Full Year 2023 Sigma Lithium Corp Earnings Call
Call is being recorded and is broadcast live on signals website.
On the call today is the company's CEO, Anna Cabral Gardner and company Executive Vice President Matthew.
We will now turn the call over to Matthew.
Yeah.
Thank you Dennis.
This morning before market opened we announced a final investment decision for our phase two expansion as well as preliminary unaudited <unk> and full year 2023 financial results.
Before we begin I would like to cover a few items.
During the presentation you hear a certain forward looking statements concerning our plans and expectations.
I note that actual events or results may differ materially given market conditions and our operations. Additionally earnings referenced in this presentation may exclude certain noncore or nonrecurring items had been based on unaudited financial statements reconciliations to the most direct comparable <unk> financial measures and other associated disclosures will be made available.
Global.
The slides will be posted on our website and following the call a post additional slides.
At our financial performance information with that I'll pass the call over to Anna.
Yeah.
Sure.
Well hi, everyone.
Good morning, we are absolutely delighted that we are announcing the final investment decision and the initiation of construction to double our production capacity from.
70000 tons.
Lithium concentrate per year.
Two 520000 tons of lithium concentrate per year.
'twenty to 'twenty three was just a transformational year for US we became a major lithium producer.
And as an investor operating team, we own more than 50% of Sigma. So we are all in together with with all of you our shareholders.
Oh, I am going to walk you through the key items. The five key competitive advantages that gives us so much confidence to make the investment decision.
First we're a large scale. So we became the fourth largest mineral industrial lithium complex globally.
Secondly, we are the sixth largest global producer that includes brine and rock so we've got scale.
More.
<unk>, we have low cost we have achieved the second lowest cost in the industry amongst our peers.
In parallel we are producing a premium <unk> material, we call lithium five 8.0, which is the quintuple zero it is.
Irrespectively of environmental and social sustainability.
Physically and chemically is the best chemical grade and most sustainable lithium in the world has unique metallurgical properties.
So.
As a result, we made the final investment decision to build double scale to deliver more of that material. So the phase two is going to be the same build team of phase, one which delivered phase one successfully on budget and on time.
More importantly, and I think lastly, a key point in this confidence behind.
Behind investment decision was that is the result of the very successful drilling campaign of 'twenty to 'twenty three we managed to increase the project life to over 25 years. So we have now permanence and longevity.
At 109 million tons of mineral resource, we've a forecasted 150 million tons of mineral resource.
Yeah.
On the next slide.
You can see.
We want a demonstrated quantitatively that we've surpassed every lithium industry record and we've achieved full production capacity just at the beginning just a second quarter of operations, we reached 270000 tonnes of material from.
September 23 to September 24.
Meaning on an annualized basis, we have 12 months.
We have reached 12 month capacity and again within just six months of commissioning.
We have managed to produce and deliver in those six months of 'twenty to 'twenty three.
105000 tons of this material.
We caught quite a lot still off the very great market of last year.
And as a result of the Supreme Superior properties.
The material, we achieved a $1333 per ton of average price premium price for the material.
Net net we're getting a hut $1160 per ton of this material again result solely off the outstanding metallurgical and chemical properties of the product.
We have managed to reach a cash cost at blend which is the second lowest amongst the hard rock lithium producers and these catch cash cost get lower as we get bigger because we dilute our fixed costs by a larger production.
More importantly, we've done all of this while generating and conserving cash in our typical sigma discipline in other words, we have a cash position of $109 $4 million sitting in our balance sheet.
So theoretically we have an entire phase two plant right there in our balance sheet ready to be deployed.
So as a result, we're initiating two increase our.
Initiating phase two to increase our scale in 100% we started with all the construction activities mobilization contracting promo and will double capacity to 520000 tonnes. So it is more of the same because it is working and it's.
Working extremely well irrespectively of lithium price cycles.
And I think lastly.
Again, we got to 109 million tons of audited mineral resource.
With an.
Unexceptional high grade of lithium oxide, which means that we have over 25 years of life of the project, but our resource last longer because he has higher lithium oxide. So we are a 100%.
One four largest producing industrial lithium complex in the world and the only one to produce this five X 5.0, carbon lithium which makes us all very pride proud because for us in our team investor operators you wouldn't be.
Any point in getting here without being able to be.
In consistency with the supply chain that we are honored to be part of this green supply chain that delivers this green electric vehicles.
Yeah.
Yeah.
So here's a picture of this industrial plant that kind of makes this magic. This is the Cleantech innovation well you see in dotted Red is this third module of the plant. This was a lot of work to put together, but that is actually up the great responsible to deliver the quintile.
<unk> zero led to the low cost and green lithium for Green cars and again, it's green lithium for Green cars not brown lithium for Green cars why is that we'd have zero toxic chemicals is dense media separation center centrifuges and technology.
We achieved zero carbon we use zero drinking water, we've been using she was great quality water.
We produced the lithium with zero tailing dams, and we use zero debt to power our power is clean and renewable.
Yeah.
On the next page is an illustration of us.
In the lithium world in General and you can clearly see numbers numbers are quite straightforward. We have our starting point at 85 million tons, which is equivalent to $2 7 million tons of L. C.
Resources, then we delivered the first leg of the mineral resource update.
Which got us to $3 3 million tonnes of LTE resources.
