UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2022

Commission File Number 001-40924

ALGOMA STEEL GROUP INC.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name)

105 West Street

Sault Ste. Marie, Ontario

P6A 7B4, Canada

(705) 945-2351

(Address and telephone number of registrant’s principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

DOCUMENTS INCLUDED AS PART OF THIS REPORT

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SIGNATURES

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, thereunto duly authorized.

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Exhibit 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following Management Discussion and Analysis (“MD&A”) contains information regarding the financial position and financial performance of Algoma Steel Group Inc. and its consolidated subsidiaries and unless the context otherwise requires, all references in this section to “Algoma,” “the Company,”, “we,” “us,” or “our” refer to Algoma Steel Group Inc. and its consolidated subsidiaries.

The following MD&A provides Algoma management’s perspective on the financial position and financial performance of the Company and its consolidated subsidiaries for the three and nine month periods ended December 31, 2021 and December 31, 2020. This MD&A provides information to assist readers of, and should be read in conjunction with, the Company’s December 31, 2021 condensed interim consolidated financial statements and the accompanying notes of the Company and the March 31, 2021 audited consolidated financial statements and the accompanying notes of the Company.

This discussion of the Company’s business may include forward-looking information with respect to the Company, including its operations and strategies, as well as financial performance and conditions, which are subject to a variety of risks and uncertainties. Readers are directed to carefully review the sections entitled “Non-IFRS Financial Measures” included elsewhere in this MD&A. For a discussion of risks and uncertainties that may affect the Company and its financial position and results, refer to “Risk Factors” in the Company’s Form F-1 registration statement available on the EDGAR website at www.sec.gov as well as in the long form final prospectus dated October 19, 2021 available through under Company’s profile on the SEDAR website at www.sedar.com.

This MD&A is dated as of February 9, 2022. This document has been reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on February 9, 2022. Events occurring after this date could render the information contained herein inaccurate or misleading in a material respect.

Non-IFRS Financial Measures

In this MD&A we use certain non-IFRS measures to evaluate the performance of the Company. These terms do not have any standardized meaning prescribed within IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of our financial performance from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. As described below, the term “Adjusted EBITDA” is a financial measure utilized by Algoma in reporting its financial results that is not defined by IFRS. The terms “Net Sales Realization” (“NSR”) and “Cost Per Ton of Steel Products Sold” are financial measures utilized by Algoma in reporting its financial results that are not defined by IFRS. Net Sales Realization, as defined by Algoma, refers to steel revenue less freight per steel tons shipped. Net Sales Realization is included because it allows management and investors to evaluate our selling prices per ton of steel products sold excluding geographic impact of freight charges in order to enhance comparability when comparing our sales performance to that of our competitors. Cost Per Ton of Steel Products Sold, as defined by Algoma, refers to cost of steel revenue less freight, amortization and carbon tax (included in cost of steel revenue) per steel tons shipped. Cost Per Ton of Steel Products Sold allows management and investors to evaluate the Company’s cost of steel products sold on a per ton basis, excluding the items that we exclude when calculating Adjusted EBITDA, to evaluate our operating performance and to enhance the comparability of our costs over different time periods. We consider each of Net Sales Realization and Cost Per Ton of Steel Products Sold to be meaningful measures to assess our operating performance in addition to IFRS measures. A reconciliation of each of Net Sales Realization and Cost Per Ton of Steel Products Sold to their most comparable IFRS financial measures are contained in this MD&A.

Adjusted EBITDA, as defined by the Company, refers to net (loss) income before amortization of property, plant, equipment and amortization of intangible assets, finance costs, interest on pension and other post-employment benefit obligations, income taxes, restructuring costs, foreign exchange loss (gain), finance income, carbon tax, changes in fair value of warrant, earnout and share-based compensation liabilities, transaction costs, listing expense, share-based compensation related to performance share units and

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business combination adjustments. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue for the corresponding period. Adjusted EBITDA per ton is calculated by dividing Adjusted EBITDA by tons of steel products sold for the corresponding period. Adjusted EBITDA is not intended to represent cash flow from operations, as defined by IFRS, and should not be considered as alternatives to net earnings, cash flow from operations, or any other measure of performance prescribed by IFRS. Adjusted EBITDA, as defined and used by the Company, may not be comparable to Adjusted EBITDA as defined and used by other companies. We consider Adjusted EBITDA to be a meaningful measure to assess our operating performance in addition to IFRS measures. These measures are included because we believe it can be useful in measuring our operating performance and our ability to expand our business and provide management and investors with additional information for comparison of our operating results across different time periods and to the operating results of other companies. Adjusted EBITDA is also used by analysts and our lenders as a measure of our financial performance. In addition, we consider Adjusted EBITDA margin and Adjusted EBITDA per ton to be useful measures of our operating performance and profitability across different time periods that enhance the comparability of our results. For a reconciliation of Adjusted EBITDA to its most comparable IFRS financial measures, see “Results of Operations – Adjusted EBITDA” presented in this MD&A.

Adjusted EBITDA, Net Sales Realization and Cost Per Ton of Steel Products Sold have limitations as analytical tools and should not be considered in isolation from, or as alternatives to, net income, cash flow from operations or other data prepared in accordance with IFRS. Some of these limitations are:

Because of these limitations, such measures should not be considered as measures of discretionary cash available to invest in business growth or to reduce indebtedness. We compensate for these limitations by relying primarily on our IFRS results using such measures only as a supplement to such results.

Functional Currency

The Company’s functional currency is the US dollar, which reflects the Company’s operational exposure to the US dollar. The Company uses the Canadian dollar as its presentation currency. In accordance with IFRS, all amounts presented are translated to Canadian dollars using the current rate method whereby all revenues, expenses and cash flows are translated at the average rate that was in effect during the period or presented at their Canadian dollar transactional amounts and all assets and liabilities are translated at the prevailing closing rate in effect at the end of the period. Equity transactions have been translated at historical rates. The resulting net translation adjustment has been recorded in other comprehensive income. Unless otherwise stated, the figures included in this MD&A are stated in Canadian dollars.

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The currency exchange rates for the relevant periods of fiscal 2022 and fiscal 2021 are provided below:

Overview of the Business

Algoma Steel Group Inc., formerly known as 1295908 B.C. Ltd., was incorporated on March 23, 2021 under the BCA for the purpose of purchasing Algoma Steel Holdings Inc. under section 85(1) of the Income Tax Act (Canada), effecting the purchase on an income tax-deferred basis. A purchase agreement between the Company and Algoma Steel Intermediate S.A R.L. (the “Vendor”) was executed March 29, 2021, whereby the Vendor sold its equity holdings in the capital of Algoma Steel Holdings Inc. to the Company. The transaction resulted in the Vendor transferring its 100,000,001 common shares of Algoma Steel Holdings Inc. to the Company in exchange for 100,000,000 common shares of the Company.

