Good morning, everyone, and welcome to Stelco’s Second Quarter Earnings Conference Call. Joining me on the call today is David Cheney, our Chief Executive Officer.

Yesterday, after the market close, we issued a press release overviewing Stelco’s financial performance for the second quarter of 2019. This press release, along with the company’s financial statements and Management’s Discussion and Analysis, have been posted on SEDAR and on our Investor Relations website at stelco.com/investors.

We have provided a link to the presentation referenced on today’s call on our website as well. I’d like to inform everyone that comments made on today’s call may contain forward looking statements which involve assumptions which have inherent risk and uncertainties.

Actual results may differ materially from statements made today. So do not place undue reliance on them.

Stelco management disclaims any obligation to update forward looking statements except as required by law. With that in mind, I would ask everyone on today’s call to read the legal disclaimers on page two of the accompanying earnings presentation and also to refer to the risks and assumptions outlined in Stelco’s public disclosures in particular the second quarter Management’s Discussion and Analysis sections related to forward-looking information and risks and uncertainties as well as our filings with Securities Commissions in Canada.

The appendix of our presentation and the non-IFRS performance measures and review of non-IFRS measures of our second quarter MD&A provide definitions and reconciliations of the non-IFRS measures that we use today. Please also note that all dollar figures referred to in today’s call will be in Canadian dollars, unless otherwise noted.

Following our prepared remarks, David and I will take questions. To maximize the efficiency we ask that all participants who would like to ask the question limit themselves to one question and one follow up question before re-queuing.

With that, I’d like to call, take the call, I’d like to turn the call rather over to David.

Thank you, Don and good morning everyone. As many of you are aware, the end of the second quarter marked two years since this management team formally started its journey to restore Stelco’s position as a leader in the North American steel industry.

Before I ask Don to provide some insights into our financial results for the quarter, I want to take a moment to share some details regarding the Stelco culture that is been integral to the success we have shared their stakeholder during this period. Over the past two years, you’ve heard repeatedly about our tactical flexibility business model, the core philosophy behind the way we do business at Stelco, the willingness to change and adapt to changing market conditions and quickly response to external pressures that challenge our business has allowed us to deliver sustainable financial results and also we've returned more than $300 million directly to our shareholders.

Those returns continued in Q2 as we delivered results within a range of expectations despite facing some challenging headwind throughout the quarter. While we have utilized our tactical flexibility model to guide our business and capitalize in the ever changing market, Stelco has remained grounded in a core set of principles that are integral to the long-term sustainability of our business.

Our priority is to maximize the long term returns for our shareholders. To achieve this, we operate our business with a focus on six key priorities.

One, expand and serve our customer base. Two, optimize our assets.

Three, maximize profitability and cash flow. Four, maintain a strong balance sheet.

Five, grow our business, and six, operate safely and sustainably. These priorities drive our decision making process and I am pleased to report progress across all these key areas.

We maintain an unwavering commitment to serve our customers. As we announced earlier this quarter we responded to the demands of our customers by investing in new batch annealing equipment.

The addition of up to 200,000 tons of fully processed Cobo capacity to our product mix has been welcomed by our customers and represents an important value added product for our business. We expect this result and better utilization of our Hamilton works finishing assets and has the potential to add meaningful incremental EBITDA once we reach full capacity.

We are also getting our products to our customers more efficiently and sustainably after investing in our logistics capabilities. The addition of nearly 400 leased rail cars and vessel shipments from our Lake Erie dock offers many benefits, greater logistics flexibility, quicker delivery times, lower freight costs and a reduced carbon footprint.

In the second quarter 20% of our shipments were via vessel and rail. Going forward, we will work closely with our customers to further optimize logistics channels and to identify and develop the next generation of steel products to serve both their needs and those needs of the users of our products.

We have always been committed to investing to optimize the utilization of our assets and we will continue to do so. Over the past two years, we've invested in our assets to increase production and to improve our capability to manufacture the next generation of steels, especially for the auto industry.

Starting in July, we began making a significant investment to upgrade the end fluids at our Lake Erie works Coke Battery. We expect this investment will yield approximately 100,000 tons of coke above our 2018 production levels.

