Good afternoon, and welcome to the Alcoa Corporation First Quarter 2024 Earnings Presentation and Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to James Dwyer, Vice President, Investor Relations and Pension Investments. Please go ahead.

Thank you, and good day everyone. I am joined today by William Oplinger, Alcoa Corporation's President and Chief Executive Officer, and Molly Beerman, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Bill and Molly. As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation and in our SEC filings. In addition, we have included some non-GAAP financial measures in this presentation. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today's presentation. We have not presented quantitative reconciliations of certain forward-looking non-GAAP financial measures for reasons noted on this slide. Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally, as previously announced, the earnings press release and slide presentation are available on our website. With that, here's Bill.

Thanks, Jim, and welcome everyone to our first quarter 2024 earnings call. It's a pleasure to discuss our recent activities and performance with you today. Let's start with the transaction that we announced in late February. Our proposed acquisition of Alumina Limited, which would give Alcoa 100% ownership in the Alcoa World Alumina and Chemicals, or AWAC, joint venture. In the all-stock transaction, Alumina Limited shareholders would receive 0.02854 Alcoa shares for each Alumina Limited share. Based on Alcoa's and Alumina Limited's closing prices as of February 23, 2024, the agreed ratio implied an equity value of approximately $2.2 billion for Alumina Limited and a premium of 13.1% to Alumina Limited's share price. Today, through a complex web of holdings at a subsegment level, Alumina Limited shareholders have exposure to 40% of only the AWAC bauxite, alumina and aluminum assets. Upon completion of the transaction, Alumina Limited shareholders will own 31.25% and Alcoa shareholders would own 68.75% of the combined company on a fully diluted basis. We believe the acquisition will deliver immediate and significant value for both companies' shareholders and is the right path forward for both Alcoa and Alumina Limited. Alumina Limited's shareholders will participate in the upside potential of a stronger, better capitalized company with a larger and more diversified upstream aluminum portfolio. Alcoa offers a full suite of low carbon and recycled content products and has long-term technology projects under development to transform the upstream aluminum value chain. Additionally, Alcoa shares will be traded in Australia through a secondary listing on the Australian Securities Exchange, or ASX, via CHESS Depositary Interests, or CDIs. And as stated earlier, it elevates the ownership position of Alumina Limited shareholders and provides them with a premium over the recent share price for their non-controlling interests. For Alcoa stockholders, the transaction increases Alcoa's economic interest in our core tier-1 bauxite and alumina assets and simplifies governance, resulting in greater operational flexibility and strategic optionality. It advances our position as the global pure play upstream aluminum company and enhances Alcoa's vertical integration along the value chain across bauxite mining, aluminum refining, and aluminum smelting. Alcoa would significantly increase its ownership in five of the 20 largest bauxite mines and five of the 20 largest alumina refineries globally, excluding China. Following this transaction, Alcoa will be better positioned to continue our long-term plan of investing in Australian bauxite mining and alumina refining. Together, Alcoa and Alumina Limited shareholders will benefit in several ways. There are tangible near-term cost synergies and the potential for further organizational optimization, replacing the complex joint venture arrangement with a simpler, less expensive structure. We will be more efficient in executing decisions with a view to maximizing returns with fully aligned interests among Alcoa and former Alumina Limited shareholders. We remain fully committed to our capital allocation framework. The all-stock transaction preserves Alcoa's balance sheet strength and provides capital structure flexibility. As one company, we will continue to have opportunities to pay distributions to shareholders, while also transforming the portfolio and positioning ourselves for growth, deploying capital to maximize value creation. So in sum, we believe this is the right deal for Alumina Limited shareholders, for Alcoa shareholders, and our broader stakeholders and communities. We're confident the transaction will build on our leading position as a global pure play aluminum company and improve our ability to execute on long-term strategies and growth opportunities. Finally, a quick note on transaction timing. We expect to close the transaction in the third quarter. In the second quarter, we expect that Alcoa will be filing a proxy statement and Alumina Limited will be filing a scheme booklet in connection with the transaction. There are also government approvals that we are seeking in the second and third quarters, which include, in Australia, the Foreign Investment Review Board and the Australian Competition and Consumer Commission, and in Brazil, the Brazil Administrative Council For Economic Defense. We expect to apply for our ASX listing in May. And finally, but most importantly, the shareholder votes to approve the transaction and issue and exchange shares are expected to take place in the third quarter. Now, let's talk about the first quarter. It was a busy quarter. First and foremost, we had no fatal or serious injuries in the first quarter. Our key lagging indicators, days away restricted time, total recordable injuries, and all injury rates all improved. The improving safety performance is driven by a concerted focus on safety across the company and by using programs that include managing critical risks and increasing the positive impact of our leaders spending time in the field. No matter what, safety is always our first priority. Other items to note in the quarter, in addition to announcing the Alumina Limited acquisition, we continued efforts to find a long-term solution for the San Ciprián complex, and we've started a process to potentially sell the facility. We completed the restart of one potline at Warrick, and we set records for quarterly production rates at two smelters, ABI and Mosjøen. We fully deployed the $100 million productivity and competitiveness program, and we announced the Kwinana full curtailment. Finally, in March, we issued a $750 million green bond to support our cash position using Alcoa's new green financing framework.

