Good morning, ladies and gentlemen. My name is Amy, and I will be your conference facilitator today. I would like to welcome everyone to the Cleveland Cliffs First Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking within the safe harbor protections for the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Forms 10-K and 10-Q and news releases filed with the SEC, which are available on the company website. Today's conference call is also available, and being broadcast at clevelandcliffs.com. At the conclusion of the call, it will be archived on the website and available for replay. The company will also discuss results excluding certain special trade items. Reconciliation for Regulation G purposes can be found in the earnings release, which was published this morning. At this time, I would like to introduce Cliffs' Executive Vice President and Chief Financial Officer, Keith Koci. Please go ahead.

Thanks, Amy, and good morning, everyone. Going right into our results, our first quarter adjusted EBITDA of $513 million represented a 79% increase over last quarter, reflecting our first full quarter of results from the former AM USA assets as well as stronger steel pricing offset by reduced third-party pellet sales due to the annual maintenance of the Great Lakes flocks. In the steelmaking segment, we sold 4.1 million net tons of steel products, which included 28% hot-rolled, 18% cold-rolled and 33% coated with the remaining 21%, consisting of stainless, electrical, plate, slab, and rail. This mix is generally in line with what we expect to see going forward. Our aggregate average selling price of $900 per ton in Q1 is certainly the low point for the year in our forecast and is lower than our Q4 2020 average solely because of the different mix associated with the former AM USA plants. On the cost side, our performance came in as expected. Relative to last year, we are seeing decreases in cost for coke and coal, as well as benefits from decreasing scrap use and higher productivity from using our HPI products in-house. This has been offset by higher prices for scrap, alloys, and natural gas. We also saw higher labor costs due to increased profit sharing. DD&A was $217 million for the quarter and we expect about $840 million on a full year basis now that purchase price accounting has been further refined. An important moving piece this year in our cost structure will be iron ore costs. We certainly benefit on the former AM USA side from transferring pellets at cost, but during the first and second quarters, we are working through the pellet inventory previously purchased from legacy Cleveland Cliffs. These pellets were purchased at a margin prior to the acquisition, and therefore the higher cost runs through our income statement in 2021, and the resulting impact is not included in the add-back for inventory step-up. This short-term anomaly had a negative impact on our first quarter of approximately $50 million and will be a $40 million headwind in Q2. After that, the impact will be negligible creating nearly a $100 million EBITDA tailwind going forward in comparison to the first half of 2021. We experienced the same anomaly in 2020 as a result of the AK acquisition. As for synergies, we have already identified and set in motion $100 million in cost synergies from the AM USA acquisition, some of which will take effect later this year. We are well positioned to reach our target of $150 million of annual run rate savings by the end of this year for a total of $310 million from the two combined acquisitions. As far as cash flow, Q1 contains several previously discussed one-time items that will not recur going forward. As was contemplated in the acquisition of AM USA, we had a significant investment in working capital of nearly $650 million during the quarter due first to the completion of the unwind of the ArcelorMittal AR factoring agreement as well as other acquisition-related cash impacts. We are now completely done with this and receivables have been rebuilt. Second, we saw working capital build related to receivables corresponding to the rising steel price environment. Also, we made our deferred pension contribution related to the CARES Act of $118 million in January. With the passage of the most recent stimulus bill and the extended amortization feature, future cash pension contributions will be reduced by an average of $40 million per year over the next seven years. For the remaining three quarters of this year, we will be generating record levels of free cash flow. In future years, we expect certain cash outflow items to be lower than in 2021. Sustaining CapEx will be approximately $525 million annually. Interest expense will be lower due to reduced debt, and pension contributions will also be lower without deferral payments and with the new stimulus benefit. In addition, working capital impacts will likely revert to neutral over time unlike the large build we project this year. Upon releasing our Q4 earnings, we guided to a substantial EBITDA improvement from Q1 to Q2, and by the end of March, we had enough pricing visibility to disclose a $1.2 billion adjusted EBITDA guide for Q2. The increase from the first quarter is driven primarily by pricing, offset by higher incentive compensation and profit sharing and higher raw material pricing for scrap and alloys. On the liquidity side, we currently have $200 million in cash and $1.6 billion of availability under our current credit facility. Our ABL debt balance is currently $1.6 billion and we expect to have this paid off by the end of the year. Our paydown of this instrument will come penalty-free and every dollar that has been reduced in ABL debt will be added to our liquidity. In closing, we find ourselves well positioned to take advantage of a healthy steel market and also take care of a significant portion of our debt balance in very short order. Based on what we are seeing in the market, we believe our estimates supporting $4 billion of adjusted EBITDA for the year are conservative relative to today's forward curve.