And then we have the expected a further increase its at 4.8 million tons of L. C equivalent resources on this page you can clearly see where we are in scale in Brown, you see our peers up all of them in Australia.
All of them, let you mean industrial mineral complexes in production in bubble I've been known producing so we basically are the four largest lithium industrial mineral complex in production. We are of that scale and this is just our first year of operation.
It shows that we have permanent because we are as large as the greatest project in the world sitting in Australia, we joined that club.
Here is when we stack us up against all producers, including Brian producers and again the charge is pretty self explanatory, we became the sixth largest producer globally, but because we commissioned our operations with.
The headwinds of the lithium cycle, reaching bottom we never got the opportunity to be repriced as the large scale producer that we are and here. We're gonna demonstrates visually the disconnect. When you seen dark green is the volume in LTE equivalent.
'twenty to 'twenty four production.
In pop in in Gray you can see the market cap current of these companies clearly when you look at Sigma at 37000 tons of LTE equivalent of production for 'twenty to 'twenty four like right now.
You look at our market cap, we're really priced like a developer so the discrepancy speaks for itself and the the the plan for this year and our number one mission is to close that gap up basically doing what were doing demonstrating that we're here to stay as a large supply.
Or and this next slide proves it we're going into a ninth shipment we have demonstrated resilience.
And the sheer metallurgical product quality of this material, we established shipment cadence basically on month five after commissioning by reaching capacity annualized capacity, we've done all of that against terrible headwinds. So we.
Now have a track record of being a reliable large scale supplier to D V battery chain.
And in the spirit of transparency, we're showing every shipment in every implied price per ton of every shipment. So we've achieved this on merit.
Slightly bring uniting over our peers because the product has what we call value in use superior metallurgical properties up that deliver measurable quantifiable cost savings to the customers. So we're here to stay where large.
K O producers, we are a force for good in the industry.
On this next slide a bit more on premium pricing up we've been achieving a meaningful final premium price. This month, we able we were able to close the gap completely eliminated provisional pricing. So that once again validates this outstanding metallurgy.
Nicole and chemical properties up the product the product is better you deliver savings. So we're not capturing all of those savings we're capturing some of it that becomes a premium pricing. So just now for its eight shipment we've achieved 1333.
Nameplate price, which include the D. C Metro V. T is a $1160 per ton. So that's a very decent premium for you know the new producer on the block this price again as final and non provisional so.
It's a meaningful increase over the previous premium prices. We already achieved we showed you on the previous pages up and if you translate that into a variable price Orient to a reference that's equivalent to 8.75% of the London metals exchange lithium.
I see I F quote.
So it shows that we're grabbing a significant portion of the value of the supply chain.
The price discovery with transparent he was driven through close private bidding and the purpose of it is working partnership with Glencore, our marketing and commercial partner to maximize the value of this superior product for Sigma.
On this next slide again more of why do we have value in use what are these chemical and physical properties did allow us to premier and I's even against headwinds first it's because the product is high purity high purity means low iron ore.
Syed low potassium oxide low sodium Mac oxide. These are three let's say impediments to achieving ultra high purity lithium chemicals at a low cost for our clients. It also has low Micah, which again is another stumbling block.
In the refining process, what's interesting, though is that when you look at the physical properties of the product we have a dry course, the dry course behaves in the calcination stage at the keel beautifully.
Z heats up and it becomes better spodumene. So there are efficiency savings right. There in the form of saved energy. So this whole combination delivers a saving that's measurable how so the downstream or just needs.
Seven tons of a product to produce altria high purity lithium hydroxide. When you look at the comparable product nine to 10 tons of DAC comparable product is needed. So there's 3000 tons of savings for our client portal.
<unk> of lithium hydroxide, which could technically translate as about $330 per ton of savings for us. If you look at just seven tons and again, it's visual you can look at the pictures and you can see the difference our.
Ours is this very light.
Greenish which means spirits he of course.
Material buses, the muddy Doc type wet materials.
From our competitors.
And again, here's the Kinder pole zero I'll be brief, but we are very proud to say that we've done all of that staying true to purpose, whether he matters or not whether we get a green premium or not that is not why we do it we do this because 12 years ago, we started.
On this journey of being investor operators in Sigma to deliver just that to be at the leading edge of sustainability zero carbon zero chemical zero toxic chemicals, no tailing dams are no cannibalization of the community board potable drinking water with clean.
Power. So we did exactly what we said we did we didn't increase our production cost as a result, but unfortunately, we do not get a green premium, but again, our product is up better.
So a bit about up okay.
A bit about the numbers right. We're built to last I mean, we built this company with draconian financial discipline over.
Over 12 years. So ironically this is probably one of our best moments because it's the first year we have revenues.
And more importantly, we're able to quantifiably demonstrates that we're low cost. So we have revenues we have low cost we have cash flow.
And the consistency of delivery and production of our Green tax plan keeps on driving revenues keeps on achieving that at very low cost, creating what we call commodity cycle resilience, so irrespective of commodity cycles, we're generating cash.
Cash and we have a very robust business as Jim calling us to say, we're built to last.
In 2023, our full year dollar revenues War 135 million U S dollars, we shipped 102000 tonnes of material. We produced 105000, but the average realized price per ton of material was 1300 <unk>.
The one.