Thank you, Bill. Revenue was flat sequentially at $2.6 billion. In the alumina segment, third-party revenue increased 6% due to higher average realized third-party price for alumina and higher shipments. In the aluminum segment, third-party revenue decreased 3% due to lower average realized third-party price for aluminum. The net loss attributable to Alcoa changed $102 million to $252 million, and the loss per share changed from $0.84 to $1.41. On an adjusted basis, the net loss attributable to Alcoa was $145 million, or $0.81. The difference is primarily related to the restructuring costs and other charges for the Kwinana curtailment. Adjusted EBITDA increased $43 million to $132 million. Let's look at the key drivers of EBITDA. First quarter 2024 adjusted EBITDA increased $43 million primarily due to improved energy costs. Raw material and other cost benefits were offset by volume and production costs. The unfavorable production costs included the single quarter recognition of Section 45X of the Inflation Reduction Act credits for Warrick and Massena, while last quarter included impacts for the full year based on the timing of approval. Alumina segment EBITDA increased $55 million sequentially, primarily due to higher alumina prices and favorable currency impacts. Lower raw material and energy costs mostly offset higher production costs and lower shipment volumes in Brazil and Australia. Aluminum segment declined $30 million sequentially. While we also saw substantial benefit from lower energy and raw material costs, those benefits were more than offset by unfavorable currency and metal prices, primarily due to the end of the metal hedge program at Alumar. Other factors are higher alumina costs and unfavorable production costs, including impacts from the just mentioned 45X credits. Outside the segments, transformation demolition costs, other corporate costs, and intersegment elimination all improved. Let's look at cash movements within the first quarter on the next slide. In the first quarter, working capital changes, capital expenditures, and environmental and ARO payments were the largest uses of cash. Working capital as a significant use of cash in the first quarter is typical for us. However, the first quarter 2024 increase was significantly lower than the last two years' levels. Capital spend and environmental and ARO payments were both in line with our 2024 outlook, although the spending is not ratable for the year. Sources of cash in the quarter include the debt issuance of $750 million. The additional liquidity provides us with the flexibility needed to continue to execute the actions which further strengthen our asset portfolio. In the longer term, our capital allocation framework remains unchanged and focused on maintaining a strong balance sheet. In regard to our debt issuance, this is the first issue under our new Green Finance Framework, which prioritizes expenditures and climate change mitigation through projects in circular or low-carbon products and pollution prevention technologies while supporting renewable energy and water management. Proceeds from the issue cover both new and existing decarbonization and water management projects, our research and development expenses related to our breakthrough technologies, ELYSIS, ASTREA, and Refinery of the Future, purchases of renewable energy, as well as certain costs related to the production of our low carbon alumina and aluminum products. Under the Green Finance Framework, the net proceeds of green financing debt can be allocated to qualifying expenditures on a two-year look back and three-year look forward. We do not expect to allocate part of the net proceeds to significant capital investments in our breakthrough technologies as we do not expect those to occur in the remainder of this decade. Moving on to other key financial metrics. Our key financial metrics are consistent with our earnings results. Year-to-date return on equity was negative 14.5%. Days working capital increased 8 days to 47 days sequentially, primarily due to higher accounts receivable. Our fourth quarter dividend added $19 million to stockholder capital returns. While free cash flow plus net non-controlling interest contributions was negative for the quarter at $269 million, impacted by the typical first quarter working capital build, the cash balance increased $500 million to $1.4 billion, including proceeds from the debt issuance. Let's turn to the outlook for the second quarter. We have one update to our full year outlook on the income statement. Interest expense is changing from $110 million to $145 million in light of our debt issue. Regarding sequential changes for the second quarter, in the alumina segment, we expect impacts of approximately $20 million related to higher seasonal maintenance and other mining costs for the Australian operation. In the aluminum segment, we expect favorable raw material and production costs to fully offset unfavorable energy impacts. Alumina costs and the aluminum segment are expected to be unfavorable by $15 million. Below EBITDA, note that first quarter other expenses included one-time negative impacts from foreign currency losses of approximately $20 million. Based on last week's pricing, we expect second quarter 2024 operational tax expense to approximate $40 million to $50 million. Lastly, I'd like to provide a quick update on our near-term actions for profitability improvement as we guided last quarter. For the second quarter, we have locked in more of the $310 million year-over-year savings in raw material costs, although not as prominent from a sequential view. Our productivity and competitiveness initiatives are identified and being implemented. We are on track to deliver at a full run rate by the first quarter of 2025 as committed. The Warrick third-line restart was completed at the end of March. However, additional actions have been identified and need to be deployed to achieve profitability. The smelter is not expected to have significant improvement in the second quarter but is projecting an improved second half of 2024. The full improvement is not expected to be reached until the end of 2025. Kwinana curtailment is going according to plan and we expect to start seeing some savings in the second half of 2024. Although stability continues to be a challenge at the Alumar smelter, we remain committed to delivering our near-term targets by the end of 2025.