Thank you, Keith and good morning to everyone. I will start my prepared remarks reminding our investors that this first quarter of 2021 which we're currently reporting results was the very first full quarter for Cleveland Cliffs following the closing of the acquisition of AM USA on December 9, 2020. And it was a massively successful quarter for our integration, culture change and clearly our profitability. Our attitude towards commercial and the steel pricing is the main reason behind the massive numbers we are showing for the quarter in guiding for the balance of the year including $513 million of EBITDA in Q1, $1.2 billion EBITDA next quarter and $4 billion EBITDA for 2021. The steel industry is capital-intensive and return on invested capital is necessary. If we lose track of that, we would not be able to address issues like equipment reliability, workplace safety, or the environment. We are not greedy. We are realistic. That's why steel prices are where they are and that we will continue going forward. Right now, the American consumers are consuming a lot. Stimulus money provided to the majority of the population is being redirected right back into the economy and that's great for flat-rolled steel producers like Cleveland Cliffs. This money is being spent on consumer goods like HVAC, appliances, and cars, evidenced by the skyrocketing auto starts in March. This will hold experts that won't predict the demise of the domestic steel industry had been proven completely wrong. When Cleveland-Cliffs bought AK Steel and AM USA, or when the COVID recovery began, they had an easy window of opportunity to fix their field DCs. Unfortunately, their addiction to negativity is apparently the only thing that they care about. These folks just don't want to see our industry thrive and they clearly don't care about the well-paying middle-class jobs we generate and sustain in the United States. For the record, from our proxy materials, the median yearly pay of our 25,000 Cleveland-Cliffs employees is $102,000. And we are hiring because we are growing. Make no mistake, we are adding jobs. Since December 9, 2020, we have already added 710 new employees to our workforce. As we always do at Cleveland-Cliffs, we are putting our money where our mouth is and bringing back the America that we love with a vibrant manufacturing sector, a thriving middle class, and with opportunities for all people that believe in education and hard work. The main factor supporting this new way of doing the steel business are the following. First, industry consolidation. Prior to our acquisitions of AK Steel and AM USA, they were both buying from Cleveland Cliffs under take-or-pay type of contracts. As a result, their top concern was filling up their steel order book, so they could satisfy their purchase requirements with us. And in many cases, that involved being aggressive on pricing their end product so they could move material. We and the business we acquired are no longer burdened by this, which leads me to number two, a more disciplined supply approach. As I have stated in the past, we can be flexible with our production and can walk away from bad deals, automotive contracts, spot or otherwise, much more easily. This industry has been plagued in the past by volume for volume's sake. But with our transformative acquisitions, we have always started to see rationality in the marketplace. And don't forget, the U.S. dominates the world in environmental performance. Of all the world's CO2 emissions from the steel industry, the U.S. comprises just 2% while China is responsible for 64%. We have also the lowest CO2 emissions per ton of steel produced among the nine largest steel-making nations due to both the prevalence of EAF production and the massive use of pellets in blast furnaces. This leads me to my final factor, the one that will drive mid-cycle hot-rolled quarter pricing higher for the long term, the scarcity of prime scrap. EAFs make up more than 70% of steel production in our country. This U.S. reality is unique among all major steel-making countries. EAFs have long taken advantage of the large pool of scrap here in our country. However, with all the new capacity coming from the EAF side of the business, the scrap stock has become scarce. In order to make flat-rolled products in EAFs, you need prime scrap and metallics, both of which actually originate from the integrated rock. On top of that, manufacturers have become more efficient at processing high-grade steel, generating less prime scrap to be sold back to