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CLF Cleveland-Cliffs

Participants
Lourenco Goncalves CEO
Keith Koci CFO
Matthew Fields Bank of America Merrill Lynch
Curt Woodworth Credit Suisse
Phil Gibbs KeyBanc Markets
Piyush Sood Morgan Stanley
Call transcript
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Operator

Good morning, ladies and gentlemen. My name is Denise and I am your conference facilitator today. I would like to welcome everyone to the Cleveland-Cliffs’ 2019 First Quarter 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. Harbor that statements made be of that forward-looking the you will today’s made XXXX. reminds Private within predictive the include are Safe company certain Reform on comments call as Securities The Litigation of Act protection intended to

found such that At will Important The the Although certain assumptions, call, available could reports the conclusion results published differ I earnings and to is conference differ Chief materially are that Reconciliation available can results the Chairman, also materially. cause also President company’s that on release, for of Executive be in time, believes to could and the website. this subject in At company and for Officer. with forward-looking was cleveland-cliffs.com. be set cause website. statements actual Forms which would it results replay XX-Q company are on Lourenco on will the forth news items. excluding morning. discuss the based risks to XX-K Goncalves, and factors are being its reasonable purposes G SEC, statements special on and at introduce available uncertainties Today’s Regulation filed releases which the like call broadcast are to the this

Lourenco Goncalves

Thank you, morning. Denise, and thanks to everyone this for joining us

Metals our in XX He the Financial promoted private the capacity, of Officer, we charge IPOed we we several Vice in the into he the was on integrated Budgeting Business of and to Chief USA. USA Metals the to way USA doing successful when traded to was our in then worked Steel XXXX. M&A for Keith of Metals XXXX. to we CFO And Keith new USA Development, me With time ran the properly player the business. Reliance very made me XXXX, the became we years, shortly for Cleveland Stock until in company the and most Before Keith was CapEx. Controller which in introduce valuable my of after. and NASDAQ of join President, He that listed we instrumental stayed in with XX XXXX Executive Keith & Exchange. like on Steel time, At another Aluminum Cleveland-Cliffs. publicly company took very company, when the also acquisitions, Director I start, Keith were with years listed York sold USA was New would to At Metals USA Koci. and the has company me him when invited earlier year, as relocate to Metals Reliance here at Metals I this I

of HBI to different the the considering better growth, are plant related our of currently and not a With we CFO conclusion alternatives the Cleveland-Cliffs. in have soon at several company, number with this coming for great here Toledo construction could one future I

So Keith? I'll with portion Koci the turn call. overview it of this for to Keith over financial that,

Keith Koci

a to my to half it's Thank you as for potential suppliers of Financial the service today's said, kicking about as remarks quarter will overview Cleveland-Cliffs, it out have to and comments. for we a unique begin will of Great feedstock months position carve be the all That I excitement company, for part advantages After bright, With for in extremely the dog on center and Coming in premium market, our career the from as in in world, space huge The my eat American you, hard Lakes, long have this future steel the as dog suppliers of well call. is Lourenco a company. HBI, I we Lourenco before appreciation customized a back EAF competitive the Chief two of industry. morning his of and I am an about as Officer thrilled with listening to it. good contain the of geographical our our inside

first to the typically aware, realizations to our on majority the quarter volumes our of have to their net always back way will the pellet pass fact of lower should the our business customers our of deliveries, most for due quarter Soo be in all for This portfolio. Great Lakes. shipments As among which lightest through our annual the the where investors quarter of lowest the in be limits closure our Locks, rail

fraction QX for such, total we generating of EBITDA full our As adjusted anticipate company small year. represents the what a million $XX of

line pelletizing expected long due than performance due X.X and mining outperformed by also and year quarter and sales with million in our of extra carriers our rail to ability our the vessels deliver better in First last expectations tons quarter. to were to own

is remain With ice of for the even increase X a North expectation pellets the plant full of significant tons, locks includes quarter. XX to our Minnesota long Toledo quarter now the as Also, in to second Shore long grade plant April, and our usual. considerable pellet tons tons third open, XXX,XXX delivered in long be from on HBI that expectation is our year this levels point the as million during DR million QX shipments through sales representing in lakes from our

than to our rail less year guidance due we price is as since of QX lower was range, in customer the pellet shipments. full ton weighting heavy $XX long our realization QX indicative noted mix of per favorable Our

the had quarter, the we HRC During revenue year-over-year price revaluation no had remaining adjustment. in this $XXX hot flat relatively at favorable quarter, last With end the time, rate. from because this first adjustment year's $XXX ton enormous quarter, such to from AMM price the rose beginning during per short an year's explaining rolled first we of coil decline the to