We are also continuing our preparation for investments to further upgrade and modernize our blast furnace scheduled for 2020 that we expect to yield as much as 300,000 tons of molten metal above current production levels. In addition, we are investing in cutting edge technologies that we believe will enable us to run our assets more efficiently and profitably.

For example, Stelco was at the forefront of deploying artificial intelligence and day-to-day operations. Working with Candace analytics, a leading AI platform for industrial operations, Stelco has implemented AI for optimizing the steel production process, leapfrogging the market by deploying AI in production using reinforcement learning and autonomous control system and a full production environment.

This is leading to reduced waste, improved quality and optimization of asset utilization. We are extremely excited with the prospects you see in deploying AI and you will hear more from me on this topic.

The third of our core values is maximizing profitability and controlling costs. It is here where we will focus on maintaining and improving our cost structure so that we will continue to generate positive returns throughout the cycle.

The first half of 2019 is a challenging period for industry as a changing geopolitical climate, customer destocking and falling steel prices required us to be extremely disciplined with respect to cost controls. Despite these challenges I'm proud to report our cost per ton improved versus prior quarter.

Our business remains profitable and we generated cash flow. However, I believe there is more that we can do to improve our bidding cost position.

We are announcing an initiative to achieve sustainable annual run rate cost reductions of $25 million to $50 million over the next several quarters. This represents up to $20 per ton of steel on an annualized sales volumes of 2.5 million tons.

The identified savings were challenging or achievable and will further position Stelco as an industry leader when it comes to the efficiency of our operation and our ability to generate returns for our stakeholders. Fourth is our focus on preserving a strong balance sheet.

As I said in the past, we view the bottom of the cycle as a point where value can be created and where opportunities exist to grow. In order to take advantage of those opportunities, the business must be in a strong financial position with sufficient liquidity to execute our strategy.

At the end of Q2, Stelco held cash and cash equivalents of $277 million after generating a $146 million in cash of operating activities in first half of the year. Today, we have approximately 455 million in the bank to put that in perspective, our cash represents approximately 40% of our market value.

Our strong liquidity and balance sheet positions us to take advantage of opportunities in the market. To that end I’m pleased to say we have recently reached an agreement with the Government of Canada to access approximately $50 million from the strategic innovation fund, while the specific details of this partnership will be announced shortly.

I can say that these funds will be used to support the modernization of our facilities in both Hamilton and Nanticoke, which leads me to our next core value, growing our company. As we execute our strategy, we continue to look for every opportunity to grow the business both organically and through accretive M&A activity.

I spoke earlier about our asset optimization projects to believe to increase production at our coke and steel making facilities as well as investments to support production of fully processed cold roll sheet. Further, our Executive Chairman Alan Kestenbaum as well as others from our executive management team continue to investigate multiple M&A opportunities and conduct strategic assessments of the potential value creation.

As these opportunities materialize we will provide additional information at the appropriate time. We continue to believe we are entering a period where Stelco is uniquely positioned for growth.

Finally, we have maintained our commitment to ensure our operations are safe and sustainable. The health and safety of our workforce remains at the heart of our operations and we pride ourselves on returning employees home to their families safely each and every day.

As evident to that commitment, none of our employees have suffered any injury requiring days away from work in nearly two years. With respect to sustainability, we continue to pursue innovative opportunities such as electricity cogeneration.

As a reminder, over this quarter we announced a strategic partnership with DTE to construct the cogeneration power plant at our Lake Erie site. This initiative will require limited capital from Stelco and we believe it will yield up to $20 million in annual savings.

We will continue to pursue measures to enhance our performance in these areas and we report on significant developments and achievements at the appropriate time. Overall, we believe it's been true to these core principles coupled with the responsive nature of our tactical flexibility model will position Stelco for continued growth and sustainable profitability, while 2Q had its challenges we have seen a reversal of what we saw in Q2, market prices have normalized and are rising and order volumes are strong.