the system. The United States is a net exporter of scrap but it is also a net importer of prime scrap. Combine that with China's growing needs for imported scrap, which will outpace their own generation in the near term, then the U.S. EAFs have a big problem. Obsolete and lower grades of scrap, we will likely be okay as higher prices incentivize collection, but that's not the case for prime scrap. Lower-grade scrap is good for rebar but it's not good or not enough for the production of more sophisticated flat-rolled steel products. This scarcity points to significantly higher prices for scrap. Meanwhile, we at Cleveland Cliffs will continue to enjoy the steady cost structure of our iron feedstock. Our own 100% internally sourced pellets with decades of iron ore reserves ahead and our in-house production of HBI fed by our own mine and pellet plant. We formulated this view in 2016 and that has been the driving force behind our strategy for the past five years, including the construction of our HBI plant and our two transformational acquisitions executed last year. It is actually interesting to see other companies come to the same conclusion five years later. At the time, Cleveland-Cliffs had already started to enjoy the benefits of our investments of the past years. Our direct reduction plant has had a remarkable few months since the start-up in December of 2020 and has already exceeded our expectations thus far on HBI production and shipment. Tons of free cash in the month of March and expect to reach our annual run rate of 1.9 million tons this quarter. While we have already shipped some HBI tonnage to select outside clients at very good prices, we have thus far used most of the products internally at our own EAFs, blast furnaces, and BOFs. Operational results have been both our own expectations in all kinds of internal usage of our HBI. Particularly at our EAFs, HBI currently makes up between 20% and 30% of their melt. More importantly, our HBI has effectively eliminated our need to buy prime scrap. We only need to buy lower grades at this point, substantially lowering our cost structure. It has also lowered our greenhouse gases emissions and improved our iron and chrome yields. The original intention for the Toledo direct reduction plant in Cleveland-Cliffs was just another company that wanted to exclusively sell HBI to third parties but that dynamic has changed with our two acquisitions of last year. Given our expectations for the scrap markets, our HBI is an incredibly important Cleveland-Cliffs internal resource and differentiating factor, both now and going forward. This is why I'm happy we did not sign long-term contracts to supply HBI to third parties. I did not need them to build the plant, I don't have them now and I don't want long-term supply contracts going forward. For the record, the consistent performance we get out of our HBI in all of our plants, both in quality and environmental performance, is one of the most positive factors differentiating Cleveland-Cliffs from the rest of our competitors, both integrated and mini-mills. On the steel operation side, things have been progressing nicely. Our Middletown outage was a success. We completed the blast furnace repair in less than 14 days and the DOS vessel maintenance was finished ahead of schedule. And we do not have any major outages scheduled in Q2. We are focused on getting steel out of the door. Despite all we hear about supply shortages of electronic parts and other components in automotive, we really have not seen a huge impact on volumes to this end market. We have been running our coating lines at full capacity in response to outstanding demand and we are restocking our Columbus coating galvanizing line that will increase our output of galvanized products starting in this second quarter and will help our clients take care of their own high demand. For the small amount of automotive tonnage that has been deferred, we have been able to divert that service rate to higher margin customers linked to the spot market. We completed all of our April 1st automotive contract renewals with nice price increases and plan to continue to see significant improvement in these margins going forward. All of our actions support immense cash flow generation for this year and beyond, and that cash will be used to pay down debt. Under our latest forecast, we expect to generate a record level of free cash flow in the last nine months of 2021 which will put us at a figure of less than one-time EBITDA leverage by the end of the year.

