Tronox Limited
Tronox Ltd (Form: 8-K, Received: 11/28/2017 07:51:45)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

 
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):   November 28, 2017 (November 28, 2017)
 

 
TRONOX LIMITED
(Exact name of registrant as specified in its charter)
 


Western Australia, Australia
 
001-35573
 
98-1026700
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
263 Tresser Boulevard, Suite 1100
 
Lot 22 Mason Road
Stamford, Connecticut 06901
 
Kwinana Beach, WA 6167 Australia
 
 (Address of principal executive offices, including zip code)

(203) 705-3800
(Registrant’s telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
             Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
             Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
             Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 


Item 7.01. Regulation FD Disclosure.

On November 28, 2017 and November 29, 2017, the management team of Tronox Limited (the “Company”) intends to conduct one or more meetings with investors and analysts.  Copies of the slide presentation expected to be used at such meetings and the corresponding script are attached as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K.

Such information, including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.  Financial Statements and Exhibits.
 
(d)
Exhibits.

Exhibit No.
 
Description
 
Investor presentation, dated November 28, 2017.
 
Investor presentation script, dated November 28, 2017.


SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
TRONOX LIMITED
 
 
 
 
By:
/s/ Richard L. Muglia
Date: November 28, 2017
Name: 
Richard L. Muglia
 
Title:
Senior Vice President, General Counsel and Secretary
 



Exhibit 99.1
 
 Citi Basic Materials Conference   November 28, 2017 
 

 Safe Harbor Statement  1  Statements in this presentation that are not historical are forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These and other risk factors are discussed in the company's filings with the Securities and Exchange Commission (SEC), including those under the heading entitled “Risk Factors" in our Form 10-Q for the period ended September 30, 2017 and our Annual Report on Form 10-K for the year ended December 31, 2016. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information or future developments.This presentation contains certain non-U.S. GAAP financial terms that we use in the management of our business, including EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow and adjusted earnings per diluted share. Reconciliations to their nearest U.S. GAAP terms are provided in the Appendix of this presentation. 
 

 Strong Performance - Strategically, Financially and Operationally    3Q17 TiO2: Revenue +28%, Adj. EBITDA +79%, Adj EBITDA margin 31%; FCF $120m    Sale of Alkali Chemicals for $1.325 billion    Refinancing lowered cost of debt, extended maturities, increased liquidity, provided additional pay down flexibility     Shareholder approval received to issue 37.58 million Class A Shares to Cristal     Cristal TiO2 acquisition integration planning proceeding on schedule  2    Increased TROX liquidity from secondary offering of 22.425m shares by Exxaro 
 

 Tronox-Cristal Investment Highlights  3  Large scale assets with highly competitive cost positionIntend to be ~85% vertically integrated on net-TiO2 basisFull utilization of mineral sands assets across cycles  $100m synergies in year 1 and $200m in year 3 expectedUnlocking incremental TiO2 volumes from operational efficiencies in tight supply-demand marketCash flow generation expected to lead to rapid deleveraging and cash deployment opportunities  Largest TiO2 production base with ~18% of industry capacity in 2016Global footprint with 11 TiO2 plants and 8 mineral sands facilities on 6 continentsIncreased exposure to faster-growing emerging markets   Creates Largest Global TiO2 Producer  1  Most Vertically Integrated  2  Multiple Levers to Grow Shareholder Value  3 
 

 4    Global Footprint  45-63-136  42-109-186  103-146-171  134-184-0  112-48-160      ThannFranceCapacity: 32 kMT  Ashtabula 1 & 2USACapacity: 245 kMT  Salvador, BahiaBrazilCapacity: 60 kMT  YanbuKSACapacity: 200 kMT  BunburyAustraliaCapacity: 110 kMT  FuzhouChinaCapacity: 46 kMT  StallingboroughUKCapacity: 165 kMT                                Namakwa SandsSouth Africa  KZN SandsSouth Africa  Chandala(2)Australia  KwinanaAustraliaCapacity: 150 kMT  HamiltonUSACapacity: 225 kMT  Jazan(1)KSA    Botlekthe NetherlandsCapacity: 90 kMT    CristalPigmentMineral Sands      TronoxTronox Corporate PigmentMineral Sands              StamfordUSACorporate Offices  ParaibaBrazil  CooljarlooAustralia  WonnerupAustralia  SnapperAustralia  GinkgoAustralia  Tronox negotiating an option to acquire Cristal’s Jazan slaggerRepresents a mineral processing plant and not a mine 
 

