Alcoa Corporation (AA) Earnings Call Transcript & Summary

Hello, and welcome to Alcoa's Investor Day presentations. I'm Roy Harvey, President and Chief Executive Officer of Alcoa Corporation. We are excited about our future, and we're proud to share with you how we see what's next for Alcoa. First, let me tell you about the information we're providing today. Let's take a quick walk through our speakers and topics. I'll start with the first section, which will give background on our company and the many accomplishments we have made since we launched as a stand-alone upstream aluminum producer 5 years ago this month. Next, Tim Reyes, our Chief Commercial Officer, will share his insights into the current markets and why we believe that they will be stronger for longer than in previous slides. Our Chief Operating Officer, John Slaven, will then share some details of our operational achievements and describe how we pursue stability and continuous improvement as well as showcase the technical and operating savvy that keeps our facilities performing at a high level. Returning to Tim, he will discuss growth options across our 3 segments. And then Benjamin Kahrs, our Chief Innovation Officer, will share how we are building on our technical expertise with research and development activities. We are working on some exciting advancements that, if successful, have the opportunity to bring substantial returns for Alcoa's stockholders and also help address some of the world's greatest challenges. Next, Chief Financial Officer, Bill Oplinger, will talk about capital allocation and how we balance the allocation model's stated priorities to fund current operating needs, to maintain a strong balance sheet, to provide stockholder returns and to address options for funding future technology development. Finally, I will sum up our vision of the future and why we believe that Alcoa is the right company to provide solutions and help transform the aluminum industry. We believe we are uniquely positioned to thrive in the world of tomorrow. First and foremost, Alcoa's current and future success is rooted in our values, the basis upon which we make our decisions and judge our actions. We act with integrity, striving to do the right thing always. We operate with excellence, consistently working to do our best every day. We care for people, considering not just our people who work at Alcoa, but the people with whom we interact, be they customers, suppliers, community members or government employees, stockholders or bondholders. Finally, we lead with courage. Never shying to making the tough decisions that can make us a better company and allow us to challenge the status quo and take our industry to the next level. Our priorities remain as they have been: to reduce complexity and lower cost, to drive returns over the long term and to advance sustainable, making Alcoa a stronger, more sustainable company. And in the face of important global dynamics and priorities for our planet, we believe there's important opportunities for Alcoa. If we do these things well, if we are true to our values and deliver on our priorities, we expect we will reinvent the aluminum industry for a sustainable future. This will align with our purpose to turn raw potential into real progress. Said another way, when all is said and done, we endeavor to take the great raw potential that is our company in the aluminum industry and transform it into real progress for our stockholders and for a world that relies on aluminum as part of the sustainable solution for the future. So let's talk a little more about Alcoa. We are a 5-year-old company with a proud 135-year history. We helped to invent the aluminum industry, and we work to reinvent it every day. Our more-than-12,000 employees operate around the world with interests in 6 of the world's 7 continents. We have 3 product segments: Bauxite, Alumina and Aluminum. We are 1 of the world's largest bauxite miners and enjoy a first quartile cost position. We are proud of the best-in-class mining method we employ, the way we rehabilitate mined areas and the pulse relationships we have in the communities where we operate. We are the world's largest producer of third-party smelter-grade aluminum, with the lowest carbon intensity in the business and the only refiner to sell a low-carbon aluminum product smelters, a product we call EcoSource. This smelter-grade alumina allows an aluminum smelter to reduce its carbon emissions simply by switching to this particular alumina brand. Our third segment is the most profitable one this year, aluminum. Securely positioned in the second quartile of the cost curve, we are aiming for the first quartile as we continued our portfolio review. With roughly 78% of our smelter energy from renewable sources, we are a low-carbon footprint primary aluminum producer and offer a full range of low-carbon and recycled-content aluminum products. As you can see from this slide, the majority of the bauxite we mine flows to our own aluminum refinery system, most of it by conveyor, ensuring stable quality and continued supply. While third parties buy 70% of our alumina shipments, roughly 30% of our alumina sales are to our own shipments. So we have a dependable supply chain that runs from mine to cast house. In addition to our Sustana products, we also have been aluminum stewardship initiative or ASI, certified at 15 locations and for ASI achievements custody certification for our entire value chain. How do we get to where we are today? It has been 5 years of progress, which I will speak to in the next 5 slides. First, from the very beginning, we started working on the portfolio in early 2017 by closing the Suralco mine and refinery in Serena. Progress continues on remediating that site. We also closed the Rockdale, Texas smelter and started remediation work there while terminating its power contract. We divested our Portovesme smelter in Italy. Finally, in 2017, we also restarted the Portland Australia aluminum smelter and the Lake Charles, Louisiana calciner in response to market conditions. You can see on the slide that 2018, 2019 and 2020 saw a steady drumbeat portfolio actions, including divestments, closures and curtailments across the refinery and smelter systems. In 2021, we announced our 2 most positive smelter moves, the repowering of the Portland smelter for an additional 5 years and the restart of the Alumar smelter in Brazil, both are excellent facilities with terrific workforces. But it was not all portfolios. We also took our actions to secure our financial future. We have amended our revolving credit facility to improve financial flexibility and to reflect our improved financial measures. We have issued debt at favorable rates and redeemed higher interest rate debt early. We have improved the funded status of our pensions, especially in the U.S., through increased funding, adjusting our investment strategy and annuitizing certain liabilities in the U.S. and Canada. We also took actions to reduce future OPEB liabilities. And as importantly, we successfully managed sales processes for 4 major noncore assets, raising in 2 years more than $1.1 billion of net cash proceeds. While we took portfolio actions and improved our financial position, we did not take our eyes off our focus to continually improve our operations and commercial activities. Administratively, we changed the way we operated the business, closing offices, removing bureaucratic layers, cutting costs and improving connections throughout the organization. In operations, we worked to modernize labor contracts around the world, and we have strengthened the collaboration in many of our locations. We have maintained strong stability across our operations, which was especially notable during the height of the pandemic. We set production records, enhanced safety programs for employees and contractors alike and developed operations management systems to allow complicated endeavors like relocating the hub for our Willowdale bauxite mine in Western Australia to a new region. Moving an 850-metric-ton crusher about 20 kilometers is no small fleet. But our team executed it flawlessly, setting up in a new region that will be the center of the mine for at least the next couple decades. Commercially, we rolled out new Sustana products like EcoSource, no carbon aluminum, offered a full suite of products featuring ASI certifications and saw our Elysis joint venture produce R&D batches of metal without any direct carbon dioxide emissions. As we continue to ramp up the Elysis technology, it was exciting to see this process, which produces pure oxygen and eliminates all greenhouse gases being used to produce commercial-grade metal that's been incorporated into today's consumer products. These partnerships include Apple for a model of their MacBook Pro and the [indiscernible] Audi's first electric sports car, the E-tron GT. So while we were working in the present, we did not ignore the future. I've already mentioned some of the commercial outcomes for the metal produced by our Elysis joint venture. But I also wanted to talk about the history and structure behind this exciting project. After decades of experience, our teams at the Alcoa Technical Center in Pittsburgh developed a process that produced aluminum at smaller scales without any direct carbon dioxide emissions, using proprietary materials and design. In 2018, we teamed up with Rio Tinto to form Elysis, a joint venture company that is taking this innovation, which eliminates all greenhouse gases and emits pure oxygen to a commercial scale. Just days ago, we announced that Elysis is now producing metal using a full industrial design in Quebec, and we continue to prepare for our commercial demonstration at industrial average in 2023, with construction already underway. This year, we announced a project with the government of Australia to develop an aluminum refinery with low carbon emissions by pursuing development of large-scale use of mechanical vapor recompression, fueled by renewable energy. And also this year, we announced an agreement to pursue a joint venture to commercialize the process to make high-purity alumina and supply the rapidly growing market for this specialty non-metallurgical alumina. And as you see, as you progress through our Investor Day, our Chief Innovations Officer will introduce a new research and development project that we've been advancing, a program targeting the reinvention of scrap processing and production of high-purity, contaminant-free metal. We call it Astraea. And while there is much work ahead of us, it only complements our offering of processes and products focused on a sustainable future. All this work by the Alcoa team: portfolio changes to fix, curtail, close or sell facilities; operating commercial and administrative improvements; financial moves, including bond offerings and redemptions while improving pension and investing in future technologies. We have built a new stronger Alcoa, perhaps doing it faster and building it stronger than some thought was possible, all over these 5 short years. Perhaps our most proud accomplishment is that we have done it the right way, tapping the talents of our diverse workforce. We have stayed true to our values. And that determination to do the right thing in the right way has been publicly recognized multiple times over the years by Dow Jones, by EcoVadis, by Platts, by Fortune, by Bloomberg and by a host of others. Markets are very good right now, but we always operate our company so it can succeed through all commodity cycles. Now we are positioned to not only survive but thrive in whatever markets we might face. Our key liability metrics are at all-time lows. Our return on equity is at an all-time high, and our cash position is strong, so strong that we have initiated a quarterly dividend and added $500 million in share repurchase authorization. We fundamentally believe that Alcoa, 5 years later, is significantly stronger and is a better-positioned company than the Alcoa that was reborn in late 2016. Alcoa is ready to succeed in a sustainable world. Aluminum is part of the solution. We are positioned for the sustainability trends we see today and expect to see in the future. We have a strong balance sheet and have solved our most pressing financial challenges. We have positioned our portfolio to be stronger than ever before, and we will continue to take actions to optimize our portfolio. We have started investments in technologies with significant potential for the company, and that could address some of the world's key environmental challenges. To quote a historical commercial from days gone by, Alcoa can't wait. Today, that's not history. It's our future. We are ready for what's ahead, both the challenges and the opportunities.