Algoma Steel Inc., the operating company and a wholly owned subsidiary of Algoma Steel Holdings Inc., was incorporated on May 19, 2016 under the BCA, for the purpose of purchasing substantially all of the operating assets and liabilities of Essar Steel Algoma Inc. The Company is an integrated steel producer with its active operations located entirely in Canada. The Company produces sheet and plate products that are sold primarily in North America.    

Merger Transaction

On October 19, 2021, the Merger between a subsidiary of the Company (“Merger Sub”) and Legato Merger Corp. (“Legato”), pursuant to an Agreement and Plan of Merger (“Merger Agreement”) entered into on May 24, 2021 (the “Merger”), was completed (the “Closing”), with Legato becoming a wholly-owned subsidiary of the Company and the shareholders of Legato becoming shareholders of the Company. Pursuant to the Merger Agreement, the Company effected a reverse stock split such that each outstanding common share became such number of common shares, as determined by the conversion factor of 71.76775% (as defined in the Merger Agreement). As a result of the Merger, the shares were dual listed on the TSX and NASDAQ and became publicly traded on October 20, 2021.

Pursuant to the Merger, each outstanding share of Legato common stock was converted into and exchanged for one newly issued common share of the Company. This resulted in the issuance of 30,307,036 common shares of the Company, after redemption by initial Legato shareholders. On Closing, the Company accounted for the Merger as a share-based payment transaction, with the fair value of the Algoma common shares issued to the Legato shareholders measured at the market price of Legato’s publicly traded common shares on October 19, 2021. The total fair value of the Algoma common shares issued to Legato shareholders was $421.3 million (US $340.9 million). As part of the Merger, Algoma acquired cash, a receivable previously owed between Legato and Algoma Steel Inc. (“ASI”) and warrants, with the difference accounted for as a listing expense. Refer to Note 28 of the condensed interim consolidated financial statements for a reconciliation of the elements of the Merger. Following the consummation of the Merger on Closing, Legato was dissolved and its assets and liabilities were distributed to the Company.

Concurrent with the execution of the Merger Agreement, the Company and Legato entered into subscription agreements with certain investors (the “PIPE Investors”) pursuant to which the PIPE Investors agreed to purchase, and the Company and Legato agreed to issue to the PIPE Investors, an aggregate of 10,000,000 common shares of Legato common stock, for the purchase price of US$10.00 per share and at an aggregate purchase price of US$100.0 million (the “PIPE Investment”) on closing. Those PIPE Investors that subscribed for Legato common stock exchanged their PIPE shares for common shares pursuant to the PIPE subscription agreements immediately prior to the Merger. After giving effect to such exchange 10,000,000 common shares of the Company were issued in the PIPE Investment.

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Pursuant to the Merger Agreement, the previously outstanding Legato warrants were converted into an equal number of warrants issued by the Company. These warrants comprise 23,575,000 Public Warrants and 604,000 Private Warrants (collectively “Warrants”). In connection with this conversion, there were no substantial changes to the rights assigned to the holders of the warrants and assumed by the Company. Each of the Company’s Warrants are exercisable for one common share in the Company at US$11.50 per share, subject to adjustment, with the exercise period beginning on November 18, 2021.

On Closing, the Company recognized a liability in the amount of $92.0 million (US $74.5 million) using the market price of the Legato Warrants as an approximation of fair value for each unit of Warrants.

As at December 31, 2021, the 24,179,000 Warrants remain outstanding with an estimated fair value of US$2.86 per Warrant based on the market price of the Warrants, for which the Company recognized a liability of $87.7 million (US $69.2 million) in warrant liability on the condensed interim consolidated statements of financial position. Change in fair value of the warrant liability of ($6.8) million is presented in the condensed interim consolidated statements of net income (loss).

On Closing, the LTIP awards granted by Algoma Steel Holdings Inc. (“ASHI”) became vested and were exchanged for replacement LTIP awards issued by the Company (“Replacement LTIP Awards”) as determined by the conversion factor of 71.76775% (as defined in the Merger Agreement). Based on the conversion factor, 3,232,628 Replacement LTIP Awards were issued. Similar to the LTIP awards, each Replacement LTIP Awards allow the holders to purchase one common share of Algoma. The Replacement LTIP Awards are considered fully vested and can be exercised for US$0.013, pursuant to an LTIP exchange agreement with each holder, per common share at the earlier of a significant disposal of Algoma common shares held by the Company’s shareholders immediately prior to the Closing, or December 31, 2025. Should the participants’ employment with the Company ceases, a cash-out option is available as an alternative method of settlement for a portion of the vested Replacement LTIP Awards based on the five-day volume-weighted average trading price of the Company’s common shares, subjected to the approval of the Board of Directors.

On the day preceding the Closing, the Company remeasured the fair value of the original LTIP Awards as they became fully vested on the day before the Merger. Consequently, the Company recognized a liability in the amount of $44.9 million (US $36.4 million) using the market price of the Algoma common shares as an approximation of fair value for each unit of Replacement LTIP Awards. The gain on change in fair value of previously recognized LTIP awards accounted for as cash-settled share-based payments, including restricted share units and director units, were recognized in profit or loss in the amount of $10.4 million. In addition, the fair value of the previously recognized fully vested performance share units, which were previously accounted for as equity-settled share-based payments, was recognized as a liability in the amount of $35.5 million (US $28.7 million) with an offsetting charge to equity to reflect the modification of these units to cash settled awards.

The Company accounted for the Replacement LTIP Awards as a modification of share-based payment as the LTIP awards and the Replacement LTIP Awards share similar terms and conditions, and were only replaced as a result of a liquidating event (the Merger) as described by the original long-term incentive plan. Given the alternative settlement options at the election of the participant, the Company has accounted for the Replacement LTIP Awards as cash-settled share-based transactions, which are measured at fair value on initial recognition and at each reporting date with the changes in fair value recorded in the condensed interim consolidated statements of net income (loss). The Company applied modification accounting by remeasuring the fair value of the LTIP awards previously granted by ASHI as at the day prior to Closing and determined that there is no resulting gain or loss.

As at December 31, 2021, the 3,232,628 Replacement LTIP Awards remain outstanding with an estimated fair value of US$10.55 per share based on the market price of the Company’s common shares, for which the Company recognized a liability of $43.2 million (US $34.1 million) in accounts payable and accrued liabilities on the condensed interim consolidated statements of financial position.

Pursuant to the Merger Agreement, holders of the Company’s common shares and each holder of Replacement LTIP Awards were granted the contingent right to receive their pro rata portion of up to 37.5 million common shares of the Company if certain targets based on Earnout Adjusted EBITDA (as defined in the Merger Agreement) and the trading price of the Company’s common shares were met as at December 31, 2021 and thereafter. The Company has accounted for the earnout rights as a derivative liability, which are measured at fair value on initial recognition and at each reporting date with the changes in fair value, recorded in the condensed interim consolidated statement of net income.