 5  Benefits of Integration    Mineral Sands Can Maintain Consistently High Operating Rates  Optimizing Feedstocks and Grades  Zircon and Rutile Co-products  Guaranteed demand from 11 TiO2 pigment plants enables smelting operations to run at consistently high utilization rates and at low costLow-cost position generates strong cash flow with reduced volatility No longer subject to demand volatility across the cycle; merchant feedstock suppliers have historically operated at lower utilization rates during cycle downturns  High-value co-products in the mining of TiO2 feedstockProvide attractive co-product credits, further benefiting integrated margin profileIn effect, reducing net feedstock costs  Ore bodies within a mine can be targeted to deliver specific feedstock and co-products contentDependent on market conditions, higher zircon content can be targeted versus titanium-bearing ore, for exampleTronox benefits from having both chloride and sulfate plants 
 

 Pre-tax run-rate synergies of more than $100 million by year 1 and more than $200 million by year 3 expected  Components of Anticipated Synergies (1)  Full utilization of mineral sands assets Optimizing value in use of our feedstockSharing of best practices across complementary technologies, production facilities and production geographiesSignificant supplier overlapEnhanced global footprint reduces average distance to customers Consolidation of third party spend, overlapping functions, elimination of redundant corporate costs  One-time Costs to Achieve (1)  Sources of Synergies   ($ millions)  ($ millions)  6  Highly Synergistic Combination  Estimates at deal announcement on February 21, 2017 
 

     7  TiO2 Nameplate Capacity  Feedstock Balance(kMT, TiO2 units)  Sales by Region  Pro Forma SalesAnnualized($ millions)  Pro Forma Adj. EBITDAAnnualized1($ millions) and % margin  858 kMT  465 kMT  Feedstock Balance Shifts (2018E)  (kMT, TiO2 units)  220 Long  New Tronox  Tronox  180 Short    220 Long  180 Short  400 Short  1,323 kMT  Pro Forma Tronox Overview  20.3%  14.3%  20.4%  New   Note: USD in millions. Tronox figures are for Tronox TiO2 business plus Corporate minus Alkali business.Sum of 1H 2017 Pro Forma Adj. EBITDA multiplied by two and Year 1 estimated synergies of $100mm.Pro forma sales adjusted for 1H 2017 annualized elimination of sales between Tronox and Cristal of $54mm; Pro forma adjusted EBITDA reflects an additional $16mm EBITDA related to Cristal’s 50% interest in AMIC, which is not a part of the Cristal Acquisition  Synergies:  $100  $731  (2)  (2) 
 

 8    45-63-136  42-109-186  103-146-171  134-184-0  112-48-160  Pro Forma EBITDA  Synergies  Interest  Capital Expenditures  Taxes  Free Cash Flow  Strong EBITDA growth driven by multiple levers  Sizeable and achievable synergies from Cristal merger  Leverage significant tax attributes to reduce taxes   Refinancing lowered overall cost of debt and provided additional pay down flexibility  Support requirements of business and debottleneck operations    +  _  _  _  Attractive free cash flow generation attainable in the near-term  Free Cash Flow and Deleveraging Profile 
 

 Capital Allocation Strategy  45-63-136  42-109-186  103-146-171  134-184-0  112-48-160  Capital expenditures to support business growth and debottleneck operations    Reduce debt with target net leverage ratio range of 2.0-3.0x EBITDA    Balance strategic investment flexibility and shareholder capital return    9 
 