Thank you, Lourenco. We will now open the floor to questions. Your first question today comes from Lucas Pipes with B. Riley Securities. Please go ahead with your question.

Congratulations on the continued success.

Thank you.

On prior calls, Lourenco and just now in fact, there have been discussions about auto supply agreements and what you could do or what it could allow for in terms of improved value capture on your part. And I appreciate that this is a little bit of a delicate matter but I wanted to ask, in what ways, if any, these relationships continue to evolve. Thank you.

Lucas, the relationship is great because it's a relationship built on co-dependence. They depend on us and we depend on them. The good news is that since we acquired AM USA, our percentage of automotive business in the overall business dropped dramatically, so even though automotive is still important, it's not a make-or-break like it was for AK Steel when AK Steel was a stand-alone company. Another thing is that the real competition for the more sophisticated grades of steel that AK Steel, and Cleveland-Cliffs owned AK Steel for a long time. The only real competition was AM USA. So now we own both. So the automotive clients, they have already realized that. And they are no longer negotiating with a beggar. They negotiate with the supplier that treats them with a lot of respect and demands respect in retrospect, so we are doing great. We haven't had to shut down any clients yet in contract negotiations but every time they think about playing hardball they should know that at this tight side of the table, there is someone that loves to play hardball. So, so far so good.

That's very helpful. Thank you, Lourenco. And then it's Earth Day today and President Biden and President Xi have been outbidding each other with announcements on carbon reductions and you spent quite a bit of time talking about this larger context in your prepared remarks. But I wondered if you could maybe go back on some of the details to what extent are carbon reductions in the U.S. by 2030, for example, a risk or an opportunity for the U.S. and then of course you've always had great perspectives on what's going on in China and the implications for global steel and iron ore markets, and of course it has major impacts for you as well. And so kind of wrapping it all together, if you could include those aspects in your response as well, I would really appreciate it. Thank you.

Yes, it's a lot to pack into an answer for you, but I will try to summarize the best I can. First of all, I believe that the fact that President Biden is retaking the U.S. leadership in this environmental conversation is a very welcome move and it's overdue. I have heard way too much from countries and companies that don't have anything to say, but they are saying anyway, the United States can say a lot. We have the most stringent and serious laws and regulations. In order to operate in the United States, you need to comply with them day in and day out. That's the stock. The other thing that I love about what President Biden is doing is that he established a deadline for the reduction of 50% in 2030, and 2030 is around the corner. I hate when I see companies saying that they are great companies and countries say they will be carbon-neutral by 2050 or, in the case of China, 2060. There is only one certainty about 2060, all of us that are on this call will be dead. That's the only certainty that we have that 40 years down the road, I don't think that we have too many 20, 25-year-olds in the call. They hide in business and they hide behind keyboards, they don't come to calls to learn. So anyway, for the thirties and forties, if you're not dead, you are very old at that time. That's the only certainty that we have. But 2030 is around the corner, so it's good that Biden is talking about 2030. And he is putting a target of 50% reduction from 2025, and that's a good point to start. If you look at our environmental commitments, we are talking about a 30% reduction in 2030 taking 2017 as a base case. We haven't checked against 2005 because this announcement came this morning. But I believe that we are already there. So that's good for us because we did not start counting from 2005, we're counting from 2017. That was the beginning of the HBI plant when we started with the HBI. Going forward in our business, the data will start to be realistic and we are going to start to see things the way they are. China is responsible for 64% of greenhouse gas emissions from the steel business, while the United States is responsible for 2%. Here in the United States, we have excellent performance from all EAFs remaining from our EAFs at Cleveland-Cliffs and also from blast furnaces that are all filled with pellets. Our Middletown blast furnace has a performance that is very similar to an EAF. Our Dearborn blast furnace will look into just to the number because of the coregen arrangement that we have with Dearborn energy DDI. We have numbers that are below the EAFs. So that's the hardest thing that needs to be fixed. Our blast furnace in Dearborn is not better than on the EAF. It's just the way things are accounted for and there are things in Dearborn that are not being accounted for as well as there are things in EAFs that are not being accounted for. For example, the usage of imported pig iron because imported pig iron goes against Scope 3 and everything that's been reported in Scope 1 and Scope 2. So we are going long story short, with the involvement of President Biden and President Xi, things will start to be more in the real world in terms of being discussed between academics and funded to people that are starting to sell consulting services, reality will sink in and will prevail in Cleveland-Cliffs is reality.

