential restart of the remaining 25% of production that is not operating today. As we've discussed before, our experience with these restart projects is that it is best to be thorough in the planning stage rather than to rush the restart and potentially create operational and cost issues down the line.
Gerald C. Bialek: Due to our contractual and physical inventory lags the benefits of these price decreases will take some time to roll through our results with Sherry will give you a bit of a more detail onto this.
Gerald C. Bialek: Finally at Mount Holly, we made good progress during the quarter towards completing the necessary engineering and procurement plans to enable the potential restart of the remaining 25% of production that's not operating today.
Gerald C. Bialek: As we've discussed before our experience with these research projects.
Gerald C. Bialek: It's best to be thorough in the planning stage, rather than to rush, the restart and potentially create operational and cost issues down the line.
Jesse E. Gary: We are hopeful that we will have additional updates for you on our 2-2 call later this summer, but we do not expect that we will have any significant capital or cash requirements for the restart over the course of 2024. Gary, we'll now walk you through the quarter and our Q2 outlook. Thank you, Jesse.
Gerald C. Bialek: We are hopeful that we will have additional updates for you on our Q2 call later this summer right.
Gerald C. Bialek: We do not expect that we will have any significant capital or cash requirements for the restart over the course of 2024.
Gerald C. Bialek: Barry will now walk you through the quarter and our Q2 outlook.
Gerald C. Bialek: Let's turn to slide seven to review first quarter results. On a consolidated basis, first quarter global shipments were approximately 175,000 tons, up slightly from the prior quarter despite the power curtailments in ice. Realized prices, however, decreased versus the prior quarter due to lower value-added and regional delivery premiums, resulting in net sales of $490 million, a 4% decrease sequentially. Looking at Q1 Operating Results, Jefty Bida was attributable to Century with $25 million. This was a sequential decrease of $32 million, primarily driven by the recognition of the full year 2023 IRA Section 45X credit during the fourth quarter, compared with one quarter of 2024 credit recorded in the current period.
Barry: Thank you Jesse let's turn to slide seven to review first quarter results.
Barry: On a consolidated basis first quarter global shipments were approximately 175000 tons up slightly from prior quarter. Despite the power curtailments in Iceland.
Barry: <unk> prices however.
Barry: Decreased versus prior quarter due to lower value added and regional delivery premiums, resulting in net sales of $490 million, a 4% decrease sequentially.
Barry: Looking at Q1 operating results adjusted EBITDA attributable to century with $25 million.
Barry: This was a sequential decrease of $32 million primarily.
Barry: Primarily driven by the recognition of the full year of 2023 IRA section 45 ex credit during the fourth quarter compared with one quarter of 2024 credit recorded in the current period.
Gerald C. Bialek: Normalizing for the timing of the recognition of the Section 45x benefit in the prior quarter, adjusted EBITDA improved due to lower energy and raw material costs, which were partially offset by the anticipated lower value-added product premiums. During the period, we finalized purchase accounting for the Jamaco acquisition and recorded a bargaining purchase gain of $246 million. Adjusted net loss was $3 million, or $0.03 per share.
Barry: Normalizing for the timing of the recognition of the section 45 X benefit in the prior quarter adjusted EBITDA improved due to lower energy and raw material costs, which were partially offset by the anticipated lower value added product premiums.
Barry: During the period, we finalized purchase accounting for the <unk> acquisition and recorded a bargain purchase gain of $246 million.
Barry: Adjusted net loss was $3 million or <unk> <unk> per share.
Gerald C. Bialek: The main adjusting item is the deduction of $246 million related to the bargain purchase gain. As a result of finalizing purchase accounting, we have now updated our 2024 outlook for depreciation and amortization to between $100 and $110 million for the year, as you can see on slide 19. We maintain strong liquidity of $302 million at the end of the quarter, consisting of $93 million in cash and $209 million available on our credit facility.
Barry: The main adjusting item is the deduction of $246 million related to the bargain purchase gain.
Barry: As a result of finalizing purchase accounting, we have now updated our 2020 for outlook for depreciation and amortization to between 101 hundred $10 million for the year as you can see on slide 19.
Barry: We maintained strong liquidity of $302 million at the end of the quarter, consisting of $93 million in cash and $209 million available on our credit facilities.
Gerald C. Bialek: Now turn to slide 8 to explain first quarter sequential improvement in adjusted EBITDA on a normalized basis. In total, Jeff did EBITDA for the first quarter with $25 million, realized LME of $2,190 per ton was up $8 versus the prior quarter, while realized US Midwest premium of $409 per ton was down $16, and European delivery premium of $223 per ton was down $57. Together, the LME and delivery premiums amounted to a $4 million headwind in the quarter.
Barry: Now turning to slide eight to explain first quarter sequential improvement in adjusted EBITDA on a normalized basis in.
Barry: In total adjusted EBITDA for the first quarter was $25 million.
Barry: Realized <unk> of $2190 per ton was up $8 versus prior quarter, while realized U S. Midwest premium of $409 per ton was down $16 and European delivery premiums are up $223 per ton was down $57.
Barry: Together, <unk> and delivery premiums amounted to a $4 million headwind in the quarter.
Gerald C. Bialek: Power costs decreased by $4 million. Realized cold prices decreased $71 per ton, and realized pitch prices decreased $163 per ton. Together, raw material costs resulted in a $13 million improvement in EBITDA. Lower value-added premiums created a headwind of $9 million.
Barry: Power costs decreased by $4 million.
Barry: Realized copper prices decreased $71 per ton and realized pitch prices decreased $163 per ton.
Barry: Together raw material costs resulted in a $13 million improvement in EBITDA.
Barry: Lower value added premiums created a headwind of $9 million Opex was $9 million better than prior period.
Gerald C. Bialek: OPEX was $9 million better than the prior period, including the OPEX efficiencies we identified in last quarter's outlook, and in addition, some deferred pot relining expense related to the Iceland power curtailment that will now be incurred in the second quarter. With that, let's turn to slide nine for a look at cash flow. We began the quarter with $89 million in cash.
Barry: <unk> the Opex efficiencies, we identified in last quarter's outlook and in addition, some deferred pot realigning expense related to the excellent power curtailment that will now be incurred in the second quarter.
Gerald C. Bialek: Adjusted EBITDA contributed $25 million. Capital expenditures totaled $30 million, $17 million of which relates to the Grunder-Tongey Caft House project. We increased short-term borrowings to fund normal working capital flows, as I pointed out last quarter. At the end of quarter one, we had $93 million in cash. Let's turn to slide 10, and I'll give you some insight into our expectations for the second quarter of 2024. For Q2, the lagged LME price of $2,265 per ton is expected to be up about $75 versus Q1 realized prices. The Q2 lagged US Midwest premium is forecast to be $417 per ton, up $8.
Barry: With that let's turn to slide nine for a look at cash flow.
Barry: We began the quarter with $89 million in cash.
Barry: Adjusted EBITDA contributed $25 million.
Barry: Capital expenditures totaled $30 million $17 million of which relates to the <unk> project. We increased short term borrowings to fund normal working capital flows as I pointed out last quarter.
Barry: At the end of quarter, one we had $93 million in cash.
Gerald C. Bialek: The European delivery premium is expected to be $270 per ton, or up about $47 per ton versus the first quarter. Taken together, the LME and delivery premium changes are expected to increase Q2 EBITDA by approximately $15 million versus Q1 levels. We expect power prices to be in a range between flat and a $5 million benefit. Collectively, we expect our key raw materials to be about flat. We expect volume to be flat to a slight headwind given normal summer seasonality at our U.S. smelters. Finally, we expect a headwind of about $10 million related to pot relining expenses deferred from Q1 because of the power curtailment in Iceland.
Speaker Change: Let's turn to slide 10, and I'll give you some insight into our expectations for the second quarter 2024.
Barry: For Q2, the lagged <unk> of $2265 per ton is expected to be up about $75 versus Q1 realized prices.
Barry: The Q2 lagged U S. Midwest premium is forecast to be $417 per ton up $8.