Good day, everybody. It's an exciting time to be in the aluminum industry, and it's great to be with you to talk about the markets as we see them evolving. In discussing the aluminum markets changing dynamics, I'd like to first discuss the market conditions in which we find ourselves in 2021, before moving to our longer-term market outlook. The London Metal Exchange aluminum price, at its peak in 2021, essentially doubled relative to the low point in the second quarter of 2020, as the economic recovery and the tightness of supply have continued to be supportive of higher pricing, including LME and regional premiums. This year, we expect annual global demand for primary aluminum to increase approximately 10% relative to 2020 and to surpass the pre-pandemic levels of 2019. China is now a net importer of primary aluminum, and China is also where we have seen significant supply constraints. In 2021, China has curtailed more than 2 million metric tons of annualized capacity due to power shortages and its enforcement of policies related to energy and the environment. For Alcoa's commercial impacts, we are also seeing significant year-over-year growth for our value-add aluminum products as well as higher premiums. Much of our volume for value-add products is sold on annual contracts. So only a portion benefit from high spot pricing. However, current market dynamics provide a positive environment for 2022 contract negotiations, which are now underway. Turning to alumina. As we've noted previously, we are the world's largest third-party producer of alumina. And alumina fundamentals have also become more favorable. We've seen a substantial rally in pricing, aided by supply tightness caused by some unplanned production disruptions outside of China as well as restricted production in China. Overall, the aluminum market seems to have fully recovered from the global economic uncertainty related to the pandemic. However, there are key longer-term trends that have emerged that support both a positive long-term outlook for overall aluminum demand growth as well as a shift in how supply will grow. With this in mind, I'd like to discuss our view of how markets could evolve over the next 10 years. When looking toward the future over the next decade, China is likely to remain in a structural deficit for primary aluminum. This dynamic is the result of the constraints to China's in-country primary aluminum supply, given their 45 million-ton annualized production capacity cap. While demand is likely to continue to grow, this shortage of primary aluminum also implies that China will need to continue being a net importer of primary aluminum in order to meet their increasing demand needs. Outside of China, we expect deficits in key markets where we operate, including North America and Europe, both to grow. As the world shifts toward greener energy and lifestyles, aluminum end markets will see a positive impact for demand. One of the most notable trends is in the automotive sector. As you can see in the first bar graph, vehicles with internal combustion engines, ICE vehicles, have a much lower rate of aluminum intensity versus hybrid and battery electric vehicles. In fact, based on the current average weight of aluminum in vehicles, a typical plug-in hybrid electric vehicle or battery electric vehicle, contains almost 50% more aluminum than a typical gas-powered car. Looking toward the future, this will be positive for aluminum demand growth as automakers are making commitments to lower their vehicle emissions and are working to cycle out their production of ICE vehicles within the next 15 to 20 years in order to comply with increasingly strict government regulations and increasing consumer demand for lower carbon footprint vehicles. On the graph to the right, you will notice that ICE-powered vehicle production in gray is the only market expected to decrease from now through 2028, which will bring ICE market share down from 84% globally to only 57% of global production, whereas production of electric vehicles and hybrids will be 43% of the market and make up roughly half the total primary aluminum demand for the transport segment. Although transportation will be the largest end segment utilizing aluminum in the effort to lower carbon emissions, it is not the only sector to do so. Looking at the chart on the bottom left, we have a visual that summarizes the aluminum intensity of renewable power generation in terms of metric tons of aluminum use per megawatt. The shift toward green will also benefit aluminum in the world of renewable energy, because renewable energy generation and infrastructure requires more aluminum. Solar and wind power generation require more metal, with solar requiring almost 30x more aluminum and wind power requiring 4x to 7x more aluminum versus other types of power generation on a per megawatt basis. These trends contribute to strong demand growth expectations across all end markets, but in particular, in the transport and electrical markets as well as the packaging and foil end markets, which are moving to incorporate more aluminum into their products for recyclability and reusability. Since the global financial crisis in 2008 and 2009, inventory overhead has been a major issue for the industry. However, growing demand and tightening supply have reduced inventory back to more manageable levels. Looking at current inventory levels from a days of consumption perspective, inventories have returned to a low point of 58 to 59 days of consumption, which is the lowest level of inventories we have seen since the global financial crisis. With inventory at decade-low levels and demand for aluminum is expected to continue increasing from now to 2030, it's becoming more and more apparent that the world needs more aluminum capacity. As we look toward the future, this will need to come from expansions of both primary and secondary aluminum capacity. While the need for additional aluminum capacity is clear, there are currently several constraints for new aluminum capacity coming from Chinese regulatory changes and the world's accelerated pace towards green. In China, we have seen regulatory changes, including policy goals, targeting reductions in total carbon emissions, a push towards energy efficiency and encouraging downstream investments as well as domestic consumption-led growth. In line with these regulatory changes, China has made a commitment to cap their primary aluminum smelting capacity at 45 million metric tons of annualized capacity, which leaves them little room for further net production growth. China has also made other moves in this direction, including announcing a public commitment to peak their nonferrous metals emissions by 2025. They have also implemented the dual-control mechanism, which sets targets for each province on energy intensity per unit of GDP and total energy consumption. In an effort to meet these targets, some provinces have curtailed smelter and refinery production or have limited new capacity expansions already. At the same time, aluminum supply will likely face higher costs when the world's transition to a low-carbon future. As I mentioned earlier, China has recently announced policy goals, targeting at reducing total carbon emissions. China has declared a target of reaching peak emissions by 2030 and carbon neutrality by 2060. As one way to achieve this, they have launched their own emissions trading scheme this year, which sets the price for carbon emissions. Outside of China, Europe is the leader in driving for lower emissions and decarbonization. The European Union created the world's first major carbon market to set a price for carbon emissions. This year, the EU released their Fit-for-55 package, which aims to lower emissions by 55% by 2030. The European Commission has also proposed a carbon border adjustment mechanism, which would tax aluminum imports based on carbon intensity. We have also seen a move towards green in the U.S., which has rejoined the Paris Agreement and has pledged efforts to reduce CO2 emissions, including the incorporation of a $50 per ton social cost of carbon to be used in investment decision-making by U.S. government agencies. These developments in China and around the world all contribute to increasing costs for both existing and potential new aluminum smelting capacity. Given the expectations for continued demand growth and increasing constraints for adding additional capacity, the project pipeline for expansions within the next decade may not be sufficient. Of the roughly 11 million metric tons per annum of smelting projects that have been announced for the next 10 years, the majority is expected to be powered by renewables as costs of fossil fuel-based power are likely to increase. While the majority of expansions in the last decade took place in China, where capital intensity is significantly lower, in the next 10 years, higher capital intensity projects outside of China will increasingly be needed as China nears its capacity cap. And to this point, of the 11 million metric tons I mentioned, only 4 million metric tons is in China. As mentioned earlier, we have observed the accelerated pace towards green in some of the world's major aluminum-producing regions, which will add carbon emissions costs to the aluminum cost curve. In China, to echo targets of achieving peak carbon emissions by 2030 and carbon neutrality by 2060, the Chinese government has publicly announced a series of actions. One example is the -- is China's 14th 5-year plan released in March, which set some key environmental targets. One target is an 18% reduction in carbon intensity per unit of GDP by 2025. The 5-year plan also targets a reduction in energy consumption and an increase in nonfossil fuel energy share. Guided by those overarching goals, the Chinese central government has set dual-control targets for each province on energy intensity per unit of GDP and total energy consumption. We have observed that some regions have already curtailed aluminum production to ensure compliance with the targets. In addition, China has launched a national emissions trading scheme, an ETS, this February. The national ETS will cover the power sector initially, but eventually will likely expand to cover high emissions industries, including primary aluminum and smelting. Furthermore, in September, the Chinese National Development and Reform Commission, the NDRC, released a new tiered-power price policy, which sets higher power consumption standards for smelters, effective from the beginning of 2022. The policy is expected to increase cost for less energy-efficient smelters, unless they invest to improve their energy efficiency. On the other side of the world, carbon