Brennen Arndt - Vice President-Investor Relations Thomas J. Casey - Chairman & Chief Executive Officer Katherine Carolyn Harper - Chief Financial Officer & Senior Vice President Edward T. Flynn - Executive Vice President and President, Tronox Alkali, Tronox Ltd. Jean-François Turgeon - Executive Vice President and President, Tronox Titanium Dioxide.

Des Kilalea - RBC Europe Ltd. (Broker) Edlain Rodriguez - UBS Securities LLC Roger Neil Spitz - Merrill Lynch, Pierce, Fenner & Smith, Inc. James P. Finnerty - Citigroup Global Markets, Inc. (Broker) Bill Hoffmann - RBC Capital Markets LLC Lauren K. Gallagher - Credit Suisse Securities (USA) LLC (Broker) Richard E.

Kus - Jefferies LLC Tarek Hamid - JPMorgan Securities LLC Chris Silvio Perrella - Bloomberg LP (Research).

Good day, ladies and gentlemen, and welcome to the Tronox Limited Fourth Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded.

I would now turn the call over to your host, Brennen Arndt. Please go ahead..

Thank you, Stephanie. And welcome, everyone, to Tronox Limited's fourth quarter 2015 conference call and webcast. With me today are Tom Casey, Chairman and CEO; and Kathy Harper, Senior Vice President and CFO. Joining us for the Q&A session will be Jean-François Turgeon, President of Tronox TiO2; and Ed Flynn, President of Tronox Alkali.

We'll be using slides as we move through today's conference call. Those of you listening by Internet broadcast through our website should already have them. And for those of you listening by telephone, if you haven't already done so, you can access them on our website at tronox.com.

A reminder today that our discussion will include certain statements that are forward-looking and subject to various risks and uncertainties including, but not limited to, the specific factors summarized in our 2014 Form 10-K and other SEC filings. This information represents our best judgment today based on today's information.

However, actual results may vary based on these risks and uncertainties. And the company undertakes no obligation to update or revise any forward-looking statements. During the conference call, we will refer to certain non-U.S.

GAAP financial terms that we use in the management of our business including EBITDA, adjusted EBITDA and adjusted earnings per diluted share. EBITDA represents net income before net interest expense, income tax and depreciation, depletion and amortization expense.

Adjusted EBITDA represents EBITDA as further adjusted for non-cash, unusual and non-recurring items. Adjusted earnings per diluted share represents EPS adjusted for unusual or non-recurring items and on a fully diluted basis. A reconciliation is provided in our earnings release. It's now my pleasure to turn the call over to Tom Casey. Tom..

Thank you very much, Brennen, and good morning, everybody. Thank you for joining us. During the fourth quarter, we continued to work hard to decrease our non-essential cash spending while simultaneously improving our working capital and CapEx efficiency.

As a result, our TiO2 and Alkali businesses together delivered free cash flow of $147 million to the company. $114 million of that came from TiO2 and $33 million came from the Alkali segment. We exceeded our full-year 2015 targets for cash generated from both cost reductions and working capital reductions.

We delivered $90 million from costs after taking into account the costs to achieve those savings, exceeding our target which was $60 million by 50%. Plus, we delivered an additional $98 million of cash from working capital reductions, and this also exceeded our target, which was $85 million.

We remain confident in our ability to deliver our previously announced target of more than $600 million of incremental aggregate cash over the period 2015 to 2017.

This level of performance in the quarter is particularly noteworthy in our view because it was achieved despite the headwind of continuing selling price declines in TiO2 pigment and some feedstocks.

Compared to the year-ago quarter, our pigment sales volumes were up 7%, but average selling prices were 22% lower, which includes the effects of currency, and 5% lower sequentially from the third quarter.

For 2014 compared to 2015, segment revenue declined 13% from $1.74 billion to $1.51 billion as volumes remained relatively flat, they increased about 1% on the year, and average selling prices declined 18%. This led to a year-on-year EBITDA decline of just over 50%.

Our TiO2 segment EBITDA margin for 2015 was 14.2%, and our Q4 segment margin was 10.7% even under these difficult conditions. We believe that both of these margin measures exceed any other competitor in our market. We continue to believe that pigment prices, however, are set at unsustainably low levels.

In December, we announced the price increase which we continued to push forth in all of our markets in all the regions of the world. Our Alkali business is a strong complement to this TiO2 segment business. In the fourth quarter, Alkali generated $38 million of adjusted EBITDA and delivered free cash flow of $33 million.

In the three quarters of 2015 that we owned the business, Alkali generated adjusted EBITDA of $129 million and delivered free cash flow of $127 million to the company. Given Alkali's sustained structural cost advantage, it continues to operate in a sold-out mode.

Of course, our cash generation performance in the quarter contributed to strengthen our balance sheet. We closed the quarter with $229 million of cash on hand, an increase of $84 million from the end of the third quarter. And now, I want to address our board's actions on our dividend policy before going into the specifics of our segment performance.

Our board has concluded that we will alter our dividend policy not for the fourth quarter of 2015, but going forward for 2016. Specifically, given our strong cash position at the end of the year in 2015, the board decided that we will pay our traditional $0.25 per share dividend for the fourth quarter of 2015 on March 17.