Barry: The European delivery premium is expected at $270 per ton are up about $47 per ton versus the first quarter.
Barry: Taken together, the <unk> and delivery premium changes are expected to increase Q2, EBITDA by approximately $15 million versus Q1 levels.
Barry: We expect power prices to be in a range between flat to a $5 million benefit <unk>.
Barry: Collectively we expect our key raw materials to be about flat.
Barry: We expect volume to be flat to a slight headwind given normal summer seasonality other U S smelters.
Barry: Finally, we expect a headwind of about $10 million related to realigning expense deferred from Q1 because of the power curtailment in Iceland.
Gerald C. Bialek: All factors considered, our outlook for Q2 Adjusted EBITDA is expected to be in a range of between $25 to $35 million. I want to take a moment to demonstrate the earnings potential of the business under current market conditions. As we have discussed, historically, rising LME prices take time to roll through our results due to contractual lags with our customers. If we were simply to adjust the outlook range to current LME spot prices only, the business could generate $75 to $85 million of quarterly adjusted EBITDA.
Barry: All factors considered our outlook for Q2, adjusted EBITDA is expected to be in a range of between $25 million to $35 million.
Speaker Change: I want to take a moment to demonstrate the earnings potential of the business at current market conditions as.
Barry: As we have discussed historically rising LNG prices take time to roll through our results due to contractual lags with our customers.
Barry: If we were simply to adjust the outlook range to current LNG spot prices only the business could generate $75 million to $85 million of quarterly adjusted EBITDA and improvements in regional and value added premiums would add additional upside.
Jesse E. Gary: And improvements in regional and value-added premiums would add additional upside. The work that we've done to stabilize operations and drive efficiencies, along with favorable market conditions, provides exciting opportunities for the business. Now, I'll turn the call back over to Jesse.
Barry: The work that we've done to stabilize operations and drive efficiencies along with favorable market conditions provide exciting opportunities for the business.
Barry: And now I'll turn the call back over to Jesse.
Jesse E. Gary: Thanks, Jerry. Turning to slide 11, I'm pleased to present our two new exciting growth projects that we announced this quarter. One of our core strategies at Century is to capitalize on our position as the largest producer of primary aluminum in the U.S. market, which is the shortest market for aluminum in the world. Our production footprint in the U.S. is close to our customer base, allowing us to offer unmatched flexibility and service to our customers, while benefiting from strong regional premiums and long-term trends toward nearshoring supply chains and critical mineral production. Both Seabury and Mount Holly are well-known in the marketplace as Tier 1 suppliers of billets and other value-added products.
Jesse: Thanks, Gary.
Jesse: Turning to slide 11, I am pleased to present, our two new exciting growth projects that we announced this quarter.
Jesse: One of our core strategies at century is to capitalize on our position as the largest producer of primary aluminum in the U S market.
Jesse: It is the shortest market for aluminum in the world.
Jesse: Our production footprint in the U S. It's close to our customer base, allowing us to offer unmatched flexibility and service to our customers, while benefiting from strong regional premiums and long term trends towards nearshoring supply chains and critical mineral production.
Jesse: Both sebree and Mt. Holly are well known in the marketplace as tier one suppliers of billets and other value added products.
Jesse E. Gary: Demand for aluminum products in the U.S. has continued to grow as long-term trends toward renewable energy and electrification call for increasing amounts of advanced aluminum alloys and green aluminum products. And in order to capitalize on these trends, we've looked for ways to build on our leading position and meet this ever-increasing demand from our customer base. Turning to slide 12, the first of those opportunities is to make a more substantial foray into secondary aluminum production.
Jesse: Demand for aluminum products in the U S has continued to grow as long term trends towards the renewable energy and electrification call for increasing amounts of advanced aluminum alloys, and rina aluminum products.
Jesse: And in order to capitalize on these trends we have looked for ways to build on our leading position and meet this ever increasing demand from our customer base.
Jesse: Turning to slide 12, the first of those opportunities is to make a more substantial foray into secondary aluminum production.
Jesse E. Gary: This has long been a priority for us, and as we've discussed in the past, we've engaged in some small amounts of secondary production in our existing U.S. cast house. Through this experience, we were able to engage with our customers and see the growing demand for green recycled fillet production in the U.S. Given the differences in supply chain and operational expertise necessary to build and operate a secondary cast house, we quickly realized finding a partner with experience in this space would be key to successfully entering this new line of business.
Jesse: This has long been a priority for us and as we've discussed in the past we are engaged in some small amounts of secondary production in our existing U S cast houses.
Jesse: Through this experience, we were able to engage with our customers and see the growing demand for green recycled pellet production in the U S.
Jesse: Given the differences in supply chain and operational expertise necessary to build and operate a secondary cast house, we quickly realized finding a partner with experience in this space will be key to successfully entering this new line of business.
Jesse E. Gary: And, as we announced in March, we were thrilled to find the perfect partner in MX Holdings, a long-time operator of secondary cast houses, scrap procurement, and trading businesses in the U.S. MxWelding's strategy and expertise complement our own, and we have quickly found that the two organizations share a common set of values and people-centric culture. Together with MX, we are far advanced in our plans to construct a new 250 million pound secondary billet cast house in the Ohio Valley region.
And as we announced in March we were thrilled to find the perfect partner and Amex Holdings, a longtime operator of secondary cast houses scrap procurement and trading businesses in the U S.
Jesse: Cemex holdings strategy and expertise complement our own and we quickly found that the two organizations share a common set of values and people centric culture.
Jesse E. Gary: Together with Amex, we're far advanced in our plans to construct a new 250 million pounds secondary billet capitals in the Ohio Valley region.
Jesse E. Gary: The cast-off is being designed with cutting-edge casting and post-consumer scrap processing equipment. When paired with our combined advanced technical expertise, the billet produced by the joint venture will deliver exceptional quality and performance and enable our customers to achieve their sustainability objectives for next-generation extrusion products. Engineering work and supply chain planning is near completion, and we expect to be in a position to make the final investment decisions in the third quarter. Upon completion in 2026, the cast house would be the largest American-owned secondary billet cast house.
Jesse: The cat stuff is being designed with cutting edge casting post consumer scrap processing equipment.
Jesse: When paired with our combined advanced technical expertise that were produced by the joint venture will deliver exceptional quality and performance and enable our customers to achieve their sustainability objectives for next generation extrusion products.
Jesse: Engineering work and supply chain planning is near completion, and we expect to be in a position to make the final investment decisions in the third quarter.
Jesse E. Gary: On completion in 2026, the cat's out would be the largest American owned secondary billet cast house.
Jesse E. Gary: The joint venture will be complementary to our smelters by offering our existing extrusion customers a complete suite of primary and secondary value-added products, as well as the potential for a closed-loop supply chain solution through scrap tolling arrangements. We expect we'll be able to provide you with more details on those projects on our Q2 call in August. Okay, turning to page 13, we were thrilled to announce late last month our plan to build a new state-of-the-art green aluminum smelter here in the U.S.
Jesse E. Gary: The joint venture will be complementary to our smelters by offering our existing extrusion customers a complete suite of primary and secondary value added products as well as the potential for a closed loop supply chain solution through scrap tolling arrangements.
Jesse E. Gary: We expect we will be able to provide you with more details on those projects on our Q2 call in August.
Jesse E. Gary: The Green Aluminum Smelter Project would nearly double the size of the existing U.S. industry and build on our leading market position to fulfill the ever-growing strategic need for a secure domestic U.S. supplier of low-carbon primary aluminum alloys and value-added products. The new green aluminum smelter would provide our U.S. customer base with a secure domestic source of low-carbon and military-grade primary aluminum, as well as a full suite of value-added products produced with best-in-class technology.
Jesse: Okay, turning to page 13, we were thrilled to announce late last month, our plan to build a new state of the art Green aluminum smelter here in the U S.
Jesse: The green aluminum smelter project will nearly double the size of the existing U S industry and build on our leading market position to fulfill the ever growing strategic need for secure domestic U S supplier of low carbon primary aluminum alloys and value added products.