full metric the indicative our full customer of ore expected of to of much importantly, the revenue mix. larger $XX and shipping at as more per the hot quarter for pricing, iron Very ton per what prevailing has closely year, to we the be in our pricing and land of in $XXX our compared For of $XXX increases expectation the applying long year rate $XX range range prices metric premium the sample ton, at at ton, provided will second, is iron the increased $XXX third quarter, pellet due spot Atlantic remainder fourth higher year, ton. revenue would short last remainder rolled representative size ore volumes the per our for to per

far pricing of strong in third the note, as of have right market. to alters first now represent most what based are on of volume quarter figures of a index already as pricing, a year, were year, ton we number excellent do not our to Regardless cash on of internal year. we reflect guidance in in methodology costs of to our low costing view end $XX use remainder the As for cases, does books. just lower utilized third higher entire in we the typically year per Because contracts artificially index in ton DD&A our averages, last an in as our near excellent year, pricing time the through quarter. they in standard revenues year similar Similar an position on incredibly our a for an last are formulas we points have the full the set one because April, late base per have performance actual we range, the ourselves of and we find almost the

the $XX closer ton, P&L Going the like cash to full expect are long obviously on cost improved SG&A our point items and more guidance profit remained based trend I year for would prior which have our forecast to per miscellaneous. and to All to revenue forward, to earnings costs range items and are Other than recouping side. of spending higher $XX on sharing maintenance estimates corresponding our royalties, of and we forecasts. other with consistent we the end

the $XX which was SG&A a $X million. pay included Our severance expense of quarter, during million

Our SG&A the full budget was maintained year for $XXX at for million.

will saw chunk Empire just but related miscellaneous materially quarter good accretion. the about idle, like which to in we next $X This this million the be two higher record in over to cash net, of ARO non will slightly, QX, item a we amount continue quarters. for is line As not per

customary, the thus million quarter, far on $XXX translated XXX as were during inventory, million That XXXX expenditures was the outflow. pace outpaces into remain cash will of about rest with front, as HBI year. completion. production throughout million first during the This first went which we a consistent be toward we the a as the expected our cash planned. of middle shipping as built for pellet Capital $XXX track flow On recouped project quarter, which the largely

the and $XXX million. peak North budget upgrade on on Shore expenditures our capital HBI spending final spend year this Our year This year unchanged DR project. at the for is of remains

is be beginning million my comments back that, should And done CapEx number into $XXX quarter, CFO, was $XXX in nearly the to as XXXX. total Cleveland-Cliffs by wrap step be share XXXX, thrilled With the I competitive since the of simple of million. shares count million rate of to I industry. with the obvious up expected the to a approximately buybacks of of XX, in side. $XXX has, XXX.X total we sustaining by March common tax we the Also on envy XX%. advantages during bringing purchased shares, tax of that total year, position And share we spent shares expect to that Next finally, reduced a a will to Along the program. as the million the have also

for We million coming nearly will next taxpayer AMT but the we of years. remaining be zero way future, refunds have tax cash over four the not cash foreseeable our a only also $XXX

up balance Between previously the report favorable the first vessel receipt for of to look turn our restart again than next I back cash the the and pile it With I we rest that, the to $XXX this, pricing in expected by beyond, over has will moved progresses. this quarter. Our our see the as expect and forward earlier watching to cash the conditions enjoy should of grow million year of expected time we year and to Lourenco. season, we

Lourenco Goncalves

of our tenure the mentality, act our Thanks, nearly steps to strategy two CEO five hire not We year players pretty out of will three Keith. we so happen consultants, of working using accordingly. all be always predict our advance. herd following elected the or Cleveland-Cliffs, and on advantage use in among several to as the pack, use what industry, resources. and in I to perspective maneuvers Throughout this my the my have years prevalent tried much ahead Instead to own internal business, it own to have I

few you. a for examples list me Let

our shorting that bond our enhances on folks, our fact bankrupt, to able we not folks huge able call investors a our shorted That not our these back dollar, faster a disagreed with to market be paid shorting intended, that provide fantastic of during company. of allows the than accomplished we’re so, short. I that to of entire bonds tenure to thank for debt a Knowing the buy open would the good at couple market if quickly By save us down cheap enough as we bonds. this some lot the buy cannot reduce example. do, bonds pun effectively. very so shortcut, They to sent our and loads. particularly time. ability lot amount my bonds our a and The debt go called would we us this the First in was a were almost Cliffs’ while with first CEO. investors doing I of years