emissions costs are a reality for smelters in the European Union today from the European emissions trading scheme. While today, carbon emissions costs are offset at least in part by free allowances, those free allowances are expected to dry down over the next decade, increasing effective carbon emissions costs for European smelters. Furthermore, the EU has put forward an additional proposal for a carbon border adjustment mechanism, which would implement a duty on aluminum imports based on carbon intensity. With the policies mentioned, we have simulated what a global carbon price of $50 per ton would do to the aluminum cost curve on the left-hand side. Assuming this global carbon price, the associated curve steepness in the distance between the 20th and 80th percentile would increase by over $500 per ton. With that change, Alcoa is expected to become even more advantaged on the cost curve given that we have a low carbon smelting system. As noted on the last slide, Alcoa's low-carbon smelting fleet is well positioned to capture growing demand for low-carbon aluminum products. We estimate that globally, around 8 million metric tons, representing a little over 10% of global aluminum output, is produced with emissions below 4 tons of CO2 equivalent per ton of aluminum when including Scope 1 and Scope 2 emissions from the entire value chain, from bauxite mining, alumina refining and aluminum smelting and casting. Of this volume, Alcoa smelter production represents roughly 1/4 of the world's low-carbon aluminum supply, again, considering the full value chain of Scope 1 and 2 emissions. In Europe, we have seen an exponential growth and interest in sustainable products this year, which will only get stronger going forward. Customers are recognizing benefits of sustainable metal and are willing to pay a premium for it as reflected in the steady increase of fast markets, low-carbon differential indices. According to fast markets, the most recent European value-add product, low carbon differential now stands at $20 to $30 per ton. This trend is also starting to pick up pace in North America, in Asia as well, with some Asian customers even willing to pay a premium for any metal that has a lower carbon footprint than the metal produced by smelters powered by coal. Consequently, increasing demand for low-carbon aluminum should lead to increasing demand for low-carbon alumina, as alumina is the next major carbon content contributor after smelter emissions, both indirect and direct. And we are well positioned to provide solutions through our Sustana line of low-carbon products, which is the industry's most comprehensive. Our low-carbon primary aluminum product, EcoLum, has a carbon footprint of less than 4 tons of carbon equivalents per ton of aluminum when considering Scope 1 and 2 emissions from bauxite, alumina and aluminum. On the alumina side, Alcoa has the lowest carbon footprint refining system in the world. And our EcoSource smelter-grade alumina product, the industry's only low-carbon alumina brand, has emissions below 0.6 tons of carbon per ton of alumina, including bauxite-related emissions. Finally, we also offer a recycled content product, EcoDura, made with a minimum of 50% recycled content. And in 2021, we have concluded sales of each of our Sustana product brands, EcoLum and EcoDura aluminum and EcoSource alumina. Also, for EcoLum, we have concluded sales of all of our major casthouse products, meaning slab, billet, foundry alloys and remelt. Let's look more closely at the alumina market now. In the current decade, alumina supply is expected to grow largely in Asia. Within China, refinery expansion projects have had an overall cost advantage compared to those projects outside of China due to the benefit of low capital intensity and the availability of seaborne bauxite. Meanwhile, small inland China refiners will grow their dependence on imported bauxite, resulting in higher costs. Overall, China is expected to remain a net alumina importer of alumina. While China is expected to maintain a capital intensity advantage for new refining projects, their overall economic advantage could erode over time, driven by the potential for higher labor costs, additional environmental requirements, licensing fees and strengthening of the R&D, in addition to depleting domestic bauxite reserves. Outside of China, alumina supply growth in the next decade will be dependent on a variety of factors, such as access to in situ bauxite or competitively priced seaborne bauxite and access to competitively priced energy, gas in the midterm and renewable energy in the long term. As we discussed a few slides ago, the majority of primary aluminum supply increase this decade will come from outside of China. In 2030, we expect around 37 million metric tons of primary aluminum will be produced in countries outside of China. This will be 7 million metric tons higher than today's level, with growth projects largely lined up for expansions into Asia, outside of China, including Indonesia, India, Middle East and Russia. We still see China producing more than half of the world's aluminum in 2030. However, supply growth will be slower than the rest of the world as a result of China's smelting capacity cap, which is expected to limit aluminum production in China to 45 million metric tons of annualized capacity. As such, we expect alumina demand outside China to grow twice as fast as in China. This calls for more refining projects to be built outside of China, which we will discuss in the following slide. Looking back over the last decade, the alumina price index or API, has been susceptible to significant price movements in response to supply side disruptions. For example, the alumina price hit historic highs in early 2018, following a significant supply disruption in Brazil. And lately, we have witnessed a rapid alumina price rally, driven by supply disruptions in both the Atlantic and China, where power cuts and environmental policies are impacting alumina production. Looking into the future, announced refinery projects could add around 34 million metric tons of annualized capacity by 2030. The announced expansion projects are primarily located in Asia, including China, Indonesia and India, in addition to the Middle East. What is significant is that the majority of these projects are planned to be supported by coal-based energy, and the pace at which the world is moving toward a more sustainable future calls into question whether the projects will, in fact, be executed. If they are not executed due to ESG or other factors, then the market will likely need additional expansions that are not yet announced. Environmental, social and governance, ESG factors relating to refining operations include -- including bauxite residue management and carbon emissions costs, are another important issue for the alumina industry. One example, dates back to 2018 when Chinese producers announced multiple coastal refinery projects in the Liaoning projects -- in the Liaoning province, which were protested strongly by local residents due to environmental concerns. Those projects ended up either being canceled or relocated to other regions. In addition, as pricing for carbon emissions become more mainstream, alumina refineries are increasingly facing the potential for costs related to their emissions. In Europe, carbon pricing is a reality for refineries today. As I mentioned earlier, China launched its national emission trading scheme this year, and this is likely to impact the cost of captive coal plants and refineries in the future. Again, we have simulated what a global carbon price of $50 per ton would do to the alumina cost curve on the left-hand side. Assuming this global carbon price, the associated curve steepness in the distance between the 20th and 80th percentile is expected to increase by around $50 per ton. Alcoa's alumina products would be advantaged, given that we currently have the lowest carbon intensity refining system in the alumina industry. Alcoa is the largest alumina producer outside of China. We are also the world's largest third-party supplier of alumina. Alcoa's alumina makes up close to 1/3 of third-party volumes outside of China today. Alcoa is the only producer in the industry which has launched a low-carbon alumina product, EcoSource. Alcoa enjoys the lowest carbon-emitting refinery system, with a carbon intensity lower than 0.6 tons of carbon per ton of alumina, which is better than 90% of refinery assets globally and roughly half the global industry average of around 1.2 tons of carbon per ton of alumina. So with that in mind, let's turn to the bauxite market. China is a major consumer and net importer of bauxite. Due to the supply tightness and decreasing quality of domestic bauxite, Chinese companies continue to invest in overseas mining projects to secure their raw materials. China's total demand for bauxite is expected to grow in the next decade with new alumina projects coming online. Demand for imported bauxite is expected to grow due to both increased coastal refinery demand from new projects and inland refinery demand for seaborne bauxite due to depletion of local bauxite mines. We expect China's demand for seaborne bauxite to exceed 190 million metric tons in 2030, of which the imports from Guinea are expected to more than double to 130 million metric tons per year compared with 2021. Outside of China, we expect Africa, Australia and Southeast Asia to lead the increase of bauxite supply in the next decade. With the largest bauxite reserves in the world, reliance on Guinea bauxite to support demand growth will likely continue to increase. Alcoa has access to over 300 million metric tons of total reserves for the listed mines, as you can see on the slide, in Australia, bauxite in Guinea. While our bauxite is mainly used to supply our integrated refineries, we are positioned to support seaborne bauxite demand growth as well as integrated refinery growth, providing us with options depending on how the markets evolve going forward. So to sum up our view of the markets. Overall, long-term demand growth for aluminum continues to be promising, with aluminum established as a key enabler of decarbonization and electrification. Both primary and recycled aluminum markets are expected to grow over the next decade, with aluminum being a key enabler of a circular economy by being infinitely recyclable. Structural changes driven by decarbonization should give low carbon operators, like Alcoa, a competitive advantage in the future in both the aluminum and alumina markets. And our global bauxite presence positions Alcoa to support both seaborne bauxite demand growth and/or in situ refinery growth. Thank you.