 Q&A Session  www.tronox.com 
 

 Appendix  www.tronox.com 
 

 12  TiO2 Value Chain  45-63-136  42-109-186  103-146-171  134-184-0  112-48-160      Titanium-Bearing Mineral Sands    Zircon    Ilmenite    Synthetic Rutile    TitaniumSlag    Pig Iron    Natural Rutile    Leucoxene      Feedstock   TiO2 Pigments   Markets 
 

 Reconciliation of Non-U.S. GAAP Financial Measures  13  TRONOX LIMITED                  (UNAUDITED)                  (Millions of U.S. dollars, except share and per share data)                                             RECONCILIATION OF NET INCOME (LOSS)                  ATTRIBUTABLE TO TRONOX LIMITED (U.S. GAAP)                  TO ADJUSTED NET INCOME (LOSS) FROM CONTINUING OPERATIONS                  ATTRIBUTABLE TO TRONOX LIMITED (NON-U.S. GAAP)                        Three Months Ended September 30,          Nine Months Ended September 30,             2017     2016     2017     2016                             Net income (loss) attributable to Tronox Limited (U.S. GAAP)      $ (247)     $ (37)      $ (285)      $ (182)  Income (loss) from discontinued operations, net of tax (U.S. GAAP)      (216)      23       (179)      55   Net income (loss) from continuing operations attributable to Tronox Limited (U.S. GAAP)      $ (31)      $ (60)      $ (106)      $ (237)  Acquisition related matters (a)      13       -       33       -   Restructuring (income) expense (b)      -       1       (1)      2   (Gain) loss on extinguishment of debt (c)      28       -       28       (4)  Adjusted net income (loss) from continuing operations attributable to Tronox Limited (non-U.S. GAAP) (d)      $ 10       $ (59)      $ (46)      $ (239)                             Basic and diluted net income (loss) per share from continuing operations (U.S. GAAP)      $ (0.26)      $ (0.53)      $ (0.89)      $ (2.04)                             Acquisition related expense, per share      0.11       -       0.28       -   Restructuring (income) expense, per share      -       0.02       (0.02)      0.02   (Gain) loss on extinguishment of debt, per share      0.23       -       0.24       (0.04)  Diluted adjusted net income (loss) from continuing operations per share attributable to Tronox Limited (non-U.S. GAAP)      $ 0.08       $ (0.51)      $ (0.39)      $ (2.06)                             Weighted average shares outstanding, diluted (in thousands)     119,405      116,219      118,908      116,108                              (a) Represents transaction costs associated with the Cristal Transaction which were recorded in "Selling, general and administrative expenses" in the unaudited Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2017.                  (b) Represents severance costs associated with the shutdown of our sodium chlorate plant and other global restructuring efforts, which was recorded in "Restructuring expense" in the unaudited Condensed Consolidated Statements of Operations.                  (c) Represents a $28 million loss which includes a $22 million loss associated with the redemption of the outstanding balance of the Senior Notes due 2020, $1 million of unamortized original debt issuance costs from the repayment of the UBS Revolver, and $5 million of debt issuance costs from the refinancing of the $1.5 billion Prior Term Loan. During 2016, the $4 million gain was associated with the repurchase of $20 million face value of our Senior Notes due 2020 and Senior Notes 2022. These amounts were recorded in “Gain (loss) on extinguishment of debt” in the unaudited Condensed Consolidated Statements of Operations.                  (d) No income tax impact given full valuation allowance except for South Africa restructuring related costs of less than $1 million.                  
 

