Sigma Lithium Corporation

Good morning, ladies and gentlemen. Welcome to Sigma Lithium 2025 Third Quarter Earnings Conference Call. We would like to inform you that this event has been recorded and all participants will be enlisted on the mode during the company's presentation. There will be a replay for this call on the company's website. After the prepared remarks, there will be a question and answer section for participants. At that time, further instructions will be provided. I would now like to turn the conference over to Anna Hartley, Vice President of Investor Relations. Please go ahead, Anna.

I'd like to welcome you to our third quarter earnings conference call. Joining me on the call today is Anna Cabral, CEO of Sigma Lithium. Our third quarter 2025 earnings press release presentation and corresponding documents are available on our website. I will now turn the call over to Anna Cabral.

Good morning, everyone. It's with great pleasure to present Sigma Lithium's third quarter of 2025 results directly from the Amazon, where COP 30, the United Nations Climate Conference, is being held. Sigma is here as a member of the Brazilian delegation, We have been engaged in high level dialogues with other delegations from all over the world. And we are showcasing how we have implemented and executed on every single one of our targets. sustainability set out in 2017, when we made the original investment in the company. Since then, we have managed to build the most sustainable lithium beneficiation plant in the world, digitalized and using algorithms that employ bots or AI to become more and more efficient in treating the mineralogy of our mines and increasing plant recovery. So our plant is where technology meets Metallurgy meets mining and delivers sustainability, doing more with less. Please kindly read the disclaimers. We're going to make quite a number of forward-looking statements and projections and guidances as we go through this presentation. We're very proud of our accomplishments in the third quarter, especially considering the state of the lithium markets throughout the quarter. We have managed to increase the resilience of our business significantly, achieving the following five initiatives. First, we substantially increased our net revenues through optimum commercial strategy. we increased revenues by 69% quarter on quarter and by 36% if compared to the third quarter of last year. We have generated cash of $31 million resulting from final price settlements of sales that happened throughout the year. In addition, We expect cash generation from sales over processing high purity, high grade middlings, which are the result of our sustainable efforts. We have approximately a million tons of those dry stacked high purity materials. We are also in the process of successfully upgrading our mining operations. Our plant has already restarted this week. Our mine is expected to resume operations within two to three weeks, and Sigma will operate the mine with equipment leased directly from the manufacturer. Lastly, we continue to maintain financial discipline, and that's demonstrated by the leveraging on our short-term trade finance debt by 43% this year, despite the challenging lithium pricing environment. On this page, we showcase the financial highlights of the third quarter of 25, related to the increased cash margins and the deleveraging of our short-term trade finance debt. Our revenues have increased by 69% if compared to last quarter. More importantly, we increased revenues by 36% versus the third quarter of last year. Our pricing also increased by 33% versus last quarter. So the revenues increase as a result of our efficiency increase. Our margins also increased. The operating margin increased in 42% versus the third quarter. And the net margin increased 67% of last year. Both margins also increased substantially versus the previous quarter. But by showcasing the increase versus last year, we demonstrate how we increase the resilience and the strength of the business. Our deleveraging is demonstrated by the decrease in trade finance. We managed to pay down export financing short-term debt in 43% this year. The remaining balance is just $33.8 million as of November 13th. Our cash has also increased by 42% versus last quarter, which is a trend very different from our peers, which had burned cash. Our current cash today is $21 million plus $8 million off cash. incremental trade receivables, all related to sales realized until the third quarter of 2025. On this page, we discuss our stellar record of zero accidents. We have achieved 787 consecutive days without accidents with lost time injury. It's over two years with zero records. This demonstrates our operational excellence in addition to managing to continuously decrease our costs. So we haven't cut costs at the expense of health and safety. Our TRFIR is 1.79 amongst the lowest in the world. This results in employee engagement and safety processes, a direct connection to the factory floor, which leads us to enhanced performance and ideas for cost optimization coming straight from our employees. So it's a self-fulfilling circle where focusing on safety enables us to keep on getting