Jesse: The new Green aluminum smelter would provide our U S customer base with the secured domestic source of low carbon and military grade primary aluminum as well as a full suite of value added products produced with best in class technology.
Jesse E. Gary: We've been working on this project for quite some time, and we're extremely proud and grateful to have been selected by the U.S. Department of Energy to receive up to $500 million in funding as part of the Industrial Demonstrations Program. The selection process for the DOE grant was extremely competitive.
Jesse: We've been working on this project for quite some time and we're extremely proud and grateful to be selected by the U S Department of energy to receive up to $500 million in funding as part of the industrial demonstration programs.
Jesse E. Gary: The selection process for the Doe Grant was extremely competitive.
Jesse E. Gary: And for our project to be selected for this historic investment is confirmation of both the strategic need for domestic primary aluminum production and the viability of the project. Combined with the Section 45X production tax credits, this generous grant from DOE shows the significant commitment that the Biden administration has made to ensuring that this critical industry and its workers will be producing the strategic metal in the US long into the future. I'd also like to thank Dave McCall and our colleagues at the United Steelworkers for their help and shared commitment towards making this project a reality. The Green Aluminum Smelter is expected to create more than 1,000 full-time direct jobs represented by the United Steelworkers and over 5,500 construction jobs.
Jesse: And for our project to be selected for this historic investment as confirmation of both the strategic need for domestic primary aluminum production and the viability of the project.
Jesse: Combined with the section 45 X production tax credits, that's generous grant from Doe shows a significant commitment that the by the administration has made to ensuring that this critical industry and its workers will be producing the strategic metal in the U S long into the future.
Speaker Change: I'd also like to thank Dave in the call and our colleagues in the United Steelworkers for their help and shared commitment towards making this project a reality.
Jesse E. Gary: The green aluminum smelter is expected to create more than 1000 full time direct jobs represented by the United Steelworkers and over 5500 construction jobs.
Jesse E. Gary: Of course, this new aluminum smelter is a tremendous undertaking and one that will take years to complete. As detailed in our announcement of the project, we've already begun engineering work, energy procurement, and site selection, focused on the Ohio and Mississippi River Valleys, and have narrowed the potential location of the smelter to three states. Our next immediate steps on the project will be completion of the site selection and energy supply negotiations, finalization with the Department of Energy regarding the terms and timing of the $500 million grant, and completion of our second phase of engineering work.
Jesse E. Gary: Of course, this new aluminum smelters are tremendous undertaking and one that will take years to complete.
Speaker Change: As detailed on our announcement of the project, we have already begun engineering work energy procurement and site selection focus on the Ohio, and Mississippi River valleys and have narrowed the potential location of the smelter three states.
Speaker Change: Our next immediate steps on the project will be completion of the site selection and energies client negotiations.
Speaker Change: Finalization with the department of energy regarding the terms and timing of the $500 million Grant.
Speaker Change: And completion of our second phase of engineering work.
Jesse E. Gary: We expect to make significant progress on each of these initiatives over the next several months, and we'll provide updates on each on our next call. I can't tell you how proud we are to be announcing these two projects and helping to ensure the future of the U.S. aluminum industry. We look forward to your questions today, and we'll turn the call over now to the operator. Thank you. If you'd like to register a question, please press start followed by one on your telephone keypad, ensuring that you are unmuted locally. If you'd like to withdraw your question at any time, you can do so by pressing start followed by one.
Speaker Change: We expect to make significant progress on each of these initiatives over the next several months and will provide updates on each on our next call.
Speaker Change: I can't tell you how proud we are to be announcing these two projects and helping to ensure the future of the U S aluminum industry.
Jesse E. Gary: We look forward to your questions today, and we'll turn the call over now to the operator.
Jesse E. Gary: Thank you if you'd like to register a question. Please press star followed by one on your telephone keypad, ensuring you are on mute locally.
Jesse E. Gary: He'd like to withdraw your question at any time, you can do SIFI question Scott.
Speaker Change: Okay.
Operator: The first question comes from the line of Lucas Pipes of B Riley Securities. Your line is now open, please go ahead. Thank you very much, operator. Good morning, everyone, and congratulations on your progress on many fronts.
Speaker Change: The first question comes from the line of Lucas pipes with B Riley Securities. Your line is now open. Please go ahead.
Lucas Nathaniel Pipes: Thank you very much operator, good morning, everyone and congratulations on your.
Jesse E. Gary: One of them is starting production in Iceland with the Cast House, and it sounds like you'll be ramping up over the course of this year. In Q2, I would imagine you're probably still losing money as you ramp up, and I wondered if you could maybe articulate that so I can fine-tune my model and get a better sense for the impact, especially as the facility ramps up. Thank you.
Lucas Nathaniel Pipes: Progress on many many fronts.
Lucas Nathaniel Pipes: Fronts.
Lucas Nathaniel Pipes: One of them is.
Lucas Nathaniel Pipes: Starting production in Iceland, with the cast house and.
Lucas Nathaniel Pipes: It sounds like you'll be ramping up over the course of this year.
Jesse E. Gary: In Q2, I would imagine you're probably still losing money as you ramp up and I wondered if you could maybe articulate that so I can find to my modeling and get a better sense for it.
Jesse E. Gary: The impact, especially as the facility ramps. Thank you.
Jesse E. Gary: Thanks for the question. You're right that in Q2 and Q3, the cast volumes will be fairly limited, mainly consisting of trial loads for our customer base in Europe. And so most of those...
Speaker Change: Sure Lucas.
Speaker Change: Thanks for the question.
Speaker Change: Youre right that over Q2, and Q3, the capsid volumes will be fairly limited, mainly consisting of trial loads for our customer base in Europe.
Jesse Gary: And so both of those.
Jesse E. Gary: Volumes will come over the course of Q2, sent into Europe where they'll be trialed over Q2 and Q3, and then you'll actually start to see the volumes ramp up in Q4, as we mentioned, and should be going full out in Q1. In terms of the cost structure, that'll all be included in the guidance that we gave, so there won't be anything incremental to that. It won't be significant over that period, and then you'll start to see the additional upside for the business of those billet sales starting to hit in Q4 and then full out in Q1 of 25.
Lucas: Volumes will come over the course of Q2 so.
Jesse E. Gary: And then into Europe, where there'll be trialed over Q2 and Q3.
Jesse E. Gary: And then you'll actually start to see the volumes ramp in Q4, as we mentioned and should be going full out in Q1.
Jesse E. Gary: In terms of the cost structure and that will all be included in the guidance that we gave so there won't be anything incremental to that.
Lucas: It won't be significant and over that period, and then youll start to see the <unk>.
Lucas: Additional upside for the business of those billet sales starting to hit in Q4, and then full out in Q1 of 'twenty five.
Jesse E. Gary: Got it. So the big step up would come not in Q3, it's really kind of in Q4 versus Q3 where we would see that kind of quarter over quarter step up in EBITDA thanks to this asset. That's correct, Lucas.
Speaker Change: Got it.
Lucas: <unk> step up would come not from not in Q3, it's really kind of in Q4 versus Q3, but we would see that that.
Jesse E. Gary: Kind of quarter over quarter.
Lucas: Step up in in an EBITA, thanks to two to this asset.
Lucas: That's correct Lucas.
Jesse E. Gary: There will be some sales in Q2 and Q3, but those are really pretty, pretty small, and really just trial loads into the customers. Any way to quantify the potential impact in Q4 versus Q3? We'll of course give that guidance on our Q3 call. What I would just say for now is... There will still be a ramp-up period in Q4 as you start to sell into that customer base. So it won't be the full quarter's worth of volume that will hit in Q1 or 25, but it will be substantially higher than what you'll see in Q2 and Q3. I appreciate that. Thank you.
Jesse E. Gary: There'll be some sales into Q3, but those are really pretty pretty small and really just trial loads into the customers.
Lucas: Any way to quantify the potential impact in Q4 versus Q3.
Lucas: Okay.
Speaker Change: We will of course give that guidance on our Q3 call.
Jesse E. Gary: What I would just say for now is.
Jesse E. Gary: There will still be a ramp up period in Q4.