 Condensed Statement of Free Cash Flows (non-U.S. GAAP)  14  TRONOX LIMITED                        CONDENSED STATEMENT OF FREE CASH FLOWS                        (UNAUDITED)                        (Millions of dollars, except share and per share data)                                                               Three Months Ended September 30, 2017             Nine Months Ended September 30, 2017             TiO2     Corporate     Consolidated     TiO2     Corporate     Consolidated                                      Income (loss) from operations (U.S. GAAP)   $ 75       $ (24)      $ 51       $ 168       $ (90)      $ 78   Depreciation, depletion and amortization expense   44       1       45       132       4       136   Other   17       10       27       44       27       71   Adjusted EBITDA (non-U.S. GAAP)   $ 136       $ (13)      $ 123       $ 344       $ (59)      $ 285                                       Adjusted EBITDA (non-U.S. GAAP)   $ 136       $ (13)      $ 123       $ 344       $ (59)      $ 285   Interest paid, net of capitalized interest and interest income    -       (73)      (73)            (157)      (157)  Income tax provision   -       (13)      (13)            (10)      (10)  Transaction costs   -       (13)      (13)            (33)      (33)  Contributions to employee pension and postretirement plans   (9)      -       (9)      (18)      -       (18)  Deferred income taxes   -       6       6       -       8       8   Other   3       40       43       3       40       43                                       Changes in assets and liabilities                                   (Increase) decrease in accounts receivable, net   6       -       6       (29)      -       (29)  (Increase) decrease in inventories, net   11       -       11       48       -       48   (Increase) decrease in prepaid and other assets   (2)      (4)      (6)      (12)      (4)      (16)  Increase (decrease) in accounts payable and accrued liabilities   (3)      (34)      (37)      3       (30)      (27)  Increase (decrease) in income taxes payable   -       (1)      (1)      -       -       -   Subtotal   12       (39)      (27)      10       (34)      (24)                                      Cash provided by (used in) operating activities, continuing operations   142       (105)      37       339       (245)      94                                       Capital expenditures   (22)      (1)      (23)      (61)      (2)      (63)   Free cash flow (non-U.S. GAAP)    $ 120       $ (106)      $ 14       $ 278       $ (247)      $ 31  
 

 Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (non-U.S. GAAP)  15  TRONOX LIMITED                  RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA (NON-U.S. GAAP)                  (UNAUDITED)                  (Millions of U.S. dollars)                        Three Months Ended September 30,          Nine Months Ended September 30,             2017     2016     2017     2016                             Net income (loss) (U.S. GAAP)     $ (241)      $ (39)      $ (274)      $ (183)  Income (loss) from discontinued operations, net of tax (U.S. GAAP)     (216)      23       (179)      55   Net income (loss) from continuing operations (U.S. GAAP)     (25)      (62)      (95)      (238)     Interest and debt expense, net   47       46       140       138      Interest income   (3)      -       (5)      (2)     Income tax provision   13       6       10       25      Depreciation, depletion and amortization expense   45       45       136       131   EBITDA (non-U.S. GAAP)     77       35       186       54      Share-based compensation (a)   5       8       26       18      Transaction costs (b)   13       -       33       -      Restructuring (income) expense (c)   -       1       (1)      2      (Gain) loss on extinguishment of debt (d)   28       -       28       (4)     Foreign currency remeasurement (e)   (5)      14       1       32      Other items (f)   5       -       12       4   Adjusted EBITDA (non-U.S. GAAP) (g)     $ 123       $ 58       $ 285       $ 106   (a)  Represents non-cash share-based compensation.                 (b)  Represents transaction costs associated with the Cristal Transaction which were recorded in “Selling, general and administrative expenses” in the unaudited Condensed Consolidated Statements of Operations.                 (c)  Represents severance and other costs associated with the shutdown of our sodium chlorate plant, and other global restructuring efforts which was recorded in "Restructuring income (expense)" in the unaudited Condensed Consolidated Statements of Operations.                 (d)  Represents a $28 million loss which includes a $22 million loss associated with the redemption of the outstanding balance of the Senior Notes due 2020, $1 million of unamortized original debt issuance costs from the repayment of the UBS Revolver, and $5 million of debt issuance costs from the refinancing of the $1.5 billion Prior Term Loan. During 2016, the $4 million gain was associated with the repurchase of $20 million face value of our Senior Notes due 2020 and Senior Notes 2022. These amounts were recorded in “Gain (loss) on extinguishment of debt” in the unaudited Condensed Consolidated Statements of Operations.                (e)  Represents foreign currency remeasurement which is included in “Other income (expense), net” in the unaudited Condensed Consolidated Statements of Operations.                (f)  Includes noncash pension and postretirement costs, severance expense, accretion expense, insurance settlement gain and other items included in “Selling, general and administrative expenses” and “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations.                 (g)  No income tax impact given full valuation allowance except for South Africa related restructuring costs.               
 