better, both operationally by increasing efficiency, but also cost-wise by gaining ideas directly from employees on how to be lower cost. We're very proud of this. On this page, we're going to start to discuss our financial performance this quarter. On this slide, we demonstrate how Sigma achieved an optimum commercial strategy which allowed us to price efficiently our material, capturing the price cycle, despite the price volatility that took over the metals market throughout the period that followed Liberation Day and the tariffs. You can see on this chart in red the sales on provisional prices and in green the sales on final prices. And it's visible that we were able to capture a much higher final price as we managed to authorize our clients to resell the products and settle our final prices. These adjustments resulted in incremental cash revenues for this quarter. So, a picture is a thousand words. And here is how that translates into cash generation. This commercial success resulted in incremental cash from the final settlement with the trade partners. And you can see that by looking at the initial cash position at the end of the second quarter. the increasing cash from operations on a provisional price basis of $30 million. Then the generation of trade receivables booked on sales up until third quarter on provisional prices of $20 million. That got converted into cash as of now, but that refers to sales with a cutoff on the third quarter. In addition to that, we had another incremental increase in trade receivables because of the extra increasing prices that we have been experiencing to date at $1,700 per ton. So that's another $8 million, which means that there were $28 million extra that resulted from our optimum commercial strategy. So, when you observe our cash as of today, we have $21 million in the bank, plus $8 million of settled trades at current market prices. Now, in addition, we have $33 million of potential sale of lithium middlings, which are high purity middlings or dry stacked material that currently sits both at the port and at our plant. at current market prices quoted at Shanghai metal markets of $112 per ton, net of transportation costs to port for part of it and to China for the materials sitting at the port. So, a significant cash boost coming from materials that have already been produced. but more importantly, a direct result of our investment in dry stacking our tailings and recycling and reprocessing and optimizing our lithium green tech industrial plant. On this page, we show what that cash position enabled us to do. We managed to pay down our short-term trade finance 60% year to date to November. If you cut it off as of October, we paid it down 44%. That's a significant debt reduction, especially considering the down markets and the lithium prices volatility we experienced this year. So we had a cash increase and we decreased our short-term trade finance expensive debt. That's a significant accomplishment in financial results. for a year such as these English markets. On this page, we demonstrate how the debt maturity profile will be lengthened further because all that's left now is essentially $10 million that we already paid down, plus $100 million that will be paid down next year in December, which relates to our shareholder debt, whose generosity has allowed us to get here, to commission our green tech plant, and to continue to make improvements to achieve the stellar operational performance the plant has been delivering. So, we are in a very comfortable debt position as of November 13th. And we demonstrate here on this page all the short-term debt that we have managed to pay down or roll. This page demonstrates our low-cost resilience and the fact that we are a source of responsible lithium production in this industry. we have managed to maintain the highest sustainability and ethical sourcing standards throughout market prices. meaning our resilience is here to stay, even with the slight decrease in production, which is shown here in the little green over our regular costs, we're still lower than the lowest cost producer for non-integrated lithium oxide concentrate in Africa. And this location to the very left of the non-integrated concentration supply curve is exactly what we plan to remain throughout the foreseeable future. On this page, we demonstrate how the lower production levels in September have not really affected our low cost position. In other words, the slight increase in cost maintain the zone guidance for the all-in sustaining cost. And that's demonstrated by the chart to the right, where we show the nine-month all-in sustaining cost versus the full-year guidance we provided at the beginning of the year. This all-in sustaining cost includes interest, capex, maintenance, all of it. royalties, SG&A, environmental and social that is voluntary, so we're very much on track. We're issuing guidance of this only sustaining cost becoming $560, meaning lowering to $560 for 2026, based solely on production from the first plant. Now, the increase in CIF cash costs and plant gate costs are easily corrected once we return to full production in the first quarter of 26. So, our low-cost position is