Dollars per ton or F O b adjusted cost at plant was $427 a tonne.
<unk> be a just a cost at port of Victoria, meaning taking from the villages kitchen going it to the port of Victoria was $485, but done so in China, all the way in a Chinese board is $565 per ton, so very very close to the guidance.
Provided to the market as to expect for the full year.
As we keep on deep cluttering or as our friend, Joe said, removing the noise out of our financials given that this was a hybrid ear part commissioning bar production. So in margins the margins are pretty spectacular.
Our F O B plus margin is 67% port margin, 63% cash costs, Cif, China margin, 57% at well some people consider to be the bottom of the cycle. This is mathematics, the mathematics off.
Commodity cycle resilience and as we say mathematics has no opinion mathematics is just a fact.
So on the next page is again more mathematics for full year, we've already given you the revenues the shipped them out and the price per ton now, let's move on to E. B that we posted an accounting EBITDA.
<unk>, meaning with the noise of commissioning of $24 million up from July to December because that's when we earned it.
Less than half a year now we adjusted for nonrecurring items, which include things such as.
A R. S you expenses and commissioning costs. So the pure EBITDA margin F. O B revenues was 18%, but the adjusted EBITDA margin for the nonrecurring items and noncash items such as stock compensation is 36.
Percent, so again, a very robust EBITDA margin to be expected from us in our very first year.
So.
It is and it is this low the low production cost that drive our ability to generate free cash flow as I said earlier, we are draconian when he caught when it comes to cost we always do more with less why well. We're all owners were all investors.
Operators, it's not somebody else's money, it's our money every employee every senior manager is a shareholder so we look after our our our money we look after our expenditures like you look after you know the money that goes into our wallets.
So fourth quarter cash unit operating cost at Victoria is $442, a ton nonrecurring commissioning expenses amount to about $94 a ton. So the pro forma fourth quarter cash unit operating cost of concentrate amounted to $455 a ton.
Done my partner, Matt is going to give you a bridge in a lot more detail in a second so we're targeting for the third quarter 24 at an average.
So very close to the guidance $420 a ton F O B, Victoria $370 a ton plant gate.
Cost initiatives include a number of things diversifying suppliers and service providers.
We are onboarding contract labor, which was important when we commission and that was one of the expenses, we adjust it out meaning deemed in years off the the construction companies. The engineering companies that stayed behind to help us operate the plant and commission the plant, they're no longer with us.
We now have our own teams and we've optimized maintenance schedules and we're running dislike of clock, we have predictability and umbrella maintenance contracts with Rob main parts manufacturers.
So now I'm passing it on to Matt Deyoe My partner to go over the bridge for the cost Matt you got it.
Thank you Anna so.
Our reported <unk> cost in the fourth quarter as we had highlighted in the release was 400 $549 per ton.
Within <unk>, where a number of costs associated with commissioning expenses that were more of a <unk> phenomenon, but booked within the October November timeframe, there real cost, we incurred them, but on a pro forma basis. They didn't recur in December or January or February. So we feel very confident that those are.
As you say non recurring that would drive a pro forma F&B inventory at cost of about $4 55.
If we strip out the $70 per ton in.
Hi, great frame.
We ended up with a <unk> pro forma plant gate cost of about three five within the fourth quarter, that's not very far as we said from the $3 70 that we were highlighting three Q average and again [noise].
We haven't even really begun to benefit from the transition of contract labor to salaried domestic labor some of the diversification of our suppliers or the optimized maintenance schedule. So we think we have plenty of room or a good line of sight again due to hitting that 370 number obviously as you build this back up to get to.
And what we hope is a recurring reported costs all in you add back that spodumene freight royalties DNA and you should get to a rough ballpark of where we hope to be at least on a pro forma basis. If you were to think about for Q.
Other items that impacted the fourth quarter low grade trucking and warehousing.
We're not trucking our tailing soon to afford anymore at the moment given market conditions. So we don't expect those costs to continue as we mentioned those commissioning expenses are in there and we got some tailwind from equipment tax credits, so that kind of bridges perhaps.
The other.
Line items, just from a quarterly impact perspective, so again I think we feel pretty good.
With with the direction we're headed.
Back to you.
Yes, Sir so here. We go next page again. This is the bridge to EBITDA and again, it's a very straightforward bridge, we start with sales and we go all the way to the adjusted EBITDA and I want to make it clear we're adjusting for not for noncash items and for commissioning costs. So.
We delivered what we call an adjusted EBITDA of 49 million U S. Dollars. So we ended our very first year production with positive cash adjusted EBITDA and cash operating profit I mean, considering the downfall in lithium prices. We are all very proud of this accomplishment.
So here. It is we start with sales in dollars U S of 135 million US Then we have operating costs nonrecurring transport and warehousing, we get to that we get to the gross profit right. So at the gross profit than we have SG&A.
E S G and others and then we catch it. So then we start moving back into the items for adjustment Meanie stock based compensation gets added back.
Because it's a noncash item is an I F. R. S. At County item, then we get the DNA added back and then we get to the EBITDA. So all of this is accounting straight from our non audited financial information. So then we get to the 25 million U S of EBITDA.
Which I just showed you on the previous page and then we add back the nonrecurring SG&A, which has sparked mingled with the operating cost there, it's mostly related to commissioning costs for instance in commissioning engineering costs alone, we have something around $6 million we.