 Reconciliation of Net Income (Loss) to Adjusted EBITDA (non-U.S. GAAP)  16  TRONOX LIMITED                  RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA (NON-U.S. GAAP)                  (UNAUDITED)                  (Millions of U.S. dollars)                                             The following table reconciles income (loss) from operations, the comparable measure for segment reporting under U.S. GAAP, to Adjusted EBITDA by segment for the periods presented:                                                    Three Months Ended September 30,          Nine Months Ended September 30,             2017     2016     2017     2016                             TiO2 segment     $ 75       $ 17       $ 168       $ (12)  Corporate     (24)      (17)      (90)      (45)  Income (loss) from operations (U.S. GAAP)     51       -       78       (57)                             TiO2 segment     44       44       132       127   Corporate     1       1       4       4   Depreciation, depletion and amortization expense     45       45       136       131                              TiO2 segment     17       15       44       41   Corporate     10       (2)      27       (9)  Other     27       13       71       32                              TiO2 segment     136       76       344       156   Corporate     (13)      (18)      (59)      (50)  Adjusted EBITDA (non-U.S. GAAP)     $ 123       $ 58       $ 285       $ 106  
 



Exhibit 99.2
 


Prepared Remarks

Presented to Citi 2017 Basic Materials Conference

by Jeffrey N. Quinn
Tronox, Ltd.

November 28, 2017
 


2017 CITI BASIC MATERIALS CONFERENCE
NOVEMBER 28, 2017
INTRODUCTION

Thank you and hello everyone.  I’m Jeffry Quinn.  Later this week, I will become the CEO of Tronox.  I thought I would get a couple of days’ head start by speaking with you today.

For those of you that were looking forward to hearing the sweet sounds of Peter Johnston’s Australian accent, I apologize — all you get is my Kentucky twang.  At least I’ll try to use the word “mates” a couple of times in my presentation.  With me today are two of my mates from the company - Tim Carlson, our CFO, and Brennen Arndt, vice president, investor relations and corporate communications.  We will be pleased to answer your questions after my remarks.

It’s our pleasure to be here today to provide an update on our strategic direction and our planned acquisition of Cristal TiO 2 .
 
SAFE HARBOR STATEMENT

I will not read the forward looking statements on this slide - but instead say that they apply in full to my remarks today.

Let me just take a moment to quickly introduce myself.  I’ve spent 30+ years in the industrial world in mining, refining, and chemicals. I spent 15 years at Arch Coal, several years in the refining industry working for Tom O’Malley at Premcor, and almost 10 years at Solutia, where I was chairman and CEO for over 8 years until we sold the company to Eastman Chemical in 2012.

Since 2012, I ran my own investment company where we invested in the chemicals sector and sponsored two SPAC’s.  I’ve been on the board of Tronox since 2011 and am also currently on the board of W.R. Grace. I am really honored and excited to take the helm at Tronox.  We have a great team and a great future ahead of us.

With that let’s talk about Tronox. 


2

2017 CITI BASIC MATERIALS CONFERENCE
NOVEMBER 28, 2017
STRONG PERFORMANCE – STRATEGICALLY, FINANCIALLY AND OPERATIONALLY

Tronox is performing very well on all fronts - strategically, financially and operationally.  Our TiO 2 business continues to deliver strong results.