The record date for that payment will be March 4. Thereafter, we intend to pay a quarterly dividend of $0.045 per share or $0.18 per share annually. This will provide investors with a higher-than-market yield and free approximately $100 million per year in cash for us. I'll now move forward to a review of the fourth quarter performance.

First, in TiO2, and I'm talking now to slide 4, TiO2 segment revenue of $336 million in the fourth quarter was 16% lower than the $400 million in the prior-year quarter, primarily the result of lower pigment selling prices. Sales of pigment products declined 16% compared to the year-ago quarter for the reasons that I discussed a minute ago.

Sales volume gains were realized in North America and Europe, Middle East and Africa, while Asia-Pacific sales volumes were modestly lower. Sales of titanium feedstocks and co-products declined 13% versus the year-ago quarter. Lower sales of pig iron, rutile and zircon were partially offset by higher chloride slag and ilmenite sales.

And remember that no sales were made of either chloride slag or ilmenite in the year-ago quarter. Selling prices for CP titanium slag, zircon and rutile were lower than the year-ago quarter.

Compared sequentially to the third quarter of 2015, segment revenue of $336 million was 12% lower than the $380 million, reflecting normal seasonally lighter sales volumes and lower selling prices for pigment products. Pigment product revenue declined 10% sequentially, as volumes declined 5% and average selling prices declined 5%.

Sales volumes in the Americas, EMEA and Latin America were modestly lower, while sales volumes in Asia Pacific were level to the prior quarter.

Selling prices in North America, Europe and Asia Pacific were down in the 4% to 6% range, and our finished pigment inventory continued on its downward trend and ended the year slightly below normal seasonal levels.

Sales of titanium feedstocks and co-products, including zircon and rutile products, were 10% lower than the third quarter as volumes were level and average selling prices declined 10%. Zircon, rutile and ilmenite sales volumes increased modestly, while chloride titanium slag sales were lower.

Selling prices for CP titanium slag, zircon and rutile were also lower in the quarter than the prior quarter. TiO2 segment adjusted EBITDA was $36 million in Q4. Cash provided by operating activities was $151 million and capital expenditures were $37 million.

Therefore, the titanium oxide business unit delivered free cash flow of $114 million in the quarter. As I said, TiO2 CapEx of $37 million included $15 million related to the Fairbreeze mine project.

Fairbreeze began operations ahead of schedule at the end of Q4 and will produce feedstock to supply the slag furnaces at our KZN Sands operations, and it will also provide new zircon and new rutile co-products for us to sell. At the project commencement, total CapEx for Fairbreeze was estimated to be approximately $225 million.

Approximately $164 million of that has been spent through the end of 2015 with approximately $50 million planned to be spent in 2016 till the project is completed. We expect to complete Fairbreeze under budget and ahead of schedule.

In addition to our cost reduction and cash generation initiatives, we've maintained our tight operating focus on aligning supply and demand. As part of that effort, we've continued to curtail production in the fourth quarter at the same levels as we did in the third quarter.

In pigment products, our processing line curtailments represented approximately 15% reduction in total production. In feedstocks and co-products, our CP slag production continues to operate at a level of approximately 50% of our production capacity.

Our mining operations continue to run at capacity in order to produce zircon and rutile, which we believe there exists the market demand for.

Sales volumes for both pigment products and titanium feedstocks have been unaffected by our production curtailments, however, as we're meeting demand for these products from the combination of our reduced production supplemented by draw-downs of inventories at all levels of our operation.

Our inventory reduction initiatives have also been successful beyond that. We ended the fourth quarter with finished pigment inventory, as I said, below normal seasonal levels. In 2015, inventory reductions were a source of $157 million for the company, with reductions in our integrated TiO2 business inventories being the primary driver.

Moving to slide five and our Alkali business. The segment fourth quarter revenue of $199 million was 3% lower than pro forma revenue of $206 million in the year-ago quarter. Selling prices increased 1%, volumes declined 4%. Given its sustained structural cost advantage, Alkali remains in a sold-out mode.

And with sold-out conditions in both periods, the sales volume decline was the result of lower production in Q4 compared to the record production in the year-ago quarter. I would point out that 2015 was the second largest production for Alkali in its history compared unfavorably only to 2014.

Compared sequentially to the Q3 of 2015, revenue increased 2% as sales volumes increased 6%, led by higher export sales, partially offset by a 4% lower selling price as a result of lower export selling price.

Alkali adjusted EBITDA of $38 million in the fourth quarter compared to pro forma adjusted EBITDA of $45 million in the prior-year quarter due to higher plant spending, higher royalty payments on the mining activity and higher distribution costs.

Looking at the sequential comparison, adjusted EBITDA declined by $3 million compared to the third quarter, a measure of $41 million as higher sales volumes were more than offset by lower export selling prices and higher royalty costs. Cash provided by operating activities was $46 million and capital expenditures were $13 million.

Therefore, Alkali delivered free cash flow of $33 million in Q4, another strong quarter of cash by Alkali. I'll now turn the call over to Kathy Harper, our CFO, for a review of our financial position.

Kathy?.