Thanks, Molly. The near-term markets are showing signs of improvement, and the long-term outlook remains very positive for both alumina and aluminum. For alumina, alumina prices recently reached a two-year high. While demand has remained steady, near-term supply concerns have continued. Chinese refineries have curtailed capacity due to bauxite shortages and environmental issues. The fuel depot explosion in Guinea raises concerns about the security of supply for China's and the world's largest seaborne bauxite source. The Queensland, Australia gas supply disruption, as well as our announced curtailment of the Kwinana refinery, have made Australian alumina supply less certain. Long-term alumina demand is expected to grow alongside aluminum, but limited low-carbon energy sources and increasing reliance on seaborne bauxite supply, particularly for Chinese refineries, are expected to constrain the growth potential and cost competitiveness of future refineries. For aluminum, currently demand is looking up. Demand in the automotive and electrical sectors have remained strong, and we are seeing signs of recovery in packaging. Building and construction remains the most challenged end market, but it is showing signs of stabilization, especially in North America. In our order book, we see sales of VAP, or value-add products, increasing both year-over-year and quarter-over-quarter. We are even seeing opportunities for spot sales across our portfolio. From a supply perspective, there are few new projects coming online. Even considering the announced Yunnan restarts, China continues to hold to its 45 million metric ton production cap. So, inventory days remain low, and unwanted Russian aluminum still makes up more than 90% of the LME inventory. The big news last week was that the US and UK governments announced sanctions on Russian aluminum. The impact was to establish an import ban into the US and the UK, and restrict activity at the London Metal Exchange and the Chicago Mercantile Exchange. This was the right decision, as Alcoa has consistently advocated, and we maintain that the EU should take action as well. As you might expect from this news, LME aluminum recently hit its highest level in a year, and first quarter regional premiums in the US, Europe, and Japan all increased sequentially. Long term, we remain bullish. More aluminum, both primary and secondary, will be needed to drive the renewable energy transition and achieve global decarbonization goals. Today, there are not enough announced projects to meet that expected demand, and future projects face challenges finding renewable energy supplies amid expected increases in carbon emission costs. Even China is adding aluminum to its emission trading system, or ETS. In summary, alumina and aluminum markets are improving in the near term, and our long-term outlook remains very positive. Now, let's review key activities at Alcoa. We continue to make progress on key near-term actions as well as keeping momentum on long-term activities. Focusing on the near term, the overall outlook is positive. We're seeing further improvement in purchase prices for key raw materials, so if the current market outlook continues, our expectation is to exceed our savings target. We have deployed our productivity and competitiveness program and expect to realize savings in the coming quarters with full run rate improvement of $100 million by the first quarter of 2025. The restart of one potline at Warrick is complete, and we remain optimistic that we will see additional IRA funding decided by the US government sometime this year. The Kwinana full curtailment, which we announced in January, is on track with all production to be stopped by the end of the second quarter. We expect to see resulting EBITDA improvement in the third quarter. On a negative note, the Alumar restart has regressed. While we have solved a number of issues, we continue to struggle with equipment reliability and personnel experience. We have reinforced the leadership and expert teams in Brazil and are taking actions to improve its overall performance. San Ciprián is a focal point of our near-term actions. Consistent with the viability agreement, we restarted 32 pots in the first quarter. Our work is in two areas of focus: to take actions to make San Ciprián viable for the long term, and alternatively, to find a potential purchaser for the site. We have completed the optimization study and delineated a modest set of potential short-term and medium-term improvement actions. We are working on implementing actions while preserving cash. Though purchase prices for energy and sales prices have improved, the business remains unviable, and we do not expect near-term government support to be forthcoming. We started a potential sale process for the entire location, both the smelter and the refinery, and we expect to complete the bid process by the end of June. Any long-term solution requires government and union support. Consistent with all these actions and the current market environment and barring reaching an acceptable outcome on either of these two paths, we expect cash to run out in the second half of 2024. At that point, Alcoa Corporation will not provide further funds and hard decisions will need to be made. As a company, we are very excited about the progress we are making on multiple fronts. Through the Alumina Limited deal, we are increasing the economic interest in assets we already control and operate in an all-stock transaction that benefits all parties. We have safely executed an impressive list of operational activities to improve the business, and we have more actions to complete. And both the alumina and aluminum markets are on the upswing. This is an exciting time to be at Alcoa.

