Brennen Arndt - Vice President-Investor Relations Thomas J. Casey - Chairman & Chief Executive Officer Katherine Carolyn Harper - Chief Financial Officer & Senior Vice President Jean-François Turgeon - Executive Vice President John Merturi - Global Treasurer & Vice President.

Hassan I. Ahmed - Alembic Global Advisors LLC Richard Hatch - RBC Europe Ltd. (Broker) Roger Neil Spitz - Bank of America Merrill Lynch Edlain Rodriguez - UBS Securities LLC James P. Finnerty - Citigroup Global Markets, Inc. (Broker).

Good day, ladies and gentlemen, and welcome to the Tronox Limited Q1 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will host a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded for replay purposes.

Now, I will hand the conference over to Brennen Arndt, Vice President of Investor Relations. Sir, you have the floor..

Thank you, Brian and welcome to Tronox Limited's first quarter 2016 conference call and webcast. With me today are Tom Casey, Chairman and CEO; and Kathy Harper, Senior Vice President and Chief Financial Officer. Joining us for the Q&A session will be Jean-François Turgeon, President of Tronox TiO2; and Ed Flynn, President of Tronox Alkali.

We will 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. For those listening by telephone, if you haven't already done so, you can access them on our website at tronox.com.

A reminder that our discussion today 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 2015 Form 10-K and other SEC filings. This information represents our best judgment based on today's information.

However, actual results may vary based on these risks and uncertainties. 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 that also adjusted for unusual or non-recurring items on a fully diluted basis. A reconciliation is provided in our earnings release issued yesterday after the market.

It's now my pleasure to turn the call over to Tom Casey. Tom..

Thanks, Brennen, and thank all of you for joining us this morning. We start with what we think is the most important factor. We believe the first quarter marked the turning point in the long decline in TiO2 prices that we have experienced over the last couple of years.

We've said on our previous calls that we expected first quarter 2016 selling prices to decline sequentially and that did happen. But we saw an upturn during the quarter itself with March average selling prices higher than those in February.

We're seeing selling prices increase in all regions in the second quarter and we expect to see sequential price improvements for TiO2 pigment not only in the second quarter, but also in the third quarter as the increases role across our global customer base.

In addition to improvement on pricing, for the second consecutive quarter, we also saw TiO2 pigment sales volumes increase by more than 7% year-on-year in this quarter. The high volume of purchases has reduced inventories because as you recall we have curtailed, TiO2 pigment production by approximately 15% since the second quarter of last year.

Our Alkali business continues to operate in a sold-out mode benefiting from its sustaining structural cost advantage. As a result, Alkali sales every ton it produces. In the first 12 months of having Alkali in our portfolio, the business delivered free cash flow of approximately $156 million, which exceeded our expectations when we acquired it.

We continued to make good progress in cash generation, which as you recall, we sourced from both cost reductions, working capital reductions, and reduced capital spending. Together our TiO2 and Alkali businesses delivered free cash flow of $73 million to the company in the first quarter.

Our Operational Excellence program is on track to meet our 2016 cash generation targets, again sourced from cost reductions and working capital reductions.

Our Fairbreeze mine in South Africa was formally commissioned in the first quarter and is now producing feedstock for our KZN furnaces, as well as zircon and rutile co-products for sale into the global markets.

With our solid cash position and considering the market price of our debt at the time, we repurchased approximately $20 million face value of our bonds for a price of about $15 million which resulted in a $4 million net gain. It constituted an attractive return on that investment.

We closed the quarter with $152 million of cash on hand and liquidity of $444 million. Moving to a review of our first quarter results starting in TiO2, move to slide four, TiO2 segment revenue of $285 million was 26% lower than the $385 million in the prior year quarter.

This is the result of lower pigment selling prices and the comparison to a first quarter in 2015 where we sold over 50,000 metric tons of titanium slag to a third party in a sale that was not part of this year's plan.

And the timing of a large zircon shipment, 5,000 tons, I believe it was 5,000 tons that was scheduled to ship in March that actually shipped in April. In the first quarter, we dedicated 100% of our slag production to our own TiO2 pigment operations.

However, we expect to make third-party titanium slag sales in each of the next three quarters of the year. In zircon, we continue to expect sales volumes in 2016 to exceed those of 2015. Zircon selling prices have been level for the last two quarters and we expect them to remain level.