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On Closing, the Company forecasted that the highest level of the Earnout Adjusted EBITDA would be achieved as at December 31, 2021. Accordingly, the Company recognized an earnout liability based on the expectation that all 37.5 million Algoma common shares underlying the earnout rights would become issuable. On October 19, 2021, the Company recorded an earnout liability in the amount of $521.3 million (US $421.9 million) using the market price of the Algoma common shares as an approximation of fair value for each unit of earnout rights. Given that the earnout rights were granted to all of the previous shareholders of the Company, the amount was recorded as a distribution through retained earnings.

As at December 31, 2021, the 37,500,000 earnout rights remain outstanding with an estimated fair value of US$10.55 per unit based on the market price of the Algoma common shares, for which the Company recognized a liability of $501.6 million (US $395.6 million) in earnout liability on the condensed interim consolidated statements of financial position. Change in fair value of the earnout liability of ($33.6) million is presented in the condensed interim consolidated statements of net income (loss).

Strategic Capital Projects

Electric Arc Furnace (“EAF”)

On November 10, 2021, the Company’s Board of Directors authorized the Company to construct two new state-of-the art electric-arc-furnaces (EAF) to replace its existing blast furnace steelmaking operations. The transformation is expected to reduce Algoma’s carbon emissions by approximately 70%. The Company plans to invest approximately $700 million in the EAF transformation, funded with previously announced financing commitments and the proceeds from the Merger. The Company anticipates a 30-month construction phase for the EAF facility, coming online in 2024, and expects to transition away from blast furnace steelmaking thereafter as increased electric power from the grid supplying the Company becomes available.

On September 20, 2021, the Company secured an agreement with the Minister of Industry of the Government of Canada, whereby the Company will receive up to $200.0 million in the form of a loan to support the Company’s EAF transformation. The loan is provided through the Net Zero Accelerator initiative of the Federal Strategic Innovation Fund (the “Federal SIF”). The repayment period will commence upon the earlier of the Company having access to full power from the grid to operate the EAFs independently, or January 1, 2030. The annual repayment is further dependent on the Company’s performance in reducing green house gas emissions.

On November 29, 2021, the Canada Infrastructure Bank (CIB) and the Company have entered into a definitive agreement with respect to the CIB’s previously announced commitment to finance green house gas reduction industrial initiatives, including the transformational upgrade of the Company’s steelmaking processes at its facility in Sault Ste. Marie, Ontario. Under the terms of the agreement, the CIB will provide up to CDN $220 million in low cost financing towards the approximately CDN $700 million transformation to electric arc furnace (EAF) steelmaking.

On December 2, 2021, the Company announced that it has selected Danieli & C. Officine Meccaniche S.p.A. (“Danieli”) as the sole technology provider for the EAF steelmaking facility. In connection with this agreement, Danieli will supply its AC-Digimelter technology powered by Q-One digital power systems.

EAF construction activities are progressing and include the installation of foundation piling, relocation of utilities and services, commencement of building foundations, and the relocation of rail tracks.

The Company is progressing its applications for environmental permits through the Province’s Ministry of Environment Conservation & Parks.

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On January 27, 2022, the Company announced that it has awarded GE Gas Power (GE), a General Electric company, a contract for the upgrade to the Company’s natural gas combined cycle power plant, including the installation of two gas turbine packages. The upgrade is expected to supply the Company with sufficient internal generation capability to power phase one of its impending transition to EAF steelmaking. Under the terms of the contract, GE will provide two LM6000 aero derivative gas turbines complete with new control systems as well as a new control system for the existing GE steam turbine. In addition, GE will also complete a full rewind on the No. 2 Generator.

Plate Mill Modernization

The Company has undertaken a plate mill modernization project which is expected to be completed in November 2022 and plans to invest a total of approximately $120 million, which will be partly funded by governmental loan facilities totaling approximately $50 million. This strategic initiative will enhance the capacity and quality of one of the Company’s key products and sources of competitive advantage. The Plate Mill Modernization Project will facilitate the Company to achieve product quality requirements of its customers with respect to surface and flatness, increase high strength capability with availability of new grades, ensure reliability of plate production with direct ship capability and increase overall plate shipment capacity through debottlenecking and automation. The modernization process will be comprised of two phases: quality focus and productivity focus. The first phase, which focuses on quality, is expected to be completed by May/June 2022 and includes the installation and commissioning upgrades of a new primary slab de-scaler (which improves surface quality), automated surface inspection system (which detects and maps surface quality), a new in-line hot leveler (which improves flatness), and automation of the 166 inch Mill (which expands grade offering). The second phase, which focuses on productivity, is expected to be completed by November 2022 and includes installation and commissioning upgrades of the onboard descaling systems for both the 2Hi and 4Hi roughing roll stands, mill alignment and work roll offset at the 4Hi, 4Hi DC drive, in-line plate cutting including new cooling beds coupling the plate mill and shear line, dividing shear, new plate piler and automated marking machine.

Key Leadership and Governance Announcements

The Company’s current Chief Executive Officer, Michael McQuade, joined the board of directors of Algoma Steel Inc. following the restructuring of the company under the Companies’ Creditors Arrangement Act. Mr. McQuade became Chief Executive of Algoma Steel Inc. in March 2019. Mr. McQuade has informed the Algoma Steel Inc. board of directors that, while he is pleased to continue serving as a director of Algoma, he is considering retiring from the Chief Executive Officer position in the next 12 months. Mr. McQuade has committed to remain as Chief Executive Officer until a successor is identified and it is expected that he will continue to serve as a director of Algoma. The Algoma board of directors has retained a search firm to assist the board in hiring a successor to Mr. McQuade.

On October 22, 2021, the Company announced the addition of six new directors to its Board following the closing of the Company’s business combination with Legato Merger Corp. The new directors expand the range of expertise offered, and underscore the Company’s commitment to bringing diverse perspectives and experience to the boardroom that reflect the broader interests of the Company’s stakeholders. In connection with the Transaction, in addition to Andrew Harshaw (Chair), Andrew Schultz and Michael McQuade, new directors Mary Anne Bueschkens, Gale Rubenstein, and James Gouin were added to the Company‘s board. Former Legato representatives David Sgro and Eric Rosenfeld and former Legato chairman Brian Pratt also joined the Company’s board on the closing of the Merger. All of the Company’s directors, other than Mr. McQuade, the Company’s CEO, are independent.

On October 27, 2021, Algoma announced that its Chief Commercial Officer, Robert Dionisi, will be retiring effective May 1, 2022. Algoma has identified Rory Brandow, Algoma’s current Director of Regional Sales, to succeed Robert as Vice President of Sales.

Factors Affecting Financial Performance

The Company’s profitability is correlated to the pricing of steel, ore, coal and energy and the existence of tariffs on its sales outside of Canada. Changes in the underlying pricing of the Company’s steel products and raw materials, and changes in tariffs on sales outside of Canada cause variation in operating results between periods. During periods of stronger or improving steel market conditions, the Company is more likely to be able to pass the increased costs of ore, coal and energy to its customers, protecting the Company’s margins from significant erosion. During weaker or rapidly deteriorating steel market conditions, including due to weak steel demand, low industry utilization rates and/or increasing steel product imports, the competitive environment intensifies which results in increased pricing pressure. All of those factors, to some degree, impact pricing, which in turn impacts margins.