Good morning, good afternoon and good evening to everyone, wherever you are in the world. I'm really excited with this opportunity to share with you the work we're doing as operations to make our business safer, more sustainable, more profitable over the short, medium and longer term. We manage operations across 19 locations around the world, across the value chain from mining, refining, smelting and casting. We're confident that in our segments, we're among the best operators in the world today. And I will share with you our areas of focus, our management operating system, some specific achievements and the broader value we deliver to the business over time. As always, we will start with the highest priority, safety. We're obviously deeply concerned about all aspects of job safety, our professional health and environmental compliance. But without doubt, our major focus is on preventing fatalities and serious injuries. We have well-defined standards and operating practices to manage known risks. Critically important, though, is the visible felt safety leadership in the field to develop our people where the work is being done. We also had active learning from incidents to enhance our controls. And this informs where we see sustaining capital and maintenance and also our training efforts. We also recognize that where we have had fatalities over the past 5 years, vis-a-vis the mine, our contracted population. So we're working very actively to critically assess our in-source versus outsource decision-making and the end-to-end contractor management processes. While we're encouraged with the recent performance in this area, we retain a very high level of chronic unease, which is critically important to continue improvement in this space. Our operations team creates value for our shareholders and other stakeholders over the 3 broad areas. Obviously, we need to deliver the operations plan for the year. This includes safety, volume, cost, quality, R&D, et cetera. Secondly, we focus actively to strengthen and embed on management operating systems, the Alcoa Business System or ABS, which I'll discuss further later. Effective ABS delivers operational stability, ensuring that our processes are always running in control, eliminating unplanned losses and rapidly recovering if and when we have exclusions. It enables us to develop our people, which is the critical enabler of continuous improvement. And it also enables us to proactively identify and manage operational risks. Finally, we're building capabilities for the future. This includes improving process technologies. I've will share a few of these today, and you'll also hear more on that topic from Ben Kahrs. We are also committed to the elimination of all forms of process waste, significantly reducing our environmental footprint. And we are actively deploying digital tools and the use of advanced analytics to accelerate our improvement. It's one thing to claim that we're the best operators in the industry. But like everything else we do, we need to be able to demonstrate this with data. I've taken refining production volumes as an example to illustrate the part. This chart shows production versus nameplate capacity for Alcoa and our industry peers. The reality is that operating a refinery well is really, really hard. As you can see, Alcoa has successfully and continuously crept production well above nameplate capacity, while our peers have struggled to really, really achieve their nameplates. Our superior performance is enabled by a differentiated operating model, our management operating system ideas and delivered by the industry's best operations team, all of which I will describe further in the next few slides. The Alcoa business system is at the heart of everything we do. There are initiatives within each one of the plan to check and adjust components, focused on improving the system. The integration of these initiatives is supported through development with training packages and various communication methods to ensure that everybody understands the intent of the system. So starting with planning. We've got a robust 10-year planning process, fully integrating corporate, COE and location planning activities; locations map and assess their processes with COEs providing recommendations and support to those with the largest gaps. We recognize that to achieve the greatest return from the resources and investments we deploy, we must manage the portfolio of opportunities across locations. And we have a robust set of tools to achieve this. In the view stage, we use cascading KPIs. These map appropriate leading and lagging indicators from the shop floor, all the way to the key business drivers for the operation and ensure that the right metrics are managed at the right level in the organization. A key element of ABS is people development to drive continuous improvement. Our frontline leadership experienced significant time on the shop floor to provide coaching on what -- on both what to do and how to do it. We are digitizing our daily visual management and DVM system, improving people efficiency by eliminating manual effort and enhancing process stability through improving problem solving, decision efficiency and accuracy. Our reliability excellence or REX, asset management approach and best practice process management drive client stability and efficiency and maintenance execution. In the check and adjust stage, we have a comprehensive operations performance dashboard, which provides comprehensive, real-time set of EHS, physical, technical, operational and financial metrics to enable a shared view on the ongoing performance and asset health. We're also investing in a comprehensive data platform to enable our people at all levels of the organization to access rich, real-time accurate information to perform their critical analysis. Our scale and scope and the way we're organized provides our core with a unique advantage relative to our competitors. The line leadership is organized by region to drive delivery of the day-to-day operating outcomes. And we have industry-leading COEs, which partner with the line to enable sustainable improvement in process capability and also rapidly address the immediate performance challenges. The breadth and depths of our experience in talent is unparalleled in the industry. We have a diverse team of engineers, scientists, technicians, practitioners, chemists, trade people, front-line leaders and operators at the highest caliber. This operating model enables us to identify and progress productivity opportunities within the segment and use any broader learnings to drive value across segments. We can also quickly and effectively identify causes for performance issues, enabling us to recover and maintain process stability, thereby minimizing unplanned losses. I'll now touch on a few technology developments across our segments that are representative of the breadth of our efforts to significantly and sustainably improve the business performance. So starting at the top left, we're developing and applying technologies to process bauxite at the mine, to improve grade and quality before it's sent to the refinery, thereby improving refining efficiency and reducing costs, including freight. The washing plant at Juruti illustrated here reduces reactive silica in the bauxite and hence, caustic consumption in the refinery. These technologies also enable an increase in viable reserves and extend the mine life. Alcoa has deep expertise in biorefining chemistry and engineering, and we apply this across a portfolio of improvement projects for our refining operations. One exciting area is the application of state-of-the-art digital techniques and advanced sensors. Our proprietary online sensors, resistant to high temperatures and the corrosive environments of the process, are used at many different stages through the process with our combined advanced control outdoor and data science models to provide continuous higher frequency process optimization. Key elements of Alcoa's deep smelting process knowledge are embedded in a suite of models for optimizing the design and operation of the smelting process. The diagram on the upper right models the current voltage operating window, which assists us in defining the operating boundaries to maximize smelter economic performance. As you can see, that to stay within that small green sweet spot, we ensure efficient power consumption, low emissions and extended pot life, but that's a challenge. In casting, technology improvements are also being applied over a large number of areas, including our Dynaprime molten metal filtration system and fuel-free heating for casthouse furnaces. An exciting area I would like to highlight is the range of new high-performance alloys we're developing to expand our value-added product market share. Our new easy cast heat treatment-free alloys for large automotive die castings are illustrated at the lower right. For our customers, these alloys reduce costs, energy emissions and provide simplification of their processes by avoiding the heat treatment and post treatment mechanical processing normally required. Here, I'd like to use 2 examples to briefly describe how improvements combine to enable us to creep our refining and smelting assets. Firstly, Wagerup, which has grown consistently over the years to both improve digestion flow and yield. So note that flow increases actually caused yield decreases. The fact that we've been able to increase both yield and flow shows the power of the process technology improvements we've deployed. Through consistently optimizing process conditions such as bauxite grind size, digestion temperature, liquid concentration, we improve liquid stability and productivity to allow increased yield. Through the use of liquor scaling additives, we reduced the buildup of scale in process vessels and piping. This improves process flow and energy efficiency. It also increases plant availability by extending the time between descaling maintenance events. Equipment reliability improvements with changes in materials and design, particularly through digestion, have delivered increased availability and associated flow. The dip in production in 2018 you see was the result of equipment failures in bauxite handling and milling. Moving to Deschambault, which was already a first quartile and environmentally advanced smelter. They have developed technology and operational improvements to increase capacity by approximately 25,000 tons over the past 10 years, which equates to a little less than 10%. This improvement has come from a sequence of pot design, substation and environmental technology upgrades. As we increase line current, the electrochemical dynamics accelerate. So it's essential to improve operational performance in parallel. This has been achieved through deployment of operational best practices and advanced operator training. Deschambault achieves the longest pot life of the AP30 platform running at high amperage, and they operate at the optimum economics as benchmarked against equivalent technologies. They are also a world leader in water management, thanks to their zero-discharge system for processed water and [indiscernible]. Expanding now to the full portfolio, you see the benefits of our ABS, which delivers operational stability and continuous improvement, combined with the broad and successful approach of improving our core process technologies. Together, these have enabled us to progressively creep capacity across the fleet of operations. The figures represented share of the change in production over the period for a constant portfolio. So I only include those assets that we are currently operating today. Key drivers for the changes include the topics I shared earlier. So increased stability through standard operating routines, continuous process technology improvement and increasing asset availability from improved maintenance strategies and execution. Alcoa, as you well know, is a values-driven company, and these values guide everything we do. In the next few slides, I'll describe how we demonstrate those values in our operations. We recognize that we're extremely fortunate to have the support of our host communities and governments to enable us to mine our large long-life, bauxite ore resources, in the environmentally sensitive areas of the Jarrah forest in Western Australia and the Amazon in Brazil. To maintain their trust and our social license to operate, it's important that we avoid sensitive areas in the first place and then rehabilitate the areas we mine, effectively returning them