Jesse E. Gary: As you start to sell into that customer base.
Speaker Change: So it won't be the full out a quarter's worth of volume that will hit in Q1 of 25, but it will be substantially higher than what youll see in Q2 and Q3.
Speaker Change: Sure.
Jesse E. Gary:
Jesse E. Gary: Yes.
Jesse E. Gary: And then on the projects you outlined in the U.S., first, congratulations on that. Very exciting on many different levels. On the new cast house, uh, it sounds like it would, if I read it right, we'll start in 2026. And I wondered if you could maybe give us a sense for the economics around that project. What is the capital intensity? How would spending be paced?
Jesse E. Gary: I.
Speaker Change: Great. Thank you and then on.
Jesse E. Gary: On your new.
Jesse E. Gary: On the projects you're outlining.
Jesse E. Gary: In the U S first congratulations on on that very exciting on many different levels.
Jesse E. Gary: On the new cast house.
Jesse E. Gary: It sounds like.
Jesse E. Gary: If I read it right will start in 2026.
Jesse Gary: And I wondered if you could maybe give us a.
Jesse E. Gary: Since for the economics around that project.
Jesse E. Gary: What's the capital intensity how would.
Jesse E. Gary: Spending.
Jesse E. Gary: over the next two years, and anything you could share on the return thresholds would be very helpful. Thank you.
Jesse E. Gary: Base.
Jesse E. Gary: Over the next next two years and anything you could share on the return thresholds would be would be very helpful. Thank you.
Jesse E. Gary: Yeah, you're right; we're really excited about this project. We've been talking for a long time about our aspirations to enter this portion of the business, and we're indeed seeing a lot of increased demand for secondary aluminum, both here in the U.S. and also in Europe and elsewhere. So it's a really good opportunity for us to enter the space, and we think it's going to be very well received by the market. And as I mentioned, it's actually very complementary to our existing billet business in the U.S. because we are able to offer closed-loop supply chains to our existing billet customers, and we'll be able to offer sort of that full suite of both primary and secondary products to the customer base.
Speaker Change: Sure sure, Yes, you're right, we're really excited about this project.
Jesse E. Gary: <unk> been talking for a long time about our aspirations to enter this portion of the business.
Jesse E. Gary: And we are indeed, seeing a lot of increased demand.
Jesse E. Gary: For secondary aluminum both here in the U S.
Jesse E. Gary: And also in Europe and elsewhere. So it's a really good opportunity for us to to enter the space.
Jesse E. Gary: We think it's going to be very well received by the market and as I mentioned, it's actually very complementary to our existing biller business in the U S. Because we are able to offer closed loop supply chains to our existing builder customers and we will be able to offer that sort of that full suite of both primary and secondary products.
Jesse E. Gary: All the.
Jesse E. Gary: The customer base.
Jesse E. Gary: So we do expect that we'll be in a position to make an investment decision, hopefully, in Q2 and Q3, and once we do make that decision, we will provide everyone with an update on exactly what the project looks like and what the expected returns are at that time. We are continuing to sort of finalize the engineering work, as I mentioned, on the project, working with our partner at Med-X on that, but we're really far advanced on this one and excited about it. I think it's going to be a good project. Just in terms of a very high level on the spending profile and return profiles.
Jesse E. Gary: So we do expect that we'll be in a position to make an investment decision hopefully in.
Jesse E. Gary: In Q2 and Q3.
Jesse E. Gary: And once we do make that decision we will provide everyone with an update on exactly what the project looks like.
Jesse E. Gary: And what the expected returns are at that time, we are continuing to sort of finalize the engineering work as I mentioned on the project working with our partner at <unk>.
Jesse E. Gary: On that but we're really far advanced on this one.
Jesse E. Gary: And excited about it I think it's I think it's going to be good project.
Jesse E. Gary: Just in terms of very high level on spending profile and return profiles.
Jesse E. Gary: [inaudible] We do think this will be an asset that we're able to secure some pretty attractive financing on. And then, of course, it is a joint venture, 5149 with us on the small minority side. And so that will decrease the cash requirements from our side. And we think with the financing structures we're looking at, we shouldn't have much cash requirements for the project over the balance of 2024. So that gives you a little bit of sense on the timing.
Jesse E. Gary: Okay.
Jesse E. Gary: We do think this will be an asset that we're able to secure some pretty attractive financing on and then of course it is a joint venture.
Jesse E. Gary: 149.
Jesse E. Gary: With us on the small minority side.
Jesse E. Gary: And so that will decrease the cash requirements from our side and we think with the financing structures. We're looking at.
Jesse E. Gary: We shouldnt have.
Jesse E. Gary: <unk> much cash requirements to the project over the balance of 2024.
Jesse E. Gary: That gives me a little bit of sense on the timing more course give more detail there going forward.
Jesse E. Gary: We'll, of course, give more detail there going forward. And then, in terms of return, we talked a little bit, without getting into specifics, we haven't finalized engineering work on the project, but we've talked a little bit about our return requirements in the past when we were talking about the ISN cast house. And just remember there, we said, we're looking for unlevered IRRs in the mid-teens
Jesse E. Gary: And then in terms of return perspective, we talked a little bit without getting into specifics, we havent finalized engineering work on the project, but we've talked a little bit about our return requirements in the past.
Jesse E. Gary: When we were talking about the ice and cast house and just remember there. We said we are looking for Unlevered IRR is in the mid teens.
Jesse E. Gary: And so that gives you some sense of how we look at these projects going forward.
Jesse E. Gary: And then finally, just, you know, one other consideration that we really like about this business and is complementary to the rest of our business is the secondary business is really LME independent because you're purchasing scrap at a discount to LME prices in the marketplace and then converting it and selling it at LME prices to your customer base. So it's really becoming a processing and margin business, which will be independent from the rest of our business, which is LME exposed. Very helpful. Thank you for that. And just to follow up on the financing. Should I expect the vast majority of the capital? A project level loan of either secured or unsecured.
Jesse E. Gary: And then finally, just one other consideration that we really liked about this business is complementary to the rest of our business.
Jesse E. Gary: As the secondary business is really only independent because you're producing scrap at a discount to <unk> in the marketplace, and then converting that and selling it.
Jesse E. Gary: LNG prices to your customer base. So, it's really becomes the processing and margin business, which will be independent from the rest of our business which is exposed.
Jesse E. Gary: Yes.
Speaker Change: Very helpful. Thank you for that and just to follow up on the financing.
Jesse E. Gary: Should it should I expect.
Jesse E. Gary: The vast majority of.
Jesse E. Gary: The capital.
Jesse E. Gary: The project level.
Jesse E. Gary: Loan either secured or unsecured.
Jesse E. Gary: Yes, we do expect that this will be project-level financing. All right, I have more questions but really appreciate all the colors so far, and I'll turn it over. Thank you and best of luck. Thanks, Lucas. The next question comes from Katja Jancic of BMO Capital Markets. Your line is now open, please go ahead.
Speaker Change: Yes, we do expect that this will be project level financing.
Jesse E. Gary: Alright.
Katja Jancic: More questions, but really appreciate all the color so far and I'll turn it over thank you and best of luck.
Katja Jancic: Thanks Lucas.
Jesse E. Gary: [laughter].
Katja Jancic: The next question comes from Jeff.
Katja Jancic: Johnson of BMO capital markets. Your line is now open. Please go ahead.
Operator: Hi, thank you for taking my question. On the green aluminum smelter, can you talk a bit about how much you think this smelter would cost in total? I have you.
Katja Jancic: Hi, Thank you for taking my questions.
Katja Jancic: The green aluminum smelter can you talk a bit about how much you think this smelter with costs in total.
Jesse E. Gary: Thanks. Yes, as I said on the call, we're really excited about the green smelter. You know, this has been, for someone who's worked in the U.S. industry for over 15 years, really rewarding to be talking about growth. And when you look at the overall supply situation in the U.S., which is over 4 million tons short, it's very clear that something like this is needed. And I think the grant that we got from DOE is really recognition that this is recognized all the way up to the national and federal level.