Thanks, Tom. I'll begin with the review of corporate items, then move to our balance sheet and cash flow statement. Corporate adjusted EBITDA was negative $14 million in the fourth quarter versus pro forma adjusted EBITDA of negative $26 million in the year-ago quarter and adjusted EBITDA of negative $18 million in the prior quarter.

Corporate income from operations was $4 million in the quarter, resulting from a true-up of segment allocations of SG&A for the year that was booked in the fourth quarter compared to a pro forma loss from operations of $22 million in the prior-year quarter and loss from operations of $16 million in the third quarter.

Selling, general and administrative expenses in the fourth quarter were $46 million compared to $54 million in the prior-year quarter and $55 million in the third quarter on lower incentive comp expense and professional services fees.

Interest and debt expense of $45 million increased from $32 million in the year-ago quarter primarily due to a higher debt level related to the Alkali acquisitions that closed in the second quarter of 2015. On December 31, 2015, gross consolidated debt was $3.121 billion and debt net of cash was $2.892 billion.

Cash on the balance sheet was $229 million and liquidity was $530 million. Capital expenditures were $50 million in the fourth quarter and depreciation, depletion and amortization was $72 million, bringing full year CapEx to $191 million and DD&A of $294 million.

There's a new table in our press release with segment details that hopefully will make this all clear for you. Regarding foreign exchange impacts on the income statement, our primary exposure to currency exchange rates is in South Africa, Australia and the Netherlands.

The exposure is more prevalent in South Africa and Australia as the majority of revenues are earned in U.S. dollars, while expenses are primarily incurred in local currencies. Clearly, in 2015, our cost structure in both countries benefited from rand and Aussie dollar movements relative to the U.S. dollar.

The foreign exchange risk in Europe is partially mitigated as the majority of revenues and expenses are in the same local currency, creating a partial natural hedge.

However, as you'll see in Tom's discussion of our Operational Excellence program, we've taken foreign exchange impacts out when measuring our cash generation performance against our targets, to challenge ourselves to deliver real incremental cash generation.

I'll now turn the call back to Tom for an in-depth discussion of our Operational Excellence program.

Tom?.

$63 million from labor and maintenance savings; $7 million from SG&A reductions; $32 million from lower raw materials and processed chemical costs; and $27 million from lower energy costs. And that $99 million is our result – never mind that we had $30 million of inflation that we had to absorb and overcome.

So, as to where that – now that $99 million shows up on our financial statements, $31 million was reflected on TiO2's income statement in 2015 and $68 million remains on the balance sheet in the form of inventory which will flow through the income statement in 2016 as we sell the product. Moving to other cost impacts.

The fixed cost absorption penalty resulting from our reducing production to bring supply in line with demand totaled $45 million, which reduced our EBITDA to $266 million. Lastly, there was a $51 million net increase within non-cash LCM reserves that, while not a cash item, hits our EBITDA in the year.

And that takes us now to $215 million which we reported in this year. As we've discussed over the last two quarters, we valued our ilmenite inventory as of the time of our merger with Exxaro in 2012. We sold a significant amount of excess inventory mineral sand materials last year.

These transactions generated significant incremental cash, but were sold at prices less than their carried book value. And therefore, we took these LCM charges. The rest of these LCM impacts are reported, that is to say, taking into consideration the LCM, our reported EBITDA in TiO2 was $215 million.

Adjusting out those non-cash charges, our EBITDA would have been $266 million. The $215 million is the same number we reported in the Q4 financial statements we released yesterday. As I mentioned, we'll provide this level of detail as we report our progress twice each year, at the end of the half and at the end of the year.

So, now let's look at the impact of our program on the company's performance in 2015 from a cash flow perspective, which is shown on slide nine. And here's the cash flow profile. Again, moving left to right, as reported in the 2015 income statement, net loss was $307 million.

Depreciation, depletion and amortization was $294 million, and other amortized costs were $20 million, for a total of $314 million of DD&A. Share-based comp, pension and related items were $28 million. We sourced $157 million from inventory reductions. We sourced an additional $20 million from accounts receivable and $4 million from accounts payable.

And as a result, cash provided by operating activities was $216 million, which ties directly to our cash flow statement under cash provided by operating activities. CapEx totaled $191 million in the year. We've shown you the build-up of that CapEx by segment, including a separate entry for the Fairbreeze mine product – project.

So, in summary, given our market, we're pleased with the aspects of our $215 million performance that we can control, which produced cash flow from operations of $216 million and finished the year with a positive free cash flow of $26 million.

Under the circumstances, we think positive free cash flow for the year was a strong indication of the effectiveness of our programs. So, on slide 10, we talk about 2016 perspectives. We expect market conditions in the seasonally light first quarter to be similar to those we saw in the fourth quarter.

As we discussed, we announced the price increase in December for pigment products in all regions. As you know, pricing in pigment products is subject to contracts and is also largely set on a quarterly basis. The vast majority of first quarter pricing had been set at the time we made our announcement.

So, in effect, it was an announcement geared towards the second quarter, which is the seasonally strongest quarter. We are working diligently to realize the announced price increases. As we've said in the past, pigment selling prices are at unsustainable low levels on a global basis, and we believe they have to increase.