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North American steel pricing is largely dependent on global supply and demand, the level of steel imports into North America, economic conditions in North America, global steelmaking overcapacity, and increased raw material prices. North American steel producers compete with many foreign producers, including those in Europe, China and other Asian countries. Competition from foreign producers is periodically intensified by weakening regional economies of their surrounding countries, and resultant decisions by these foreign producers with respect to export volumes and pricing possibly more influenced by political and economic policy considerations than by prevailing market conditions.

Global steel production increased 3.7% in 2021 compared to 2020 to 1,950.5 million metric tonnes. China represents approximately 53% of global crude steel production. (source: Worldsteel Association “December 2021 crude steel production” January 25, 2022). Given the strong recovery in steel production in 2021 compared to 2020 pandemic levels, the Organization for Economic Cooperation and Development projects that global excess capacity was approximately 478 million metric tonnes in 2021, which is down from previous levels but remains approximately 30 times the size of the Canadian steel industry.

COVID-19 Pandemic

As the COVID-19 pandemic declared on March 11, 2020 by the World Health Organization endures, the Company has continued to undertake comprehensive measures to protect the health of employees and their families.

These measures include:

The Company continues to evaluate all developments and makes modifications and enhancements to these measures as public health authorities and governments provide updated information.

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Overall Results

Net Income (Loss)

The Company’s net income for the three month period ended December 31, 2021 was $123.0 million compared to a net loss of $73.5 million for the three month period ended December 31, 2020, resulting in a $196.5 million increase of net income. This increase in net income was due primarily to an increase in steel revenue of $625.7 million, primarily a result of an increase in selling price of steel, offset in part by listing expense of $235.6 million and transaction costs of $12.3 million due to the Merger transaction. Further offsetting the increase in revenue was an associated increase in cost of steel revenue ($158.4 million) mainly due to an increase in purchase price of inputs (iron ore, scrap, alloys and natural gas), increase in employee profit sharing expense and income taxes.

The Company’s net income for the nine month period ended December 31, 2021 was $614.1 million compared to a net loss of $176.2 million for the nine month period ended December 31, 2020, resulting in a $790.3 million increase of net income. This increase in net income was due primarily to an increase in steel revenue of $1,639.4 million, a result of an increase in selling price of steel, offset in part by listing expense of $235.6 million and transaction costs of $21.5 million due to the Merger transaction. Further offsetting the increase in revenue was an associated increase in cost of steel revenue ($478.6 million) primarily due to reasons described above.

Income (Loss) from Operations

The Company’s income from operations for the three month period ended December 31, 2021 was $446.1 million compared to a loss from operations of $17.7 million for the three month period ended December 31, 2020, an increase of $463.8 million, due primarily to the same reasons mentioned above for net income except expenses associated with the Merger transaction.

The Company’s income from operations for the nine month period ended December 31, 2021 was $1,100.4 million compared to a loss from operations of $45.2 million for the nine month period ended December 31, 2020, an increase of $1,145.6 million, due primarily to the same reasons mentioned above for net income except expenses associated with the Merger transaction.

Adjusted EBITDA

The Company’s Adjusted EBITDA for the three month period ended December 31, 2021 was $457.3 million (December 31, 2020 – $11.7 million), with an Adjusted EBITDA margin of 42.9% (December 31, 2020 – 2.7%), average net sales realization of $1,827 per ton (December 31, 2020 - $701 per ton) and costs of steel products sold of $946 per ton (December 31, 2020 - $647 per ton).

For the nine month period ended December 31, 2021, the Company’s Adjusted EBITDA was $1,168.7 million (December 31, 2020 – $32.2 million), with an Adjusted EBITDA margin of 40.8% (December 31, 2020 – 2.8%), average net sales realization of $1,525 per ton (December 31, 2020 – $695 per ton) and costs of steel products sold of $829 per ton (December 31, 2020 – $647 per ton).

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Steel Revenue and Cost of Sales

The Company’s NSR on steel sales (excluding freight) per ton shipped was $1,827 for the three month period ended December 31, 2021 (December 31, 2020 - $701), an increase of 160.6%. Steel revenue increased by 163.0% and steel shipment volumes increased by 0.9% during the three month period ended December 31, 2021, as compared to the three month period ended December 31, 2020. The overall increase in steel revenue is mainly due to increased steel prices compared to the three month period ended December 31, 2020 when the impacts of the COVID-19 pandemic were more pronounced.

For the nine month period ended December 31, 2021, the Company’s NSR on steel sales (excluding freight) per ton shipped was $1,525 (December 31, 2020 - $695), an increase of 119.4%. Steel revenue increased by 159.2% and steel shipment volumes increased by 18.2% during the nine month period ended December 31, 2021, as compared to the nine month period ended December 31, 2020. The overall increase in steel revenue and shipment volumes is primarily due to increased steel prices and demand due to the same reasons described above.

For the three month period ended December 31, 2021, the Company’s cost of steel products sold increased by 47.4% to $522.8 million (December 31, 2020 - $354.6 million) due primarily to an increase in purchase price of inputs (iron ore, scrap, alloys and natural gas), and increased employee profit sharing expense. Employee profit sharing expense has been calculated in accordance with the profit sharing agreement for the three month period ended December 31, 2021. For the three month period ended December 31, 2020, there were no employee profit sharing expenses.

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For the nine month period ended December 31, 2021, the Company’s cost of steel products sold increased by 51.4% to $1,450.3 million (December 31, 2020 – $957.9 million) due primarily to an increase in the purchase price of inputs, employee profit sharing as described above, and in part, mostly due to an increase in steel shipments (18.2%). Employee profit sharing expense has been calculated in accordance with the profit sharing agreement and the appropriate accrual has been made for the nine month period ended December 31, 2021. For the nine month period ended December 31, 2020, there were no employee profit sharing expenses.

Further, the Government of Canada passed the Canada Emergency Wage Subsidy (“CEWS”) in response to the COVID-19 pandemic. For the three and nine month periods ended December 31, 2021, the Company did not receive CEWS funding. For the three and nine month periods ended December 31, 2020, the Company recorded a reduction of $4.5 million and $52.3 million, respectively, to the cost of steel products sold as a reduction to personnel costs, included therein, in connection with the CEWS program.

Non-steel Revenue

For the three month period ended December 31, 2021, the Company’s non-steel revenue was $14.2 million (December 31, 2020 - $9.5 million). The increase of $4.7 million was primarily due to increased sales of kish, high Sulphur iron and scrap rolls.

The Company’s non-steel revenue for the nine month period ended December 31, 2021 was $70.4 million (December 31, 2020 – $23.8 million). The increase of $46.6 million was mainly due to the sale of royalty rights ($20.0 million) and also due to increased sale of various by-products.