Sales of pigment products declined 12% compared to the prior year quarter, as volumes increased 8% and average selling prices declined 19%, which was 18% on a local currency basis. Again, we believe that period of consistent decline in pigment pricing is over.

Pigment product sales volume gains were realized in EMEA and in Asia-Pacific, while sales volumes in North America were essentially level to the year-ago quarter.

Again, as I just covered, sales of titanium feedstocks and co-products were 50% lower than the year ago quarter as a result of those substantial prior year external titanium slag and timing of a zircon shipment move. We don't expect either of those to recur during the year and so we view it as a one-off sort of experience in the first quarter.

Rutile prime sales were level to the year ago, as higher sales volumes offset lower selling prices. Higher ilmenite sales partially offset lower sales of pig iron and zircon.

Lower pig iron sales can be attributed to the lower production compared to the year ago quarter because, as you know, pig iron production is a by-product of slag production and we have shut two of our four slag furnaces.

Selling prices for zircon declined 12% compared to year ago levels while pig iron selling prices were down significantly from the year ago quarter because pricing in that market is correlated to market pricing for iron ore.

Sequentially, TiO2 segment revenue of $285 million was 15% lower than the $336 million in the fourth quarter of 2015, again driven by the timing of titanium sales, slag sales, and zircon shipments.

Pigment product revenue declined 2% as sales volumes increased 2% and average selling prices declined 4% in the first quarter of this year relative to the fourth quarter of last year. Sales volume gains were realized in EMEA, volumes were level in Asia, and slightly lower in North America relative to the prior quarter.

Finished pigment products inventory ended the quarter below seasonal norms, as we have planned and have discussed in prior calls. Sales of titanium feedstocks and co-products were 39% lower than the prior quarter, as volumes declined 32% and selling prices declined 9%.

The primary driver of lower sales volumes was again the slag sale and the zircon shipment. The selling price decline is primarily due to product mix, specifically higher ilmenite sales which carry a lower absolute price than the other products in our portfolio.

More importantly, selling prices for zircon, rutile prime and pig iron were level quarter-to-quarter. Lower zircon sales we already talked about that resulted from shipment timing.

And on a sequential basis, the comparison is affected by the fact that Chinese New Year in the first quarter of the year reduces sales into China compared to the fourth quarter as it does every year. TiO2 adjusted EBITDA was $22 million in the quarter compared to $85 million in the year-ago quarter and $36 million in the prior quarter.

Compared to the prior year quarter, our Q1 EBITDA was reduced by more than $30 million because of the negative fixed cost absorption impact associated with the production curtailments in both our pigment operations and our feedstock operations that began in the second quarter of last year.

We continue to believe these curtailments were appropriate given the supply demand imbalance that led to unsustainably unprofitable levels of pricing in the market. Lower pigment selling prices and the timing of zircon sales that moved from the first quarter to the second quarter also contributed.

Compared sequentially, again lower pigment selling prices and timing of zircon sales constituted the primary explanation. TiO2 segment operating loss was $36 million compared to operating income of $9 million in the year-ago quarter and an operating loss of $65 million in the prior quarter.

Capital expenditures in TiO2 were $17 million in the first quarter, which included $8 million related to the Fairbreeze mine project.

Fairbreeze, which began operations ahead of schedule at the end of the fourth quarter of last year, is producing feedstock to supply the slag furnaces at our KZN operations and also as I said, providing zircon and rutile products for us to sell into the global market.

At the beginning of our project, total capital expenditures were estimated to be approximately $225 million for this project. Approximately $172 million has been spent from the beginning through the first quarter of 2016 with approximately $40 million budgeted to be spent in the balance of 2016 for project completion.

We expect to complete the Fairbreeze mine under budget and that it will be a net positive contributor to 2016 EBITDA from the sale of zircon and rutile co-products coupled with efficiency gains expected to be realized in our downstream smelting and pigment operations.

With cash provided by operating activities of $61 million, less the capital expenditures of $17 million, TiO2 delivered free cash flow of $44 million in the quarter, which was $37 million more in free cash flow than it delivered in the first quarter of 2015.

Moving to our Alkali business, this is on – shown on slide five, Alkali segment revenue of $190 million was 3% lower than pro forma revenue of $195 million in the year ago quarter. Sales volumes were 2% lower and selling prices were level for the year ago quarter.

Again with sold-out conditions in both periods, the sales volume decline was the result of lower production. In the domestic market, we gained sales volumes driven by continued market growth particularly in flat glass markets, while higher selling prices reflected implementation of price increases in our annual contracts.