However, for 2016, we are expecting the primary sources of profit growth and cash growth in TiO2 to come from cost reductions and working capital reductions. On the Alkali side, we continue to believe that this is a great business with sustained structural cost advantages and attractive cash generation potential.

Given its lasting cost advantage, it continues to operate in a sold-out mode. Essentially, Alkali can sell as much product as it produces. And as I mentioned already, 2015 was its second highest production year ever.

On a long-term basis, the demand growth for Alkali's product, like that of pigment, is highly correlated to the GDPs of the region it serves. So take a position on GDP growth rates in U.S., Latin America, Europe and Asia, and you'll have a fairly good estimate of our Alkali volume growth.

Looking at Alkali's 2015 revenues as reported, 58% of that revenue was derived from the domestic market. In this market, well over 90% of the business is under one-year or even longer multi-year contracts. Contract negotiations typically occur in the fourth quarter each year. Selling prices reset on January 1 and are fixed for a year – one year.

In multi-year contracts, year two and year three typically have caps or caps and collars rather than a specific price. Therefore, we have – we think we have good visibility on what domestic prices look like for 2016. Our expectation is that selling prices for soda ash in the domestic market will be up in the low- to mid-single-digit percentage range.

2015 export markets represented 42% of Alkali's reported revenue. Contract terms vary by region in the international market. Latin America, which represents 21% of total Alkali revenue, a majority of contracts are one year.

In Asia, which represents 15% of Alkali revenue, contracts vary, usually from three months to 12 months, and that is typical in the rest of the world markets as well and the rest of the world markets represent 6% total revenue.

So there's a bit more uncertainty in the shorter-term contract characteristic of global international markets, but overall, we expect export selling prices to be down in the mid-single-digit range. Overall, we expect another solid year of EBITDA and free cash flow from our Alkali business. Finally, moving to the capital expenditures of the company.

We expect to continue our disciplined policy regarding capital spending in 2015. I've said before that the maintenance capital for TiO2 is about $60 million per year, and in Alkali, it's about $25 million per year. That's maintenance capital spending, which we obviously view as mandatory.

The primary component to discretionary capital is the completion of Fairbreeze. I've already said that in 2016, we expect Fairbreeze CapEx to be about $50 million and that will occur in 2016. So we have $85 million in maintenance CapEx, with $50 million in Fairbreeze. That's $135 million of CapEx in 2016.

We have about $15 million or $20 million of discretionary capital in a few small projects that have been introduced by various people in the business and that we are evaluating. So, we think CapEx will be $150 million to $160 million maximum, and that will be down from $191 million in 2015.

From a cash flow perspective, one year from now, when we review our 2016 cash flow bridge with you, we expect to present another year of positive free cash flow for Tronox. With that, I thank you, and, operator, we can now open the call for questions..

Thank you. Our first question comes from Des Kilalea with Royal Bank of Canada. Your line is open.

Des?.

Good morning. Thank you very much for the presentation. Tom, few questions.

The first is the acceleration of your targets on cost savings for which, well done, should we see that as you've identified more cost savings or you've accelerated it? And the cost of actually getting the savings, instead of $9 million, were $25 million, again, should we see that as paying less for the cost savings, but over the three-year period, you will pay the same? And then you called Fairbreeze discretionary.

Does that mean that you could slow it down? And maybe as an adjunct to that question, how is the drought in South Africa affecting Fairbreeze at the moment? Thanks..

Okay. The first is, I think, Des, if I have this correctly, did we – is the $90 million outperformance in cost savings this year deducted from 2016? That's not what you said, but that is....

Yeah, more or less..

Yeah. All right. So, the answer to that question is no. We're going to get$50 million in 2016 in addition to the $90 million that we captured in 2015.

And similarly, on cap – I mean, the working capital management, obviously, is a slightly different phenomenon simply because when you've optimized your accounts payable or your accounts receivable, you can't do much more than that.

But in essence, the numbers we picked up in 2015, we have not reduced our 2016 and 2017 estimates in order to reflect that. So, we should be outperforming. With respect to the cost to achieve, most of the $25 million will be paid.

So, therefore, what wasn't paid in 2015, which is approximately $16 million, will slide into $16 million or perhaps even some of it into 2017. With respect to Fairbreeze, we don't – I mean, yes, Fairbreeze is technically discretionary, but we are already producing material there. We intend to finish Fairbreeze.

As we have said, we expect Fairbreeze to ramp its production – it's already producing. We expect to ramp production through the year. We expect it to be at full production in the first half.

That mine introduces rutile and zircon, which, since Hillendale shut down, KZN has not been producing, so that's incremental opportunity to produce revenue and high margin for us. And we intend to finish it. And we expect to spend $50 million maximum on that in 2016. Finally, there is a drought in the KZN region.

The government has already, I think, reduced water allocations to industrial applications by, I think, 15%. That has left us unaffected because we didn't use. We only used less than that of our allocation. KZN, as you may know, is a water mining technique, that is we have high-pressure hoses that we run on the mine walls, and that's how we mine there.

That actually uses less waters than the mining method that produces ponds with dredges, at least big ponds. And so, I think that we will be – at these levels, we will be fine. We're unaffected.