to their original state and exiting the location. We focus on 2 key metrics to evaluate our performance. Firstly, the quantity of rehabilitation. This is the rate at which we care versus rehabilitate. The target is to maintain a ratio of less than one, which means we are rehabilitating faster than clearing. The ratio will be higher during the time of mine moves, where we are operating in more than one area, and then we catch up when the move is complete. And secondly, the quality of we have. This is the degree to which we restore biodiversity to the level existing prior to the caring with a target of 100%. Although we lost ground on rehabilitation rates in the early part of last decade, due to a major mine move and hopefully, we've recovered significantly since, and we'll be back to net positive during next year with further improvement plan thereafter. Alcoa's biodiversity management standard commits us to no net loss for new operations or major expansions of existing operations. While biodiverse mine rehab is an important mitigating measure, Alcoa also avoids and minimizes disturbance to critical habitat of conservation of significant species and other areas of high conservation significance. Stakeholder expectations are increasing rapidly, and the performance of operators is becoming more visible, more quickly. Alcoa is working hard to establish robust social performance and management plans to strengthen the relationships and secure long-run community and stakeholder support for our operations. Our social management system or SMS is robust and comprises of 4 social standards, including social performance, human rights, indigenous at land-connected people and cultural heritage. Our SMS is aligned with international good practice, including ASI and ICMM. As you'll see in the chart, individual requirements of those social standards are met to the relevant sustainability goals. This area is critically important for us and will be a major focus of method for us going forward. Alcoa has a very long and successful history in tailings management. We developed industry-leading practices over decades with a tailings standard in place for over 25 years, regularly updated to reflect the latest thinking in developments. The Alcoa standard has been aligned with the guidelines developed by industry bodies, including [indiscernible] for our technical standards and [indiscernible] for governments. We believe it's critically important for the industry to set minimum requirements. And Alcoa has played an active role in the formulation of the global industry standard for tailings management or GISTN through our participation in the ICMM working team. Even for an industry leader like Alcoa, achieving full compliance with GISTN's 77 auditable requirements across all 110 tailings facilities will require extensive work over the 5-year implementation period. We're also actively working on technologies to reduce risk and environmental impact due to residue storage. We've already deployed residual filtration and dry stacking facilities in Kwinana and Pinjarra and are executing a similar project at [ Portovesme ]. The perennial challenge in operations is containing in reducing costs. All businesses are confronted with underlying inflation. But in the resources sector, we also need to respond to higher community and regulator expectations, the impact of decline in bauxite grades as we act to extend mine life, et cetera, et cetera. As a capital-intensive industry with long life assets, we also see a variation period-to-period in the costs associated with phases of mine development, periodic major maintenance events, the number of pipelines to be renewed, et cetera. And finally, we have choices about how aggressively we choose to invest in making our business stronger and more sustainable for the medium to longer term, where much of these expenses shows up as operating costs versus capital. In 2020, we delivered a very positive net improvement in operating costs, despite the challenges of COVID. Although our productivity program continues to make strong progress in 2021, this has been more than offset by a range of factors that I have just mentioned. We've also had a few high-impact performances this year, the most significant of which was the failure of the Alumar bauxite [indiscernible]. Because of the reality of these cost headwinds, we maintain a very robust program and a strong focus in driving productivity across all our operations. In summary, I'm extremely proud of the global team we have in operations who are all working safely, sustainably, smartly, diligently every day to deliver today and improve tomorrow. Together, we've accomplished a great deal over the past 5 years and recognize that we are very well positioned to deliver so much more in the future. We're very excited by this prospect and look forward to demonstrating this through continued strong operational performance going forward. Thank you for listening.

Good day, everybody. I'm now going to discuss growth and specifically Alcoa's opportunities to grow. And let's start with the aluminum segment. In the aluminum industry, low-cost renewable energy is key to maintaining competitiveness. When we look at the cost curve on the left side of the slide, we see that China, which is roughly 57% of global production, is weighted towards the right-hand side of the cost curve as China pays higher prices for alumina and energy. However, those disadvantages are partially offset by their technological advantages as Chinese smelters tend to be newer and of higher amperage than smelters outside of China. The higher amperage is an advantage in terms of energy efficiency. So while China has higher energy cost per megawatt hour, those costs are offset to some extent by lower consumption. One area where China is disadvantaged and where Alcoa has an advantage is in carbon emissions. In a hypothetical world in which we have a $50 per ton price of carbon globally, the curve steepens in the position of the Alcoa portfolio, and in particular, our EcoLum smelters move to the left and become even more competitive as the industry cost curve steepens. When looking at opportunities for Alcoa, growth in the aluminum sector will be focused on executing creep projects, restarting idle capacity and implementing game-changing breakthrough technologies. As you can see on the left side of this slide, Alcoa has potential to increase aluminum capacity by 400,000 to 450,000 tons per annum. We just announced the restart of 268,000 tons per annum of capacity at our Alumar smelter, where production will begin in the second quarter of 2022. I also want to highlight that by 2024, 100% of the power to the Alumar smelter will be supported by renewable energy sources through a series of long-term contracts. In addition to the potential to restart idle capacity, the balance of the additional capacity will come from creep projects, those that unlock additional capacity through process improvements and investments, all focused on our low-carbon smelters. Alcoa has a track record of delivering creep projects, which are low risk compared to brown and greenfield projects and are typically low capital intensity with attractive returns. For example, at our Deschambault smelter in Canada, which was built in 1992, we continue to generate more production through process improvements and investments and have increased production volume by over 10% in the past 10 years. In regard to developing new technology, you can hear more details from Benjamin Kahrs today about the prospects of developing technologies like Elysis and Astraea. New technology will open new avenues to address global sustainability while also being economically viable. For example, besides eliminating direct greenhouse gases, Elysis has potential to increase anode life, reduce operating costs and operate more efficiently than conventional smelting. Turning to alumina. We will again start with some of the factors that drive competition in the industry. China has been expanding refining capacity, and the economics shown here demonstrate why Chinese refineries have overcome higher operating costs, driven by import bauxite costs with lower capital intensity and higher domestic aluminum prices. However, like smelting, China's refining capacity is primarily fueled by coal. To see more growth outside of China, one enabler will be a price of carbon emissions. As you can see on the right-hand side, Alcoa leads the industry as a low-carbon alumina producer. Alcoa's refining system has the lowest carbon intensity in the world. We are also the only producer to offer a low-carbon alumina product, EcoSource. As I pointed out earlier, a price for carbon emissions would disproportionately impact China due to their higher carbon intensity and enable growth outside of China. As we discussed on the previous slide, China is disadvantaged in both operating cost and the cost of carbon but has advantages in terms of the required return on capital and price. For growth to occur outside of China, there must be changes in the economics. One risk to these economics becomes freight. In-situ mines offer a cost advantage over China's exposure to uncertain freight costs. An increase in freight would widen the gap between China's already higher operating costs and those of refineries elsewhere. The same would be true for cost of carbon as it would further increase the cost of refiners relying on coal. Because of our low operating costs and ability to access in-situ bauxite, Alcoa is well positioned to grow our low-carbon refining system as conditions evolve. We continue to evaluate growth opportunities that will create value by adding low-carbon capacity that generate returns. We have a track record of delivering projects like Alumar Unit 2 and the last 2 Pinjarra creep projects. Under the right market conditions, our pipeline of growth projects has the potential to add 15-plus percent production growth versus a 2022 baseline. We also have opportunities to grow in the nonmetallurgical grade alumina markets. Today, we sell roughly 900,000 to 1 million metric tons per year of nonmetallurgical grade alumina products from our global refining system. On September 30, Alcoa announced a new development project with FYI Resources Limited to produce high-purity alumina, HPA. Alcoa has entered into a binding term sheet, which positions us to own a 65% interest in the project that is expected to result in competitively produced HPA. Market growth for HPA is driven by global decarbonization goals, including demand for synthetic sapphire used as a substrate in the production of LED lighting; as a powder on lithium-ion battery separators, where demand is driven by growth of electric vehicles and other battery applications as well as other niche high-tech uses. The HPA market is expected to have an almost 20% compounded annual growth rate to 2028. This is an exciting prospect, and the staged investment structure will allow us to evaluate technology and market opportunities as we develop the project. Turning to bauxite. When we look at the next decade, we see tremendous growth in the seaborne bauxite market as China import needs will grow from a little over 110 million metric tons in 2021 to over 190 million metric tons by 2030. The refining expansions, especially those in Asia, ex China, will also drive increased consumption of bauxite over the decade. Much of this growth will be fed by increased supply that we expect to come primarily from Guinea and Australia. Looking at the bauxite reserves, Alcoa is present in the largest high-quality bauxite deposits in the world, like Guinea, Australia and Brazil, and has growth opportunities in multiple locations. The opportunities identified our Brownfield expansions in regions that value responsible mining and where Alcoa can leverage its social license to operate, including bauxite to serve the Atlantic region and bauxite with access to the growing Chinese market. Finally, our growth decisions will follow our capital allocation framework. Positioned for growth is 1 of the 3 categories that maximize value creation. Our growth opportunities include all 3 segments: aluminum, alumina and bauxite, and span the vectors of creep and expansion projects of our existing assets, extension of our core segments and developing and deploying new technologies that will reinvent the industry. We will continue to focus on projects that build on our strengths and generate strong returns through the commodity cycles and that are consistent with our values and advance our sustainable mission. Thank you.