compliance the a of time in value sanity Brazilian executives back approach China. predict Australian also as due all top the to the much outperform world third, each incredible to brought example. the in was of the rational There the value, the world. also everywhere That ability over championships Second time stupidity. to companies of predicted iron And We ore other business. a mining cost particularly during they lowest producer in were major the to as ore destroy to environmental their that a known shareholder some and toward the volume more the push trying demise iron we the departures of and markets

pricing a that it we formulas, not the premium an reason, even an discussion. all introduced pellet our And Well, object at about was alone important the added of company, we it's being inclusion other when our since structure. $XXX premium of as pellet has things EBITDA For in annualized pellet did premium to equal. pricing our time million part the in

build of of this, selling We'll the by a on predicted forward later construction this plant supply waited And we relevant more I this most one to examples, on the June able and projects had investors, these expansion that expansion. in the analysts thought product a of the HBI mistake. being talk call. that after to Muse trustworthy will Since partner. announcement because and more come were already when from ones, be about several If will huge two behind online, Fast industry will we time great was fighting was now in elected such a three even some we announcements worse, and be forward this EAFs get are new ahead going our investment new until and stewards proven EAF now be of financial have we existing the will plants. Beyond not we of one, number HBI correctly HBI asked move to Several we XXXX. EAF years over. today's way participants of

to and ground manufactured in five Cliffs theme in the high of environmental than produced Australia. an ore, that pellet, this all time was labeled extracted business. iron is to ore ago, safety fundamental for producer cost while despite in called United standards the was now, States For brings from the pellets at no maintaining Meanwhile, arrived entire are the and of indication as Cliffs substantially the why my When as actually finds there Fortescue this most of years CEO rated that a producing not highest a we valuable the all a get feed who first fact has BHP and tenure driven appreciation more of Vale, Rio explain cost could Cliffs’ me a product lowest if their CX the to all cost center again, industry. Tinto, point, number, see was success. the important underlying I iron been

cutting As for I potentially safety, and dangerous have been like just and days areas since capital please and intensive mining to jeopardize might or business rights stewardship. Street bragging XXXX, management repeating is Wall environmental a costs necessary important

or of actions currently a result we years so, few be is majors and taken, actions ore not up iron what by a As be production happen. happen Several people Brazil meaningful did easily directly that in with the shortage ago, industry the multi-year and more entering brought involved That the would not would a indirectly the not and are or and taken shaping lost initially pellets. be believed not even replaced of will back to online.

ore perpetrators. for shortfall much investigating metric annualized accounted serious ore of has only the XXs more iron the liability, the object of should criminal very of mainstream fact, Brazilian and and of serious multiple and costly of The as about systems continue In very the life distraction related punishing root including lawsuits, from by loss to to courts of Brazil law heated elevated new used governments discussion Furthermore, media, not and ore unreliable causes hundreds it medium millions anytime been become year the become of become of this tons. this for Welcome of as new [indiscernible] prices future. as get shortages, That and foreseeable to pellet no to the a as is better worse. supplier. or iron term has for get the normal. soon get should next will such, that iron world a supplier of short Brazil totally solution the to and and remain or throughout There confirm massive normal, might easier

just in is a to and the starting at the to do inventories considering transit we China now Córrego and both are point physical and at China from in ends, in felt where exactly at ago world. XX throughout Brazil impact the be catastrophe Vale days Brazil With Feijão vessels port

did of stock add how take exactly appropriately? own hands at So we major like both advantage this would market We said I event Cliffs bought the we not our reading do. with back

doing to take the us. by dollar. of same what have company shares back dollars not we of don't low the we tape. by And at I hundreds fight very the millions our are bonds, gives buying Four fight I added years I back As always our this now, on the in prices. do buying tape. I value cents ago, CLF the market said,

XXXX above another this And time, to million. we at in be expect XXXX up revenues will Our year. $XXX EBITDA for last step from taking be

$XXX cash result our In a of of almost our board that that these As continue million to available the and our we year. program, capital to down an to buyback $XXX to up share be With even year regard directors shareholders. already will in million. million direct $XXX still levels our original of debt additional forecasts, meeting, have pay after authorization considering toward our of for program, to should improved still the million CapEx, that share generate enough the repurchases yesterday, EBITDA XXXX and approved $XXX spent inception this in million return bringing $XXX board since meaningful our and for year to big this we continue

Our One was mining the in through pellets we're problem actually remain a money, handle pellets peak, to from hunger is its pelletizing lot rates. declined have, continue shape. few years. has has This compared order operations to what drives to pushing equipped steel at our and pace But making weather. distributors to pricing seen royalties. a winter Why that Minnesota the year as the profit are to not, Michigan thing, this past costs more well our up employees up have inclement fact good for healthy and the we sharing harsh great which and in manage operations and our especially in

the world, dictated domestic allow That the iron to throughout increase caused more ore the by they with in only so, not the new mills United improve, pellets the will profit doing ultimately the by prices and charge expensive that driven by a steel for otherwise trend the to that scrap would happen should following mainly price And steel States in believe for avoid normal we them United States. new Additionally, normal. but by squeeze feedstock.