We can even take a little bit less, but those miners who are using ponds with dredges may have a problem because obviously the ponds need to be replenished as evaporation and general operations affect that. So, for right now, we are fine on the drought in KZN..

Thanks, Tom..

Okay..

Our next question comes from Edlain Rodriguez with UBS. Your line is open..

Good morning. Thank you. Just, Tom, just one quick question in terms of the new dividend policy.

So, how did the board come up with that new level of $0.18 for 2016? I mean, is that based on what's viewed as more sustainable given current market conditions right now? And also, as you move into 2017, I mean, would that dividend policy continue to be reevaluated?.

The board decided to give a – it arrived at the payment level both with respect to its expectation of what kind of cash and performance we would be producing in 2016 and future years. So, first, obviously, it has to make sure that it's fair to the shareholders, it's fair to the creditors, it's fair to all the stakeholders to pay at any level.

And once it had decided that, it then determined that it wanted to put in a share yield. It believes that the shareholders deserve a yield in addition to capital appreciation, obviously.

And then it looked to see a higher-than-average yield, both so it had some room to grow the stock price, but also as an incentive for existing shareholders to stay in and for new shareholders who believe that with the saving of the $100 million and the generation of the strong cash performance in 2015, that that was a more attractive investment opportunity also to give them an attractive yield.

So both to retain existing investors and to attract new investors, it arrived at that level.

With respect to future years, obviously I can't commit the board, but I think the board's expectation would be that as the stock price increased and as the performance of the company improved, as we get out of these trough conditions, then return of capital to shareholders will always be a significant consideration..

Okay, thank you. And another quick one on the Alkali business. So, just trying to think of the sustainability of that business. Like in Q1 of this year, you had $35 million EBITDA and then $50 million, and then $41 million, and then $38 million.

Just trying to see, like, can you talk about the seasonality of that business? And if we go into 2016, should that same pattern hold in terms of the quarterly EBITDA changes?.

Yeah. I would say that the Alkali business is not as seasonal as the TiO2 business where it's very clear that sales and performance in the second quarter and third quarter exceed that in the first quarter and fourth quarter. What affected the production or the EBITDA performance of the Alkali business across 2015 was more production-related.

And, I mean, you can correlate their margins to their production very, very relatively closely because, as I said, they essentially can sell everything they make.

So, if they have an unplanned outage or even a planned outage and it reduces production in a quarter, then revenue will decline and margin will decline, and that's what explains the different quarterly numbers across 2015.

We have – as we've said before, we have a – the Alkali business mines with a longwall mining technique, which essentially means as the machine that digs the wall of a path that goes on for a mile or something underground, maybe even two miles.

And every once in a while, I mean, every 14 months or 15 months, it gets to the end of that path, and it has to be picked up and moved to the next path. So, the quarters in which that occurs is going to be a quarter in which production declines.

I can tell you that this – we have planned and I think we've said last year at one of these calls, that we're going to move the longwall miner – mining facility in a period, second quarter, end of this quarter, early second quarter, maybe spilling across the two. So there will be a production impact..

Okay. Thank you very much..

So it's about production. It's not about anything else, really..

Okay. Thank you very much, Tom..

Yeah..

Our next question comes from Roger Spitz with Bank of America Merrill Lynch. Your line is open..

Thank you. Good morning. You said in the slides that you expect Asian soda ash prices to be down a bit in 2016 low- to mid-single digits.

What are you seeing from the impact of that large Chinese soda ash outage, I think, due to a dam breach? And how are you seeing Asian price – soda ash prices move, and do you expect if that company had to pull back, which is, I understand, a major exporter to Asia, will ANSAC come in and supply more volumes into Asia and therefore, help push up domestic prices even more?.

All right. We're going to answer this question in two ways. I've told Ed Flynn that the closing of a plant a while ago, which was a relatively big producer and then, this – closing of the plant that you're talking about, absolutely should lead to those results that you have mentioned.

So, now – but now, I'll let Ed answer what he thinks is likely to happen..

Yeah, this is Ed. Hopefully, you can hear me because I'm in a headlock right now. Let me respond to the first point which is the dam break at the Weifang facility. Now, I've seen photos of that and it is quite a disaster because it not only affected the Weifang plant, but it's affected all of the plants around it.

If that plant was in the United States, it would never restart again because the federal authorities would come in and say, you can't do that. But we're talking about China.

What we have heard right now is that they are trying to rebuild the waste dam and they are expecting to have 1.2 million of the 3 million tons up and running by the end of February. They expect to have a new waste bed completed by the end of April, but there's no word on the additional 1.6 million to 1.8 million remaining tons.

Your point about them coming off the market, they were a large exporter because they're located closer to the coast than some of the others. They exported probably about 10% of their production which therefore would be about 300,000 tons. We have not seen export prices move yet as a result of that.

Now, there is about 4 million tons of excess capacity in China, so that could happen. But your premise about rising – domestic prices rising, as Tom talked about, the domestic prices are pretty much locked for a year because we have a multi-year contract. So, it won't impact the domestic price.