We will now begin the question-and-answer session. Our first question today is from Lucas Pipes with B. Riley. Please go ahead.

Thank you very much, operator. Good afternoon, everyone. Bill, first to maybe start it on the macro side a little bit higher level. With some of the changes that are expected on the power side and then the Chinese production cap, what's your view of kind of the relative market strength in aluminum versus alumina and how should we see that in the context of the AWAC acquisition? And on AWAC, any view that you could share in terms of kind of synergies from a tax perspective and overhead? Thank you.

Let me address the second question first. The Alumina Limited deal is a long-term agreement that we've been focused on for some time. We believe it brings benefits to both our shareholders and theirs, as well as to the communities we operate in. Therefore, any short-term market dynamics do not significantly influence our decision-making regarding the Alumina Limited deal. In terms of synergies, we can quickly eliminate $12 million in overhead, with potential future synergies related to capital structure and debt opportunities in Australia. Looking back at your initial question, the market dynamics for both alumina and aluminum are improving. Regarding aluminum, we are witnessing demand growth in all major markets except for European construction, resulting in year-over-year demand growth that is pushing metal prices higher and also increasing regional premiums in the Midwest, Europe, and Japan. For alumina, as noted in our prepared remarks, there is uncertainty surrounding raw materials, like bauxite from Guinea and the gas situation in Northern Australia, which has also contributed to rising alumina prices. To summarize our outlook for 2024, we expect aluminum to remain relatively balanced despite stronger-than-anticipated demand, while alumina is likely to be in deficit due to recent curtailments, particularly the Kwinana curtailment that occurred in June of this year.

Thank you. Thank you very much, Bill. And then, there's been a lot of government support recently. If you look to the US, there's been DOE funding for new smelter. We'll see what the details bring. In Europe, there's been over €8 billion in public funding announced for the transition of the steel industry. And you've invested a lot in new technologies such as ELYSIS and the Refinery of the Future. And I would imagine your programs would be prime candidates for some of these government initiatives. So, at this time, could your programs benefit? Is there anything in the pipeline? How do you think about all that? Thank you.

Lucas, we'll be looking at different forms of governmental support for our programs. However, one of the things to consider is that the implementation of our three breakthrough technologies will really be out post 2030. So, any support that we would be looking for today would be on the R&D side, but any implementation or significant capital spend is really going into the next decade, and therefore, it doesn't match up well with the near-term governmental support.

Understood. I appreciate that, Bill. And to you and the team, best of luck. Thank you.

Thanks, Lucas.

The next question is from Chris LaFemina with Jefferies. Please go ahead.

Thanks, operator. Hi, Bill and Molly. Thanks for taking my question.

Hi, Chris.

Hi, Chris.