We have a series of this one off items, they're not going to repeat.
To be repeated on an ongoing basis and as a result shouldn't be part of your modeling of the company. So then we get to what we call adjusted EBITDA of 49 million U S dollars.
Yeah.
Okay.
Yeah.
So here a bit of kind of the breakdown of these nonrecurring our general and administrative expenses AR that we discussed before what are these items. What's in there. It's a mix of things for example, as you can see 25% of these numbers are related to the commissioning.
Team on phase one construction, 29% is legal I mean, we had litigation we had the strategic review, we were very well advised and very well guided by excellent lawyers, but they are one off so more important we had quite a lot of consulting work.
Which we're calling audit and accounting services, which were basically helping us put our S. E. T back on track classified cost properly I mean, we work kindly support supported by the folks at various Ah Ah consulting firms to get those put our back office in order.
So that's again an investment a one off investment in that.
Is that part of the business, we had known recoverable V to taxes of seven 4% and then transaction cost and commercial develop achieving the premium price cost travel cost money. We spent quite a lot of time in Asia working with clients.
Working with refineries working with battery makers working with end users to test product and establish ourselves again remember we started from zero. We did not have a book of clients. So we built an incredible book of clients that premium is our product because we worked with it.
Them to understand and to test and to demonstrate value and use that as the 28% nonrecurring. So we kind of kind of gave you a glance of what are these we call investment items. This is us investing in the resilience of our business up for the next call.
Quarters.
And up on the previous slide so just to recap then up number by number so.
Okay.
So this break down if you look at this 24 million U S dollars that bridge, the 25 accounting you'd be down to the $49 million of adjusted he be that that next page.
Basically shows you the breakdown of that 24.5 nonrecurring G&A expenses, we tried to give you as much clarity and insight as possible into a number that is an adjustment that is nonrecurring.
So now we go on to how are we gonna look like steady state well, we started with the current prices with the guidance, we provided which we stick to it. So again the estimated Oh, well then that concentrate price. We just obtained is 8160 whatever it is on the.
Cycle, it doesn't matter because our Cif costs in China are $510.
We believe the recurring SG&A to be about $48 and the maintenance capex to be about $18. So the the estimated run rate cash operating margin per ton is $584, which means we make money up with every <unk>.
Single chip right, so deduct up.
You know up 1106, the minus five and minus 48 minus 18. There you have it is a substantial gross margin. It's always a substantial net operating margin cash margin. So then when we go to mid cycle. This number get this number gets even bigger because.
Cuz, we achieve an even bigger run rate cash operating margin per ton. So we gave you the per ton numbers. So that you can actually model.
In whichever cutoffs you you you choose so we generate cash at the trough of the cycle at mid cycle would generate quite a lot of cash. So that's just a demonstration of our unique operational efficient efficiency and I must say that.
On this aspect as well we are in food tandon with where the electric vehicles industry is going it's now all about producing cheaper batteries cheaper car lower priced cars. So we are the low cost producers so where he.
Here to stay and these low costs are basically mainly do actually two hour lower greentech plant processing costs.
Of course, it is a dense media separation use its interest you gauge and uses less electricity, yes, our electricity is clean and cheaper, but our process just have basically seven six me via masses seven main.
Stabs plus the crusher, so we don't even crushed your powder. So it is a lower cost industrial process period, that's where we gain competitive advantage, we decided to invest in this technology Ah we took a contrarian view into <unk>.
19, and we proved that dense media separation technology is not only greener, but it's also more cost effective. So it is in tandem with the future of the industry in its two core characteristics.
Batteries have to be cheap and we believe materials in these batteries have to be green. So this is us. So when you perform a 'twenty 'twenty four estimated cash flow, assuming a $270000 270000 tons per year produced.
We have the equivalent of $158 million of estimated run rate run rate cash operations generated at current prices.
Mid cycle will be 249 million U S dollars, so pretty robust cash generation are when you go to 25 with doubling the capacity, we can dilute down a bit the obvious of fixed costs such as recurring SG&A so that number.
He was a bit higher if it goes higher than doubled it becomes 304 million U S dollars. So again as.
As we've shown on the bridge that my partner presented them you can clearly see that as actual costs, where there were delivering actual costs. They are closer to guidance because we built the guidance bottom up supplier by supplier before.
For providing it to the market.
And so we've all of that I think I might have given you're calling for it that we got a very resilient business. We have solid cash generation. So we're building our board in a green light its final investment decision and we are initiating the construction to double production capacity.
Two 520000 tons per year on the next page.
The picture a thousand words, you can clearly see that all we got to do is build another green tax line.
<unk>.
Oh that would cost about 100 million U S dollars and he will add 250000 tons of lithium concentrate production capacity.
Given our cash at hand, meaning cash at hand of $109 million in theory, we could actually build a plant right now just drawing down from our cash position now why is that and that's where our next slide is going to show.
This comes and we we haven't explained it as clearly we have trade finance, yes, we do it's revolving because it's linked to our ability to deliver what we just showed you cadence every month every ton produced generates permanence of trade finance in.
Brazil, it's called advancements of export contract Acte's. They last about 180 days, but they're linked to our ability to produce cadence of production. The thing, though is that we did not draw down these lines.