However, in the three-month to 12-month contracts we have both in Asia and rest of the world, it could impact that. So, we're looking at how that will play out, and obviously, ANSAC will push for more price..

Thank you for that. And my other question on Fairbreeze.

When is it a EBITDA contributor above startup costs, has it – is it now net of the cost of starting up contributing positive EBITDA or when does that become material?.

I'm not sure I fully understand the question. It will be a positive EBITDA contributor in 2016.

And that's largely because of the impact of the incremental zircon and rutile sales as well as the elimination of the transportation costs that were necessary to bring supply from either Namakwa or Australia into the KZN slag smelters as well as the product coming, the ilmenite coming out of Fairbreeze is high quality.

And so, we think the KZN smelters will operate efficiently. So, in 2016, it will be a positive net contributor. When it pays back the capital investment costs, if that's what you were asking, I don't know – I'm sure we can calculate that, but I don't know off the top of my head what it is.

But the performance in 2016 will be positive and the performance in 2017, 2018 and 2019, that will increase as the mine gets in full production..

When does it become EBITDA positive in 2016? Is that a Q2 event? Is it already positive in Q1? That's what I meant..

Oh, I'm sorry. No, it's not positive now. I mean, in fact, we're still really in the construction phase. So, it doesn't even begin to produce at full levels until the second half. So I would say for mid-second half, it will become positive..

Thank you very much..

Okay..

Our next question comes from James Finnerty with Citi. Your line is open..

Hi. Good morning, Tom..

Good morning..

Two questions, one on debt.

Now with the dividend having been reset, is there any change in the view of potentially buying back debt in the open market?.

My lawyer is now sitting next to me quivering. Look, I mean, we understand the situation with the pricing of our debt. I mean, we are cutting the dividend for a variety of reasons, large among them is we don't get any credit for it, so we might as well put the cash, $100 million a year of the cash to better uses.

And then that's what we're saying we're going to do..

Okay.

So better uses could just be building liquidity or could be addressing debt potentially?.

That's right..

Okay.

And just on the comment about your inventory being below seasonal levels, would you say the same holds true for the industry as a whole?.

No. I don't know their inventory, obviously. I mean, I'm not as informed, but it's not my sense that others are running inventories the way we are..

Okay. Thank you..

Thank you. Our next question is from Bill Hoffmann with RBC Capital Markets. You may begin..

Yeah. Thanks.

Tom, can you talk a little bit about your thoughts about as you ramp up Fairbreeze and have the incremental rutile sales, sort of how you expect to do that without impacting sort of the price of the feedstocks markets? And also, just as a sort of add-on to that, you indicated that you've been working down some of your inventory pile that you had on the books.

Just wanted to get a sense of how you see the mineral sands business overall from a pricing standpoint and return?.

Okay. Zircon and rutile are two very separate products. So, let me talk about rutile. Most of our rutile goes into our own blends or goes into the non-pigment market, the welding market. And a lot of that is in Asia. And we think that that can absorb the amount of rutile we have.

We expect in a full year of production that we would have 30,000 incremental tons of rutile coming out of Fairbreeze. So, we think that's absorbed in that market. With respect to zircon, we know that Iluka announced recently that it was closing some of its mining so as to limit the amount of zircon that was incrementally added into that market.

And we obviously, as we have shown in our management of the pigment production and the slag production that we will also manage our addition of product into markets in an attempt to try to avoid flooding the market with supply over demand.

We think that the Fairbreeze – obviously, the Fairbreeze production is going up, but the – also remember, we closed a portion of our Australian mine, what's – so-called the North Mine, and that was producing some zircon. So, net-net, Fairbreeze will add some zircon and rutile. North Mine will decrease some zircon and rutile.

And finally, in the question that Des raised earlier about the effect of the drought in KZN, you may remember that KZN – that area, KwaZulu-Natal, is the area in which not only do we operate, but Rio operates its Richards Bay facility. And as I recall, those are pond-based dredge mining operations there.

And so, all the water that – the water is a challenge for industrial operations in that part of the country. That might also affect their ability or willingness to mine actively there. So, again, I think, the zircon market, in particular, is going to have some changes over the course of this year. We're watching it carefully.

We're not going to flood the market with supply. We've shown that in our operation of our pigment and slag. So, we won't do that. That's the bottom line..

Okay. So, it's just the TiO2 feedstocks market though, and from your mineral sands business last year, I mean, prices were still coming down there.

Do you think that market has bottomed out as well from a balance standpoint?.

We think in the fourth quarter, it was relatively flat. Pricing was relatively flat. We hesitate to say that any one quarter is indicative of the future – forever. But I can tell you that the prices look like – the prices in the feedstock side of the business were relatively flat..

Okay. And then, next question just with regards to timing, obviously Q1 is a weak one, maybe just seasonally anyway.

But from a cost impact standpoint, do you expect the cost saves to really reflect more in the second half of the year, or do you actually start to see more of that in Q2?.

I think we'll see some earlier, in the first half. And remember, $68 million of it is in inventory right now. So, as we sell that through labor, most of our labor reductions were as of December 31. And so, we didn't see much benefit from them in Q4, but we're going to see a lot of benefit from them in Q1 immediately.