also expansions address additional While we're HRC the the analysts to that destroy like a some called discussing would markets. of are so market domestic prices steel couple market I and capacity dynamics, and the pushing steel theme experts will latest

Just for like always looking scenario. with next these folks gloom are and iron doom ore, the

predicted predictions the to prices long States every in the the economy jobs. year the making a It's moving of only a afforded of United to been wrong be With domestic years. a consistent been embarrassingly service have evolution same. reminder, a goalposts good The later. the have United The underlying strong. these demand single manufacturing of is of each foundation, year. a another a As that number for iron based country States crash to to in with last ones And and and continue ore to will continue excuses will history middle solid can four be be it a luxury steel, paying steel will manufacturing class be providing the

history side, On in become older or facilities. some the versus the both always, in entire away. steel States will And marginal steel United countries will United and uncompetitive in industry newer players that and in the newer of matter the steel replacing fade the supply facilities is States, ones naturally for Canada like Canada

is glut of supply exaggerated. So, definitely the fear the

capacity this new a States steel to United continues As impact country. the on net importing of the pricing, for be

that that Besides and for States market EAF for playground abundantly domestic new it or tariff to that, within no a reasonable this. a at same we're room doesn't fairly by level all United the unfair played prices. years against And buyers longer we cheaters side, a strong used domestic raw number EAF loss of will fundamentals law amount steel. if more of tears all decent until inability not top the that, time. On and there's underlying the have few to furnaces analysis an anti-dumping in is land. the over furnaces of the the worse a a long online enough could that have believe fighting get to steel no China that That's balloons the priced duties, is consider things many also enough the demand death in This of it's scrap extended longer for China raw operate to still world. trade, problem be do steel we for So industry for clear market the certain and lot importer the now, real metallic. of quotes. also reasonable including the you they will have At mills barriers materials less entire lead it all at ago. starts of traditional countervailing the secure These cost free finally will high from the a a much to blast mainstream cheaters, imported marginal going either player, to replace to level. environment get time, these when an always has a importers, from of pay the That understand their price coming treated have keep as period premature be to capacity and for competitive furnace steel how new of destroys that US to Without North will today. supply. domestic With will a poison being get the a material and Even the America said, are Chinese pass how this steel pellet term support into

if one two by With the term its short-handed or will restart, no inability there be the XXXX, brought million good the expand needs. Great our pellets is number implications to to unable production is option be Lakes. consuming to logistics, Empire full supply balance fill up furnaces Important X cost I I Great them, at market good furnaces. was Last blast these By HBI Cliffs disadvantages, way shortfall. run. of time million situated, not quarter, need given our blast and plant There of outside the these presently pellet the for a market had possibility which mine for of a outside solution will pellet in will and long located tons, long is backfill the one asked an from Lakes. X.X leaving the for the shortage suppliers

on of who specifically, of track long On failure remain we the their And their a Cleveland-Cliffs a capital battle minimum for period HBI allotment long of furnaces plant unless in raw can to with ago. XXX% quarter among term someone in Like And The secure why remarkable of existing However, said, coming our dynamics full blast marked is material left that's to long XXXX. for we plant Without important number long we our we the furnaces our out so to something strategically hold, saw owning any about Empire, furnace guaranteed on the from will to term of the win set to at blast remain blast EAF bailing or Thanks execution, to will mid-XXXX this if And client price time strategic Koci of and needs. will completion. rates starving. planning take be the for of one furnaces flawless by a we invest think either the way. current expire will ground. pay demanding first the operation be number be prevails the contracts of arrangement, versus lock term at Empire shift not will certain is is the one reserves contract market benefit Cleveland-Cliffs. Keith blast type a HBI The not up Cleveland-Cliffs. in any project end at HBI pellets progress. EAFs, another that regardless IRR

begun plant the morning, structure million the [indiscernible] high. of has budget feet about this as $XXX metric tons stands XXX X.X Our remains for million. and

place will good. strong work the year illustrate end of of first the of the months the workers done, have four in this right so To hours work far entire on last through and surpassed controls have have amount We to now, XXX already progress in By site. the of monitor approximately completed amount hours we all the April, completed being so year.