So, meaning sorry, we drew it down but we did not use it for trade finance so to make it clear we have the trade finance, we drew down the lines, but we did not use it to finance the working capital until the client.
Gives us why because this is where glencore steps in in addition to be a fantastic commercial and trade partner, they're also our financing backstop.
As you notice in the previous shipment they advance on a final and known provisional basis now 85% of our boats of our shipments. So we rely on glencore not only for their incredible marketing and commercial expertise, but also for <unk>.
Fighting us with the actual trade finance so the trade finance lines, we have in the banking system here.
Our city untouched in off balance sheet, so they're drawn and they are untouched and what are we going to do with them are we going to build a whole plant with them no were not but they are going to be the cash that will advance the funds for construction as we progress.
It's because the development bank lines of B M D S or on a reimbursement basis. So we pay we get reimbursed and the cash position is a demonstration that we have the ability to green light does entire construction right now too.
Today, we're the snapshot you got in front of you. So as we keep on generating more cash. We've every shipment we're extremely comfortable financially.
So again, we approved the initiation of construction of phase two because well we have a track record of building on schedule on budget, we actually broke the record of this industry of getting there fast so with a total capex of $100 million.
For the 250000 tons of increased capacity.
Essentially we're gonna have on with Beach, you enough lithium for 850000 tons of V. So we like to say to Sigma belongs to the World I mean, we can't deliver there's too many markets are well beyond our borders we are a global force for good in the industry.
The E. P. C. M is mobilizing to fleet for earthworks, we arent active construction a mobilization.
Preparation the phase two flow sheet is consistent with the processing sheet the technology to process. The process. The material just becomes improved so it's consistent it's consistent with all the lessons we learned with phase one so we have quite a lot.
Of technological advancements and improvements and lessons learned that we are building or we built into the engineering of a phase two so phase two is a better version of phase one up and the and this comes from savings in engineering optimized design.
Offsetting material cost well the dry stacking for once which didn't work in June so we figure out how to make it work, we're now going to build a dry stack and that's going to work immediately together with the module to the dense media separation plant. So we got technological improvements all along and this is <unk>.
Why we were eligible for the Brazilian development Bank innovation line, because there's innovation all around.
This flow sheet, and and again innovation as all of you innovators know is not and you'll recall thing is the sum of various optimizations in industrials like we are through it out a processing plant. So the sum of all of this innovation.
The sum of all these optimizations leads us to the.
Incredible production cadence and consistency that we weren't able to reach so the next slide well has a lot of me Tom.
This slide has a lot of information a lot of detail, but we wanted it to be just that we wanted to do a side by side of what was phase one and what is phase two and where are the savings. This is public information. So you can refer back to it I'm not going to spend that much time on it but.
Essentially.
Where are we saving is a bit of everything really ripe were saving on spare parts because we're an operating entity. So we don't need to build an inventory of spare parts, we're saving 50% of engineering because it we have a we have a plant that works.
So we're basically doing the designs offs of a plant that we already have with the improvements theres a bit of environmental savings up to the extent that for example, we do not need to build an entire its few wood treatment station like we did before.
Given that we use sewage water from the ticketing going a river. So it's it's it's a it's a some of various savings that leads us to a plant that is going to cost about 20% less than phase one.
On a total construction capex basis, it's kind of roughly 10% less which is 10% less of a very inexpensive plants. So given the track record given that we've done this before given to the team is exactly the same every one that built this is here.
Keith Keith branches is leading it I'm here Phillipe, you, which was chief controller of procurement is back here. So it's kind of the back is putting the same team back on the field to do what they do best build on time on budget and we're hiring bromont again, which has done a spectacular job for us.
In a previous project and we're hiring Forex again, which has done a spectacular project assembling this in record time.
Yeah.
The next slide is a bit more meat.
We will put our labels on this but the purpose here is just to illustrate that when you start construction up you don't really have all the costs. So month, one is a Chris sendo right. So you start with artwork civils foundations, which.
Cost about 10 million Bucks, but it's not 100, which means it's back loaded cost them. The disbursements start to increase as equipment gets order prepaid or intermediate payments and then later on delivered to site. So this law.
Like kind of illustrates that that construction of a plant is back loaded even though we have the cash sitting in our balance sheet. We could do all of it front loaded in theory, that's not how it really works and this is why we're so relaxed on the other hand in typical financial Prudence, we're going to build one plant.
At a time.
So that's an important point to leave you with we are building a plant. This year and then next year. We're building otherwise so the next step more on the construction process. So construction activities are starting this month for Earth Civil works Foundation infrastructure installation mobilization of equipment, we're going to have.
About 200 extra workers involved is it kitchen going is so more of the prosperity that we brought to the region. We're gonna probably lodge them any ciena, which is a city closer to us. So the first step the very first step with licensing. So we were already awarded a license so were.
Fully licensed to build.
And to operate that's an incredible accomplishment we have the allo the operating license for this plant already why because of the track record. We demonstrated that we are impacted both so we got something that is typically granted to industry.
Brazil, but rarely two industry connected to mining. So we got the same industrial Ah Ah Ah industrial Ah Ah clout as a high tech industry, because we demonstrated to be good protagonist off many.
Our old transformation. Our plant is innovative is green DAC it changed the conversation in the sector. So we got the operating license right at the get go. So we're fully license as soon as they're done building, we can start selling product.