We believe Stelco to have one of the lowest steel making cost in the North American steel industry and the measures I just outlined will only improve that position. Before I hand things back to Don, I want to provide an update regarding the progress on the utilization of our surplus lands.

In the Q1 earnings call, I said there was more to come regarding the land. I'm extremely pleased to announce that we have signed a long term lease for 125,000 square feet of our space at our Hamilton site.

The 10 year lease is with one of our largest customers at very attractive rental rates. It has an NPV of approximately $20 million.

We have in excess of 500,000 square feet of existing industrial warehouse space available for rent. And more than 500 acres of developable land, which could equate to additional 8 million square feet of rentable space once developed.

I want to pause for a moment and put all this in context. The lease we just signed represents less than 1.5% of the total potential rentable square footage at our Hamilton site.

In short, this land is an incredible asset and has the potential to drive significant value creation. Against this backdrop, we are seeing very strong interest for potential renters, including customers, using the available real estate to better serve our customers and at the same time increase returns from a real estate investment as a two-fold benefit of enhancing the core steel business and driving high ROIs on our land investments.

As always, our efforts are intended to achieve one core objective - maximize returns to our shareholders. Our utilization of the tactical flexibility model and commitment to our core principles has afforded our business the opportunity to build upon the more than $300 million we have paid in dividends to our shareholders since IPO less than two years ago.

Our board has approved another regular dividend of $0.10 per share, which will be paid at the end of August. This is further proof of our success and building a financially sustainable business that is capable of responding to the challenges and delivering positive returns at every point in the market cycle.

We see reason to be optimistic for our business in Q3 and beyond. We've seen positive developments in both market volume and pricing -- for any early portion of Q3.

As we follow through on our commitment to diversify our product mix and secure permanent sustainable cost reductions Stelco will be really well positioned to maintain its position as an industry leader. I will now turn the call over to Don to talk more about the financial results, cash generation and the balance sheet.

Thanks, David. Despite facing a challenging market, we had success in managing those headlines, while at the same time strengthening our balance sheet and improving our cost structures.

Revenue in Q2 totalled $431 million, bringing revenue for the first half of the year to $948 million. Adjusted EBITDA for the quarter was $32 million and $108 million for the first six months.

Our Q2 revenue of $431 million reflects an average selling price of $761 per ton, down $66 per ton from 827 in the first quarter that 8% decline in quarter-over-quarter price reflects the general decline in prices experienced in the broader market, as seen in crew prices. We saw our selling prices trough in late June and then begin to recover in July.

Again not inconsistent with the pattern seen in broader market prices as seen in the crew. Non-steel sales totalled $16 million in Q2 up $11 million from the first quarter.

We believe that the decline in market prices in 2019 and destocking by customers are related. Steel shipments in Q2 totalled 545,000 tons down from 612,000 tons in the first quarter.

While steel shipping volumes were lighter in the first half of the second quarter order volumes improved noticeably in June, while market prices were bottoming. Those stronger order volumes have largely continued into Q3, the stronger order volumes coupled with some strengthening and market prices in July and early August are encouraging trends.

Through our focus on liquidity strong cost management and tactical flexibility our business generated a $146 million in cash from operations and we ended the quarter with $550 million of liquidity including $277 million in cash and $238 million of borrowing capacity under our ABL revolver. These cash and liquidity amounts are after paying $118 million in dividends and investing $97 million in CapEx and $21 million in land year-to-date.

We believe that focusing on a healthy balance sheet and strong liquidity are important elements to creating shareholder value. To that end, we added an accounts receivables sales facility in late June, the receivables sale facility gives us the flexibility to sell receivables effectively, accelerating the collection cycle.

Further, we’ve used our inventory monetization facility to improve working capital management and effectively extend vendor payment terms. After the close of the second quarter, we have expanded the monetization facility to include more category -- inventory categories and improve our inventory capital management adding approximately $175 million to our cash position.

That concludes our prepared remarks. Now I would like to turn the call over to the operator for Q&A.

Operator?

Hi, great. Thanks for taking my questions.

I’ve got a few but I’m going to try and limit it in the first round with some near term questions. First of all, second quarter volumes they were down about 11% quarter-over-quarter which is more than the other producers that we cover anyway.