unmatched and unchanged. On this slide, we basically outline the offtake agreements expected for this year. They're basically enabled by the significant commercial leverage and power we achieved by being an ethical producer and one of the lowest cost producers of lithium concentrate globally. Now, what we've done, we tailored different types of off-takes to cater for different specific client needs across geographies. So this year, what we have is three different kinds of off-takes being discussed with three very different kinds of clients. The first kind is what we call the three-month rolling off-take. They're done at market prices, and these are prepayment of upcoming production until March. The objective is to provide Sigma with low-cost working capital. The second kind of offtake is a 20,000 tons for three years for $25 million. It's a small long-term offtake. And the use of proceeds will be to pay for the mining equipment that will help us upgrade our mining operations, meaning the larger scale trucks and overall excavators and mining equipment. The third category is a conventional offtake or prepayment being negotiated with a global European trading company. So the user proceeds is to deploy towards our expansion plans remaining on track for our growth strategy next year. We are in contract negotiation stages with that one. Now, for 2026, we still have another 120,000 tons of product uncommitted to be contracted into offtakes. The objective is to strike conventional offtakes for both amounts. The first amount for 80,000 tons will be assigned to a regular end user. And the objective is to repay the long-term shareholder debt that was generously enough offered to Sigma in December 2022 and enabled us to get here to this very strong operational position. We are in contract negotiations for that one. The second offtake is going to be achieved against an agent, meaning a trading company, which, again, is going to be a typical conventional offtake, once again deployed towards building and delivering on our growth strategy, meaning building a second plot. and this offtake is under contract negotiation. So we're expecting to announce three offtakes still this year and two more next year. This page demonstrates our production and cost guidance for the upcoming years, 2026 and 2027. Our cash flow is poised to increase as our production efficiency increases with the execution of our strategic plan. With Plant 1 alone, we're bound to generate an all-in sustaining cost of $560 per ton, and that includes everything, including interest expenses. Now, at the current price levels of $1,000 per ton, that represents a free cash flow generation of $132 million. Once we complete Plant 2 by the end of next year, we expect to have 550,000 tons of production throughout 2027, which will lower our all-in sustaining cost to $500 approximately. that at current price points for lithium is expected to generate a free cash flow of approximately $270 million. So this page really demonstrates how by remaining the lowest cost producer globally, we are bound to benefit with excess returns from this relative increase in lithium prices, from $700 per ton at mid-third quarter to $1,000 per ton as of now, November 13th. This page demonstrates how our Green Tech Plan upgrade into the 3.0 version, concluded and executed in November 24, was not accompanied with... Pause, pause. De novo, de novo, do zero. Um, dois, três. This page demonstrates how the upgrade in our Greentech plant into a 3.0 version, which was concluded in November of 24 of last year, one year ago, was not followed by our mining operations. Here at SIGMA, just to recap, we have two different operations which are integrated. We have a mine that delivers raw material to a state-of-the-art industrial lithium beneficiation plant, the Green Tech plant. That is automated, digitalized, and run by an algorithm. Throughout the first nine months of this year, what we could demonstrate is that the plant outperformance was compensating for the mine. You can clearly see that in the chart at the bottom left of the slide, where we had an 11% increase in production in the first nine months of this year. Now, the chart above show and demonstrate the significant upgrade that took place in the green tech plant last year, when from the beginning of 24 to the end of 24, the production went up 43%. In other words, The plant can produce 300,000 tons of lithium concentrate if properly fed with fresh rock, fresh spodumene ore. It processes it efficiently because the plant recoveries are 70%. That made it clear that a mining upgrade was required. So we reassessed our mining plan and concluded that we needed larger equipment scale to basically ensure higher volumes that would be moved faster. More importantly, that would also ensure that we would maintain our stellar safety and health record at our operations. The charts on the right break down the two quarters, the second quarter 25 and the third quarter 25. And it clearly shows that the last month of the third quarter when the mining equipment provider was demobilized was where we had a significant production decrease because they were simply demobilizing and phasing down their efforts