Hi. My name is Ben Kahrs, and I'm the Chief Innovation Officer for Alcoa. I'm here today to discuss our strategically important R&D programs. When we consider the potential for growth in either the aluminum or alumina business, both capital efficiency and enhanced margins are fundamentally important. Prices over the last decade have generally not supported substantial capacity growth outside of China. First and foremost, our technology programs must make us more competitive, typically by either lowering cost or increasing efficiencies. Another critically important consideration is environmental performance and specifically lowering carbon intensity. Given Alcoa's aspiration of net zero by 2050, we consider how our R&D options can help us to solve these goals. Finally, as we look forward, we believe that post-consumer recycling will continue to grow as customers look to meet increased aluminum demand with low-carbon alternatives. I'm here today to talk about 3 key projects: Our Elysis joint venture; the refinery of the future; and Astraea, Alcoa's new patent process to convert post-consumer scrap into high-purity aluminum. Before we talk through the R&D projects, consider how carbon intensity has developed over the recent decade. In the smelting section of the slide, the chart shows the carbon intensity measured in tons of CO2 equivalent emissions per ton of aluminum produced. This includes all Scope 1 and 2 emissions. The chart shows plant emissions as well as the fuel source for the smelting process. It clearly shows the difference between a plant fueled by renewable energy rather than natural gas or coal. Of the plants operating in 2020, those that were built before 2010 had an average intensity of 9.5, while those built in the last decade averaged 13.3. This demonstrates the strong reliance of coal-driven power plants to support recent growth. And as we look forward, roughly half of the announced growth projects are still coal-driven. In the refining section, the chart again shows how much of the current fleet is driven by coal. Of the plants operating in 2020, those built before 2010 have an average intensity on an aluminum ton equivalent basis of 2.2, while those built in the last decade averaged 2.6. There are no fully renewable power refineries, and the list of announced growth projects are almost exclusively coal-driven. In both aluminum smelting and alumina refining, the growth in the last decade has made the industry higher in carbon intensity. Alcoa smelting fleet is 78% renewable energy powered, not including the upcoming restart of the Alumar smelter. The refining fleet, because it's mostly natural gas and operates at industry-leading efficiencies, is clearly in the low end of the first quartile on the carbon intensity curve. The International Energy Agency, IEA, has been defining industry-specific targets for carbon reduction, which helped us support the Paris courts and the 1.5-degree scenario. Alcoa is a member of the International Aluminum Institute, IAI, which has been working with the IEA to convert these targets into a combination of technical pathways and reduction projections. The chart at the bottom left illustrates the total carbon intensity for Scope 1, 2 and 3, excluding the downstream customers' emissions. When compared to the global average of almost 17 tons per ton, Alcoa was 7.2 in 2020. Once again, the connection to fossil fuel-driven electricity has a dramatic impact on carbon intensity in total, and Alcoa is on the low end of the curve. The right side of the page summarizes 2 key aspects of the IAI projections, which aligned to the 1.5-degree scenario. While the total aluminum supply is projected to increase by 55% over 2018 levels, the supply coming from post-consumer scrap is expected to grow by 250%. On the bottom right, this chart shows a rapid decarbonization needed to reach the reduction targets set for the aluminum industry by the IEA. From the levels in the baseline year of 2018, roughly 75% of all CO2 must be eliminated from the total aluminum supply chain by 2035. This is just 14 years from now. When considering the potential capital outlay, the need for innovative solutions and the global nature of the reduction, such a reduction will likely only be possible with a significant global price on carbon. This slide shows a road map to a decarbonized future. As shown in the bottom section of the slide, some of the advancements will need to be developed by other industries. For example, in mining, we need to connect to fully renewable grids and to convert our mobile equipment fleet to either battery or green hydrogen power. For transportation, we need renewable fuel options for maritime, rail and trucking. We look forward to working with power and transportation industries and governments to pursue adoption over time. The upper portion of the slide represents Alcoa's technology package to decarbonize the vast portion of the upstream aluminum supply chain. The intent of all of these programs is that they can be applied to both the retrofit of current operations as well as for new capacity. First, in refining, we're announcing our Refinery of the Future project. The dual goal of the Refinery of the Future program is to reduce the capital cost of refining growth and to provide full decarbonization of the refining process. Secondly, our Elysis joint venture, in partnership with Rio Tinto in Western Quebec aims to lower operating costs and improve productivity as well as fully eliminate all direct CO2 from the smelting process and to produce oxygen as a byproduct. Third, we announced today Alcoa's project to enter the post-consumer recycling business. Alcoa's proprietary process is called Astraea, and it focuses specifically on the growing supply of post-consumer scrap and the imperative to employ to meet growing aluminum demand. Finally, Alcoa's Center of Excellence continue to work with customers on alloy development, which allows for more recycling and elimination of heat-treat requirements. This broad list of projects aims to provide an end-to-end solution for all major CO2 emissions in the upstream aluminum business. The first of the 3 products that we'll review today is the Elysis joint venture. The goal of the JV is to industrialize and commercialize the inner anode smelting technology, which was originally developed by Alcoa. As discussed on the previous slide, which dimensioned the 1.5-degree scenario, successful global deployment of inert smelting technology is a fundamental requirement for the entire market to reach net-zero performance. The goals of the technology are simple: provide an anode that lasts for at least 2 years; eliminate all OpEx costs associated with calcined coke, coal tar pitch, green mills, baking furnaces and their associated emissions; provide a process that eliminates CO2 and emits oxygen; provide avoidance of any future CO2 costs associated with direct emissions; provide a platform and capital efficiency that supports both the retrofit of existing technologies as well as the installation of brownfield and greenfield growth. When considering the last point, it's important to consider the value proposition of an adopting customer. In a retrofit, this technology is effectively a cost reduction project. While the customer does have a small volume increase, the main financial value to the customer is the elimination of the carbon anode value chain and everything that comes with it. Additionally, the risk mitigation of protecting the operations against future CO2 pricing as well as having a modernized technology set, allow the plant to look forward to decades of competitive performance in the commodity aluminum market. In the greenfield or brownfield situation, the technology is actually more attractive. If an aluminum company has decided to invest in growth, the ability to avoid all capital associated with the carbon plant and to deploy capital, which eliminates carbon cost and exposure to carbon pricing, is extremely attractive. The new operation also enjoys the same OpEx and productivity enhancements as in the retrofit case. Now let's discuss Alcoa's Refinery of the Future program. As the world's leading third-party alumina supplier, Alcoa is focused on the modernization of our existing fleet as well as effective formula for growth. Doing so requires a range of solutions that address the simplification of the refinery to reduce the capital intensity of growth; the minimization or complete elimination of bauxite residue; and finally, the key decarbonization needs. We'll focus today on 2 key technologies that address the decarbonization needs. Mechanical vapor recompression or MVR takes the place of virtually all fossil fuel energy consumed in the boilers. In a traditional well refinery, steam consuming process is allowed to transfer into liquid phase before returning to the boilers as condensate. With MVR, we capture the low-pressure steam before it reaches liquid and recompress it back to the high-pressure steam needed for digestion. This avoids significant energy losses and allows the plant to operate from a renewable electricity. The process also results in up to a 35% water savings, which is an important element of the total ESG program. Electric calcination is a direct replacement of a traditional direct-fired calcination plant. The operating environment inside the calciner is radically chained and self-enclosed rather than emitting large amounts of steam. The result is not only effective calcination of the product, but also the retention of 100% of the water from the original feedstock. The result is water conservation as well as connecting the calciner to a renewable electric grid. In total, the Refinery of the Future project is intended to provide a first-of-its-kind zero CO2 aluminum manufacturing process and a path towards future profitable growth. The final innovation project that we'll discuss today is Astraea. Alcoa has been developing a patented process, which can be used to purify any scrap into purity that surpasses that of any known smelter. Looking at the figure on the page, aluminum metal purity is arranged vertically, with the least valuable scrap on the bottom and the highest purity product on the top. Commodity grade is P1020, which means 0.1% silicon and 0.2% iron. With few exceptions, most smelters have a technical capability to produce up to P0404 depending on how they deploy technology. The market has 2 currently available solutions that can translate P0610 or P1020 into higher grades. However, Alcoa is aiming to build a robust solution capable of taking any post-consumer scrap, regardless of alloy combination and to beneficiate it up to P0101. Here's a key example. One of the most plentiful and low-value aluminum scrap is Zorba. Zorba is the first cut of aluminum scrap that comes from an auto-shred plant. And because the average part is shredded, has an array of different aluminum alloys as well as other metals, Zorba is relatively low value because it cannot be blended into significant rate in most chemistries. The exception is aluminum engine blocks, which have very wide chemical limits. However, the engine block market is expected to decline with the reduction in internal combustion engines as electric cars take more market share. The remainder of the Zorba has been shipped out of North America, largely to Southeast Asia. The long position in North America