Lower production volumes were reflected in lower export sales volumes compared to the year ago quarter. Selling prices in the export market declined due to lower prices in China – in Asia, excuse me.

Chinese soda ash producers lowered domestic and export prices late last year with effect in this quarter as the raw material and energy deflation as well as currency devaluation lowered their costs.

However, production shut downs in China, some of which have been permanent, as well as some rise in co-product costs cost both domestic and export prices to increase in the quarter for those customers whose contracts permitted.

Compared sequentially to the prior quarter, Alkali revenue declined 5%, as 7% lower sales volumes were partially offset by 3% higher selling prices. Domestic sales volumes sequentially were slightly lower due to timing of shipments while lower export sales volumes resulted from lower production.

Higher domestic selling prices and favorable mix were partially offset by lower export prices. Alkali adjusted EBITDA of $35 million in the first quarter equaled pro forma adjusted EBITDA of $35 million in the prior-year quarter, as lower sales and higher royalty costs were offset by lower operating costs.

Compared sequentially, adjusted EBITDA declined $3 million from $38 million in the fourth quarter, as lower sales were partially offset by favorable distribution and overhead costs as we realized the synergies anticipated at the closing of our transaction.

Alkali segment operating income of $20 million compares to pro forma operating income of $22 million in the year-ago quarter and $23 million in the prior quarter. Capital expenditures in the first quarter were $16 million; $8 million of this total was for payments of items completed in the fourth quarter of last year.

With cash provided by operating activities of $45 million less capital expenditures of $16 million, Alkali delivered free cash flow of $29 million in the first quarter, another quarter of strong cash delivery by Alkali.

As I said earlier, Alkali has exceeded our expectations for free cash flow by delivering $156 million in its first year in our portfolio. I'll now turn the call over to Kathy Harper 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 statements. Corporate adjusted EBITDA was negative $17 million in the first quarter versus adjusted EBITDA of negative $21 million in the year-ago quarter and adjusted EBITDA of negative $14 million in the prior quarter.

Corporate cash used in operations was $105 million in the quarter level with last year. Primary drivers were $68 million semi-annual interest payment and the timing of payments including the restructuring initiated last year that will provide future benefit.

Corporate loss from operations was $13 million in the quarter compared to a loss from operations of $18 million in the year ago quarter and income from operations of $4 million in the prior quarter resulting from a change in segment allocation that was booked in the fourth quarter.

Selling, general and administrative expenses in the first quarter were $47 million compared to $44 million in the year ago quarter and $46 million in the prior quarter. The current quarter and fourth quarter last year include approximately $6 million of cost related to the Alkali business which was not in the first quarter of 2015.

Interest and debt expense of $46 million increased from $34 million in the year-ago quarter primarily due to a higher debt level related to the Alkali acquisition that closed in the second quarter of 2015.

As Tom mentioned earlier, we repurchased approximately $20 million face value of our bonds for $15 million in the first quarter resulting in a net gain of $4 million. On March 31, 2016, gross consolidated debt was $3,057 million, and debt, net of cash, was $2,905 million.

Cash on hand was $152 million and liquidity was $444 million comprised of our cash balance and $292 million available borrowings on our two revolvers. Capital expenditures in the quarter were $33 million. TiO2 spend was $17 million, including $8 for Fairbreeze, Alkali spend was $16 million.

We are on track to our committed total capital spending of $150 million to $160 million in 2016. Depreciation, depletion and amortization were $55 million down from prior levels. For 2016 we expect DD&A to be approximately $250 million.

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.

We continue to derive a net benefit 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.

Currency exchange rate changes during the first quarter had a negative impact of $ 1 million on sale, positive impact of $35 million on cost of goods and a positive impact of $29 million on adjusted EBITDA. I'll now turn the call back to Tom for some re-comment..

Thanks, Kathy. As we had said earlier, we expected the first quarter of 2016 to reflect trough conditions and it did. However, the good news is we saw the actual turn in pigment selling prices during that first quarter and we are seeing them rise in the second quarter as well. We also expect to see them increase in the third quarter.

As we also said last quarter, we are expecting the primary sources of profit and cash growth in TiO2 this year will come from cost reduction and working capital reduction. Our operational excellence program is on track to meet its cash generation target for 2016 through cost and working capital reductions.