Then we got the financing as we've shown you we got the cash balance it's linked to trade lines trade lines exist based on production on an 80 days revolver. So we're good to go then we've done the engineering work we are F. L. Three quoted promo leaded. So we we.
Have the number to precision as 100.5 million U S dollars b.
B M. D. S has honored us with an innovation line, we're very proud.
To be part of this club of companies that has been extended development bank financing in this country.
We are planning to honor the taxpayer money, that's been given to us by again delivering this on time and on budget and this is a backstop financing because again does that mean bozman lines. So we did a cash of hand in order to submit the ring Busman that then be N. D. S covers so.
We made the F. I D. This is kind of what leads us to do final investment decision. There's been months of work months of work going into the ninth month of work that led us to this moment of starting mobilization he wasn't overnight.
The next page is again completed detailed engineering Capex with F. E. L. Three accuracy. This is how we keep it on schedule. This is how we keep it on budget. This is the secret sauce of building responsibly, we don't get it wrong, because we quote suppliers.
We are licensed we have a permanent mining license for the 40 area. So we updated project execution plan, we're doing procurement, we do import logistics F final investment decision for phase two our board couldn't be more comfortable remember last time, we green light its final investment decision it wasn't.
'twenty 'twenty you was in the middle of Covid, and we did not have cash generation. So this is kind of why we sound so relaxed.
On the next page.
Were relaxed, but we're vigilant were relaxed, but we didn't lose discipline.
So we're gonna do Sigma style.
One step at a time. So this chart has a lot of information, but it is a modified chart that you already know ear by year, we're showing in dark green sources of cash flow what are the what are the industrial capacity modules, we got running right.
So 'twenty three we we produced 105000 tons of lithium concentrate cash flow right.
We finished building it we're done in 'twenty four in Orange, we're showing what we're building.
Up in in the greenish here is what's being green lighted to build so we're almost doubling capacity. We go from 272 520.
And we're putting this because that's nameplate right, we probably can go higher but its nameplate.
We're going to have the benefit of the cash flow off a phase one so.
Cash flow from one module.
Industrial plant construction of another module that's been Greenlighted imbrown, it's what's hasn't been greenlighted, but this is where we going this is the industrial plant that we submit that to be N. D. S. With a hole you know develop minute development strategy for the law.
Valley when it comes to Sigma.
In 25, we're going to have the benefit of phase one running cashflow faced you Rani cash flow, depending on where we are we may or may not even deliver a dividend, let's see but phase.
Phase three is going to be green lighted to be built most likely integrated with a lithium sulfate plant why well because of that meaningful gain the value in use that were currently providing to the clients.
For very little premium so if you recall at.
At today's prices of $14000 per ton of lithium hydroxide. If you quoted for technical grade it doesn't matter because our $3000 are intact.
One needs seven tons of our material to do it on off let's say, let himself eight or intermediates or full chemicals, we need last units less quantity of our material. So what's the rationale if I can coulson eight and do.
The acid wash ourselves, which is what it's called intermediate chemicals lithium sulfate, we're capturing that $3000 for ourselves so that becomes extra cash flow. So the decision will be made in 25, because we got a whole year to see if we can premium.
Nice to that value in use if we can't we're just going to do it ourselves because calcination has a kill and acid wash is an acid wash. These are intermediate chemicals, it's basic chemistry, Brazil is an industrial country.
The human capital and the capabilities are here, we are not going to do specialty chemicals, well, we will be doing then is shipping less volume to specialty chemical refineries all over the world, including two hour dearest Chinese customers, who already agreed to.
By this material from us so we will ship lithium sofa intermediates to China to taxes to Europe to Japan to South Korea to all over the world. So that's the 25 plan.
And then in 'twenty six we're going to sit and we're going to enjoy the industrial side. We built. So these are our plans for the next two years. So we're gonna be quite busy.
When what I also want to share with you is that none of the activities related to the strategic review has impacted it.
At all our ability to think to make a strategic plan to execute to deliver to continue to do what we do best which is to execute.
And that leads us to our concluding remarks.
I mean, we have completely transformed sigma from and you can see the picture. It's a thousand words. It was a construction site in March 'twenty three.
You can look at the left.
Well, we have now is this six global largest producer of lithium.
Across the board Brines hard rock in the four largest mining industrial complex in the world. We delivered everything that was under our control.
Completed the D. M. S commissioning initiated production in April 'twenty, three hit nameplate capacity by fourth quarter, we delivered a dry stacking. So we have zero tailing dams not a drop of water to spare we reuse the water we reached net zero, which again has been.
Four years in the making a and we also delivered a scheme to both zero lithium that we all love here, we increased mineral resources significant to give longevity to our ambitious industrial plants. So those industrial plans now are backed by 104 million tons of <unk>.
Zurich resources mineral resources, 43, 101, audited and an expanded expected mineral resource of 150 million tons and we're quickly in the process of converting part of the 109 into additional reserves.
Up and we got to a consistent monthly shipments.
What to expect from US this year well.
Mobilization, where we're beginning construction, we're going to deliver the mineral reserves were expecting to increase it by 40%. We got 54 million tons of mineral reserves, we're going to increase dosing, 40% and again, it's just you add longevity solidity and prominence to.
Our industrial plants are we gonna audits third or the 150 million ton mineral resource.