Very, very helpful. Thank you, Lourenco. I have more questions, but I want to be respectful of everyone. So I'll turn it over. Thank you and continued best of luck.

Appreciate it. Thanks a lot, Lucas.

Your next question comes from the line of Phil Gibbs with KeyBanc Capital Markets. Please proceed with your question.

Hi, Lourenco. Good morning. I am also behind my keyboard here, but not in the basement. So I've got that going for me, which is nice. CapEx this year, Lourenco, any update on that?

I'll let Keith handle that but look, when I'm talking about the kids behind the keyboard, certainly am not talking about you, Gibbs. All right. Keith go ahead.

Yes. Phil, no, we're still looking at around $650 million for the current year. That's our forecast. Last time we talked about $600 to $650 million. We're at the high end of that range. Now, we're at $650.

Okay. And then do you have with Middletown restarted, do you have an expectation for higher steel volumes in the second quarter?

That's a good question. Good. That will allow me to say something that it's a bad association. When we do an outage of our blast furnace like Middletown that's major, we prepare for that. So we never have any lower throughput because of the 14-day shutdown. That Middletown blast furnace was down for 13.5 days, but we had enough slabs, we had enough hot bands, we had enough PMO, we had enough cold-rolled hard, we had everything we needed. And as far as working processes, we keep all the lines full and all the levers in shape. And then you say, well, Lourenco, the clients are complaining that they are not receiving steel. Yes. These are the clients that when hot bands were $440, they could have loaded the truck, they could have put their warehouses full through the roof because you can't get much better than that. Actually, we should have never been even close to that. And we never will again, and that's Cleveland-Cliffs telling you, Phil. So they didn't do it because they were waiting for another $10, $20, $30 to drop to then be quote unquote opportunistic. So they are basically collecting what they pointed for and we are taking good care of some of them, while others we are not taking care of because I don't believe that they even belong. Because we don't need all of these quote unquote opportunistic players in the marketplace. They just complicate things, gossip, talk on the phone, send fake information, and do everything that we want in the marketplace. What we need in this business is stability. What we need in this place is profitability. There is no real company in this - for most of 2021 that it's a real company that's complaining about higher prices. Do you know why? Because they are all making money. There is only one way for the supply chain to be profitable, is to have prices at a level that makes sense. This is a capital-intensive industry, Phil. We need to have return on invested capital. Without return on invested capital, we can't do anything. We can't pay dividends to shareholders, we can't pay down debt, we can't do anything. So that's what we are working for. We are doing our mandate. We are doing our job. We are working on behalf of the shareholders of the company.

So essentially what you're saying is that your volume should be reasonably stable perhaps maybe up a little bit, maybe down a little bit but kind of within this range? But the automotive supply chain certainly is a big part of your business. It's a big part of the sheet industry here domestically. I think we just want a better view, if you could, in terms of what's going on. I mean obviously, there are shutdowns that are taking place, but are customers still taking steel on the prospects of ramping up in the back half of the year? Were your shipments down and do you expect them down in the second quarter and ramping back up again? It's just tough to know from our seat what's actually happening on just the volume side. Thanks, Lourenco.