start And bringing tailor events reasons reduction Brazil on the in $XX being XX.X% supply iron of project our dynamics in this of the progress making. process our ore a great clean that very continue generation call, the in they impressed Fe the pellets next fewer go scale have markets created are each these so the a to we commercial steel Cleveland-Cliffs to and explained year. pellets the and and and know no on provoked South million have radical expect grade per previous long X% outside able up the the than are grade China, business demand to to of close all are to to is rate to And forefront team Korea consumption and DR close completely direct Europe, of pellets, particularly HBI million pellets facility. X.X easy for tons in catastrophic there's the They and in it problems change back environment. completion The a to things we in appreciate events. work unreasonable for into up, much the the made catastrophic Northshore, the solution hubs work. for significant done As one United by Wrapping stable number main Furthermore, States, DR at the Japan. I and producing respective Toledo which Northshore at are center project both are with far. for and at leaders they for our phenomenal be commend made project and silica

affecting to for shortages massive fact, by And extended time period United mill at buys, characterized outside of of the few As ore sight world States, years. States. a an there Cleveland-Cliffs’ of supplies no this, the United matter the is iron address the here is in for now solution virtually no pellets, all in and where and entering steel markets a except merchants pellets market in least

that's to the for the forward, over the Going new questions. normal. With turn I'll to Welcome that, it new Denise normal.

Operator

America with first Matthew Your from Instructions] comes Lynch. question Bank Fields of Merrill [Operator

Matthew Fields

thanks Lourenco, the and Keith. for Welcome iron congrats market. for One, ore the me. of Two things discussion

Obviously, the pellet ton reacted surprising get something the on. the do think your premium not range. and that's to thoughts has in strongly been Just little you has us Why hovering $XX reacted want to just IODEX tragedy. quite a to of kind Vale $XX, been per It's Atlantic stronger?

Lourenco Goncalves

market consensus. at prosecutors premium and Thanks the pellets thing. negotiating that the got concerned that And first is and of was of supplier because of even are other the biggest That's discussion to get by pellet least, the still things spent Brazil. for then time, affected biggest of raided because pellet premium they abandoned. for Look, had by in it to houses Atlantic pellet reduction their or are suppliers is, at replacing the in less, the that to question, they but negotiation leading And at not time Vale, done was the A was biggest. Matt. about moving the that the with what federal iron the provoked folks a started do had in the the And portion all, to Vale spent or of is or was the massive be the a was was of the still Vale at same company marketplace, we and negotiation. the XX, biggest individuals get the lawyers by they Córrego the lot negotiations that the But it is content. pellet of reason. have leading exhausted, specific content was respond few the premium, Feijão, iron catastrophe responsibility lot to pellet XX% XX% Vale close of came the to and they the could time a were goalposts lot a from that anyway, international with police when they still that done And having the premium, XX being

So I believe status they that again. Vale focused one finished. the never we'll new be coming? Vale things. will over take day CEO finish That's That's the and It’s what of

Matthew Fields

ArcelorMittal out in thought interesting lesson kind people squeeze furnace. the renegotiate break and just Okay, to of the customer more, the losing business. of thanks. would of keep when a left with in about in not bit like And might be it basin, doing terms to history bonds, there's of essentially and a major a valued a how in of And often kind versus your about, long giving not one out tons like couple customer, in you then blast you your Can seems of kind you put you next of takes secured to would there with weaker just little a give, ongoing you enough XXXX, were they you talk about another shortage if tons puts now years, the and dynamic portfolio? a you of the potentially

Lourenco Goncalves

all, first discussion Well, of we other. never this ArcelorMittal. threatened each never with had We

from in I of the if the very in treated they respectable the some them ways. USA probably ArcelorMittal lot believe from I Our relationship us had heard heard was And with We particularly was that that ArcelorMittal, always I the mouth, our of for always horse's from heard that level analysts, because treats outcome always importance very conference that same horse's of both have mouth, respect. investors, different. negotiation us. a participation with We the but never

them to And were new So said, continue few no and good, that the had supply have the outcome this invest able developed them, We outcome supplier years must X had an to pellets, they United. happen. being at money with pellet was life still have for the pellet we of is to disruptions. go. the we expiring quarters were They to to need two massive that a

you might implying both ArcelorMittal a have the sides. pellet still binding good The be on So is to of if you we at I years contract for of us. contract going remind losing supply, are both eight of like that that would risk

their have have our guarantee supply them. we allocated for resources they that So

to nothing So about. there is concerned be

Matthew Fields

I was has talking who about a that… expiration different that's supplier near contract a term