And so, the combination of the cost savings hung up on the balance sheet and the impact of the head count reduction, which was about 15% of total labor costs. So, we haven't got 100% of that yet, but a very substantial portion of that 15% is effective January 1..

Okay, thank you. And then just final question on the soda ash side. One of the things that was originally anticipated was potential for further capacity expansion there. I mean obviously, given capital constraints, I assume that gets pushed out, but just any thoughts on that as you – once you get past this year, heading into 2017..

That's – the capital expansion program for soda ash is largely directed at the Granger plant. And they've done – the team at Alkali has done a very good job of analyzing what it would take to expand that plant, how to expand it and the impact of expanding it.

And you're right, I mean it looks like a major expansion could produce major benefits, but we – right now, the soda ash market and the capital situation combined would imply that we would want to – while continuing to consider that, will probably push that off, certainly out of 2016..

Great. Thank you..

But it's something we look at. We consider it, but it's not going to happen in 2016..

Okay. Thank you..

Our next question comes from Lauren Gallagher with Credit Suisse. Your line is open..

Hi, guys. Thank you for the time and all the numbers. I apologize if I get some of these wrong because I was trying to write these quickly, but the particular cost savings, obviously you've got $98 million or recognized $98 million coming out of 2015, and you said an additional $50 million in 2016.

Does that change your kind of cumulative target of $175 million by 2017?.

No..

Okay. So....

It will lead to – I mean, it will lead – we believe it will lead to an excess – we'll exceed that target for cost savings. But we're not changing any targets. We put the targets out. They are what they are. So, we're not changing targets, but we think we'll exceed them though..

Now, you'll exceed $600 million....

Yeah. But we've always said we expect to be more than that. But, yeah, I think 2015 was a very strong year, so it got us off to a good start..

Okay. Great.

And on the working capital side, I guess, where are you kind of seeing more of the improvements coming from?.

Sorry.

Where are we seeing what?.

More of the working capital improvements come from..

Inventory largely.

Kathy, do you want to take?.

Yeah. We've got a whole series of things. We mentioned we're selling ilmenite. But we're also no longer carrying any chlorate inventory. We had a restructure. We shut down the chlorate process in the fourth quarter. We've got best quality ever in TiO2, which would reduce the carry of off-spec and low-quality stuff. We've got discipline on MRO.

And so we closed the year at about just under $650 million in inventory. So we're confident we can get another $185 million out..

And just talking about price increases across the business, how successful do you think the price increases you announced across the Alkali business were in July?.

Price increases in Alkali or in TiO2? I'm sorry, I didn't hear that..

Alkali. I'll get to TiO2..

Ed?.

As we said in the script, we saw low- to mid-single-digit price increase in the domestic market. And we talked about in the export market, we'll see mid-digit – mid-percentage decrease in the export market..

And on the TiO2 side, I mean, we've said – JF, you want to talk about price increases carefully?.

Yeah. As Tom mentioned, in the first quarter, the price were already established before the announcement. But the increase, we're working hard for the second quarter at the moment and we're seeing good demand. And we hope that will be successful. But it's a bit early to confirm the second quarter, but it's positive..

Okay. Great. Thanks very much for the color..

Yes..

Our next question comes from Richard Kus with Jefferies. Your line is open..

Hey, guys.

Most of my questions have been answered, but – so, first one, on the TiO2 side, can you tell me, were the converting assets EBITDA positive this last quarter?.

I'm sorry, the converting assets, meaning the pigment plants themselves?.

Yeah. That's right..

Yes. Yes..

Okay.

But is it true that still probably the majority of that EBITDA in that segment comes from mineral sands at this point?.

Well, I mean, we don't think about it that way because as JF likes to point out, that's funny money for us. I mean, we could pound on the mineral sands pricing and increase margin at the pigment level, or we can not pound on the pricing and move margin to the mineral sands. It doesn't – we look at it as an overall unit.

So, it's not – I don't think it's really – it's not informative for us to look at it in those constituent elements. We look at it as a unit..

Okay. I see.

And then, given current prices for zircon and rutile, how do you see the EBITDA contribution for Fairbreeze on an annualized basis?.

Well, I said already that 2016, we see it as positive and we see it increasing. I mean, the mine itself, we don't evaluate it as an individual business unit.

And so, we don't ascribe an EBITDA number to it, to Fairbreeze mine, because so much of the product is ilmenite, which gets fed into our slag furnaces, and in turn, that gets converted by the pigment operations. So, again, just really the same answer. We operate our assets as part of an integrated segment unit.

And it's not – we don't pay attention to – we don't measure the performance of individual assets per se because we understand we can move those numbers around a bit if we wanted to. So, I'll just tell you that we view it as very positive in the sense that zircon will be positive. Rutile will be positive.

Better ilmenite into the furnaces will be positive. Eliminating the transportation and inventory carry costs of the ilmenite that we were feeding into KZN will be positive. All of those things are going to be helpful. JF, do you have anything to add..

Maybe one comment. In relative term, KZN will become our best asset from the position that it has at the moment being the worst asset in the portfolio. So it's a real switch, the value that we'll get with the mine for our KZN operation..

Okay. Understood. And then lastly for me, it's something you guys have talked about a lot on prior calls.