Yes. Phil. You know we supply pretty much everything to everyone because of our size. We supply roughly 4.5 million tons a year of carbon steel and another 500,000 tons a year of stainless. So all in, we supply 5 million tons to automotive. And I'll be honest with you, I haven't seen a real impact on these shortages. Yes, we did have one week that we delivered a little less to customer A, plants X, Y, Z. But then the next week that plant catches up and then another plant on another OEM is closed down because they don't have the chips or because they don't have rubber or because they don't have foam, but then they catch up and then we catch up with them. In the meantime, Phil, we have been able to take very good care of spot orders for the good service centers and we have been able to increase our prices. I don't know if you know, but this morning, hot-rolled prices were reported both at $1,400 per net ton and we are cutting deals way above $1,500 per net ton. So we're in good shape and that's fantastic, and this trend will continue. So there is no real impact from our standpoint as a supplier, and I'm really talking about across the board. It could be a big one, could be not so big one, but pretty much everybody is taking care of their respective businesses, and we are supplying them. So no impact on us. As far as producing more or producing less, we are producing a little more. Why do I say that? Because we are bringing back old school things and that's more galvanized in the marketplace, but that's just galvanized. So other than that, we are producing at capacity. And then they will say, oh but Indiana Harbor 3 is not in operation and Ashland is not in operation. Yes, they are off operation for a long time, and they will never come back, neither Ashland nor Indiana Harbor 3. They are done. They are not going to come back. They are not part of the picture. And we are producing more hot metal because we're using HBI in Indiana Harbor 7, we're using HBI in Dearborn, we're using HBI in Middletown. So that's what we're doing and we will continue to produce more increased productivity, increased throughput, and not bringing any blast furnace back.

Your next question comes from the line of Matthew Fields with Bank of America. Please proceed with your question.

Congratulations on the great success this quarter and the continued momentum. Now that you've been managing the middle assets for several months, have you had the opportunity to review them and identify any major projects needed in the next year or two? Additionally, what about older plants like Steelton, the Conshohocken plate mill, Burns Harbor, or any of the coke batteries?

Yes, we are. Yes, we learn the assets during due diligence and now we are really into the assets for a few months, and we believe we know them extremely well. We compare the overall status of the assets at a level that is not the same level that we found the assets of AK Steel. This being said, everything that we need to do with those assets has already been contemplated in the CapEx numbers that we released with these results and today during the call, Keith Koci talked about, so there is nothing really major to expect. And all of these plants that you mentioned specifically are all good niche businesses, which we are taking excellent care of and we will continue to make them grow like for example, Conshohocken, great business. We love doing business from Coatesville and Coatesville. That's a thing that we used to do a lot of business in. My metals say time we reconnected with the Pentagon and our relationship is perfect. We will continue to grow this business. Burns Harbor Plate is the best performer of plate out there as said by the clients. So the clients appreciate. And we are taking care of business in plate better than the competition. And that's what the clients say. I don't know if they are saying something different to my competition but that’s what they're saying to our guys in plate out of Burns Harbor Plate and that also includes Gary Plate. So Steelton is a business that's in a very niche business as long as you price it right, you make a lot of money over there. The EAFs there love our HBI. We are no longer buying scrap over there. We are making normal saving, easing, you know, we sell HBI to third-party clients for a very high margin, very good profitable business, but we are making more money by replacing scrap in Steelton and not buying prime scrap in the marketplace, using our HBI because the savings in costs are better than the margins that we make selling HBI. And we are denying service to the competition. So it's all perfect, so all good Matt. I don't know.

That's helpful. And then I probably I know this is like not that important to the way you run your business, but a lot of folks in my world kind of pay attention to this stuff. So your credit ratings are very mismatched between Moody's and S&P. Is there any reason that S&P just kind of doesn't get what's going on with steel prices, the steel environment or they're just way behind? Is it something that you actively can focus on? Or is it just they'll come around when they come around and get you that triple B rating, which seems kind of absurd at this point?

Look, I also noticed that and Keith and Celso as well. That's why in the last deal, I did not use S&P, I used Moody's and Fitch. I'm not saying that Moody's and Fitch are much better but I'm just saying that S&P is just horrible. So just that they are blind and they don't get it. So I don't know, we've got to ask them. If their data brain is working, they might give you an answer, otherwise, they will just receive or they barely reply the next day, so they're bad.

Yes, fair enough.

Let me do a follow-up with you Matt. When would be the day that high yield investors will allow you to do a deal without having a rating because you guys all know that these folks don't know anything. So, why investors like to see the rating out there? I price my deals at a different level of my rate. I price my deals at use that don't match my ratings. But I still need to print a rating. I mean I go with a B rating and I price below double B plus. So, you know that, Matt. You have been following us for a long, long time.