And we're Gonna Commission.
Hey, Sue so.
We're very very very enthusiastic about 'twenty 'twenty, four and again a lot less worried than when we did this the first time, because we have the first execution under our belt. So we know what we got right. We know what we got wrong and we're gonna try not to make the same mistakes making me.
Stakes is human Ah, we're not going to make the same mistake twice. So here. We go twice as experienced a producer with cash of hand marching into doubling the size of this company and hopefully hopefully being able to up getting priced.
At least in tandem we what we produce today and I'll go back to the slide if the market could only give us the credit for the produce that we are today, we would be quite happy because right now we're kind of priced cheaper than a developer so that's.
Kind of what gives us so much confidence to be you know more than 50% owners of this company here and a management team and work all hours to deliver this 'twenty 'twenty four milestones to our investors in and to all of you I want to close this was a huge thank you for supporting.
US encouraging us sticking with us.
And believing in US and this is my accountability to you we're delivering exactly as we promised on every element that we can control.
Now, we're moving on to the Q&A Matt.
Thanks, and I'll pass it to Dennis to open up for Q&A.
Thank you if you would like to ask a question simply press Star then the number one on your telephone keypad.
Once again to ask a question. Please press star one on your telephone keypad.
And we have a question from the phone line. It comes from the line of Steve Byrne with Bank of America. Please go ahead.
Do you think you are is it fair to assess your your net cash.
Position in the first quarter is dropping by 30 million.
Is that a fair assessment.
And if not what what unusuals might have led to the cash drain I'm only asking because you're moving forward.
With an outlook or of generating.
Free cash flow in the subsequent quarters I just want to make sure that squares with with what the results were in the first quarter.
Matt do you want to take the question of should I take it.
I got my congrats as well yeah, so Steve well, we give we give you the snapshot of the cash for now so 109 million is March 30th cash position right. So that's an important point what happened between then and now well.
We drew down.
This is why we wanted to give you clarity on the trade lines right. We drew down the trade lines, but we did not use it. So so what we have there is a combination of drawn trade lines, but unused trade lines.
And then if you if you take you know the the cash page here, you're going to see that we got there you go can you see the space. Yeah. So we got 88 million of these trade lines that were drawn but unused right and then the balance is just cash generated.
Now when you look at the back of the year end cash there was a 12 billion dollar advanced interest payment that was made on the long term loan we have from a shareholder and a balance sheet. So maybe that's probably D. D D.
We call the clutter when you look at the cash position in December not sure if I answered your question.
[laughter].
[laughter], where do you see if we can.
Can take it offline.
Right.
Thank you, Matt there's a little off.
[laughter].
Okay.
And then maybe next year.
Net debt increased only <unk>.
Modestly between year end 'twenty three in March and then obviously as we've been able to kind of.
Particularly more recently in our press releases, we're now locking in prices are pretty good economics. So we would expect cash to accrue quite.
Quite considerable Asian market kind of sustain these levels, which we are.
We're now seeing them they are doing.
We can talk more offline.
Exactly okay.
Yeah.
Cause if you look at the trade.
Yeah, if you take a snapshot of like today and that's an easy snapshot right. We got 100 million of long term debt of from shareholders. We got all U S dollars 10 million U S dollars from B D. M. G. So that's long term debt not amortize about but you know the interest on the long.
And that has to be paid up front. So we.
It it was decreased from the cash position in December 31st. It wasn't paid then you was paid in January then what we've done we drew all the trade finance lines, but we didnt use it we got 90 million. We got 88 on unused so when you think about the overall.
Position of Matt that we got roughly 100, and Sam meal in U S dollars sitting longterm and that's very benign shareholder plus development Bank and we got these trade finance lines, which are in Brazil kind of a unique animal there kind of a revolver, which are sole function of our ability to produce.
<unk>.
So we wanted to show that when you look at the cash position. If you deduct 109 minus the trade finance is actually generated cash right and if you try to kind of triangulate that with the cash in December probably the big item. That's missing is the payment of about $12 million of advanced.
'twenty 'twenty four interest for the long term shareholder a line.
Okay. Thank you for that and maybe one follow up on the the idea of at least considering going downstream into lithium sulfate do you have any preliminary cost estimates of what the project might cost in the mall.
Mine are where you are with their operator, calciner Poseidon and the some of that material would then be put back into the excavated areas well that is the centerpiece of B N D. As industrial strategy are we.
We we will put it whatever natural gas is going to be made available to us at the lowest cost per b to use more.
Most likely I mean, Brazil is a very large oil and gas producer offshore the gas is available in what we call the pre salt ports of which the Victoria ports, where we are is one of them. So if we can get the affordable.
Dollar per Btu of natural gas at the Port where we are already most likely we're going to put it at the board, which is worried about it makes most sense.
One of our partner clients has basically announced to do exactly what we're going to do with one of our peer companies in Australia. It's the obvious thing to do and we were the first to talk about this to do lithium sulfate AR is the natural evolution for <unk>.
Lithium concentrate producer and we demonstrated why now what's the advantage of Brazil clean cheap power I mean electricity cost two cents of a U S dollar per kilowatt hour.
We cannot obtain a very very favorable Ah Ah Ah Ah dollar per Btu gas contract at a pre salt board at the short and we do have a study which in fact, you know is very similar to what our peers going to announce in Australia.