Lourenco Goncalves

whom? With

Matthew Fields

With AK Steel XXXX? in

Lourenco Goncalves

a AK XXXX, has Oh has contract yes, Algoma AK expiring Canada. Steel portion the so of does a in by the Steel portion,

us. does So, in there buy from that their are so needs Dofasco portion others, of ArcelorMittal for they Canada a

for main the defined other contract much portion not or two, we are major Algoma that portion. XXXX. have situations that's it's a really make than these the And that So three break the other by pretty

with Did if question at History reason And be to risk. a don't were Steel dodging treated still to big for Steel relationship don't issues I AK they continues being for see answer very all or Steel for that that I I question? AK tells as any our So things your good. see am AK equal, matter. be your

Matthew Fields

great answer. No, that's a

Operator

Curt next [Operator from comes question Instructions] Your Suisse. Woodworth with Credit

Curt Woodworth

Lourenco, there point some acquirer, very obviously to Bedrock market, which around restart not pellet I own. to into you provide to seem have but take more at your would obviously, is asset you can That -- which used or get pellet if I well. with the on you that wanted guys acquirer know you would know the XX% owner do be you or restarted, to the plan the that, agreement the know announcement coming imply from views as to union

Lourenco Goncalves

we Union Yeah, down, not of the hopeless. asset, that down Stelco. shut really didn't know the well, it we it the shut shut we very announcement confirmed And totally asset we at it was down. time, was the because And by --

voyage access money fuel they So far Canada, seen from complicated. pretty very thing I did But, handle. operating. no lot willing was to Lakes, back It operation. announcing making for more that They high millions that's was useless of placed that in away in the keep need a to natural to a there. cost Stelco operates gas, was to hundreds and different for a pointing a asset order to And I dollars basis. bring money point Great profile consumption me lot pellet a want not spend was of that irrelevant, side, an are It's haven't going to the the we spend was that it's our to invest to to in over will of

the here sell have Stelco. inside to You said, to pellet there, river come don't the down get being With to down this all lakes. I the

So for that Stelco, answer was answer give on totally me asset about, need question just of a There that thinking based was color? supply more I I a for or knowledge you problem. should you my the to it’s not your me, be Did absolutely useless.

Curt Woodworth

you. And that's no, helpful. follow-up? Yeah, just then a no, Thank

Lourenco Goncalves

there for of holes, noise roof going raining roof start has is extra the But a to you putting we brown give the a the the time. new over give been That’s so the you. to roof, with because I long could is long, of it there pellet inside and can that color color there need the color I

Curt Woodworth

appreciate spending you this I more a I kind you, good to uptake. very on commercial remarks, for about get that little mean, I just I then your at would crystal about there HBI clearly, be second talked feel it. can do having you talk prepared to capacity, HBI, Yeah. I talk you're given potential. guess, then commercial envision, potential at in by capital point. discussions other And And your you you in to time? And this point can plant. superior of project ball mean, growth your discussions a guess

Lourenco Goncalves

obvious plant, HBI deny to every is an I market exchange if the Look, I'm metallics. the time, stock. exercise back point we our IRR again, second capital. to are for going to the HBI second plant buy Remember, will At best day, and the this beg of running that HBI talk bank. stock plant to starve in building IRR can money optionality going They that, we for value it's the continue plant And is to buying me an of market happen. exercise -- and accomplished not It's going this HBI until HBI first the allocation back equity, allocation a of in Because to the will continues to build not market and US it's and is the domestic second stock. about our my not is up in have in second optionality. plan and company capital get

we capital now speech. of paydown in stock use million be And $XXX would QX, second quarter, best million of just debt. it’s that $XX every bought bought proved and we not of we Our Remember, back right debt.

to for Curt, is the hard like stock company know bonds. next, me a they're It's a while well buying in you is making. than we shortages. back now buying have I par, back back Buying that at one it's tell to right and start good back you So HBI rewarding not. lot And more shortage. for the buying stock debt with

X are to number reality, build two. in up to a we not to is start Toledo. hurry HBI we So number HBI are But great deliver to pellets gearing

Operator

great congrats to start year. I the And Yeah, to agree. the

Operator

Your KeyBanc next with question Markets. comes Gibbs from Phil

Phil Gibbs

with bit for lot you the options a you your me, little think in curious about now HBI. I various curious, provide there, more thinking behind if plate company, you've had DRI, you're mentioned prepared just your given got what Lourenco, color remarks growth excuse a could on right that you

Lourenco Goncalves

Yeah. HBI is DRI brick asset.

any right are my you if and yes, the for you're various growth So options disclosure talking help calling more HBI that forward, can how of color, can my little is if you? HBI way, little answer HBI no. DRI, tell, call we about now. guy. going The are it those a DRI, I have disclose the ripe None I So detail. DRI will more same But

they word, exist my take we’re tell to can have right now. you to going You're and all studying, that's I

Phil Gibbs

decision were or you as Okay. call. the a to last a I way on think make feasibility one guess take And at another looking what it will then I Empire? study