Katja Jancic: Gotcha. Thanks.
Jesse E. Gary: Yes.
Jesse E. Gary: On the call, we're really excited about the green smelter.
Jesse E. Gary: This is Ben for someone who has worked in the U S industry for over 15 years, it's really rewarding to be talking about growth.
Jesse E. Gary: And when you look at the overall supply situation in the U S. So over 4 million tonnes short, it's very clear that something like this as needed.
Jesse E. Gary: And I think the grant that we got from Doa has really recognition and Thats recognized all the way up.
Jesse E. Gary: Two the national and federal level.
Jesse E. Gary: You know, aluminum is a critical mineral to the supply chain. In terms of the process going forward for the smelter, and to your question specifically, Katja, we are focused on the process ahead of us. As I mentioned on the call, a portion of that in the near term will be site selection and also securing the energy contract. We're pretty far advanced on that front, so we expect to make good progress there.
Jesse E. Gary: So the aluminum was a critical minerals.
Jesse E. Gary: The supply chain.
Jesse E. Gary: In terms of the process going forward for the smelter and to your question specifically gotcha.
Jesse E. Gary: We are focused on the process ahead of us as I mentioned on the call.
Jesse E. Gary: And of that in the near term will be site selection.
Jesse E. Gary: And also securing the energy contract, we're pretty far advanced on that front and.
Jesse E. Gary: So we expect to make good progress there and then as a part of that is really finishing the second phase of the engineering work for the progress for the project.
Jesse E. Gary: And then as a part of that is really finishing the second phase of the engineering work for the project, and that will take several months to complete. Coming out of that engineering work, we'll have a much better sense of and narrow down on what the total capital costs for the projects will be. And hopefully, at that time, we'll be able to give you a little bit better sense.
Jesse E. Gary: That will take several months.
Jesse E. Gary: To complete coming out of that as an engineering work will have a much better sense and narrow down on what the total capital cost for the projects will be and hopefully at that time, we'll be able to give you a little bit better sense, but at the moment. We're really just focused on the process of moving the project forward.
Jesse E. Gary: But at the moment, we're really just focused on the process of moving the project forward. We're really excited about it. We think it's going to have very attractive returns. And obviously, we find ourselves in this environment with the DOE grant, with the 45x benefits, with the shortness of the US market, and the corresponding premiums that we're able to recognize in the US. And this real opportunity to put a cutting-edge facility here in the US close to our customer bases with the flexibility that we offer them from our existing cash house of value-added products close to them, we think it's a really attractive opportunity for us.
Jesse E. Gary: We're really excited about the project, we think it's going to have very attractive returns.
Jesse E. Gary: Obviously, we find ourselves in an environment with the Doe grant with.
Jesse E. Gary: 45 X benefits with the shortness of the U S market and the corresponding premiums that were able to recognize in the U S.
Jesse E. Gary: There's real opportunity to put a cutting edge facility here in the U S close to our customer bases with.
Jesse E. Gary: With the flexibility that we offer them from our existing cast house of value added products close to them. We think it's a really attractive opportunity for us.
Jesse E. Gary: That's fair, but is it fair to say that it would be a multi-billion dollar project? Yes, it will absolutely be in that range, Katja. And maybe then, and I know this is very early, but would you look to potentially even partner with someone on building this project? Would that be a possibility?
Speaker Change: Yeah, that's fair, but is it fair to say that it would be a multi billion dollar project.
Jesse E. Gary: Yes, it will it will absolutely be in.
Jesse E. Gary: In that range.
Jesse E. Gary: And maybe then on and I know this is very early but would you look to potentially even partner with someone on building. This project.
Jesse E. Gary: Would that be a possibility.
Jesse E. Gary: Yeah, we're looking at a variety of different financing alternatives, and as I said, you know, we're pretty confident with all of those things that it will be an attractive opportunity. So, we think if we did want to bring in a partner, we think that would definitely be something that would be attractive to them, but it's a little too early to talk about exactly what the financing structure would look like. Okay, if I may, one more question on Jamalco. What is the utilization rate of the facility that is currently operating?
Jesse E. Gary: Yes, we're looking at a variety of different financing alternatives.
Jesse E. Gary: As I said, we're pretty confident with all of those items that it will be.
Jesse E. Gary: An attractive opportunity. So we think if we did want to bring in a partner and we think that.
Jesse E. Gary: That would definitely be something that.
Jesse E. Gary: Would be attractive to them.
Jesse E. Gary: But it's a little too early to talk about exactly what the financing.
Jesse E. Gary: So it looks like.
Jesse E. Gary: Okay. If I may one more on Jim I'll call what is the utilization rates. The facility is currently operating.
Jesse E. Gary: So, we're right around that 1.2 million tons of annualized volume that we originally mentioned. And what we've been focusing on and what sort of drove some of the improvements in the return to profitability in March was really the stability of the operations coming out of some of those disruptions that we had in Q4. I'm really proud of the guys and gals for pushing through and reaching that stability again and returning the plant to profitability.
Jesse E. Gary: So we're right around that one 2 million tons of annualized volume that we originally mentioned.
Jesse E. Gary: What we've been focusing on and what sort of drove some of the improvements in the return to profitability in March was really the stability of the operations coming out of some of those disruptions that we had in Q4.
Jesse E. Gary: Really proud of the guys for guys and gals for pushing through.
Jesse E. Gary: Breaching that stability again in returning the plant to profitability and we're excited about what it means going forward.
Speaker Change: Okay. Thank you.
Jesse E. Gary: Yeah.
Jesse E. Gary: And we're excited about what it means going forward. Okay, thank you. Thank you. The next question comes from the line of Timna Tanners of Wolf Research. Your line is open, please go ahead. Yeah, hey, good morning.
Speaker Change: Thank you.
Jesse E. Gary: The next question comes from the line of Timna Tanners of Wolfe Research. Your line is now open. Please go ahead.
Operator: I wanted to ask a bit more, um, uh, follow-up on those topics. Um, so, on JNAPCA, I just wanted to be clear, sorry if I missed it. Is the equipment outage resolved, and you should be at a more normalized run rate in Q2? Are there lingering issues? Where, where does that happen?
Timna Beth Tanners: Yes, hi, good morning.
Speaker Change: Wanted to ask a bit more.
Operator: Follow up on this topic.
Operator: I just wanted to be clear sorry, if I missed any equipment outage resolved and you should be at a more normalized run rate in Q2 are there lingering issues, where does that stand.
Jesse E. Gary: Yeah, you're right on Timna. The equipment issue is resolved. We should be at that normalized run rate in Q2. And we, yeah, we do expect that the refinery will continue to be profitable in the second quarter. Okay, great, thank you.
Speaker Change: Yes, Youre right on Timna equipment issue is resolved we should be at that normalized run rate in Q2.
Speaker Change: And we yes, we do expect that.
Jesse E. Gary: Finally, we will continue that will be profitable over the second quarter.
Jesse E. Gary: Yeah.
Speaker Change: Okay, great. Thank you.
Jesse E. Gary: So this is, you guys are busier than ever. I can't recall a time that I've covered you with quite so many projects in play. You've got the new smelter, the cast house, you know, the Iceland cast house. I mean, it's quite a bit.
Jesse E. Gary: Great.
Speaker Change: I can't recall, a time that I have reviewed with quite so many projects in play that.
Jesse E. Gary: Now I'll turn to the cash cows, Iceland cancer.
Jesse E. Gary: It's quite a bit.
Jesse E. Gary: And I'm just trying to understand at a high level, you know, you all. So you're deciding to look into a new smelter and add capacity also through the new Cast House, but you also have capacity offline at Hogsville and at Mount Holly. So, first off, where do you see all the additional aluminum going? Is it taking share from imports, I assume?
Speaker Change: Understand high level.
Jesse E. Gary: <unk>.
Jesse E. Gary: Youre deciding to look into a new smelter.
Jesse E. Gary: Also through the new cash cost, but you also have capacity offline.
Jesse E. Gary: At Huntsville, and Kelly so.
Jesse E. Gary: Where do you see all that additional.