Was that a function of being 100% spot exposed/destocking or is there something else going on there. And can you be a little more specific about your expectations regarding the second half volumes please.

David, look I think it’s a combination of a number of things particularly around customers and destocking. But what’s important is we’re very optimistic to the second half.

If you refer to our MDA we’re targeting 1.3 million tons shipped in the second half of 2019, this is consistent with our previous commentary on production shipping levels. Your question is why are we so optimistic.

I think the fact is as we built a business that’s capable of thriving in every part of the market cycle and we’ve seen some real favorable movements in volume and pricing in the beginning of Q3 and we think that’s sets the stage for a return to volume to similar to what we saw last year.

Okay. That’s very helpful, thank you.

And then just my follow up on switching gears to pricing. On our numbers you would recovering the pricing it looks like most of the indices are still down on a US dollar basis by about 15 to 50 bucks a ton.

If we see current prices hold for the rest of the quarter that would be Canadian dollar around 30 to 80 bucks a ton. Is that a reasonable assumption for starting point range for overall price declines quarter-over-quarter.

Are you down 30 to 80 Canadian assuming flat today is flat for rest of the quarter before we adjust for mix or is there anything that we felt that we should be thinking about?

Yes, so when it comes to prices, I think most importantly, we believe prices have bottomed. Since the first week of July, crude has increased from below 500s and reached 600 a ton.

During the end of the quarter and into Q3, we've seen our lead times increase to over four weeks for HRC right now the order book is very strong and we've seen a real nice uptick in pricing. But as you alluded to, as you put all this in context, CRU was in the high 600 at the beginning at Q2 and I think I would expect our quarter-over-quarter average sales price to follow the trend in CRU pricing.

David seems like you're in your prepared remarks, you talked about, exceptional sort of acquisition opportunities, and obviously, given the liquidity of over half a billion dollars and it seemed like, you're in a pretty unique position to capitalize on sort of this mini downturn. So I'm wondering if you can kind of talk about how you view some of the acquisition landscape, what do you view as kind of most strategic for you with enough framework.

And then, given the pretty sizablegrant from the government regarding Nanticoke and Hamilton would that implythat you're looking to restart these facilities or there's some meaningful reinvestment that you're looking to make there?

Okay, so I'll address both of those. With respect to M&A Alan and I have a long track record of delivering highly created and value enhancing growth.

It seems to have fallen under the radar, but our recent land acquisition is a great example. As you may recall on May this year we announced the acquisition of the remaining former Stelco lands.

This included 500,000 square feet of industrial space, 100,000 square feet of office space, and 37 acres of land, the purchase price was 20 million. The lease we just signed was for one of those buildings to do the math for you the lease square footage represents only 20% of the purchased square footage, and the MTV is equal to the entire purchase price.

On all I think that's pretty good transaction. As for the future, Alan and myself and the executive team are working hard for the next transactions.

That can be upstream, it could be further mill capacity, and it can be in downstream. Specifics we really we can't talk about other than, as you come to learn from us, we will remain incredibly disciplined and we're always focused on highly creative highly value creating transactions.

On the M&A on the Hamilton side this is a bit of a continuation from previous comments. Stelco was asset rich, we have a number of underutilized assets, unused assets, which include the Hamilton blast furnace, but it also includes land, a 10 megawatts turbo generator, and excess rolling capacity.

Our focus has always been to utilize all of our assets. So we think about the batch annealing it's going to pull 200,000 tons through our coal mill.

So this is going to provide a number of benefits. It's going to add more value added product mix, but it's also going to lower our unit costs to fixed costs absorption.

We think about the trauma generator having an additional 10 megawatts of low cost electricity in Hamilton behind the meter is a resource that can provide many interesting opportunities for some high paying tenants. Regarding Hamilton furnace, look it remains an option, we continue to evaluate it and we’ll update you when there is something more concrete to report.

Okay. That’s helpful.

And then maybe a question for Don, and in terms of the cost progression in the second half of the year. You’re talking about $25 million to $50 million of incremental opportunity.