Lourenco Goncalves

get secure would Upper some too ground. the assure I long a on to have take mind. changed will concluded. long of the Empire. their in to furnaces they or point, someone pay in long pony that of term pellets would if takes accepting, survival long at some thing to The it with removing stay only or I ago, Michigan after a would million few Peninsula pay a even I you In minimum furnace to these my Empire million, commit X.X IRR a assure past, at Other and tons that that, contract price a Empire. this participate term feasibility that blast X.X minority IRR of term benefit. to layers not we guaranteed contract the this client. No than a produce study at to with has if At a with been lock be The give easily That Empire to able have of equity. blast phenomenal and equity. restart our can will very take overburden, the would And would year produce, would the Well, taconite point, position wants in up out we a they was the the come to be

Phil Gibbs

be if different perspective, very more will strategic projects assets the you few thanks. startup some one around could a what have so not what will, give and that ask or they reliability years comfort profit a perspective from from or Lot believe iron confidence gives the you over deliver your It's will I of a question. why helpful. the perspective the if us planned or you just could last as perspective And alternative cost gone

Lourenco Goncalves

all the mention talking that I projects we’re about, first. because these Can

Phil Gibbs

equivalent say just the Let's other that years? HBI or projects in last DRI happened five have the

Lourenco Goncalves

huge, difference our Well, between huge, other enormous a projects big, and there's projects.

to talking You probably those got got about right? it, you best be Are to to? the say You're comparing courageous. opinion, are you ones

Phil Gibbs

the Yes. be ones. might Those

Lourenco Goncalves

So, I will assume are. they

with okay say to You bashing we're that me. are courageous but just enough just not opinion, that's

that have the the and and in pellets Trinidad out. to lot is projects our supply our feedstock this well be feedstock, not very between day high feedstock, in at the So problems the produced between a the quality We Trinidad. improving a way, year they in it's if supply, no pellets at Nucor plant, our to Trinidad furnace, pellet supplying coming project the our feedstock, DR one difference thing. we produce biggest, pellet, operate own the no is a local direct first our biggest from matter the difference clear and this a and to [indiscernible] key speak -- That's reduction we if and blast will the producing our performed project mine, off. By genius the quality extremely supplied Nucor but – it booth. loved Northshore, feedstock they for a reactor, almost been pellets, of and great Well, have day we is in its reactor this,

We one supplier, are the run major extremely feedstock. supplier, they sole supplier, not they even when good have we're just either the but not well we're

downgrades a of not Corpus over opine BR best mid we On pellets, with of that's like hear plant compares time, very even feeding with grade the hand, producer blast Cleveland-Cliffs. for and a be information periods generate their other reliable to would single downgrade racks DR pellets Christi in furnace DR ours similar that from [indiscernible] pellets Texas pellet that or grade pellet enormous source grade which an was

from good from from you to very the different good buying DR stuff Samarco, if grade third but grade So the now, can going [indiscernible] one down, supplier then stuff which with because find stuff the stuff the from go go you get pellets get step step down and different are so at the the from supplier, is when let you're DR market is and entire by a you they upgrade. when marketplace even in stuff, least, the good the Samarco can from pellet you the lot you been one alone happening sources way, supplier, has from good one find to other good different and the it

step, blast ago. pellet, step long next next the not the So down furnace [indiscernible] is too

have that the we develop me for been idea, to DR pellets single we get source thank in Nucor together our So great a the with Trinidad. and do I idea, Northshore, are to improving going develop pellet. allowing good pellets, we When the so supply very Nucor

Phil Gibbs

a is nice Sounds your to like the what continuity is mind of supply and factor. the proximity really comfort

Lourenco Goncalves

in haven't process about were do to proximity. deviation. when was to smooth. standard with, nothing standard I has said deviation Proximity statistics, a we school go talking narrow word Remember I makes about the

deviation, have standard prepared silica. DR X% my today grade of in will pellets our top remarks that and content iron said I XX.X% on narrow just So

not they it’s iron the X%. So is are high, are content low And, not content, silica XX.X. they

that they ourselves. So give to reduction preference use that that exactly that too. they get we're as the is blast far to problem total get our addicted And why what feedstock. our The going why doing direct furnaces we That's like pellets. our That's to know we get pellets, as the operators to pellets, DR, pellets. we're the our addicted

it HBI try. to going not we're So and start give up our plant first a

know we facilities they to HBI as more, to going We lot new a learning. will up allow for in operate, we start is you Midrex long are I to will benchmark lot as I And learn to as that they humble them so the But that world, learn. start good. the don't a learn our as first Very as soon far, time as if to of can so qualify learn. client, see. continue start. will assessment They HBI at