Jesse E. Gary: Is it taking share from imports I assume is that I really mean, if youre doubling capacity to the new smelter and also adding capacity like what's the vision there and also how do you balance the alternatives between restarting existing capacity and looking to add new capacity and then primary versus secondary.
Jesse E. Gary: Or is there really, I mean, if you're doubling capacity through the new smelter and also adding capacity, what's the vision there? And also, how do you balance the alternatives between restarting existing capacity and looking to add new capacity and then primary versus secondary? I just want some more of your thoughts.
Speaker Change: Mark your thoughts there please.
Jesse E. Gary: Yeah, sure, a really good question, Timna. And first, I would just like to say one of the things I agree with you: we're just about as busy as we've been. A lot of that is driven by our excitement and, you know, our views of aluminum demand going forward from here. You see global inventories at post-financial crisis lows, and LME stocks themselves are lower than we've seen since even before the financial crisis, and we are starting to see improving demand both in the U.S. and Europe and very strong demand out of China.
Speaker Change: Yes, so really good question Timna.
Jesse E. Gary: And first I would just like to say one of the I agree with you. We are just about as busy as we have been a lot of that is driven by our excitement and our views of aluminum demand going forward from here.
Jesse E. Gary: You see global inventories at post financial crisis, lows and LNG stocks themselves.
Jesse E. Gary: Then we have seen since even before the financial crisis.
Jesse E. Gary: And we start to see improving demand both in the U S and Europe and very strong demand out of China. So we are really excited about the future of the aluminum industry. We think we're the right model.
Jesse E. Gary: So, you know, we are really excited about the future of the aluminum industry. We think we're the right metal to meet a lot of the macro trends we spend a lot of time talking about, and that's really what's driving all of this work on our part, because we think there are opportunities out there for us. And secondly, I'd also like to also just... give a little bit of recognition to our operations team.
Jesse E. Gary: To meet a lot of the macro trends, we spent a lot of time talking about and Thats really whats driving.
Jesse E. Gary: All of this work from our part because we think there are opportunities out there for us.
Jesse E. Gary: And secondly, I'd like to also just.
Jesse E. Gary:
Jesse E. Gary: Give a little bit of recognition to our operations team, we are as busy as ever on the project front, but it's because one of the reasons, we're able to do that is because the operations have been more stable for longer than we've seen in a long time and real credit goes to our operating team for achieving that.
Jesse E. Gary: We are as busy as ever on the project front, but one of the reasons we're able to do that is because operations have been more stable for longer than we've seen in a long time. And real credit goes to our operating team for achieving that. And we're frankly, it's been volatile macro environments, but they've kept their noses to the ground. And we've really done a good job there. Okay. So then, to your question, Timna.
Jesse E. Gary: And we frankly have been volatile macro environment, but they've kept their nose to the ground and we've really done a good job there. Okay. So then to your question Timna.
Jesse E. Gary: <unk>.
Jesse E. Gary: We do have a lot of projects in front of us. We do think there are a lot of opportunities in the U.S. to fill that 4.1 million ton short position with U.S. production, and indeed, our design would be to replace imports and take that share. As I said, you will get growth on the demand side, but with volumes like we're talking about with the new smelter, plus the secondary cast-outs, plus the potential for Mount Holly to restart, for instance, there is a lot of ability to come in and start to fill some of that gap.
Jesse E. Gary: We do have a lot of projects in front of US. We do think there is a lot of opportunities in the U S to fill that $4 1 million tonne.
Jesse E. Gary: Short position with U S production, and indeed that would our design would be to replace imports.
Jesse E. Gary: And take that share.
Jesse E. Gary: We'll get growth on the demand side.
Jesse E. Gary: With volumes like we're.
Jesse E. Gary: We're talking about with the new smelter plus the secondary cast house plus potential for.
Jesse E. Gary: Mount Holly restart for instance.
Jesse E. Gary: There is a lot of ability to come in and start to fill some of that gap and we think when you look at the global trends.
Jesse E. Gary: And we think when you look at the global trends, as I talked about on the call, 232, Russian sanctions, Mexican tariffs, a lot of the work that's going on in the EU, what's very clear globally is that people are focused on secure supply chains, and because of our operational footprint, we're better situated to offer that to our customers than really anybody else. And we want to execute on that and continue to offer that to our customers. So we think all of these are viable, and we're looking into all of them. We're continuing to progress with the Mount Holly restart.
Jesse E. Gary: As I talked about on the call with between 232 between Russian sanctions between Mexican tariffs.
Jesse E. Gary: A lot of the work that's going on in the EU, what's very clear globally is that.
Jesse E. Gary: People are focused on secure supply chains.
Jesse E. Gary: And because of our operational footprint, we are better situated to offer that to our customers and really anybody else.
Jesse E. Gary: We want to execute on that and continue to offer that to our customers.
Jesse E. Gary: So we think all of these are viable.
Jesse E. Gary: And we're looking at all of these were continuing to progress.
Jesse E. Gary: Mount Holly restart.
Jesse E. Gary: As I said.
Jesse E. Gary: On the call.
Jesse E. Gary: We're doing the work upfront to make sure that we can execute once we're ready to go.
Jesse E. Gary: As I said on the call, we're doing the work up front to make sure that we can execute once we're ready to go, but all of the we're indeed looking at all those projects to know. Okay, so that was helpful with regard to how you're thinking about the aluminum market and the, you know, obviously vast amount of capacity additions that you're looking at. But if you could talk a little bit about why build a new smelter? You know, you note that there hasn't been one built primary smelter in over 40 years. There is probably a reason for that.
Jesse E. Gary: But all of that we are indeed looking at all of those projects to know.
Jesse E. Gary: Okay. So that was helpful with regard to how youre thinking about the aluminum market.
Jesse E. Gary: Obviously vast amount of capacity additions that you are looking at but if you could talk a little bit about why build the new smelter.
Jesse E. Gary: You note that there hasn't been one belt primary smelter in over 40 years, there's probably a reason for that and maybe this is a unique opportunity because of the barriers you mentioned right the sanctions and tariffs et cetera, but why not focus more on secondary I think green alternative.
Jesse E. Gary: Maybe this is a unique opportunity because of the barriers you mentioned, right, the sanctions and 232 tariffs, etc. But why not, you know, focus more on secondary as a green alternative? Yes, it's a good point, Timna. So, as you mentioned in your call, there has not been a new smelter built in the U.S. since Mount Holly was built in 1980, and as you might imagine, there's been a lot of advancement on the efficiency side over that time period.
Jesse E. Gary: Why build versus restart existing.
Jesse E. Gary: Yes.
Jesse E. Gary: It's a good point timna. So as you mentioned in your call, but there has not been a new smelter built in the U S. It's now Hollywood's built to 1980.
Jesse E. Gary: And as you might imagine there's been a lot of advancement on the efficiency side over that time period. So we're ready to build and produce for the long term here in the U S. We think those existing sites are viable but.
Jesse E. Gary: So, we're ready to build and produce for the long term here in the U.S. We think those existing sites are viable, but with the new smelter, we'll be able to create a cost footprint that should be in the first quartile. And that's really a game changer for us, and you're right, putting together some of the nearshoring trends, the DOE grant, the 45X tax credits, we think there's a real opportunity right now to engage in that, and that's really why we're looking at that.
Jesse E. Gary: With the new smelter will be able to create.
Jesse E. Gary: The cost footprint.
Jesse E. Gary: And that should be first quartile globally.
Jesse E. Gary: And that's really a game changer for us.
Jesse E. Gary: And youre right, putting together some of the near shoring trends.
Jesse E. Gary: The Doe grant the 40 <unk> tax credits, we think Theres, a real opportunity right now to engage in that and that's really why we're looking at that and.
Jesse E. Gary: Maybe just secondarily.
Jesse E. Gary: Versus second they're looking at primary versus secondary to growth. We think there will be growth in both there are many applications that do require primary and so we think that's a good driver here for the primary smelter and then there is also demand growth and additional calls for secondary aluminum.