Well, I think the high-yield investors are sometimes smarter than the rating agencies.

I believe so too. But they are not bold enough to do without a rating, so anyway.

Lastly, you've been right about a lot of things, but I hope you're wrong about one thing and I'd like to live past 77, if that's okay with you.

I'm sorry, say it again.

You've been right about a lot of things, but I hope you're wrong about we're all dead in 2060 'cause I'd really like to make it past 77.

Yes, look, I will start praying for you today. I think going to three and that working overtime.

A couple of questions, please. Starting out on decarbonization then another one on working capital, please. On decarbonization, obviously you spoke quite significantly about the progress the U.S. market has made in cutting carbon emissions especially versus peers in Asia. Wondering for Cliffs asset mix in particular, how you view that progressing over the medium term, obviously HBI a very big positive here. Do you see opportunity to expand HBI or expand your EAF capacity in order to reduce your carbon footprint further and over what timeframe that might be considered?

Yes. I see opportunities on that.

Okay. Is there a level of deleveraging, after which we could consider larger CapEx investment? If you can understand the moving parts.

Large CapEx investments are motivated by real need not by availability of CapEx. So, keep in mind when I started building HBI brand at the time with a budget of $700 million to produce 1.6 million metric tons of HBI, that was a massive investment for legacy Cleveland-Cliffs and we made it anyway. Because that was the right thing to do. If I had not done that, today I would be announcing an HBI plant and people would be telling me congratulations, Lourenco. So you are thinking ahead, you are thinking about doing an HBI plant and HBI will be something really good for the environment. Guess what? Remember that plant that you said that was a widowmaker that nobody can finish on time and on budget? We finished on time, we finished on budget, we increased the size instead of spending several hundred million or spending $1 billion, and now we have it in our towers and all using and we are decarbonizing. In Europe where you live, people are talking a lot about decarbonizing. They're talking about hydrogen; the technology is not there; they are talking about breakthrough technologies that not even the universe knows where they are going. And the ones that I'm talking about the exception probably for ArcelorMittal, that they really know what they are talking about. Everybody else is fighting for bankruptcy, dealing with lenders at Goldman Sachs, dealing with banks in Switzerland that go down when they release results. It's a frickin mess in Europe as far as environmental. The person running the show in environmental in Europe is a girl who's 18 years old. Here it's a 63 years old guy that has been doing this for 41 years. If you guys start paying more attention, you'd be better off. We also need to know about decarbonization.

Okay, that's very clear. One more question please on shorter-term cash flow, please. Working capital obviously significant investment in Q1. Can you give us a sense looking ahead into Q2 whether or not you think that given the cyclicality and price strength a need for incremental working capital investment, or have you already been able to get investment levels stable going into the second quarter of the year?

Yes. Keith will answer that.

We will see a little more build here in Q2 prices. Our selling prices continue to go up, therefore our receivables are going to go up. So I think embedded in our numbers is a $200 million to $300 million working capital build on receivables in Q2 and then stable obviously for the remainder.

Your next question comes from the line of Sean Wondrack from Deutsche Bank. Please proceed with your question.

This free cash flow guidance is a far cry from the guidance you got in April 2020. It's amazing to see this now and it totally backs up the buyback that you did back at that time. I'm just thinking when you look at the $4 billion of EBITDA, I'm assuming that prices hold up, $650 million of CapEx. This is sort of implying billions of free cash flow. Is that right? Are there other puts and takes like working capital or am I reading the guidance correctly there? Thank you.

You are reading extremely correctly. We are talking about $2.3 billion of free cash. That's correct. You are really right. And it will be all applied to pay down debt. And when we get to the end of the year, we're going to be below 1 times leverage and guess what, I will continue to pay down debt.

Right. Makes a lot of sense.

We want to be debt-free. Yes. I want to be debt-free because you know what, I don't know when they are going to have another COVID. I don't know what's going to happen next. What I know is that if I have my footprint producing 17 million tons of steel a year, producing $4 billion plus of EBITDA a year debt-free, I'm good.