is currently 1.3 million tons per year and growing. Alcoa's Astraea process could allow for a new value chain to make aluminum. Rather than the traditional process to dig up bauxite, refine it and smelt it. The value chain is much simpler. Using this technology, our new mine would be a car shredding facility, and we can convert that scrap directly to super purity levels using Alcoa's Astraea process. And while Zorba has been chosen as the initial feedstock, virtually any low-value scrap can be considered. To reiterate, Alcoa is pursuing a full package of technology solutions to improve profitability, support growth and decarbonize the industry. Each of these projects is in some part of the R&D phase. As Elysis has already announced previously, we are currently in a scale-up phase, which involves transitioning from a large pilot scale to a moderate industrial average of 450,000 amps. That process is going well and scheduled to complete in 2023. Given our confidence in the product development, Elysis has already announced 2 important items. First, Elysis expects to have its technology available for sale in 2024, with their first hot metal from the project coming roughly 2 years later. Secondly, in 2022, Elysis will begin the design, engineering and location studies for a facility that can produce the breakthrough proprietary materials fundamental to the inert anode, zero-carbon smelting process. For MVR electric calcination in Australia, each of them is currently at the bench to small pilot level. We cannot comment to any detailed time lines at this point, but we expect to have pilot demonstrations on MVR in Australia in place by 2023. While the programs have not yet progressed to generate detailed capital estimates, Alcoa will continue to make investments if we see the product as financially viable. We are currently developing projects as part of an effective retrofit and growth option that allows our company to succeed in a carbon-constrained world and we will continue to follow a rigorous business case evaluation. Thank you very much for your time today.

Thanks for taking the time to view this presentation on capital allocation. For those of you I've not met, I'm Bill Oplinger, Alcoa's Executive Vice President and Chief Financial Officer. Let's get started. Let me take a moment to address something we haven't talked much about lately, corporate governance. In late 2016, Alcoa Corporation was spun out of Alcoa Inc. And at that time, we made it a priority to form the company with world-class governance. The governance rating firms consistently rank us highly for our strong governance profile. Some examples of good governance include the fact that we have annually elected Board members, not staggered elections. Also, we have a Nonexecutive Chairman of the Board, not a combined CEO and Chair. Our governance documents permit 25% of stockholders to call a special meeting, and we've had proxy access from day 1. We're incorporated in Delaware, a jurisdiction well understood by our stockholders. We have a long-term executive incentive plan aligned with stockholder interest, including a total shareholder return metric. A majority of our executive compensation is performance-based, and we have an annual say-on-pay vote. We did all of this because we believe it is the right way to do things and is consistent with our values, which guide all of our decisions. Many of you are familiar with our former capital allocation framework as depicted in this slide. Our process for the last several years has been to focus on liquidity by targeting a minimum cash balance of $1 billion as well as sustaining and improving the business through appropriate levels of capital expenditures. At the end of the third quarter, we held $1.4 billion in cash and expect to spend in 2021 to total $415 million in sustaining and return-seeking capital expenditures. After that, our goal has been to use further available cash to maximize value creation. Listed in no particular order, we targeted hitting a proportional adjusted net debt level of $2 billion to $2.5 billion, returning cash to stockholders, transforming the portfolio and investing in value creation activities. I'm happy to say that in our third quarter earnings call, we announced further progress on these aspirations. First, we were below our net debt target range at $1.7 billion. We announced our first quarterly cash dividend and have stock buyback authorizations totaling $650 million. We continued to transform the portfolio with the announced restart of the Alumar smelter and just recently, the sale of the Rockdale land in Texas. And we announced a potential joint venture to develop the capability to produce high-purity alumina. Given the improvements we've made, we've simplified the capital allocation framework. As you can see in our first capital allocation framework, we kept the same themes, but in a slightly simpler format. Now using this framework, we will continue to focus on a strong balance sheet through the cycle, which includes both our cash and our net debt position. We will continue to expend capital to sustain and improve the operations. For value creation, we have the remaining 3 elements, again listed in no particular order: returning cash to stockholders, transforming the portfolio and positioning for growth. Let's look at all of these elements in more detail, starting from the top. First, maintaining a strong balance sheet. As of the end of the third quarter, our proportional adjusted net debt is a healthy $1.7 billion, much lower than in previous years. And likewise, our cash balance is higher than historical levels. Our net pension and OPEB liability has declined from $3.1 billion at year-end 2016 to $1.3 billion last quarter. Cash generation at this point in the cycle is very strong. So with current markets, solid cash generation will further improve these metrics. Our consolidated net debt was $350 million at the end of the third quarter. We've also improved our debt maturity profile. We have no substantial required debt repayments until 2027. Further, we've built a U.S. pension prefunding balance of $1 billion, and our pensions globally are greater than 90% funded. So combined pension and OPEB cash requirements for the next 4 years average only $62 million per year and are mostly OPEB. However, we do expect some increases in capital expenditures. While targeting only $375 million in 2021, we expect sustaining capital expenditures to ramp up to $450 million in 2022 and move slightly higher in '23 and '24. The increased spend comes from 2 major mine moves, similar impacts to the Willowdale mine move completed this year and new impoundment spend at several of our refineries. We also expect our return-seeking spend to return to levels consistent with previous 3 years, averaging $90 million over the next 3 years, as we implement production creep projects and cost savings initiatives across the portfolio and aluminum casthouse improvements. These estimates do not include capital related to major technology development projects or major expansion projects such as the brownfield refinery projects in Western Australia. So let's talk about funding growth, 1 of the 3 value-creation activities. The 5 major technology development projects: Elysis, mechanical vapor recompression, electric calcination, Astraea and high-purity alumina, are still R&D projects. There are several decision points for each project and full project funding is not yet approved for any of them. As an example, the high-purity alumina project has 2 more investment decision stage gates in '22 and '23. The other projects have various decision points with significant implementation spending not occurring until 2024 or later. It's important to note that while we expect many of these projects should help us to achieve our net-zero aspiration, we believe that all of the projects will have a suitable return to make them financially attractive. As a reminder, the refinery expansion projects are not listed because they are still on hold until capital costs and expected market conditions generate acceptable returns. Now let's look at the 2 other ways to maximize value, starting with transforming the portfolio. Many times when we talk about strengthening the portfolio, investors jumped to the conclusion that means we are closing capacity and will incur high closure costs. But in fact, we've shown that assumption isn't accurate. The portfolio transformation includes actions to fix, curtail, close or sell assets under review. And our sales of noncore assets have more than offset the cost of transforming the portfolio. On the left side of this slide, we have listed the key portfolio actions since inception in November 2016. It's quite a list, and our team is proud of the progress made over 5 years to strengthen the company. On the right side of this slide, you can see that the total cash outlays for 5 years compared to the total inflows from the last 2 years of noncore asset sales. The portfolio actions have cost approximately $940 million of cash to date. And with the closing of the Rockdale sale in October, noncore asset sale cash inflows have been approximately $1.14 billion. The noncore asset sale program from the last 2 years has generated approximately $200 million more than the portfolio transformation cash outlay over the last 5 years. So what's left on the portfolio review? As many of you know, 2 years ago, we initiated our successful new operating model and the noncore asset sales program. At the same time, we formalized the ongoing portfolio review program, putting under review 4 million tons of refining capacity and 1.5 million tons of smelting capacity and setting a 5-year target for completion. After 2 years, approximately 2 million tons of refining capacity and 800,000 tons of smelting capacity remain under review. Because each facility has its own potential, we don't have estimates of the cost of the remaining actions to fix, curtail, close or sell these facilities, although current alumina and aluminum market conditions should be favorable for those actions. Finally, let's look at our third value creation element, capital returns to stockholders. In late 2018, Alcoa instituted a share repurchase program authorized for $200 million and repurchased $50 million of shares in the fourth quarter of 2018. The economies of 2019 and much of 2020 brought challenges. And through last quarter, no further shares were repurchased. So as of the third quarter end, $150 million remained available from that program. Last month, Alcoa authorized its first quarterly cash dividend of $0.10 per share per quarter and an additional $500 million share repurchase authorization. Therefore, the available share repurchase authorization totaled $650 million. The announcement last month was an exciting time for all of us at Alcoa. We believe that the dividend and additional share repurchase program show that the work we have done over the last 5 years has paid off. The company is as strong as it has ever been and can thrive through the cycle. In summary, we believe that the capital allocation program reflects the great progress we have made as a company and provides the flexibility and balance to succeed in the future. So in closing, I hope you found this information helpful. But more importantly, I hope you're as excited about our future as I am. Thanks for your time today.