Jesse E. Gary: It's recycled nature and Green Green credentials, so we think being able to offer our customers both of those things at home here in the U S is a really nice initiative and a nice suite of products.
Jesse E. Gary: So, we think being able to offer our customers both of those things at home here in the U.S. is a really nice initiative and a nice suite of products that will be helpful when we're making sales for our customers. I'll leave it there. Thanks again.
Jesse E. Gary: That will be helpful. When we're making sales for our customers.
Jesse E. Gary: Okay I'll leave it there thanks again.
Jesse E. Gary: Thanks, Timna. Your final question comes from the line of John... Timna Tanners, Peter Trpkovski, Gerald Bialek, Lucas Pipes, Gerald Bialek, Peter Trpkovski, John Tumazos of John Tumazos Independent Research. Your line is now open, please go ahead. Hey, Jesse.
Speaker Change: Thanks Timna.
John Charles Tumazos: Your final question comes from the line of.
Jesse E. Gary: John.
Jesse E. Gary: Sure.
Speaker Change: Thomas stocks.
Jesse E. Gary: John Tumazos Independent research. Your line is now open. Please go ahead.
Speaker Change: Thank you Jesse.
Operator: Could you give us a little primer on pot linings 101? Does the $10 million do the whole thing in the second quarter, or will it continue into the third and fourth quarters? When you reline the pots, do you reline them one month before you expect them to fail or one year before you expect them to fail? Was there a productivity loss in the first quarter? Delaying the pot line re-line by the pots that failed or some output that you want.
John: Could you give us a little print online and Potline in just one little one.
Speaker Change: Uh huh.
Operator: Does the $10 million.
Operator: Do the whole thing in the second quarter or.
Operator: We will continue into the third and fourth quarters.
Operator: When you realign the parts the rewind them one months before you expect to or one year before you expect them to fail.
Operator: Was there a productivity loss in the first quarter.
Operator: Delaying.
Operator: Hotline rely upon success elders.
Operator: Yes.
Jesse E. Gary: Sure, John. Happy to do it and really just to talk about this generally. So, as we discussed, we did have a bit of an energy curtailment from one of our suppliers in Iceland in Q1 and falling into Q2. And what you do when you get an energy curtailment like that is you generally take a small portion of your plants offline, which is equal to basically reducing your energy consumption.
Speaker Change: Sure John Happy to do it and really just to talk about this.
Jesse E. Gary: And so that's what happened in Q1. And you might imagine that when we choose which pots to take offline, we take the ones that would be due for relining during that quarter anyway. So in Q1, you get a bit of a deferral because you're not relining pots because you've taken them out to meet the energy curtailment. And then as we get ready in Q2 to put those pots back online, you will reline both the pots you would have relined in Q1 and the pots you are planning to reline in Q2, which is what really drives that $10 million headwind So that'll be a one-time thing in Q2, will not repeat, and we'll go back to our normal pot relining process going forward. Are there any other expenses?
Jesse E. Gary: Generally so as we discussed we did have a bit of a energy curtailment from one of our suppliers in Iceland in Q1 and falling into Q2.
Jesse E. Gary: What you do when you get an energy curtailment like that is you generally will take it.
Jesse E. Gary: A small portion of their parts offline equals to basically to reduce their energy consumption.
Jesse E. Gary: So that's what happened in Q1.
Jesse E. Gary: And as you might imagine when we choose which part to take offline, we take the ones that would be due for realigning during that quarter anyway. So in Q1, you get a bit of a deferral because theyre not realigning parts, because you've taken them out to meet the energy curtailment and then as we get ready in Q2 to put those pods back online.
Jesse E. Gary: We will rely on both the parts you would've realized in Q1 and the parts you are planning to rely on in Q2, which is what really drives that $10 million headwind that you see there. So that'll be a onetime thing in Q2 will not repeat and we will go back to our normal pot lining process going forward.
Jesse E. Gary: Orange.
Jesse E. Gary: In other expenses.
Jesse E. Gary: That might have been delayed, where you'd have a little breathing room now with the metal price rise, for example. Peter and Ryan are all the engineers working on these projects at a 10% rate. Are there other costs, Katja? now that things are moving in the right direction. Not really, John.
Jesse E. Gary: That might have been delayed.
Jesse E. Gary: Where you'd have a little breathing room now with the metal price rising.
Speaker Change: For example is.
Jesse E. Gary: Seeger and Ryan or all of the engineers working on these projects due for a 10% rate.
Jesse E. Gary: There are other costs catch ups.
Jesse E. Gary: But.
Jesse E. Gary: Things are moving in the right direction.
Jesse E. Gary: You know, as we go through the cycles, we do try to maintain and run our sustaining capex programs on a steady basis. You know, one thing you learn being in this business over long periods of time is that while the market is cyclical, you really want to keep these plants operating as stable as possible through the cycles. And so we try not to defer large amounts of that sustaining capex over time. So not a whole lot of items that I can think that would fall into that category should be pretty clean going forward. I want to compliment you on working so hard with the Secondary Aluminum Expansion and the Greenfield Smelter. The Market Needs It. It's great that you guys burned the midnight oil.
Jesse E. Gary: Not really John as we look go through the cycles, we do try to maintain.
Jesse E. Gary: And run our sustaining capex programs on a steady basis, one thing you learn being in this business over long periods of time as well the market is cyclical and you really want to keep these plants operating as stable as possible through the cycles and so we try not to defer large amounts of that sustaining cap.
Jesse E. Gary: Opex overtime.
Jesse E. Gary: So not a whole lot of.
Jesse E. Gary: Items that I can think of it would fall into that category should be pretty clean going forward.
Jesse E. Gary: From that perspective.
Jesse E. Gary: I wanted to compliment you on working so hard with the secondary aluminum expansions and greenfield smelled or the market needs. It.
Jesse E. Gary: And.
Jesse E. Gary: It's great that you guys burning the midnight oil and do all these things.
Jesse E. Gary: Thanks, John. We really appreciate that. As there are no additional questions waiting at this time, I'd like to hand the conference call back over to Jesse Gary for closing remarks. Thanks, everyone, for joining the call today. Just before I end the call, I would just like to take a little bit of time to talk about the recent run-up in LME prices and, as Jerry mentioned, how that will impact our outlook going forward.
Speaker Change: Thanks, John we really appreciate that.
Jesse E. Gary: As there are no additional questions waiting at this time I would like to hand, the conference call back over to Jesse Gary for closing remarks.
Jesse E. Gary: Thanks, everyone for joining the call today, just just before I E.
Jesse E. Gary: In the call I would just like to take a little bit of time to talk about the recent run up in LNG prices and as Jerry mentioned, how those will impact our outlook going forward. So as Jerry mentioned, if you just adjust it.
Jesse E. Gary: So, as Jerry mentioned, if you just adjusted, well, maybe first to start, if people will remember, we do have lags with our customers as how the LME runs through our results and also how regional premiums run through our results. So, when you look at that, for our U.S. volumes, we've got a 1-month lag for 50% of the volumes and a 3-month lag for 50% of the volumes, and ISIN primarily runs on a 3-month lag.
Jesse E. Gary: Maybe first just start that people will remember we do have lags.
Jesse E. Gary: With our customers and this is how <unk> runs through our results and also how regional premiums onto our results.
Jesse E. Gary: So when you look at that for our U S volumes, we've got a one month lag $50 for 50% of the volumes in a three month lag for 50% of the volumes and Iceland, primarily runs on a three month lag. So you do get a little bit of a delay of the benefit of rising <unk> running through our results are similar.
Jesse E. Gary: So, you do get a little bit of a delay in the benefit of rising LME prices running through our results. Similar on the premiums, you have a 1-month lag on the Midwest premium, and you've got a 3-month lag on the European premium.
Jesse E. Gary: On the on the premium and so you have a one month lag in the Midwest premium and you've got a three months lag on the European premium and you can see all of these lags on our financial information. That's on slide 20 of the slides. So as Jerry mentioned, if you did just assume for a second though those legs and exist and instead look at the second quarter outlook.