I wanted to ask about closure costs. So, first on Kwinana, I think you've said $80 million of cash outflow to close the refinery in 2024 and $35 million more in 2025. I assume the $80 million in the second half of the year. But I'm wondering, first of all, if in addition to that $115 million if there's anything else to close Kwinana? That's my first question.

So, Chris, let's clarify that those are curtailment costs and not closure costs. Most of those are severance costs and other environmental expenses related to setting up the water treatment. That's what you're seeing there. A closure cost would be significantly higher, but we haven't made a decision yet. A decision regarding Kwinana will take some time. If we were to proceed with that, we would actually need approvals to close it permanently.

What about the situation in San Ciprián? I haven't seen any estimates regarding the potential costs. While a sale might be preferable, if you do proceed with closing the refinery and the smelter, could you provide an estimate of what that might entail?

In terms of a refinery closure without factoring in severance, because in Spain, that's very difficult to estimate, you can think of a refinery closure as about a $200 million cost. A smelter could be between $25 million and $50 million. And that would be on the environmental and ARO side. Again, not counting severance, because a very different situation on severance in Spain.

And Chris, if I could just jump in real quickly, I think it's a bit early to discuss curtailment or closure costs related to San Ciprián. We are focusing on two main areas concerning the site there. First, we are aiming to make the site viable by implementing a series of cost-reduction actions, with the ultimate goal being the sustainability of the smelter through low-cost green electricity. Secondly, we announced this quarter that we are starting a sales process and will continue this process into the second quarter to identify potential buyers for the site. We will ensure we don't repeat the issues we faced in Avilés and La Coruña, so we will be concentrating on the viability of any potential buyer for that site. Therefore, it’s too soon to speculate on curtailment or closure costs.

Understood. I'm just trying to figure out the different scenarios that might ultimately materialize there. But thank you for that. I appreciate it.

Good. Thanks.

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

Yeah. Thanks for the call and the question. I guess, firstly, on working capital, any guidance there for the rest of the year? And then secondly, you mentioned that with raw material cost trending as they are, you might be able to exceed your savings targets. Is there any way of quantifying that? And how would that trade off against potentially higher energy costs that are linked to higher LME prices? Thank you.

So, Alex, regarding working capital for 2024, we aim to reach a level of $1 billion by year-end. We concluded the quarter at $1.4 billion and are actively working towards that $1 billion target. As for raw materials, we do not have another number exceeding the $310 million year-over-year commitment, but we are observing positive results now and anticipate surpassing that. Looking at caustic prices, we are certainly benefiting from the reduced purchase prices from the second half of 2023 into the first half of 2024, with current prices being only slightly elevated and comparable to pre-pandemic levels. We continue to see reductions in coke and pitch, and despite the three-month inventory lag, we expect this trend to persist throughout 2024.

Okay. Thank you very much. And then just quickly on LMR. It sounds like kind of a switching over to EBITDA positive there is probably something that's more likely to happen now in 2025 and 2024. Is that fair or am I being too pessimistic? Thanks.

I think it will depend on what metal prices and as metal prices gone up, that's benefited the site. So, it's going to depend there and really in the case of Alumar, that site had been curtailed for about eight years. And I think we just fundamentally underestimated how hard it was going to be to get that site back up and running, especially from a mechanical perspective from the condition of some of the equipment there. So, continue to work it and it's delayed from where we thought it was going to be.

Okay. Thank you so much.

The next question is from Lawson Winder with Bank of America. Please go ahead.

Thank you very much, operator, and I appreciate everyone for taking my question. I'd like to follow up on Alumar and reflect on the decision made eight years ago to close it, as it was one of the higher cost smelters globally. Is there now any consideration on whether it might make sense to forgo the restart? Additionally, is there any thought about the potential sale of that asset? Thank you.

So, as far as consideration of abandoning the restart, Lawson, as you can imagine in our jobs, both Molly and I, we constantly need to be revisiting the decisions that we've made and make sure that on a go-forward basis the actions that we take make sense. And so, with that statement, we have looked at what are our options in Alumar. We still believe given the power contracts that we have, the fact that it's co-located with the refinery, the fact that it's in a part of the world where it needs aluminum, the business case still soft on a go-forward basis to continue with the restart. We are disappointed with the pace and the execution that we've seen on the restart and there's really a couple of different areas. I mentioned the mechanical condition of some of the equipment. We continue to work through that. And then, the other one is really around the technical expertise of the people that we have there. It has taken some time to make sure that the folks that we have there are able to effectively work through the restart. We've doubled down on some of the resources that we've provided out of the Center of Excellence and also some external resources. So, at this point, we continue to work through the restart.