And as we said we will report an in-depth review of our progress and operational excellence for you twice a year, so at the end of next quarter and at the end of full year. The Alkali business we expect solid market growth to continue in its domestic business across the year.

Higher domestic selling prices reflect price increases implemented at the start of this year and for a prospective 58% of Alkali revenue was derived from domestic market sales in 2015, export markets therefore represented 42% of its reported revenue in 2015. Contract terms vary by region.

In Latin America, which represents 21% of total Alkali revenue, the majority of contracts are for one year. In Asia, which represents 15% of Alkali revenue, contracts vary from three months to 12 months as due contracts in the rest of the world, which represents 6% of total revenue.

Overall, we expect another solid year of EBITDA and free cash flow generation from our Alkali business. Moving to CapEx for Tronox in 2016, we reaffirm our expectation for capital expenditures to be in the $150 million to $160 million range, down from $191 million last year.

And finally from a cash flow perspective, considering our targets for cash generation from cost reductions, working capital reductions, and capital spending, we expect to deliver another year of positive free cash flow for the company.

So, again summary, for first quarter we are optimistic on pigment pricing that the turn is occurring, and we're seeing it in the marketplace. We think that the mineral sand shipments are basically one offs. We expect to sell slag for the balance of the year, and we expect zircon sales actually to be higher in 2016 than they were in 2015.

So, with that, I thank you and we'll open the call for any questions that people may have.

Operator?.

Thank you, sir. Our first question comes from the line of Hassan Ahmed with Alembic Global. Your line is now open. Please go ahead..

Good morning, Tom..

Morning, Hassan..

Good to hear you on the call and hope you're feeling better..

Thank you, very much..

Tom, my question is around obviously, your sales and lot of the participants in the industry are talking now quite favorably about sort of price hikes and price hike sticking and the likes. Now as I take a look at 2015, it seemed that the industry had bottomed out in 2014; profitability was poor, inventories were under control, and the like.

But one thing that blindsided all of us was the impact of currency. So obviously, the euro weakened quite dramatically in 2015 and on the back of that we started seeing a fair bit of European product, arriving in the U.S., right, and that obviously negatively impacted pricing.

So could you talk a bit about what you are seeing in terms of trade flows today on the TiO2 side of things?.

Sure, first, talking about currency, I mean, we have a situation that is – I mean, somewhat different from some of the other participants in our market, in that, as Kathy pointed out, we incur significant expenses for all of our mining activity.

So two mines in South Africa and one mine in Australia in local currencies and the product from those mining activities are sold in dollars, and so as the currencies moved against the dollar, we actually benefited significantly from exchange rate movements.

We were surprised, I think, it's fair to say at the end of 2014, by the Chinese revaluation of its currency. But that applied across the board, that applied to all markets and all products and I think it did have an impact in 2014, but that's pretty much been absorbed now.

I mean, China, China exports in terms of trade flows, for example on a LTM basis, we track the IHS data and some of the other people who follow exports, and China exports into APAC or have increased pretty significantly year-on-year by about 16%. But China exports into every other region in the world including North America are down significantly.

And I think they are down 18% into Europe. They are down 17% in Latin America and they are down 7% into North America and the Middle-East. So that currency revaluation as it affected China sales has resulted in year-on-year sales declines.

And again, I think our view is somewhat differentiated from the other – some other participants in the markets view with respect to foreign exchange. It has benefited us significantly over the last several years in terms of the way our portfolio of costs and revenue is organized..

Very sad. Now again, sort of sticking to sort of the TiO2 side of things and what may be happening in the industry, again over the last couple of quarters they seem to be divergent sort of operating habits from a bunch of the participants.

While some were reducing their rates to keep inventories under check, others were running at 90% plus utilization rates.

Today, with all these price hikes sort of on the table, are you seeing the market participants behave rationally?.

I'm sorry, are we saying the market participants do what?.

Participants behaving rationally as it pertains to sort of not just jacking up operating rates and messing up the industry?.

Look, I mean, I don't want to speak to other people's motivations or specific company behavior in specific markets. I can tell you that, I thought last year, Huntsman, I believe Cristal, Chemours and we all lowered our plant utilization rates. And we all talked about declining inventories which we had set as a goal.

That is that we wanted to reduce inventories, clearly the way that one reduces inventories is one reduces production and continues to maintain sales which is what we all tried to do.