Administrative and Selling Expenses

As illustrated in the table above, the Company’s administrative and selling expenses for the three month period ended December 31, 2021, were $18.9 million (December 31, 2020 - $15.5 million). The increase in administrative and selling expenses of $3.4 million is mainly due to an increase in professional, consulting, insurance and other fees of $7.0 million which is partly offset by a decrease in personnel expenses of $3.2 million.

For the nine month period ended December 31, 2021, the Company’s administrative and selling expenses were $75.0 million (December 31, 2020 – $39.9 million). The increase in administrative and selling expenses of $35.1 million is mainly due to increased personnel expenses ($22.6 million) largely associated with employee profit sharing ($11.6 million), share-based compensation ($5.0 million), and CEWS funding received during the nine month period ended December 31, 2020 ($4.2 million). Further, professional, consulting, insurance and other fees increased by $11.8 million primarily due to the same reasons described above.

For the three and nine month periods ended December 31, 2021, the Company did not receive CEWS funding. For the three and nine month periods ended December 31, 2020, the Company recorded, respectively, a $0.3 million and $4.2 million reduction in administration and selling expenses as a reduction to personnel costs, included therein, in connection with the CEWS program.

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Finance Costs, Finance Income, Interest on Pension and Other Post-employment Benefit Obligations, and Foreign Exchange Gains and Losses

The Company’s finance costs represent interest cost on the Company’s debt facilities, including the Revolving Credit Facility, Secured Term Loan Facility and Algoma Docks Term Loan Facility, described in the section entitled “Capital Resources - Financial Position and Liquidity” included elsewhere in this MD&A. Finance cost also includes the amortization of transaction costs related to the Company’s debt facilities and the accretion of the benefits in respect of the Company’s governmental loan facilities in respect of the interest free loan issued by, and the grant given by the Canadian federal government as well as the low interest rate loan issued from the Ontario provincial government, all of which are discussed below (Financial Resources and Liquidity - Cash Flow Used in Investing Activities) and the unwinding of discounts on the Company’s environmental liabilities.

As illustrated in the table above, the Company’s finance costs for the three and nine month periods ended December 31, 2021, were $14.5 million and $44.3 million, respectively compared to $16.4 million and $52.6 million for the three and nine month periods ended December 31, 2020 resulting in a decrease of $1.9 million and $8.3 million, respectively. The decrease in finance cost is primarily attributable to repayment in full of the Secured Term Loan Facility ($5.3 million and $9.3 million, respectively) and Algoma Docks Term Loan Facility ($0.6 million and $1.2 million, respectively) in November 2021. The finance cost associated with the Revolving Credit Facility decreased by $0.9 million and $3.2 million, respectively due to repayments on this facility.

The Company’s finance income for the three and nine month periods ended December 31, 2021, was $0.1 million compared to $0.3 million and $1.1 million, respectively, for the three and nine month periods ended December 31, 2020, representing a decline of $0.2 million and $1.0 million, due in part to interest income from tariff overpayments in the prior year which did not repeat in the current year and other interest income earned.

The Company’s interest in pension and other post-employment benefit obligations for the three and nine month periods ended December 31, 2021 was $2.9 million and $8.7 million, respectively, compared to $4.3 million and $12.9 million, respectively for the three and nine month periods ended December 31, 2020, due to a decrease in discount rates at March 31, 2021 that was used to determine the 2022 fiscal year pension benefit expense.

The Company’s foreign exchange loss for the three month period ended December 31, 2021 was $2.0 million compared to $35.4 million for the three month period ended December 31, 2020. For the nine month period ended December 31, 2021, the Company’s foreign exchange gain was $2.0 million compared to a loss of $66.6 million for the nine month period ended December 31, 2020. These foreign exchange movements reflect the effect of US dollar exchange rate fluctuations on the Company’s Canadian dollar denominated monetary assets and liabilities.

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Pension and Post-Employment Benefits

As illustrated in the table above, for the three month periods ended December 31, 2021 and December 31, 2020, the Company’s pension expense and post-employment benefit expense decreased by $0.8 million and $0.3 million, respectively, primarily due to an increase in beginning-of-year discount rates.

For the nine month periods ended December 31, 2021 and December 31, 2020, the Company’s pension expense and post-employment benefit expense decreased by $2.4 million and $0.9 million, respectively, primarily due to an increase in beginning-of-year discount rates.

As disclosed in Note 3 to the March 31, 2021 audited consolidated financial statements, all actuarial gains and losses that arise in calculating the present value of the defined benefit pension obligation net of assets and the defined benefit obligation in respect of other post-employment benefits, including the re-measurement components, are recognized immediately in other comprehensive income (loss). In accordance with IFRS, the Company makes an assessment at each reporting period-end as to whether the accrued pension liability and the accrued other post-employment benefit obligation have been significantly impacted by changes in market discount rates, curtailments, settlements, actual returns on defined benefit pension plan assets or other one-off events.

For the three month period ended December 31, 2021, the Company recorded an actuarially determined loss to the accrued defined pension liability and accrued other post-employment benefit obligation in other comprehensive loss of $14.3 million (December 31, 2020 – actuarial determined gain of $40.2 million), a difference of $54.5 million, due to a decrease in discount rates as at December 31, 2020 (down approximately 15 basis points from September 30, 2020). The loss as at December 31, 2020 was more than offset by an asset return of 6.18%, resulting in an overall gain for Q3 2021. The December 31, 2020 OCI adjustments are compared to the December 31, 2021 OCI adjustments which experienced a decrease in discount rates as at December 31, 2021 (down approximately 17 basis points from September 30, 2021) partially offset by an asset return of 5.83%, resulting in an overall loss for Q3 2022.

For the nine month period ended December 31, 2021, the Company recorded an actuarially determined gain to the accrued defined pension liability and accrued other post-employment benefit obligation in other comprehensive loss of $58.2 million (December 31, 2020 – actuarial determined loss of $52.9), a difference of $111.1 million, due primarily to a steep decrease in discount rates as at December 31, 2020 (down approximately 154 basis points from March 31, 2020). The loss as at December 31, 2020 was then partially offset by an asset return of 25.13%. The gain at December 31, 2021 was due primarily to a year-to-date asset return of 13.42% offset by a loss due to a decrease in discount rates (down approximately 19 basis points from March 31, 2021). These adjustments are required by IFRS when the accrued liability is significantly impacted by changes in market discount rates, curtailments, settlements, actual returns on defined benefit pension plan assets or other one-off events.

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Carbon Taxes

On June 28, 2019, the Company became subject to the Federal Greenhouse Gas Pollution Pricing Act (the “Carbon Tax Act”). The Carbon Tax Act was enacted with retroactive effect to January 1, 2019. The Company has chosen to remove the costs associated with the Carbon Tax Act from Adjusted EBITDA to facilitate comparison with the results of its competitors in jurisdictions not subject to the Carbon Tax Act. For the three month period ended December 31, 2021, total Carbon Tax recognized in cost of sales was an expense of $0.1 million, compared to expense of $8.6 million in the three month period ended December 31, 2020. For the nine month period ended December 31, 2021, total Carbon tax recognized in cost of sales was a recovery of $1.0 million compared to expense of $11.6 million for the nine month period ended December 31, 2020. The decrease in Carbon tax is due to the purchase of output-based pricing system surplus credits and true up of estimate for the calendar year 2021. Carbon tax is primarily a function of the volume of our production, increasing as production increases.