Is that a number that would be fully utilized like do you realize that or is that an annualized run rate and would you view that as a structural change in the cost or is this more aggressively targeting discretionary cost and could be just a temporary dynamic to that?

Yeah. So Curt I'm going to jump over Don and address some of this.

This program has actually been quarters in the making. We have been making investments in our people and our technology and in our assets to put us in a position to launch this program.

The key elements of the plan are reducing contracting hours, strengthening relationships with key service providers, increasing equipment uptime and improving yields and getting greater utilization of our secondary materials and by products. Everyone at Stelco was fully committed to this objective and I’m highly confident we’re going to deliver on these commitments.

And these are not temporary cost reductions, these are permanent reductions to further improve our cost position. In terms of the utilization, we’ve targeted 25 million to 50 million, we’re going to try to achieve as much as that as fast as possible, in terms of exact timing, look I think it’s safe to say that at least 25 million in the second half of this year and within the next several quarters we expect to reach all 50 million.

So, I would add to what David just said that again this is not a last minute attempt to take out cost. This is the fruition of really efforts that started months and months ago when prices were still quite high.

And it’s our job to deliver the greatest return for our shareholders and we see part of that is managing our cost structures aggressively. And so when we talk about delivering on this set of cost takeouts, this is very is been developed with a lot of discipline, we’re pretty comfortable and confident in our ability to capture because we put it in the time to understand it.

And with that we’re also pretty comfortable that these are costs that we can keep out of our business. And so with all that it’s a – a pretty achievable goal for us from our perspective.

Okay, that’s great. And then just one last from me regarding the from the optimization at Lake Erie and I think you mentioned 300,000 tons of metal upside.

Is that, will that coincide with the realign that’s upcoming or could that be ahead of time. And can you just update us on towards the current thinking around exactly the timing of the realign I think at the end of next year?

Yeah. Look Kurt its part and parcel with the realign.

Part of this is positioning, we’ve always talked about we don’t want to just take our assets to prior levels. We want to improve them and upgrade them.

So the optimization and the improvements will happen at the same time as the realign, we’ll give you some more specific details but we’re expecting it to happen in the first half of next year. And a lot of the incremental production is going to come from greater stability in the assets.

We’re also going to make some repairs and upgrades to our BOF. And look just to remind you that this is the first full realign at the Lake Erie blast furnace in the company’s history.

So, we’re going to get some against some pretty good stability. We're going to further deploy AI and you know, our COO has come up with some best practices that are being used around the world that we can implement as Stelco to increase capacity.

Just two quick questions. The first one around the cash balance that you guys are telegraphing in the press release.

That is building after Q2. Do you mind maybe describing a little bit where that increase is coming from?

This is Don, I'll address that. So, I mentioned in my script that, that we expanded our inventory monetization facility after the end of the quarter and that generated about $175 million of additional cash, the way to think about it is, the company had invested cash in inventory balances prior to us expanding this, this facility after the quarter.

So in effect, what we did as we restored that cash that was invested in inventory with the expansion of the facility that served to increase our cash balances significantly.

And the second question pertains to the opportunity on slabs. It looks like it's going to the US.

Can you maybe discuss how much of an outside you can generate from this type of business?

We did sell slabs in Q2, why as we said again and again we focus on maximizing profitability. So in Q2, we had the opportunity to sell slabs and cobalt full hard to a new strategic customer both at attractive options.

We will continue to evaluate, selling all these products to all the markets. And really Max, it sounds trite -- but this is tactical flexibility at work and look going forward for the next quarter or two we should expect the ratio of other shipments as percent of total to be roughly in line.

So you pivoted towards Canada heavily from last spring to avoid the excess tariff cost. Do you reverse that now that the 232 exemption is in place?

And does that help you meaningfully in either placing tons or bringing your realizations?

Our focus has and will continue to be serving our customers. Our priority is to serve all of our existing customers a significant portion that are in Canada during the 232 period, we honored all of our customer commitments in the US but in terms of placing incremental tons we're always mindful of tariff.