in operating and moving material at the expected productivity rates. This page shows what's the way forward. Well, we have mastered dense media separation technology, achieving 70% recovered. Let me go back to the beginning. Pause, pause. Again. This page demonstrates our way forward in our operational plan. Clearly, we have mastered dense media separation technology for lithium processing, achieving 70% recovery rates. That's equivalent to flotation. We have demonstrated also greater efficiency and reliability throughout 2025. And now we're going to match it by upgrading our mining operations. First, our plant. It has already restarted. So it restarted processing high-grade material that's in our current operating site. The target for 2026 is to achieve full plant operational capacity of 300,000 tons of lithium oxide concentrate. We have been recurrently achieving unprecedented recovery levels throughout the year, up until the third quarter. So that's where our confidence comes from, from this track record. Now, on the feed of the plant, clearly a mining upgrade was required and is underway. We reassessed the mining plant and the geometry. So, we observed that we have mined about 798,000 tons in July 2020. and 659,000 tons in August. We continue to mine waste and strip in order to optimize geometry. And that is something I talked about during our second quarter 25 announcement. The ore grade is being perfectly aligned with our mine plan with no significant dilutions. So we maintain the cadence of the ore grade fed to the plot. As a result, we're very well positioned to resume our mining operations within two to three weeks once we're able to mobilize large-scale equipment so that we can increase the volume mined and the operational speed at which we advance the geometry and increase mining volumes. So with those upgrades, we expect to evolve our production capabilities at the plant, already in the first quarter of 26, reaching 73,000 tons of lithium oxide concentrate produced. That's the guidance for the first quarter of 26. This slide demonstrates how By being the low-cost and most sustainable producer at large scale, we have been able to obtain significant support by our clients to execute on our expansion plans. That's financial support and off-take support. We plan to reach 80,000 tons of lithium carbonate equivalent upon completion of our phase two expansion next year. By just adding a third production line, which infrastructure is already on site, we expected to achieve 120,000 tons of LCE equivalent of production. That is a consequence of Sigma already being a pillar throughout global lithium supply chains. So this underpins the financial support that we receive from our very large clients downstream in the lithium supply chain. So we also conclude by outlining how we're going to continue to deliver on our strategic plan for 2025. First, we're going to conclude our take agreements as we have outlined in the presentation. Second, we have achieved financial strength, but we're going to continue to do so by continuing to close final prices on the provisional price sales that we have achieved year to date until the third quarter, and we'll continue to deliver throughout the fourth quarter. We have the leverage, and we'll continue to deliver by basically paying down expensive short-term trade finance debt. We're also going to monetize existing lithium products that are currently sitting in our plant and in the port, taking advantage of the current robust pricing environment where demand for these products become actual. Currently, these products are priced at about $120 per ton, which could bring the additional revenues of $33 million throughout the fourth quarter. Thirdly, we are going to upgrade our mining operations to increase the green tech plant production scale, more feed, more concentrate. So there's another advantage to that, which means we're going to lower the structural costs of this company by lowering the plant gate costs. by increasing production volume volume in by actually decreasing the absolute number of mining costs, which represent two-thirds of our plant gate costs. Fourth, we're going to continue to partner with our very large clients with very large balance sheets to create commercial strategies that allows us to navigate lithium price seasonality. benefiting from achieving higher prices during the high seasonality. Number five, we're going to continue to increase the scale of our suppliers so that we can obtain working capital support. This is a strategy where we're simply matching or copying what the global leaders in downstream, including battery makers and car makers, receive from their own suppliers in the duration of their account payables. The average of the largest car makers in the world is from 130 days to 180 days to 210 days. We've been barely doing 30 days of deadlines for suppliers, so we're lengthening that period by leaning on larger suppliers. There are as large as us. I want to thank you for the opportunity to present you our third quarter earnings, and I'm now going to open the floor for the Q&A questions that are going to be submitted to our moderator through the chat function of this Zoom.