Jesse E. Gary: And you can see all these lags in our financial information on slide 20 of the slides. And so, as Jerry mentioned, if you did just assume for a second that those lags didn't exist and instead looked at the second quarter outlook with spot LMEs, you'd get a much higher estimated result of somewhere between $75 and $85 million, and that's before additional upside opportunities that we have. So, for instance, EBBP, if you look at where that is today versus where it was in our Q2 results, it's about $50 higher. And if you look at regional U.S. Midwest premiums, if you look at the forwards, those are trading 4 to 5 cents higher from what they were in Q2.
Jesse E. Gary: With spot Ellen means you'll get a much higher <unk>.
Jesse E. Gary: Estimated results of somewhere between 75 and $85 million.
Jesse E. Gary: And thats before additional upside opportunities that we have and so for instance.
Jesse E. Gary: If you look at where that is today versus where it is in our Q2 results.
Jesse E. Gary: It's about $50 higher.
Jesse E. Gary: And if you look at regional U S. Midwest premiums. If you look at the forwards those are trading $4 to five higher from what they were in Q2. So both of those represent additional upside for our business.
Jesse E. Gary: So, both of those represent additional upside for our business, and we continue to see and expect that the value-added market will continue to improve over the course of 2024 as well, and certainly into our 2025 contracting season for both the Gruner-Tonge-Bellekaps house and also the existing U.S. X house. And then finally, we continue to wait for 45X for the updated guidance, but if we do get the broader interpretation of eligible costs there, that would be additional upside to the guidance that you see in Q2.
Jesse E. Gary: And we continue to see and expect that the value added market will continue to improve over the course of 2024 as well and certainly into our 2025 contracting season for both the gruner talking ability, perhaps house, but also the existing U S south.
Jesse E. Gary: <unk>.
Jesse E. Gary: And then finally, we continue to wait on 45 back for the updated guidance, but if we do get the broader interpretation of eligible costs there that would be additional upside to the guide that you see in Q2. So we're really excited about the business.
Jesse E. Gary: So we're really excited about the business. We think there are a lot of opportunities, and we think the business will perform really well and help us produce great results, and also as we look to execute on these expansion projects. I do see Lucas has one more question, so I'll be happy to take that. Thank you.
Lucas: We think theres a lot of opportunities and.
Lucas: And we think that business will perform really well and help us.
Lucas: Produces great results and also.
Lucas: As we look to execute on these expansion projects. How do you see look at there's one more question. So we're happy to take that.
Jesse E. Gary: Okay.
Operator: So this question comes from Lucas Pipes of B Riley. Thank you so much for taking my follow-up question. So I was a little late there in, in, in, getting back in the queue.
Speaker Change: Thank you all open Lucas's line now please.
Operator: Our next question comes from Lucas pipes of B Riley.
Lucas Nathaniel Pipes: And Jesse, your comments just now are actually answering some of my follow-up questions. So, I really, really appreciate all those remarks.
Lucas Nathaniel Pipes: Thank you so much for taking my follow up question. So I was a little late there.
Lucas Nathaniel Pipes: And getting back into queue.
Lucas Nathaniel Pipes: Jesse your comments just now they're actually answering some of some of my my follow up question. So I really really appreciate all of those.
Jesse E. Gary: One of the ones I wanted to touch on was just how you think about the balance sheet. [inaudible] In the release, you flag it as a priority to reduce debt, your shares have... trade much better. How do you think about your cost of equity, cost of debt, and optimizing the balance sheet in this environment?
Lucas Nathaniel Pipes: All of those remarks.
Jesse E. Gary: One of the ones I wanted to touch on was just how you think about the balance sheet.
Jesse E. Gary: In the release, you flagged as a priority too.
Jesse E. Gary: Is that.
Speaker Change: You sure Seth.
Jesse E. Gary: Trade it much better.
Jesse E. Gary: Yeah.
Jesse E. Gary: How do you think about kind of your cost of equity cost of debt optimizing the balance sheet in this environment. Thank you very much.
Jesse E. Gary: Thank you very much. Thanks, Lucas. Just very simply, that's... really not something that we're considering at this time. We think there will be plenty of cash flow in order to allocate towards reducing that debt, and so that would be our plan on that. We're really prioritizing the cash flow we expect for this business, which, as I just went through, we think there's a huge opportunity for significant cash flows over the course of the next few quarters, and not really any need to go to the equity markets at this time.
Speaker Change: Thanks Lucas.
Speaker Change: Just very simply there that's really not something that we're considering at this time.
Jesse E. Gary: We think there'll be plenty of cash flow in order to allocate towards reducing that debt and so that would be our plan on on that we've really.
Jesse E. Gary: Prioritizing the cash flow, we expect for this business, which as I just went through we think there's huge opportunity for significant cash flows over.
Jesse E. Gary: Over the course of the next few quarters.
Jesse E. Gary: And.
Jesse E. Gary: Not really any need to go to the equity markets at this time.
Jesse E. Gary: Very, very helpful. Thank you. And then, at the very end of your remarks, you commented on the additional opportunity around 45x. And there was a lot of detail that you provided as to your earnings power in this environment. Very helpful, as I said. And just going back to 45x, if you were to get the full benefit today, what would be the additional contribution?
Jesse E. Gary: Okay.
Speaker Change: Very helpful. Thank you and then.
Jesse E. Gary: Just at the very end of your remarks, you commented on the additional opportunity around 45 X and it was that there was a lot of detail that you provided as to your earnings power in this environment very helpful. As I said.
Jesse E. Gary: Just just going back to 45 X. If you were to get the full benefit.
Jesse E. Gary: Today.
Jesse E. Gary: What would be the additional contribution.
Jesse E. Gary: It would be great to have an update on that. Thank you. Sure, and we went through this on the last call in some detail, and there's a slide on that on slide 26 in this investor deck, but you can see if direct and indirect raw materials are included, that would be about an additional $50 to $55 million uptick in our 2023 credit and a similar sort of uptick going forward for 2024. And again, this is kind of backwards looking as to that 2023 utilization rate.
Speaker Change: Would be great to have an update on that thank you.
Jesse E. Gary: Sure.
Jesse E. Gary: And we went through this on the last call in some detail in the slide on that on.
Jesse E. Gary: <unk> 26, and this investor deck, but you can see if direct and indirect.
Jesse E. Gary: Materials are included that would be about an additional $50 to 50 $50 to $55 million uptick in our 2023 credit and similar sort of uptick going forward for 2024.
Jesse E. Gary: And again this is kind of backwards looking as to that 2023 utilization rate. So.
Jesse E. Gary: So with a full Monholy restart and maybe a hospital coming back, we could kind of scale that up proportionally. Absolutely. And obviously, you know, the green field is some distance away, but that would also be eligible for the credit.
Jesse E. Gary: With a full Mount Holly.
Jesse E. Gary: Restart and maybe.
Jesse E. Gary: Hospital coming back we could kind of scale that up proportionately.
Jesse E. Gary: Yes, absolutely and obviously the greenfield at some distance away, but that would also be eligible for the program.
Jesse E. Gary: Okay.
Jesse E. Gary: Very good. Thanks again for taking my follow-up questions. Keep up all the good work. Thanks, Lucas; I appreciate it. There are no additional questions waiting, so Gary, Jesse, I'll hand the call back over to you. Thank you very much, everyone, for joining us. We look forward to talking to you later this summer for our Q2 call. Ladies and gentlemen, I'd like to thank you all for joining today's call. Have a great rest of your day. You may now disconnect. [inaudible]
Speaker Change: Very good thanks again for taking my follow up questions keep up all the good work.
Speaker Change: Thanks, Lucas I appreciate it.
Jesse: There are no additional questions waiting so Gary.
Speaker Change: I'll hand the call.
Jesse E. Gary: Thank you very much everyone for joining we look forward to talking to you later this summer for our Q2 call.
Jesse E. Gary: Okay.
Jesse E. Gary: Ladies and gentlemen, I would like to thank you all for joining today's call have a great rest. Your day you may now disconnect.
Jesse E. Gary: Yeah.
Jesse E. Gary: [music].
Jesse E. Gary: Yeah.