Income Taxes

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective evidence has been the cumulative loss the Company has incurred over the first two years of its operations. However, over the past nine months, operations have provided evidence that there is sufficient taxable income to permit use of the existing deferred tax assets. As such, the Company has reflected a deferred tax liability of $93.7 million, net of a deferred tax asset ($12.4 million) at December 31, 2021 (March 31, 2020 – nil).

For the three and nine month periods ended December 31, 2021, the Company’s deferred income tax expense was $9.0 million and $105.5 million, respectively, with nil for the comparative periods ended December 31, 2020, due to net income before tax of $222.2 million compared to net loss of $73.5 million for the three month period ended December 31, 2020 and net income before tax of $835.7 million compared to net loss of $176.2 million for the nine month period ended December 31, 2020.

For the three and nine month periods ended December 31, 2021, the Company’s current income tax expense was $90.2 million and $116.1 million compared to nil for the comparative periods ended December 31, 2020 due to net income before tax of $222.2 million compared to net loss of $73.5 million for the three month period ended December 31, 2020 and net income before tax of $835.7 million compared to net loss of $176.2 million for the nine month period ended December 31, 2020.

For the nine month period ended December 31, 2021, the Company has fully utilized non-capital tax losses available of $306.5 million.

Adjusted EBITDA

The following table shows the reconciliation of Adjusted EBITDA to net income for the periods indicated:

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Adjusted EBITDA for the three month period ended December 31, 2021 was $457.3 million, compared to $11.7 million for the three month period ended December 31, 2020, resulting in an increase of $445.6 million. The Adjusted EBITDA margin for the three month periods ended December 31, 2021 and December 31, 2020 was 42.9% and 2.7%, respectively. The Adjusted EBITDA per ton for the three month period ended December 31, 2021 was $827.60 and $21.36 for the three month period ended December 31, 2020.

Adjusted EBITDA for the nine month period ended December 31, 2021 was $1,168.7 million, compared to $32.2 million for the nine month period ended December 31, 2020, resulting in an increase of $1,136.5 million. The Adjusted EBITDA margin for the nine month periods ended December 31, 2021 and December 31, 2020 was 40.8% and 2.8%, respectively. The Adjusted EBITDA per ton for the nine month period ended December 31, 2021 was $667.84 and $21.75 for the nine month period ended December 31, 2020.

The increase in Adjusted EBITDA and improvement in Adjusted EBITDA margin for the three and nine month periods ended December 31, 2021 compared to the three and nine month periods ended December 31, 2020 was due primarily to increases in selling prices and, to a lesser extent, an increase in demand for steel products.

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Financial Resources and Liquidity

Summary of Cash Flows

As illustrated in the table above, the generation of cash for the three month period ended December 31, 2021 was $220.9 million, compared to the use of cash of $3.2 million for the three month period ended December 31, 2020. The increase in the generation of cash for the three month period ended December 31, 2021, as compared to the three month period ended December 31, 2020, was $224.1 million, and is primarily the result of the $367.8 million increase in cash generated by operating activities, a result of an increase in net income (net income of $123.0 million for the three month period ended December 31, 2021 compared to net loss of $73.5 million for the three month period ended December 31, 2020), for reasons described above. The increase in cash generated for the three month period ended December 31, 2021 was partially offset by the use of cash in financing activities (increased by $139.8 million) and investing activities (increased by $8.7 million), for reasons described below.

As illustrated in the table above, the generation of cash for the nine month period ended December 31, 2021 was $566.3 million, compared to the use of cash of $245.3 million for the nine month period ended December 31, 2020. The increase in the generation of cash for the nine month period ended December 31, 2021 as compared to the nine month period ended December

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31, 2020, was $811.6 million, and is primarily the result of the $945.4 million increase in cash generated by operating activities, a result of an increase in net income (net income of $614.1 million for the nine month period ended December 31, 2021 compared to net loss of $176.2 million for the nine month period ended December 31, 2020), for reasons described above. The increase in cash generated for the nine month period ended December 31, 2021 was partially offset by the use of cash in financing activities (increased by $131.9 million) and investing activities (increased by $21.0 million) for reasons described below.

Cash Flow Generated by (Used In) Operating Activities

For the three and nine month periods ended December 31, 2021, the cash generated by operating activities was $318.4 million and $819.6 million, respectively (December 31, 2020 – use of cash—$49.4 million and $125.8 million, respectively). The increase in cash generated from operating activities for the three and nine month periods ended December 31, 2021 was primarily due to higher NSR.

The following table shows changes in the Company’s non-cash working capital for the periods indicated:

As illustrated in the table above, the Company’s use of cash due to changes in non-cash working capital during the three month period ended December 31, 2021 was $54.5 million (December 31, 2020 – $45.2 million), representing a net change of $9.3 million. The increase in the net change in working capital was due in part, to an increase in inventories ($70.7 million), a result of higher steel inventory on hand and impacts of rising prices of raw material, ore, scrap and natural gas. Further, the increase in net change in working capital was due in part, to a decrease in accounts payable and accrued liabilities ($15.6 million) for timing of vendor payments. This was offset, in part, by an increase in taxes payable and accrued taxes ($77.9 million) mostly due to net income before taxes for the three month period ended December 31, 2021 of $222.2 million compared to net loss of $73.5 million for the three month period ended December 31, 2020.

As illustrated in the table above, the Company’s use of cash due to changes in non-cash working capital during the nine month period ended December 31, 2021 was $212.0 million (December 31, 2020 – $128.1 million), representing a net change of $83.9 million. The increase in the net change in working capital was primarily due to an increase in accounts receivable ($237.4 million) driven by increased steel revenue ($1,639.4 million) and improved NSR (increased by 119.4%), increase in inventory ($56.2 million) due to reasons described above and increase in derivative financial instruments ($15.6 million). This was offset, in part, by an increase in accounts payable and accrued liabilities ($133.6 million), primarily due to profit sharing and share-based compensation. Further, this was offset by an increase in taxes payable and accrued taxes ($86.5 million) mainly due to net income before taxes for the nine month period ended December 31, 2021 of $835.7 million compared to net loss of $176.2 million for the nine month period ended December 31, 2020.

Cash Flow Used In Investing Activities

For the three and nine month periods ended December 31, 2021, cash used in investing activities was $27.6 million and $71.8 million, respectively (December 31, 2020 – $18.9 million and $50.8 million, respectively).

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Expenditures for the acquisition of property, plant and equipment for the three month periods ended December 31, 2021 and December 31, 2020 were $30.5 million and $20.5 million, respectively. In addition, the Company recorded benefits of $0.9 million (December 31, 2020 - $1.6 million) in respect of the interest free loan issued by, and the grant given by the Canadian federal government as well as the low interest rate loan issued from the Ontario provincial government, all of which are discussed below. The acquisition of property, plant and equipment net of benefits for the three month period ended December 31, 2021 was $29.6 million (December 31, 2020 - $18.9 million).