Okay. That answers my questions. Thank you very much.

Thanks, Lawson.

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

Thank you for the questions. I’d like to focus on Alumar and its relation to Warrick, as it seems you're encountering some difficulties in both areas, along with some IRA issues that you're still addressing. Are the projected figures of $75 million for Warrick and $70 million for Kwinana still accurate, even though they may be pushed to later in 2025, or will the challenges you mentioned likely reduce those savings?

We are still working towards our targets and believe they can be achieved by the end of 2025. We had a successful restart at Warrick, but I don’t expect to see significant improvement in the second quarter. They have identified further actions that need to be implemented before we reach profitability. As mentioned in the last call, we have approximately $30 million in IRA opportunities and are awaiting a government decision on whether direct materials can be included. For Warrick, there was $60 million related to operations and $30 million between Warrick and Massena regarding the IRA. We remain committed to Alumar and, as Bill noted, we expect to resolve the issues we are facing. We are addressing challenges one by one with a focused approach and have enough expertise to make progress. Regarding Kwinana, we had initially guided a $70 million improvement, but that will not materialize immediately. Instead, we expect to see a ramp-up in the second half of 2024, and we should be well-positioned for realizing the $70 million in 2025.

Okay. Thanks for that. If you think about the US market, it's benefited from protectionism through Section 232. How do you see further protectionism evolving given the election year and also the headlines out this morning regarding Chinese material? Based on our math, this looks like around maybe 3% to 5% of total US imports over the past few years.

So the headlines that came out this morning, if we just back up, the 232, we don't see that necessarily the 232 tariffs changing. And so, we think those will stay in place. The headlines that came out this morning around potential increase of tariffs on 301 is, first of all, it's a fairly small sub-segment of the aluminum that's used. And second of all, I guess, in our view, it's probably positive for our North American customers. And if it's positive for our North American downstream customers, we're supportive of the increased tariff level. Now, it's very recent news and we haven't seen any of the final information. So that's a preliminary view.

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

Hey, good afternoon. As I look across your, like, remaining operations, there's still some curtailed smelting capacity and refining capacity. And in light of your optimistic outlook and the strength recently in aluminum, do you revisit like further Warrick restarts or Lista, for example, or do you think about opportunities to maybe capitalize on this higher price in the near term or going forward as well?

Excuse me, Timna, I'm dealing with a little bit of a cold here. So sorry about that. But you know that for instance in the case of Warrick and Lista, we always look at the economics of a potential restart. In both situations, we would need to have real clarity around near-term energy prices. And so, we would consider it. However, in the case of, for instance, Warrick, we want to make sure that we have the three lines running well and capture the savings that we've announced and gone out publicly with. And in the case of Lista, it would have to be an energy solution that we would be able to get over the near term.

I want to gain a clearer understanding of Spain. You're discussing the potential sale of assets, yet at the same time, expressing a lack of optimism about them. Would a prospective buyer need substantial financial resources and perhaps a different relationship with the union and government? How does one sell an asset if it's perceived to be struggling? I’m interested in your thoughts on that and the potential outlook.

Well, we're running a really broad-based sale process and we've gone out to just about every strategic and financial buyer in the industry. And it will really be up to them to take a position around how they view some of the things that they can achieve either with the union or through governmental support and metal prices and alumina prices, right? So, if somebody has a view that Europe will be short metal for the long term, potentially they can justify buying the assets. We'll go through that process, at the same time as I said, we'll be very focused around trying to ensure the viability of the site for ourselves and for a potential future buyer. And if we get to the second half of this year and we don't have a buyer and we can't assure the viability, as we've said, we're not putting more money into that site and hard decisions will have to be made at that time.

Okay. And just to clarify, the view of running out of cash in the second half, does include the recent run rate of aluminum and alumina prices?

We have about $200 million in internal lines of credit or cash, some of which is restricted cash for capital expenditures. Recently, metal prices have increased a bit, which might delay this by a month or two, but we expect it will be in the second half of the year.

Okay. I appreciate it. I hope you feel better.

Thanks.