So with, with tariffs going away, we're really pleased that the US and Canada are working together again to facilitate supplying steel in the interconnected supply chain. And as our customers continue to grow and make investments we hope to grow with them.

So in that means some incremental tons into the US possibly but it is really about serving our customers and meeting their needs.

So let me ask you a little bit on contracts. Can you talk to your expected status and success upon layering in contracts, how and whether you're going to increase that push in the year end and do you have a goal for what you're -- what you think you can achieve in terms of spot contract mix for 2020?

The goal is to make as much money as possible. We are a low cost producer and we think that being exposed to the spot market on pricing offers our shareholders the most upside possible to a rising steel price environment.

In terms of contracts, we have a number of contracts that have volumes commitments and pricing set based on market, we continue to invest in our advanced strength steels, our ultra high strengths fields for the auto sector we’ve been successful in securing contracts this year. And look as we look to further penetrate the auto sector we’re going to take on some more fixed price contracts, but it’s all about striking the right balance and again given our low cost structure, given our pristine balance sheet, given our low fixed cost, we are in a truly unique position of wanting to that exposure to the spot price, because again it just allows investors to realize maximum upside.

All right. And then last for me.

If you can remind me just for the cogen plant what is the expected cash requirement in terms of mountain timing. And when did that $20 million annual savings be realized?

Thanks.

We haven’t made a comment on the specific capital although it’s really minor. So, it’s not a significant number at all.

In terms of when we expect to realize full savings, we’re expecting the plant to start in the second half of 2021 probably in Q4 and the savings will begin immediately.

All right. Thanks guys.

Thank you.

Thanks.

Hi, great. Thank you very much.

You guys just talk about what the pipeline looks like for the real estate business. Now you mentioned 1.5% of your total square footage.

How do we see this kind of progressing? Does it sale, is it indicative of what you think you can monetize much as a per foot at and how we should kind of think about that?

Look it’s hard to get into specific details Ian other than I can say it’s progressing very well. The demand for industrial space in the GTHA market is red hot.

The reality is there is just not a lot of space for industrial users, we have not only space and we have buildings. Those buildings we’re talking cranes, we’re talking rail access, highway access, core access and our development team has potential tenants coming in virtually every day.

So, we’re continuing to work to first and foremost lease the existing buildings at the same time working on the master plan around the 500 acres of the developable land. So, we’ve only owned this land for about a year, and we just bought certain building not even two months ago.

So, we think we’re moving at a pretty fast pace and you should expect to continue to potentially accelerate.

Thank you very much.

Okay, great. Thanks for taking my follow ups.

Just one quick clarification on that land on the lease commentary. Is this lease that you’re referring to that you just signed?

Is that different than the one that you signed in May?

Yes.

Okay. And then….

We now have two new tenants to our land.

Okay, great. Thanks.

And then regarding the cash balance, obviously a pretty good pile, you kind of touch on it somewhat, but can you give us a little more specific about your priorities for that cash file?

Look it’s to grow the business. We have truly David so many levers and ways to grow the business.

We have utilization of the assets. We do have opportunities at frankly generator where there's a blast furnace wherever.

And then we're also very active on the M&A front. So we said repeatedly, the bottom of the cycle is where you find great opportunities in and we expect to use that cash to grow the business.

Okay, and then so words in your mouth or where does capital returns fit into the equation?

Look, we were always evaluating capital returns. But right now, as we said that we take a look at where we see production volumes prices going.

Also, we look at where we see the opportunity from an organic and inorganic pipeline, and then we will be trying to kind of figure out what can generate the best return. And right now, what I can tell you is that growth is the priority.

We've seen incredible pipeline, and, shareholder returns and return to shareholders will always be considered, but our focus is, is and will always be with the absolute highest return for everybody.

And then the last question for me. If we add up these price agnostic initiatives that the companies are realign to Cogen [indiscernible] etcetera.

We're coming up with about 100 million of incremental annual EBITDA conservatively I think by around 2022. And I think that's on top of the 25 to 50 million you just flagged.

So is it reasonable to assume about 150 million of incremental EBITDA by around 2022 from all these initiatives?

Yes.

Thank you very much, and have a great day.