Cleveland-Cliffs Inc.

Good morning, ladies and gentlemen. My name is Daryl and I am your conference facilitator today. I would like to welcome everyone to Cleveland Cliffs third quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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 of 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 can 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's 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 items. Reconciliation for Regulation G purposes can be found on the earnings release, which was published this morning. At this time, I would like to introduce Lorenzo Gonsalves, Chairman, President, and Chief Executive Officer.

Thank you, Darrell, and thanks to everyone. for joining us this morning. Before Celso starts the discussion of our Q3 results, I want to provide another brief disclaimer. Back in August, we announced a potential exciting and transformational opportunity for Cleveland Cliffs. Since then, restrictions have been put in place on what we can say or disclose. And therefore, for the time being, We cannot discuss the issue. So before you start wondering why you will not hear anything about it, that's why. With that out of the way, I'll turn the call over to Celso.

CELSO GONZALEZ- Good morning, everyone. In Q3, we generated revenues of $5.6 billion, adjusted EBITDA of $614 million, and GAAP earnings per share of $0.52. Total shipments reached 4.1 million net tons and, despite the UAW strike impacting three of our clients in the automotive sector, aggregate shipments to all of our automotive clients collectively were higher in Q3 than in Q2. Fuel shipments from Cleveland Cliffs to the automotive sector in Q3 were actually a quarterly record. During the quarter, we generated free cash flow of $605 million. As planned, We used the majority of that cash to pay down our ABL, bringing our net debt down to $3.4 billion and boosting our total liquidity up to an all-time high of $4.4 billion. We also returned approximately $60 million to shareholders by buying back 3.9 million shares during the quarter. With our ABL balance down to only $325 million, We now have a capital structure comprised primarily of low-cost fixed coupon debt instruments with no upcoming maturities until 2026. Since acquiring ArcelorMittal USA in December 2020, we have reduced our net debt by nearly $2 billion and eliminated another $3.5 billion in pension and OPEB liabilities. That's a 60% combined reduction in net debt and post-retirement liabilities in less than three years. Over the last couple of years, we have also reduced our diluted share count by 13%, from a high of 585 million shares to only 509 million shares today. Elaborating further on our Q3 results, shipments remain resilient despite slowed service center sales during the quarter. The maintenance activities we performed last year have paid off for us, as our operations have been running reliably, affording us the ability to achieve these strong shipment levels all year. As I said before, notwithstanding the UAW strike, steel shipments to automotive clients actually increased sequentially in Q3. This outperformance in automotive steel shipments and the lower service center shipments helped to mitigate the change in average selling prices quarter over quarter with a richer mix, holding strong above $1,200 per net ton, even after the drop in overall index prices during the quarter. Our cost reduction performance was also very good during Q3, improving by $31 per net ton quarter over quarter. This came in less than our previous guide, only due to this mixed factor. But we will happily take that trade off due to much higher prices associated with Better Mix. We expect costs to fall by another $15 per net ton during the fourth quarter. Since Q3 of last year, we have reduced unit costs by a total of $165 per net ton year over year. That is roughly $2.7 billion in savings at an annual run rate. This solid performance in costs is expected to continue into next year. We are happy to report that our annual metallurgical coal buy will result in a $250 million reduction in 2024 coal costs. We executed these 2024 annual contracts during Q3, and our negotiations were very well-timed as global met coal prices rallied shortly thereafter. Among other savings, we have also locked in an additional $150 million in savings for fixed natural gas costs in 2024. With that, I'll turn it back to Lorenzo.