Expenditures for the acquisition of property, plant and equipment for the nine month periods ended December 31, 2021 and December 31, 2020 were $76.8 million and $59.3 million, respectively. In addition, the Company recorded benefits of $3.2 million (December 31, 2021 - $9.6 million) in respect of the interest free loan issued by, and the grant given by the Canadian federal government as well as the low interest rate loan issued from the Ontario provincial government, all of which are discussed below. The acquisition, of property, plant and equipment net of benefits for the nine month period ended December 31, 2021 was $73.6 million (December 31, 2020 - $49.7 million).

Cash Flow Used In Financing Activities

For the three month period ended December 31, 2021, cash used in financing activities was $73.9 million (December 31, 2020 – cash generated of $65.9 million). The Company repaid its Secured Term Loan Facility in full in November 2021 ($380.0 million) (December 31, 2020 - $0.9 million) and its Algoma Docks Term Loan Facility ($70.7 million) (December 31, 2020 – $2.1 million). In addition, during the three month period ended December 31, 2021, the Company received proceeds from issuance of shares as a result of the Merger transaction ($393.5 million). Further, the Company paid interest of $14.8 million (December 31, 2020 - $1.3 million) for the three month period ended December 31, 2021.

For the nine month period ended December 31, 2021, cash used in financing activities was $189.2 million (December 31, 2020 – $57.3 million). The Company made repayments of its Revolving Credit Facility totaling $104.2 million and drew down $17.3 million (December 31, 2020 – repaid $175.8 million and drew down $125.9 million). The Company repaid its Secured Term Loan Facility in full ($381.8 million) (December 31, 2020 - $2.0 million) and its Algoma Docks Term Loan Facility in full ($75.9 million (December 31, 2020 – $6.2 million). In addition, during the nine month period ended December 31, 2021, the Company received proceeds from issuance of shares as a result of the Merger transaction ($393.5 million). Further, the Company paid interest of $36.2 million (December 31, 2020 - $4.2 million) for the nine month period ended December 31, 2021.

Capital Resources - Financial Position and Liquidity

As at December 31, 2021, the Company had cash of $587.5 million (March 31, 2021 - $21.2 million), and had unused availability under its Revolving Credit Facility of $290.7 million (US$229.3 million) after taking into account $36.9 million (US$29.7 million) of outstanding letters of credit and borrowing base reserves. At March 31, 2021, the Company had drawn $90.1 million (US$71.7 million), and there was $200.8 (US$156.5 million) of unused availability after taking into account $27.4 million (US$21.8 million) of outstanding letters of credit and borrowing base reserves.

On November 30, 2018, the Company secured the following debt financing:

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On March 29, 2019, the Company secured an agreement with the Minister of Industry of the Government of Canada, whereby the Company will receive $15.0 million in the form of a grant and $15.0 million in the form of an interest free loan through the Federal Strategic Innovation Fund (the “Federal SIF”). The Company will repay the interest free loan portion of this funding in equal annual payments beginning on April 30, 2024 and ending on April 30, 2031.

On September 20, 2021, the Company secured an agreement with the Minister of Industry of the Government of Canada, whereby the Company will receive up to $200.0 million in the form of a loan to support the Company’s EAF transformation. The loan is provided through the Net Zero Accelerator initiative of the Federal Strategic Innovation Fund (the “Federal SIF”). Annual repayment of the SIF funding will be scalable based on Algoma’s greenhouse gas emission performance.

In November 2021, the Company repaid its Secured Term Loan Facility and Algoma Docks Term Loan Facility in full.

The Revolving Credit Facility, the Federal AMF Loan, the Provincial MENDM Loan and the Federal SIF agreements are expected to service the Company’s principal liquidity needs (to finance working capital, fund capital expenditures and for other general corporate purposes) until the maturity of these facilities.

The Revolving Credit Facility is governed by a conventional borrowing base calculation comprised of eligible accounts receivable plus eligible inventory plus cash. At December 31, 2021, there was no balance drawn on this facility as the Company repaid the entire Revolving Credit Facility balance. There was $290.7 million (US $229.3 million) of unused availability after taking into account $36.9 million (US $29.1 million) of outstanding letters of credit, and borrowing base reserves. The Company is required to maintain a calculated borrowing base. Any shortfall in the borrowing base will trigger a mandatory loan repayment in the amount of the shortfall, subject to certain cure rights including the deposit of cash into an account controlled by the agent. As at December 31, 2021, the Company did not draw from its Revolving Credit Facility as such complied with these requirements.

The Company anticipates making, on average, approximately $50-$60 million of capital expenditures annually to sustain existing production facilities. Furthermore, supported by its agreements with the federal and provincial governments and using the cash received as a result of the Merger, the Company anticipates making significant capital expenditures relating to its modernization and expansion program over the next five years, including substantial investment in EAF steelmaking.

On November 29, 2021, the Canada Infrastructure Bank (CIB) and the Company entered into a definitive agreement with respect to the CIB’s previously announced commitment to finance green house gas reduction industrial initiatives, including the transformational upgrade of the Company’s steelmaking processes at its facility in Sault Ste. Marie, Ontario. Under the terms of the agreement, the CIB will provide up to CDN $220 million in low cost financing towards the approximately CDN $700 million transformation to electric arc furnace (EAF) steelmaking.

The above capital sources and future cash flows from operating activities avail the Company of substantial financial resources to complete its proposed expansion plans. The Company’s business generates significant cash flow and the Company does not anticipate any issues with generating sufficient cash and cash equivalents, both in the short term and the long term, when combined with the cash made available as a result of the Merger and the PIPE Investment and under the SIF Funding and the CIB Funding, to meet its planned growth or to fund development activities.

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Contractual Obligations and Off Balance Sheet Arrangements

The following table presents, at December 31, 2021, the Company’s obligations and commitments to make future payments under contracts and contingent commitments. The following figures assume that the December 31, 2021, Canadian/US dollar exchange rate of US$1.00 = $0.7888 remains constant throughout the periods indicated.

Purchase obligations, which represent the Company’s most significant contractual obligations across the periods indicated above, are comprised of contracts to purchase the raw materials required to manufacture the Company’s products and therefore contribute directly to the Company’s ability to generate revenue. The Company enters into such contracts on an ongoing basis based on its production requirements to secure favorable raw material pricing and consistency of supply. The majority of the Company’s purchase obligations mature in less than one year and are contracted based on the Company’s anticipated production, and the revenue generated from such production is applied to satisfy such purchase obligations.

Off balance sheet arrangements include letters of credit, and operating lease obligations as disclosed above. At December 31, 2021, the Company had $36.9 million (US$29.1 million) (March 31, 2021 - $27.4 million (US$21.8 million)) of outstanding letters of credit.