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

Hello, Bill and Molly. I hope you're doing fine. And you get better soon, Bill.

Thanks, Carlos.

On Alumar, just how potentially could the issue that you're facing now impact the $75 million incremental EBITDA that you expect to get from that operation by the end of 2025?

So, Carlos, so when we set that guidance for the $75 million improvement, we were really looking at the losses that we had accumulated in 2023 and setting a goal for ourselves to at least be back to neutral to breakeven. So, we're still on that path to get into 2025, hopefully turning the quarter into positive profitability. But that's why we are focused on the 75% as being achievable.

All right. Thanks, Molly. And then, on the breakthrough technologies, which some of them are really exciting, what is going on? Maybe it feels or at least to me that it is delaying a little bit the implementation, the pace at which those are advancing. Any color that you can provide there on the ELYSIS or the Refinery of the Future perhaps?

Yes. So, ELYSIS, we continue to make progress on ELYSIS. We will have a commercial size test cell running in 2024 at the Rio Tinto's Alma smelter that's a 450 kA cell. So from that cell, we'll be able to get good reading on how well it operates and be able to get a good feel for how well it operates at a commercial side. So, our view is that we won't be implementing anything till post 2030 that gives time for the technology to be completely developed and vetted out so that when we get to a point of large capital expenditures for ELYSIS pipelines, we'll have a good sense that the technology is completely solid.

And from what you see today, Bill, would you implement the ELYSIS potlines in the current smelter, or do you think it should be more in a greenfield?

It's really early, Carlos, and what some of the restrictions that we will be placing on it is that it only makes sense for us to implement ELYSIS where we have green sustainable power, renewable power that's inexpensive. So, we'll be looking around the world both for brownfields and greenfields in the 2030s timeframe to implement ELYSIS, but it will have to be on renewable low-cost sustainable power.

All right. Great. Thank you very much. Get better soon.

Thanks.

The next question is from Katja Jancic with BMO Capital Markets. Please go ahead.

Hi. Thank you for taking my questions. First, Bill, can you provide an update on the permitting process for the new bauxite mine areas in Western Australia?

Yes, we are focused on the EPA assessment process while moving forward with the Part 4 process for Myara North and Holyoake. You can find a series of outlined steps on our website that will help you follow our progress and hold us accountable. We anticipate an EPA public comment period on the environmental review document could start as early as the second quarter of 2024, possibly extending into the third quarter. We will prepare our responses to those submissions in the third quarter of 2024. The EPA is expected to publish their assessment report in the first quarter of 2025. All of this is leading up to a ministerial decision by the end of 2025, specifically in the fourth quarter, allowing us to implement the mine move with a target of no earlier than 2027. We are consistently making progress on these steps.

Okay. And then maybe on the 45X credits, do you think alumina and other input costs are eventually going to be included in the calculation? And if so, what would the incremental benefit for you potentially be?

Katja, if alumina and all of our raw materials are included, we should see about $30 million to $40 million benefit from the direct material inclusion. We have made our case to the government and now we are waiting a word.

Is there any timeline on when the decision could be made?

Unfortunately, no.

The next question is from Michael Dudas with Vertical Research. Please go ahead.

Yes. Good evening, Bill, Molly and Jim.

Hey, Mike.

Hi, Mike.

Yeah. So, I guess encouraging news on the sanctions out of UK and US. And with the Russian aluminum situation, any read or thought about the EU there on following through? And maybe on the dynamics of the marketplace, I mean certainly basin prices have improved and certainly aluminum's benefit, but can you get a sense of, I guess, the customer base really kicking in here on demand side and is some of the dynamics on them maybe speculative or some of the dynamics with regard to some of the metals flow could be more or less supportive in this recent run, Bill?

So, a lot of components to that question, Mike, so let me try to parse it out a little bit.

Sorry about that. You're working on the DayQuil there.

We appreciate the actions taken by the US and UK governments regarding Russian sanctions, which we have been advocating for over the past couple of years. Before the recent announcement, the index price for all metal sales was largely influenced by Russian units that we believe were undervalued in the market. This situation had undermined the credibility of the global pricing mechanism, as it relied on a product not widely accepted. The recent moves help restore the benchmark price’s credibility. Additionally, we think this sets the stage for the EU to take similar actions, which we would support. However, not all recent price changes can be attributed to these sanctions alone. We are experiencing strong demand across various industries and regions, with the exception of European building and construction. Growth is evident in sectors like packaging, automotive, transportation, and electrical transmission in markets such as China, Europe, and North America. Thus, the price changes we've observed on the London Metal Exchange can be partly linked to the Russian sanctions but also reflect robust demand. The increases in premiums we are witnessing are also tied to this stronger demand, as seen with higher premiums in the Midwest, Europe, and Japan. Overall, we feel we are benefiting from positive market trends.