Operator

[indiscernible] Jefferies. from The next question comes from

Unidentified Analyst

have target company appropriate you if sense perspective, you debt over just here. this long a on for strong is is. do a you're debt run, could the of the what get thoughts Obviously, from But we your pretty up to what just Maybe at set for year updated point? the think level debt a think the

Lourenco Goncalves

the from But minority with notional Matt, for in I XXX net terms couple at US debt. X know target when billion acquire always of We look, X.X. you we from Steel, ago, been us years position minority got that have of spent to working our we Empire a got million Arcelormittal. to our position

spent that. do million So to $XXX we

got billion. we X the So to

inception since we in we today, $XXX in the April less $XXX the though enhance bank to we to now to we So our real are decided company. that's have of do are do billion If it buying even have the value not we we have as sense, $XXX than buyback had XX, what of we money, would debt, million the of of to another company, these protect so now, the always net say, X net stock. debt million in far is order the looking look, back spend order in programs, shareholders to the cash net why XXXX. in to the million of notional is debt And expand targets

we realities. deal So a we deal in with world, real

target I'm be this not company to more I buy So that debt continues talking actually, I And will continue vehicles or and is do their a convenient are in not these and and that for stock. Cliffs’ that me, things billion, about guys stock about out. X go their this a a should like talking are about. not for lot for notional in something keep company the these to stock protect that folks. for months put a people lose that shareholders sleep couple I'm shareholders for but This it's the net the guys forget right and days, money couple if There's that off, the shareholders of

We for Chinese nobody doing. of the dynamics get of are understand the that is that understands path that that the only can there's so term, a long they and business what much that would ones environmental question are

sources. shut will I up. So these from. to this have mean, that are up to the from the they'll money day or money bet folks come have that have coming Chinese sources where confess not put get their great these to really guys and will environmental that will criticize NGOs these I they or is

way out we plan. the environmental, the So the industry, the long the term Chinese, high we the that keeps have, that plan, the long term of of playing the steel US viability quality revenues strategies

things, the are these notional. So billion X

Unidentified Analyst

Okay. that get quick of sort to quarter, back year, one flow. cash any build, of housekeeping more first And as insight just over bigger all a a sense the magnitude capital working of up, whether just follow item, always of get I free quarter, you the of the trying this you the course the for cash a some little guess, use the in is to

any color capital working would helpful. on just be So

Lourenco Goncalves

by that’s the have you the will if cash but in and we Denise. design Yeah, this at and it's this QX company QX. up. to HBI, question be I'll in more business related is about payables we build. this are Inventory weather Do to this mainly continue recorded one the queue? in change same. more proceeded do this in With point. company Receivables take of is inventory timing. The time year will flow any what Otherwise, point. of questions We outflow this and of at wrap QX have, dictated to change, do the the to this

Operator

Yes.

comes with Stanley. from Piyush Morgan Sood last question Your

Piyush Sood

Quick question me. housekeeping for

where there should sales third of inventory And intercompany primarily HBI rated, year, it take is year, if shipment second, EBITDA, start in of same we’ll look build wanted HBI? pellet too just since out to at to to XQ? side it won't about think sales some the understand may party, you be before half off or million to So third the how that is dynamic we next tons you the party HBI of this about X.X

Lourenco Goncalves

in You’ve given a lot one question.

be memorize So this was was I XXX,XXX And of going The let what tons are able year. me see we to move to other about? the one will tons Toledo amount if that to everything. for

Keith Koci

this year. And that'll quarter be in the third

Lourenco Goncalves

What Keith. Piyush. Thanks, else,

You too much. them gave

Piyush Sood

Sorry, DRI, sorry, in this year so for and about third the what site maybe the quarter out build inventory Northshore. extras, pellets next at HBI some some coming year from

So should or something expect XQ maybe in we magnitude XQ? similar

Lourenco Goncalves

feel and brand do Yeah, we then runs ongoing then shape, we program because but to will operate basis plant the continue and that to to the in Toledo, like will do after pellets to we're XXX,XXX on be hot to we first of start direct we're built commission, going runs. an to to good this tons,

operational by in will then level. and be So we mid-year,

then So thing. it be will an ongoing

now inventory. is thing the this So XXXX, to build right allocated the tons startup XXX,XXX in biggest

Lourenco Goncalves

This and new good What we your save money. plan will is our execution, is dialog. and ore money very a soon. the saves will and shortage. be continue All right. Don't forget execution. not in much will are not pellets you your good Headlines Thank Iron fixed good normal.

make and together together. invest Let's money

great a have guys two You months.

Thank will talk We you. Bye. months in three. or two

Operator

today's This call. conference concludes

disconnect. now may You