I don't see any – I think the fact that price declines were much lower first quarter sequentially and have now turned up means that the market is absorbing the fact that prices were at unsustainable levels, and customers who want to have a reliable source of quality supply have to recognize the fact that the supplier needs to be able to make a reasonable amount of return on the capital invested in its assets producing that supply.

I mean, we're actively in the market every day as you know. As I said earlier, demand is up 7% for two consecutive quarters and we don't see the kind of behavior that you might be asking about..

Very helpful. Thanks, Tom..

Thank you. Our next question comes from the line of Richard Hatch with RBC. Your line is now open. Please go ahead..

Thanks. And morning, Tom, and morning all. Sorry, if I missed this, I got on just a touch late.

Are you able to elaborate a bit more on your level of finished goods inventories of pigment in terms of days and how that compares to the market, please?.

We don't report specific numbers of days anymore. But our inventories are lower. I think we said in the presentation, they are lower than seasonal norms. And I think that – I noticed that one of the other TiO2 operators talked about extending orders delivery cycles. I think we also have found ourselves in position where that's happening.

So if you would assume that seasonal norms at this point are around 50 days, because normally companies would be building inventory in the first quarter going into the high selling season, and sort of average year across the whole year are 45 days of supply perhaps, we have said that we are lower than that..

Okay. Thanks so much, really helpful. And then the next one is just on the cash flow statement, the negative $54 million working accounts payable number that impacts your working capital. There was a similar move in the fourth quarter as well. Should we expect that to continue in Q2 or do we expect it to sort of flatten and be more nearer nil? Thanks..

This is Kathy Harper. It's a bit lumpy because we do semi-annual interest payments and a big portion of that move is related to the interest accrued. And so you won't see it in second quarter, but you'll see it again in the third quarter..

Okay. Cool. Thanks, Kathy. Thanks..

Yep..

Thank you. Our next question comes from the line of Roger Spitz with Bank of America Merrill Lynch. Your line is now open. Please go ahead..

Thank you. Good morning.

Can you comment on, I guess Rio Tinto and Iluka were saying that zircon prices were down 10% and you are seeing apparently flat zircon pricing?.

Yes.

What would you like me to comment on?.

Are you selling into perhaps a different end market than they are?.

I don't think so. But the zircon market is always soft in the first quarter because of Chinese New Year, in terms of volumes, and sometimes that affects prices. We did say that zircon prices were down year-on-year and perhaps that's what Iluka and Rio are talking about. But generally our prices for zircon were flat fourth quarter to first quarter.

I don't know what the basis for their statements are. Obviously I don't have information about their sales or their pricing practices. But our sales were essentially priced at a relatively constant level quarter-to-quarter..

Okay. Can you size Fairbreeze's EBITDA contribution, update the numbers you'd given us previously given the current market environment on a run rate basis and how we should think about the tempo of that as you ramp up Fairbreeze? Please..

I can tell you a little bit about production perhaps. I mean, 2016 is the year in which we ramp. First we started production very, very modest amount at the end of December of 2015. And the first six months of our mines opening, we've already discussed our – involve a ramp where you're sort of working out all of the mechanics and so on.

So you don't get full production for the first six months of the mine's existence. But in a normal year of normal operations, we would expect 60,000 tons of zircon and 30,000 tons of rutile to come out of Fairbreeze and we would expect essentially all of the ilmenite that is required to serve KZN – the KZN smelters that come out of Fairbreeze.

That would lead us to a slightly, well not slightly, a more efficient operational performance at the KZN smelters because the quality of the feedstock, the ilmenite feedstock coming out of Fairbreeze is good. And we also no longer have to ship the inventory that we had been maintaining at Namakwa Sands on the other coast and in Australia to KZN.

So there'll be a reduction in shipping costs, a reduction in ilmenite storage costs, a reduction and increase in operating efficiency, all of that is sort of operating at the smelter level and then we would have incremental production of zircon and rutile. We have – looking now at our Q, page 36 in the Q, I think we said that....

Yeah. So once it will be out later today and so you can read all the details..

Yeah. I am sorry. We didn't file it yet. But it basically reflects the kind of numbers, I was talking about. 25,000 ton for rutile, and 55,000 ton for zircon, and 121,000 ton of pig iron.

On an average year....

On an average year of production. That will be in the queue which we file....

Later today..

Today or Friday soon..

Thank you very much..