Excellent, Bill. Thank you.

Thank you.

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

Thank you. Will Alcoa apply for a $0.5 billion grant like Century did? And do you have site infrastructure in some of your existing or prior facilities that would make it cheaper for you to build a large smelter in a brownfield or existing site rather than starting fresh?

John, we have several existing sites in the US, such as Massena East, which is the former Reynolds facility, Massena West, Point Comfort, Intalco, and Wenatchee. I don't think any of these locations have the necessary electrical infrastructure to support a new plant meaningfully. They might be better suited for redevelopment, which is why we have our transformation group in place. We've achieved significant successes over the last few years, including the sale of Rockdale for $250 million and Eastalco for $100 million, allowing us to realize value from these sites through redevelopment before selling them. We will continue this approach. To address your first question, similar to what I told Carlos, we would require low-cost renewable energy to justify a large investment in the US. Additionally, we would need to engage with the government for such an investment. Currently, this is not on our agenda, and we have not discussed it; it's not something I foresee happening in the near term.

So, if I can ask another, why do you think the government chose the April 13 cut-off date for forbidding the Russian metals as opposed to forbidding the pre-existing metal wherever it might be laying around? A lot of the aluminum is stuck in Korea anyway in warehouse.

John, I don't have a good answer for you. I can't speculate why the government chose the date they chose. I'm just pleased that they took the action that they did and really think that it is the first step towards reestablishing the credibility of the aluminum contract on the LME and I'm glad they did it. And whether they've chosen the 12th or 14th, I'm just glad they did it.

Thanks, and good luck.

Thanks, John.

The next question is a follow-up from Lucas Pipes with B. Riley. Please go ahead.

Thank you very much, operator. Thank you for taking my follow-up question. Bill, on the copper side, there is a lot of excitement about AI, electrification of everything, and obviously aluminum benefits as a substitute in many of those ways. But aluminum also competes for electricity. So, when you kind of think about the demand side, but then also kind of additional costs on the supply side when you net it out, what do you think does it mean for the aluminum industry longer term and how would you position Alcoa for that trend? Thank you.

Thank you for the question, Lucas. I firmly believe that aluminum plays a crucial role in the global energy transition expected over the next 25 years. While copper is extremely important, aluminum is equally significant. Historically, there has been a ratio of about 3.5 times between copper and aluminum prices, meaning that as copper prices rise, we see a substitution effect where aluminum is used more. This trend is evident today, and as copper continues to increase in price, it should benefit aluminum. Moreover, aluminum is essential for electrification and electric vehicles, as well as in solar panel applications and wind turbines. We anticipate an 80% increase in aluminum demand between now and 2050, indicating a positive outlook for both aluminum and copper, especially aluminum.

And on the power side, what do you think it means for how you're positioned?

Well, I think on the power side, renewable green power is getting harder and harder, and it doesn't define globally. And so, it doesn't matter if it's being used for something else associated with the transition of energy, but it is getting harder and harder to find which ultimately means that supply to some extent will be limited, right? So, supply growth over time will really be based on green energy. And if green energy sources are being used for other things like data centers, I think it limits supply. So again, you can tell, I'm pretty bullish on aluminum and I think both of those factors play into a stronger aluminum market in the future.

Thank you very much, Bill. Couldn't tell you are cold on that excitement, so feel better. Thank you.

Thank you.

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

Thanks, Gary. And as we just said to Lucas, as you can hear from our voice, Molly and I are really excited about the future of the company. We think we made substantial progress in the quarter with the Alumina Limited deal being announced and the other operational actions that we took. The markets are, in our view, a tailwind and the markets are improving. We didn't really talk that much about the fact that our VAP book is improving also. So, while metal prices and aluminum prices and premiums are going up, we're seeing VAP sales, value-add product sales, go up also. And so, with all that, we'll sign off. We're looking forward to talking to you in July. Thank you.

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