In the third quarter, the business posted:
Revenue growth of 28 percent
Adjusted EBITDA growth of 79 percent
An adjusted EBITDA margin of 31 percent, and
Free cash flow of $120 million

The last time we achieved a 31 percent adjusted EBITDA margin was the third quarter of 2012 – when TiO 2 selling prices were 33 percent higher.

This level of performance clearly reflects the benefits of:
Our vertical integration with all our assets in full operation, and
The extraordinary work by our global TiO 2 team to reduce costs through their very successful Operational Excellence program.

We also made great progress on our strategic developments:

We completed the sale of Alkali Chemicals for $1.325 billion
Our shareholders approved the issuance of 37.58 million Class A Shares to Cristal in connection with the transaction, and
We completed a refinancing that lowered our cost of debt, extended maturities, increased liquidity, and provided additional pay down flexibility

All funds are now assembled to complete the planned Cristal transaction.

In addition, our trading liquidity was significantly increased through a secondary offering of 22.425 million shares by Exxaro.

Most importantly, our Cristal TiO 2 acquisition integration planning continues to proceed on schedule.

We have now received approval for the transaction from 6 of the 9 regulatory jurisdictions.  Reviews in the U.S., the EU and Saudi Arabia are ongoing.

We continue to work with the regulatory agencies to obtain the remaining outstanding approvals for the transaction.  This week is an important week for us in that the FTC must take action by December 1.
 
3

2017 CITI BASIC MATERIALS CONFERENCE
NOVEMBER 28, 2017
By that time, the FTC must: 1) allow the wedding by letting the review process expire, or 2) seek our agreement for more time to consider the deal, or 3) decide to file suit to challenge the deal.  

With respect to the EU, we have been in active dialogue for many months. In the EU process, this dialogue occurs prior to officially commencing phase one.  We entered phase one on November 15 when we filed our form CO.  The EU has published a provisional deadline of December 20 th to respond to our filing.  At that time, they can 1) clear the deal, 2) request additional time to review our filing, or 3) move to phase two for further questions and review.

As we have previously stated, we believe this deal enhances competition in the TiO 2 industry and anticipate obtaining all approvals and closing the transaction by the end of the first quarter of 2018.

That being said, there can be no assurance that any of the remaining outstanding regulatory agencies will not seek to enjoin the consummation of the transaction.  If that were to occur, we are fully prepared to defend our legal position.

In summary, we are confident that 2017 will be a year of strong performance — and that 2018 will be a transformational one for Tronox.
 
TRONOX-CRISTAL INVESTMENT HIGHLIGHTS

The combination of Tronox and Cristal provides multiple levers to substantially grow shareholder value.

We will be the largest global TiO 2 producer, with:

A production base that represents approximately 18% of industry capacity
An expansive global footprint — with 11 TiO 2 plants and 8 mineral sands facilities on 6 continents, and
A greater exposure to faster-growing emerging markets

We will also be the most vertically integrated producer with:

Upstream mineral sands mining and production assets
Coupled with downstream TiO 2 production
 
4

2017 CITI BASIC MATERIALS CONFERENCE
NOVEMBER 28, 2017
Our vertical integration places us in a highly competitive cost position.  We will move from a long to short position on feedstock and intend to be approximately 85 percent integrated on a net-TiO 2 basis.  This will enable us to operate our mining and feedstock assets at full utilization across the cycle and at lower cost.

We expect to deliver significant growth in shareholder value by:
 
Realizing synergies of $100 million in year 1 and $200 million in year 3
Unlocking incremental TiO 2 volumes across our network to take advantage of additional sales in attractive market conditions, and
Generating substantial cash flow that will enable rapid deleveraging and cash deployment opportunities
 
GLOBAL FOOTPRINT

Here’s a snapshot of our global footprint with:

11 pigment plants in 8 countries
6 mines and mineral separation plants in 3 countries, and
2 smelters and 1 synthetic rutile plant

This global footprint — with upstream and downstream production facilities strategically located on 6 continents — will enable us to better serve our customers worldwide.