Tom to reinforce on your point, the quality of the ilmenite that we get on Fairbreeze allow us to make a pig iron quality that is better than what we have done in the last couple of year and we can get an extra $100 a ton premium on the sales of that product going forward. So that's another advantage..

Right. Okay, thank you..

Oh, interesting, thank you..

Thank you. Our next question comes from the line of Edlain Rodriguez with UBS. Your line is now open. Please go ahead..

Good morning. Thank you. I mean, Tom, I am wishing you well..

Thank you very much..

Quick question.

In terms of the capacity that you have curtailed, now given that volume has picked up quite a bit and prices are moving up, is the intend to keep those plants under curtailment or is it to – are you planning on bringing them back anytime soon?.

We believe that a very disciplined approach to production, to managing supply relative to demand is what has facilitated the recovery in our market and we intend to continue to be disciplined about that. So we don't intend to bring back the full production instantaneously simply because we could see the very first signs of price recovery.

Over the course of the next period of time in the market, if demand continues to grow at 7% and inventories continue to be as low as they are and prices continue to rise, we do not want to produce sudden spikes in price because we think it's bad for our customers and therefore ends up being bad for us.

But we do want to get back to a sustainably profitable level of financial performance and we understand balancing supply and demand is going to be an important part of that and we intend to be disciplined about it. So, no, I would not expect us to crash the market with bringing all that back shortly..

That makes sense. And as a follow-up, like in terms of the $30 million hit for fixed cost absorption, I mean it seems a lot, given that those two plants only have capacity of about 80,000 tons. Yeah, I guess you mentioned that the feedstocks are involved also, but it seems like....

Right..

....is there anything else going on in there and also should we expect that kind of hit to continue forward as those plants stay down?.

Well, let's talk about the facilities that are down. 50% of our slag production is down, all right. So that's a very substantial amount of our entire slag production, 50%. About 75,000 tons or 15% of pigment production is down.

So the combination of those two is what aggregates to the $30 million – I think it's $31 million-ish of fixed cost absorption penalty this quarter. We will continue to absorb that basically for the time that they are down. And as we bring them back, when we bring them back that will go away.

So, I mean, clearly we know that, when you have a large fixed cost business, and you slowdown production, you have to absorb the fixed cost over a fewer units of production meaning the cost per unit is higher. That means EBITDA will get squeezed. We knew that when we did it. And I think we actually talked about it back when we first made the decision.

We nevertheless believe it was the right strategy because we saved cash and we balanced the market and as I said in the answer to the last question, we don't intent to be precipitous about changing course until we know that the market is solid and recovering and our customers are in a place where more supply is appropriate.

And so long as we're down at these levels there will be a fixed cost penalty..

Clearly. Thank you very much..

Okay. Thank you..

Thank you. Our next question comes from the line of James Finnerty with Citi. Your line is now open. Please go ahead..

Hi, good morning, Tom..

Good morning..

Hey.

Looking into the second quarter of 2016, just sort of checking, is there any one-time items in the year ago quarter that we should sort of be thinking about when we look into 2Q 2016?.

I'm passing to Kathy..

Okay..

For the second quarter 2016, we will have charges related to the long-haul move in the Alkali business which wasn't in the second quarter of last year..

Okay.

And what kind of range should we be thinking about?.

$4-ish million..

Okay.

But nothing in the year ago quarter that was a gain or a loss sort of any consequence that we should...?.

In the year ago quarter, we had a significant charge for LTM which was $49 million, which was the drive..

Okay..

And we didn't have that this year..

Okay, great. And then, Kathy, while we're on, in terms of debt, you repurchased $20 million during the quarter.

I noticed that the debt balance in the balance sheet decreased by more than that? Was there sort of an FX change or something that affected that debt accounts?.

Sure. This is John Merturi. In terms of the book value of the debt, this year or as effective Jan 1, there was a new accounting pronouncement that required us to net the financing costs against the debt balance. So that's what you're seeing there. It will be in the full description there..

In the Q that' s nothing..

Yeah..

Yeah, exactly. And I guess last question just coming back to the curtailment and Tom's comments there. So in theory, once if the curtailment is sort of lifted, that's the sign that you think basically everything is sustainable and the prices are moving up and operating rates are getting better at that point.

So we would think operating rates would have to be in healthy area for you to actually change the curtailment?.

The curtailment is a result of operating rate. You change the operating rates and the curtailment – accountings for the curtailment will dissipate..

Okay, thank you..