But given where the bonds and the stock are it may be difficult, can you comment a little bit on your thoughts around potential M&A in the industry as something that could catalyze maybe more capacity closures and a little bit better pricing environment?.

I mean, as you pointed out, I mean, it's tough where the bonds and the stock are right now. It's just hard to get combinations accomplished for everybody, I mean, not just for us, but for all the parties in the industry. So, I mean, it's possible, but I think it's less likely than it might have seemed a year ago..

Got it. All right. Thank you..

Okay..

Our next question comes from Tarek Hamid with JPMorgan. Your line is open..

Good morning.

Maybe just a bigger picture question, as you think through sort of your inventory position currently as being below seasonal levels normally and your competitors maybe not being, do you think the market naturally can rationalize inventories through the course of 2016, or do you think we're going to have to see some sort of consolidation to make that happen?.

No. I mean, look, I think that it's very clear that what's driving the price performance of this business is excess supply. And several of our competitors have moved production down according to their public announcements, and it doesn't make any sense to move production down and increase inventories.

Right, I mean, one presumes that over time, they also are moving their inventories down. They'll sell at whatever the level in the market they can sell product at. And if that exceeds their production, which is now reduced, then they will make it up out of inventory. I think also that – remember, our demand follows GDP relatively closely.

And it looks like in Europe and in North America, GDP looks like it's going to do all right in 2016. So, we expect demand to be relatively good in 2016. So, the answer to your question is – can it be rationalized without M&A? I think the answer to that is yes. And I think we're seeing it, to be honest..

That's helpful. Thank you.

And then just – as you think about the evolution on pricing through the course of the year, I know it's kind of a difficult question to ask with the price increase out there, but do you believe that majority of your competitors are EBITDA positive at their pigment plants at current price levels, or do you think the market ultimately just needs to get to a price point just to get to cash flow positive?.

Again, I hesitate to speak about others. But I mean, I think that – I mean, I've talked about our EBITDA margins in the presentation. And I believe our EBITDA margins – we've done the calculation of our numbers to everybody else's numbers who are public, and we have the highest EBITDA margins in the industry both for all of 2015 and for Q4.

So, predicting where the other people are, I think, Chemours is a strong company. I think they're probably close to us, but I think then there's a gap, a relatively sizeable gap between Tronox and Chemours and the others. Whether they're positive on a plant level or not, I wouldn't speculate, but..

Well, helpful. Thank you very much..

Our next question comes from Christopher Perrella with Bloomberg. Your line is open..

Thank you.

On the Alkali business, how much incremental soda ash volume can you get out of the business operating at full rates in 2016? So what's the potential step-up? I know there were some unplanned outages there, but what incremental volume can you get for this year?.

Ed?.

We are – we continue to look, without spending major capital, look at debottlenecking efforts and, through the Operational Excellence program that we started in 2014, are looking to continue to increase volume. We're looking at that – we should get mid-single-digit percentage increase in volume output.

Now, we have been successful since we started in this program, from 2012 to increase throughput by about 5% to 7%. So we're hoping that we continue on this path. And my commitment to Tom is that I will continue to sweat the assets until I reach the end, and then I'll be pushing harder to make the investment in Granger..

All right.

And what's the – for the boilers, is that coal-fired, or is that natural gas-fired?.

We have – we're primarily coal-based, but we can – we have two coal-fired boilers, and we can back one of those boilers up with natural gas if we need to when we take a biannual outage..

All right. And then a quick question on the TiO2, your outlook for global demand, be GDP-type growth.

Do you see supply coming in out of China? Do you see any shutdowns out of China at this point?.

Yes. We are seeing shutdowns in China for a variety of reasons. The government appears to be enforcing environmental regulatory performance measures more stringently, and so some plants that can't meet them are shutting down.

We think that there's a cash – at the prices that are prevalent in China domestic market, there are some that can't meet their cash cost of operation and they're shutting down.

So, we have seen some of that, some of the consultants that do business in China are basically saying that they believe China supply will remain relatively constant relative to demand for the next 10 years. Overall, we see demand globally rising probably 2.5%-ish to maybe a little more, but somewhere in that region globally for the year..

All right. Thank you very much..

Okay. Okay. One more question, operator, and then we're done..

Our final question comes from Lynn Loufik with CVC Credit Partners. Your line is open.

Lynn, if your line is on mute, can you please unmute it?.

There are apparently no more questions..

All right. I'll turn the call back over to Tom Casey, Chairman and CEO, for closing remarks..

Okay. Thank you very much. We appreciate your time as always in listening to us and describe our business and our performance in the fourth quarter. As I said then, we believe we're in pretty good shape in terms of focusing and having an effect on improving what we can improve.

So, I won't repeat all those numbers, but Brennen, you have a final comment?.

Yeah. I just want to say to all of those who are looking for our slides on our website, our vendor was slow in getting those up there, now posted. So, we apologize for that delay, but they're now on the website..

Okay. And with that, again, thank you for your interest and thank you for your time. I hope you have a good day. Bye-bye..

Thank you, ladies and gentlemen, that does conclude today's conference. You may all disconnect. Everyone, have a great day..