Our increased scale:

Provides production flexibility and a competitive advantage in retaining existing customers and obtaining new business
Reduces the average delivery distance to their facilities
Enables us to offer our customers a broader suite of products in all regions, and
Increases our exposure to faster-growing emerging markets
 
BENEFITS OF INTEGRATION

The cost benefits of our vertical integration are substantial.

With guaranteed demand from our 11 pigment plants, our smelting operations will run at consistently high utilization rates.  This lowers our cost profile and generates strong cash flow with reduced volatility.
 
5

2017 CITI BASIC MATERIALS CONFERENCE
NOVEMBER 28, 2017
We will no longer be subject to volatility in feedstock demand across the cycle.  This volatility can require merchant feedstock suppliers to operate at lower utilization rates during cycle downturns and incur high fixed cost penalties.

We can target ore bodies within a mine to deliver specific feedstock and co-product content. For example, higher zircon content can be targeted versus titanium-bearing ore — or vice-versa.

We benefit from zircon and rutile co-products.  Zircon and rutile are high-value minerals obtained in the mining process.  They provide attractive co-product credits which benefit our integrated margin profile.  In effect, they reduce our net feedstock costs.
 
HIGHLY SYNERGISTIC COMBINATION

Our combination is highly synergistic.  We expect to realize pre-tax run-rate synergies of more than $100 million by year 1, and more than $200 million by year 3.

We plan to derive these synergies from multiple sources:

Running our mineral sands assets at full utilization
Optimizing the value in use of our feedstock
Sharing of best practices across technologies, production facilities and geographies
Eliminating significant supply chain overlap
Reducing delivery distances to customers
Consolidating third party spend, and
Eliminating redundant corporate costs
 
PRO FORMA TRONOX OVERVIEW

Here is a snapshot of pro forma Tronox following the Cristal acquisition:

Nameplate TiO 2 capacity of more than 1.3 million tons
Approximately 85 percent vertically integrated, and
Pro forma sales of more than $3.5 billion and adjusted EBITDA of $731 million, including $100 million of year 1 synergies — based on annualizing first half 2017 results for both companies —

The pro forma enterprise today is running at higher annualized sales and EBITDA levels then these first half run rates.
 
6

2017 CITI BASIC MATERIALS CONFERENCE
NOVEMBER 28, 2017
We remain confident that our combination has the potential in year 1 to generate approximately $1 billion of EBITDA and $400 to $500 million of free cash flow.
 
FREE CASH FLOW AND DELEVERAGING PROFILE

Looking at our combination from a cash flow perspective…

We expect strong EBITDA growth sourced from multiple areas in the combined enterprise — coupled with the synergies we intend to realize.

Our refinancing lowered our overall cost of debt and provided additional pay down flexibility — in anticipation of this strong free cash flow.

We intend to leverage our significant tax attributes to reduce cash taxes, and

We will continue our disciplined approach to capital spending - focused on supporting the requirements of our business and debottlenecking our operations.

With this substantial free cash flow, our priority is to rapidly deleverage our balance sheet.  If you consider our current debt levels and the potential for generating $400-500 million of free cash flow in year 1, you can quickly gain a perspective on the pace of that deleveraging.
 
CAPITAL ALLOCATION STRATEGY

Our capital allocation priorities are to:

Support business growth and debottleneck our operations through disciplined capital spending
Reduce net leverage to 2-3x EBITDA, and
Balance strategic investment flexibility with shareholder capital return

Let me just conclude by reaffirming once again that we are building a high-performance company focused on:

Increasing production by unlocking incremental TiO 2 production across the combined footprint
Operating our vertically integrated assets in a highly efficient and low cost manner
Meeting or exceeding our synergy targets
Generating substantial free cash flow
Rapidly deleveraging our balance sheet, and
Balancing strategic investment flexibility with shareholder capital return
 
7

2017 CITI BASIC MATERIALS CONFERENCE
NOVEMBER 28, 2017
Q&A SESSION

With that, I thank you.  We will be pleased to take your questions.
 
###
 
 
8