The driver of ending the curtailment is demand and price stability, right. So as long as we see demand in the market, that is continuing to support purchases at a higher level than we are able to satisfy with our production and our inventory levels, then we will begin to increase production so that we can supply our customers demand at a fair price.

When we do that operating rates will inevitably rise and the fixed cost absorption penalty will automatically decline.

So, clearly, going back to full production is good because it signals more volume of sales, higher price of sales, otherwise we wouldn't be doing it and better fixed cost absorption, all of which will go to a leveraged EBITDA recovery..

Okay. And just last one on the TiO2 pricing.

The first price increase, could you sort of gauge like what level of that price increase went through for the industry?.

No..

Thank you..

You're welcome..

Thank you. Our next question comes from the line of (42:54). Your line is now open. Please go ahead..

Hi. I was wondering if you could say what the lower cost of market charge was for this quarter.

Did you say there was none, so it was zero?.

No, for the quarter we actually – the lower cost for market reserves reduced and so it was about $10 million, offsetting the cost of goods flow-through. So, no impact on EBITDA, but if you just look at the change in the reserve flowing through the P&L, it was about $10 million..

And that compares to $9 million in the prior year?.

Yes..

Thank you..

Thank you. Our next question comes from the line of (43:42). Your line is now open. Please go ahead..

Hi, good morning, guys. First question, you mentioned the zircon shipment that shipped in April instead of March.

Could you give me an idea what the impact was that on sales and EBITDA then for the quarter?.

No..

Okay..

Because what I am telling – I mean I said it was 5,000 ton-ish a little bit over 5,000 tons. And if I gave you those impacts, I'd be indicating too much competitively important information..

Okay..

It's a high margin – Zircon is a high margin product for us..

Okay. You bought bonds back this quarter. You expect to be free cash flow positive for the year. Is there a minimum kind of cash balance liquidity that you want to look to buy back more bonds in the year.

Is that something that's in your calendar, is there certain minimum price, how are you thinking about bond repurchases going forward?.

Yeah, we operate off of a desire to have a minimum cash balance. I think the numbers you talked about, $100 million, $150 million are – that's a reasonable target range for us. We want to be around there. And also the fact that the bonds have traded up to – I think the last time I looked, they were in low to mid $80 million.

The return on the investment buying them back now is different than it was before. But we have cash and there are a variety of opportunities for us to buy bonds back, and if we think it's a good investment of our money, and if we have adequate cash reserves on the balance sheet, then we can do that..

Okay. And then for the second quarter, so you're seeing an increase in demand sequentially.

And an increase in TiO2 prices as well, any color on the increase in prices you are seeing sequentially?.

Not yet..

Okay..

We will talk about it when the quarter is over. But we are obviously in conversations with our customers and we think our customers have recognized that all of us have to be able to make money in the supply chain.

And as long as we don't engage in behavior that spikes their cost in an unanticipated way, unacceptable way, and they have the ability to plan, and how they can recover cost increases that we will move back in that direction. And we'll give you a second quarter when it's done.

But right now the quarter is not done and so we don't want to get ahead of ourselves there..

Okay. Thank you..

Yeah..

Thank you. Our next question comes from the line of (46:40). Your line is now open. Please go ahead..

Good morning. Thanks for taking my call. Most of my questions have been answered.

I just wanted to ask which bonds did you buy back in the quarter?.

A mix of the two..

Yes..

Okay.

And John, when you guys talk about being positive free cash flow, is that inclusive of the bond buyback activity or is that simply just cash flow from operations less CapEx?.

Cash from operations less CapEx..

Did you hear that?.

I did, I did. Thanks..

Okay..

That's it from me. Thanks..

Yep..

Thank you. Ladies and gentlemen, this concludes our question-and-answer session for today. I'd now like to call back to Tom Casey, Chief Executive Officer of closing comments..

Thank you very much. Thank you for your interest in Tronox. We appreciate that. We continue to work towards improving the performance of the business and I think as we said that the quarter was – I think it's going to mark a turning point and we are optimistic about that, about the sustainability of that and about our ability to move forward.

We have continued to work on operating efficiency, where we've reduced our cost so as prices rise and as they continue to rise, the leveraged benefit for us will be very significant. So we thank you with that and now we will go back to it. Appreciate your time and your interest..

Ladies and gentlemen, that does conclude today's program. And you may all disconnect. Everyone, have a wonderful day..