All right. Now that's, I think you have roughly $1.6 billion on your ABL right now. Aside from, did you repay any other debt or do you think just to refinance and maybe take out the secured debt as the time comes.

No, we are going to start paying tranches in cash. We settle everything. We have the plan laid out completely between now and the end of 2022 on what tranches we're going to take and when. And I'm going to take them all down with cash. We will not even need a rating from the rating agency. That will be the part that I will really miss, you know?

Yes. Well, your bonds are pricing at a single B anyway. So I think people get the picture here. But thank you very much for answering my question.

Yes, what I'd like to have from this rating agency, you know what, they need to start giving you one rating, LG, that's it. A, B, C, D, give them an LG rating. That's what the investors want to see. They give me money all the time. Every price starts at 200 to 250 basis points, the whole competition, all the time, as you know.

Your next question comes from the line of Karl Blunden with Goldman Sachs. Please proceed with your question.

Thank you. Good morning, guys, congrats on the strong results and guidance. This might be an extension of that question, but I mean you have quite a bit of debt now, you've got a lot of cash flow when that debt comes down. You have to make decisions with your cash flow. What do you think you would prioritize as you go into kind of '22 and '23 timeframe based on where you see the ability to get economic returns or potentially shareholders want to see a line of sight to return, whether it's dividends or share buybacks? Just be interested in your thoughts on that.

Yes. All of the above. All of the above. This is a good problem to have and we will address when we get there. We will not commit to anything right now other than paying down debt. Every single dollar that we pay down on the debt for the same enterprise value goes to the other side, goes to equity and the stock price and we will start to appreciate. We are in a moment here in the United States in which the economy is booming. The consumer is consuming, like I said in my prepared remarks, we are selling everything we want and the stock price should continue to appreciate. It's time for real investors to start to move money to where companies are making money, I don't know, in the tech side. And well to have a hard time believing that Uber for example is a tech company, it's a cab company that doesn't have employees as they explore contractors. So anyway, the real companies, the ones that generate strong, the ones that create middle-class consumption, the ones that generate the ability to move the economy. Investors need to take notice because we are making money. And we are starting to trade at the multiples that are absolutely absurd, absolutely ridiculous and this thing is not going to stay there forever. What we'll continue to do, we'll continue to move numbers from the debt side to the equity side. That's what we're doing.

Yes, I mean, it makes sense. I think there is an argument in there that North America in the U.S. steel market has matured or developed pretty quickly to be a healthier environment. When you think about the options that you have is inorganic growth part of the equation as well, or are there, maybe it's not immediate because you're integrating pretty large investments, but are there other opportunities like that to become bigger or more efficient?

Yes, I would never rule out anything, but it takes two to dance. When I acquired AK Steel, I went there to buy a furnace and saw the opportunity to buy a company. Then when that company was acquired, the opportunity to buy AM USA showed up for us and we acted very swiftly. So we will not rule out anything, but we are always on the lookout for more efficiency. We believe that our way of doing business is good. Our culture is good and the people that came from both AK Steel and AM USA, they are happy they are with us. We pay people well. We don't take advantage of people. We don't exploit people. And that's the most important thing we have. So it creates a lot of momentum when we acquire a company, because we don't go in and fire half of the employees and say we are saving costs. We are doing the opposite; we are hiring people. We are eliminating over time, so we are creating a workforce of people that really love to work for Cleveland-Cliffs. So, yes, there is a real possibility that we'll continue to do things but I have no targets at this point, and usually, when I have a target I act so fast that between one quarter and another we're going to have something out. I have not improved in the over right now. My focus is 100%, 100% on paying down debt and eliminating debt and creating equity. And then the numbers have no other place to go except the stock price. That's what I'm doing right now.

And there are no further questions in queue at this time. I turn the call back to the presenters for any closing remarks.

Thank you very much for your interest in Cleveland-Cliffs. We will be in touch. Thanks a lot. Bye now.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.