As discussed above, the Company maintains defined benefit pension plans and other post-employment benefit plans. At December 31, 2021, the Company’s net obligation in respect of its defined benefit pension plans was $115.1 million (March 31, 2021 - $170.1 million) and the Company’s obligation in respect of its other post-employment benefits plans was $309.7 million (March 31, 2021 – $297.8 million).

The Company’s obligations, commitments and future payments under contract are expected to be financed through cash flow from operations and funds from the Company’s Revolving Credit Facility. Any default in the Company’s ability to meet such commitments and future payments could have a material and adverse effect on the Company.

Related Party Transactions

As a result of the Merger, the Company is no longer a related party of Algoma Steel Parent S.C.A., and its commonly controlled affiliates. Further, Algoma Steel Parent S.C.A. settled its promissory note payable to the Company for $2.2 million (US $1.7 million) by receiving a net amount of $6.5 million (US $5.0 million) in exchange for settling this note payable with the return of capital of $8.3 million (US $6.7 million), as explained in Note 22. To facilitate this payment, the Company entered an agreement with its subsidiary, Algoma Steel Inc. to pay the net amount of $6.5 million (US $5.0 million) on its behalf. The Company settled the loan to its subsidiary, Algoma Steel Inc. with net proceeds from the merger transaction.

There are no ongoing contractual or other commitments with related parties.

Financial Instruments

The Company’s financial assets and liabilities (financial instruments) include cash, restricted cash, accounts receivable, margin payments, bank indebtedness, accounts payable and accrued liabilities, taxes payable and accrued taxes, derivative financial instruments, warrant liability, earnout liability and long-term governmental loans.

Financial assets and financial liabilities, including derivatives, are recognized when the Company becomes a party to the contractual provisions of the financial instrument or non-financial derivative contract. Financial instruments are disclosed in Note 25 to the December 31, 2021 condensed interim consolidated financial statements.

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Critical Accounting Estimates

As disclosed in Note 5 of the March 31, 2021 audited consolidated financial statements, the preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the years.

Significant items subject to such estimates and assumptions include the going concern assessment, allowance for doubtful accounts, carrying amount and useful life of property, plant and equipment and intangible assets, defined benefit retirement plans and income tax expense and scientific research and development investment tax credits. Further, Note 28 to the condensed interim consolidated financial statements discloses the basis for determining the fair value of the warrant, earnout and share-based compensation liabilities. Actual results could differ from those estimates.

Going Concern Assessment

The Company continually monitors its ability to continue on a going concern basis. The Company assesses whether there are any indications that an impairment loss may have occurred. In doing so, the Company makes judgements, based on an internally generated short-term cash flow forecast, in concluding that there are no material uncertainties related to events or conditions that cast substantial doubt upon the Company’s ability to continue as a going concern. Judgements and estimates are made in forming assumptions of future activities, future cash flows and timing of those cash flows. Significant assumptions used in preparing the short-term cash flow forecast include, but are not limited to, short-term commodity prices, production volumes, reserves, operating costs, financing costs and development capital. Changes to these assumptions could affect the estimate of the Company’s available liquidity and conclusion as to whether there are material uncertainties related to events or conditions that cast substantial doubt upon the Company’s ability to continue as a going concern.

Allowance for doubtful accounts

Management analyzes accounts receivable to determine the allowance for doubtful accounts by assessing the collectability of receivables owing from each individual customer. This assessment takes into consideration certain factors including the age of outstanding receivable, customer operating performance, historical payment patterns and current collection efforts, relevant forward looking information and the Company’s security interests, if any.

Useful lives of property, plant and equipment and intangible assets

The Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each annual reporting period, and whenever events or circumstances indicate a change in useful life. Estimated useful lives of items of property, plant and equipment and intangible assets are based on a best estimate and the actual useful lives may be different. The useful life of property, plant and equipment and intangible assets affects the amount of amortization and the net book value disclosed in the Company’s financial statements.

Impairment of property, plant and equipment and intangible assets

Any accounting estimate related to impairment of property, plant and equipment and intangible assets require the Company to make assumptions about future cash flows and discount rates. Further, determining whether property, plant and equipment and intangible assets are impaired requires the Company to determine the recoverable amount of the cash generated unit (“CGU”) to which the asset is allocated. To determine the recoverable amount of the CGU, management is required to estimate its fair value. To calculate the value of the CGU in use, management determines expected future cash flows,

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which involves, among other items, realization rates on future steel output, costs and volume of production, growth rate, and the estimated selling costs, using an appropriate weighted average cost of capital. Assumptions about future cash flows require significant judgement because actual operating levels have fluctuated in the past and are expected to do so in the future.

Defined Benefit Retirement Plans

The determination of employee benefit expense and obligations requires the use of assumptions such as the discount rate applied to determine the present value of all future cash flows expected in the plan. Since the determination of the cost and obligations associated with employee future benefits requires the use of various assumptions, there is measurement uncertainty inherent in the actuarial valuation process. Actual results could differ from estimated results which are based on assumptions.

Taxation

The Company computes an income tax provision in each of the jurisdictions in which it operates. Actual amounts of income tax expense and scientific research and experimental development investment tax credits only become final upon filing and acceptance of the returns by the relevant authorities, which occur subsequent to the issuance of the consolidated financial statements.

Additionally, the estimation of income taxes includes evaluating the recoverability of deferred income tax assets based on an assessment of the ability to use the underlying future tax deductions before they expire against future taxable income. The assessment is based upon existing tax laws and estimates of future taxable income. To the extent estimates differ from the final tax return, (loss) income would be affected in a subsequent period. The Company will file tax returns that may contain interpretations of tax law and estimates. Positions taken and estimates utilized by the Company may be challenged by the relevant tax authorities. Rulings that alter tax returns filed may require adjustment in the future.

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Selected Quarterly Information

Trend Analysis

The Company’s financial performance for the third quarter of fiscal year end 2022 (“Q3 2022”) decreased from the second quarter of fiscal year end 2022 (“Q2 2022”), primarily due to listing expense as a result of the Merger. This was offset, in part, by increased steel revenue mostly due to higher average steel selling prices. The following discussion reflects the Company’s trend analysis in chronological order:

Revenue:

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Net income (loss):

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Exhibit 99.2

Condensed Interim Consolidated Financial Statements

ALGOMA STEEL GROUP INC.

(Unaudited)

As at December 31, 2021 and March 31, 2021

and for the three and nine month periods ended

December 31, 2021 and 2020

Algoma Steel Group Inc.

Condensed Interim Consolidated Statements of Net Income (Loss)

(Unaudited)

See accompanying notes to the condensed interim consolidated financial statements

2

Algoma Steel Group Inc.

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

See accompanying notes to the condensed interim consolidated financial statements

3

Algoma Steel Group Inc.

Condensed Interim Consolidated Statements of Financial Position

(Unaudited)

See accompanying notes to the condensed interim consolidated financial statements

4

Algoma Steel Group Inc.

Condensed Interim Consolidated Statements of Changes in Shareholder’s Equity

(Unaudited)