For the next few minutes, I would like to weave together the presentations we've covered in this Investor Day and to summarize how Alcoa is positioned to benefit its stockholders and other stakeholders as our industry and our market evolves. These slides and comments are meant to capture not only where we find ourselves today, but more importantly, where we're going and why we are convinced this path is the right one given accelerating market changes and expectations and why Alcoa is the right company to find these needed solutions. Let's start with the current state of Alcoa. We are strong financially, operationally, commercially focused on continually solving the industry's biggest challenges and ready to not only survive but thrive throughout the cycle. Everything we do starts with staying true to our values, which have guided us through our first 5 years as an independent company. We are proud that across market cycles, we have focused on our people, always acting with integrity and operated with excellence. We have maintained operational stability, setting production records along the way. And while markets have had their ups and downs, our continued efforts to drive returns have culminated in a strong balance sheet and improved cash flows. Over the last 5 years, we have taken important steps to improve the portfolio, making Alcoa even stronger. At the same time, we have research and development projects underway with the potential to transform our company and the aluminum industry. Those steps are possible because we have the right operating model for a commodity company, lean and connected to the operating and commercial teams that produce and sell our products. And we empower our teams to think critically, act quickly and work together creatively. We continuously maintain a commodity mindset, knowing we have a responsibility to ensure Alcoa is successful through the cycle. Our capital allocation model is clear and balances strengthening the company with returns to stockholders and potential for growth. Likewise, our commitment to environmental, social and governance issues is solid and transparent. We are well positioned for a carbon-constrained growth, always seeking to maintain or earn our right to operate across all our locations. And our governance model is designed with our stockholders in mind. So that foundation is why we are ready for the future. As we look ahead, aluminum is the metal for a sustainable future. Our world is one that increasingly requires recyclable products and lower carbon footprints. Aluminum, more so than most competing materials, is infinitely recycled. So much so that roughly 75% of all primary aluminum ever made is still in use today, and it is a virtuous serve. Compared to making primary aluminum, recycling our miracle metal saves 90% of the energy needed to make its primary alternative. Its high strength to weight ratio and corrosion resistance make it an excellent choice to lighten automobiles, trucks and trailers, saving on fuel and reducing carbon emissions. It also is the material of choice for packaging, keeping products fresh while making product transport easier with lower carbon emissions. Finally, new technologies from LED lights and solar panels to electric cars and power generation and transmission benefit from aluminum's high conductivity and other properties. While the world is calling for more aluminum, it is also calling for it to be produced in the most responsible and sustainable way. To speak very clearly, not all aluminum is created equal. It must be produced in a way that protects the environment throughout the full value chain and provide shared value back to communities. A growing awareness of the need to reduce carbon emissions leads to a cycle that can benefit the most responsible producers. Demand for aluminum is expected to continue to grow in large part to meet the needs of growing economies and to help reduce carbon emissions. On the other hand, due to the energy intensity of its production processes, much of the aluminum supply chain can be impacted by global decarbonization efforts, limiting opportunities to create new supply. China is a good case study. As they work to reduce their energy intensity, they have moved from being an aluminum exporter to an aluminum importer. Our view is that aluminum producers who have low-carbon intensity and are responsible producers, like Alcoa, will benefit the most from these trends. Let's look a little closer by referencing key elements of the International Aluminum Institute's greenhouse gas pathways to 2050. Alcoa is uniquely positioned as the world decarbonizes. First, let's look at carbon intensity across the value chain. Bauxite mining has relatively low energy intensity, but alumina refining and in particular, aluminum smelting are very energy intensity. We know that more renewable energy resources are required across all phases of aluminum production to reduce carbon emissions. The majority of the world's refining and smelting capacity is powered by coal, but 78% of Alcoa smelting feed is powered by renewable energy sources. And we expect that percentage to increase to 85% with additional actions to decarbonize our portfolio. In alumina, because we operate a refinery system that is mostly powered by natural gas, we are the lowest energy intensity producer and the only one to offer a low-carbon intensity alumina product, EcoSource. But we are not stopping there. Success is most attainable when we decarbonize the production processes themselves. As we noted earlier, bauxite mining is a relatively low-energy intensity endeavor, and miners of all major metals are already inventing and deploying solutions that we can adapt to bauxite. Our focus is on the alumina refining and aluminum smelting processes, where we are already one of the lowest carbon-intensity producers measured by Scope 1 and Scope 2 emissions. Our Refinery of the Future redesign and our Elysis' zero-carbon smelting technology are researching development projects that not only aim to reduce cost and improve efficiency, but also target complete reduction of greenhouse gas generation from their respective production processes. While we still have much work to do before we complete these projects, we are excited about their prospects and their continued progress. The third pathway to carbon reduction is recycling and resource efficiency. And here is where our third major R&D project is focused. We believe that our Astraea metal purification could significantly change how low quality, post-consumer scrap can be recycled into high-purity aluminum that far exceeds the purity of commercial grade aluminum that is produced in a smelter. While still multiple years away from commercial deployment, we are excited that the process shows promise and aligns with our company's vision to reinvent the aluminum industry for a sustainable future. One final note in why we believe that Alcoa is uniquely positioned to benefit as the world decarbonizes. Stakeholders are increasingly demanding responsibly produced aluminum. Our employees, investors, customers, communities, governments and others all have specific perspectives and priorities, but our common theme is that responsibly-produced aluminum is the path to the most promise for the future. We are proud of our relationships with our stakeholders, ensuring our social license to operate in the most sensitive and biodiverse parts of the world. And we are producing the industry's most complete line of sustainably-produced aluminum products. We believe that protecting our environment and creating shared value with our communities also creates the most value for our stockholders. To sum it up, Alcoa is ready. The world is decarbonizing, and aluminum is a key part of that solution. We have, in our DNA, 135 years of aluminum innovation and technical expertise and a history of consistent improvement. We are strong and expect to prosper through future market cycles. The dynamics of today's aluminum market are already rewarding producers, like Alcoa, that have low carbon intensity. And these trends toward responsibly and sustainably produced aluminum will only accelerate in the future. Finally, we have a suite of technology projects in development that could revolutionize the entire aluminum value chain. At Alcoa, we are ready and excited for the future.