Off how much just what's going to cause I can't divulge. It now, but this was one of the centerpieces of the conversation would be India. As this is the ambition and it's pretty straightforward because it's basic chemistry and intermediate plant is a kiln in an acid wash the kill make spodumene into better spodumene N D acid wash.
Produced the sofa now what is the real key.
And that's a key competitive advantage, which we built into this company.
RSV juice the tailings what do you do with 12 tons of toxic so florek asset tailings generated per ton of lithium self it that is the question. The very few places can answer sustainably.
And here in Brazil, we have an answer to that why these materials can be recycled.
In the construction industry because it is a cement based construction industry, we have in Brazil. These materials become concrete binding number one and number two they are aluminum sulfate. So they're used by the cleaning products industry.
Which in Brazil is a massive scale, we have 230 million people obsessed with cleaning. So we have one of the largest cleaning products industries in the world. So we can absorb.
All of the tailings. So we can do this zero tailings.
And there are very few places in the world that can do this zero tailings. Most plans involve shipping these toxic so florek asset dailies by boat elsewhere to it got to a developing country. We've a lot of people were you.
Got a cement based construction industry and a large cleaning products industry, but we have this market right. Here. We are here. So that is also a key competitive advantage to doing intermediate chemicals, because we solve a key piece of the puzzle for everyone.
And even for China for China, we can deliver what we call a.
Intermediate negative we can deliver carbon credits that allows China to do zero carbon chemicals for the west we go to deliver a chemical to chemical supply chain with zero carbon and zero tailings. So the west doesn't have to worry about licensing or.
Worry about storing or doing what have you with 12 tons of toxic so fork acid loaded tailings generated in the intermediate chemical process.
Waste is the key to where these industries are gonna be located how to you how to actually recycle and reuse their waste responsibly from an environmental perspective and in fact, that's what China does very well today, that's what we can do because of these res.
You need a large cement based construction industry and you need a large cleaning products industry to take all the element himself fate.
Very good thank you.
Youre welcome.
Your next question is from the line of Joel Jackson with BMO. Please go ahead.
Hi, good morning, Ana not everyone.
I have a few questions you can ask them one by one so can we talk about SG&A you had talked about earlier. This year are out trying to get SG&A down to up.
I think around 11 million dollar American run rate annualized I think you'd get about a 10 million Canadian run rate in Q4, So getting there were 10 million excuse me in the fourth quarter can you talk about what you think SG&A will look like in Q1 and Q2 of this year one of this year, where it was how much of that.
Much of the burn rate might be in SG&A for the strategic review.
Yeah, well if you look at this slide Matt you can take it as well and please help me here. Okay. You see that we posted 42 million right. When you look to the right you see the 24. So if you deduct 24 from 40 to you you were still at double the guidance. We gave you we try to give you guys a reason.
Of why is that and and we do believe that these cluttering of SG&A will not be here.
All its entirety in Q1, but some of it still gonna be here such as the legal we still have you know the teams work on our S. E. T. So the Q1 is still going to be working progress, we're still gonna be getting there Matt.
When we look at the bridge, though and that goes back to your point Joe on the on the on the operating cost we're almost hitting it right. So the SG&A becomes a working progress off actually decluttering and evolving into what we call a steady state SG&A.
But on the operating side, we're almost at the guidance we gave.
Ah Ah Ah Ah Bmo's conference.
For for what we call our run rate operating cost, Matt do you want to complement.
Sure I mean, Joel some of this is gonna be times, where we need to and where we can obviously this is kind of a recurring number so to the extent, we have litigation or the strategic review those would be additive, but from a bottoms up perspective as you think about the cost it really take to run the corporation.
It's a pretty lean.
Back office now we hope, we'll get additional scale as we ramp phase two because we won't have to add nearly as many hands as we were when we double capacity right, we'll get key operating leverage through SG&A and poor traffic, primarily as we go but from our perspective, if we taking a more.
Stringent approach to spending.
And crap spending is more in line with you I would say where the economics of the market are versus if you rewind to really the first half of the year, our land price expectations were much higher than we were spending to ramp that facility.
We think we've got a pretty proud of a path to getting there.
It's a little bit more of a lift perhaps and then the operating cost side.
You know numbers all the same that you go on and do you feel pretty comfortable there.
Okay, and so whats the monthly burn rate on this strategic review.
It varies that's the problem and this is what school shooting a movie target you know it really varies and that's one of the items that don't control.
That's that's one of the reasons why we can't fully the clutter. It is it's one of the non predictable elements is there a totally varies on the flow of drafting documents and structuring and things that come our way, but I would say is much alleviated. This year is much much alleviate it because we don't have to do.
Structuring we don't have to do the heavy lifting of what a transaction is going to look like documents already being you know overly mark so it's different it's it's a lot easier, but it still here right still cluttering the numbers.
But it's one of the non predictable items is still totally outside of our control.
Okay. You said Q1 spodumene production was 53000 tons a year.
9000 tonnes in Q4, two down about 7000 tons in the quarter sequentially talk about why that lower utilization in the first quarter.
Well, it's it's a it's a funny quarter in Brazil is kind of we have our own version of the Chinese lunar new year, there's something called Carnival, where it's pretty hard to get people to operate at capacity. So we kind of lose.
Hmm.
Most companies lose 10 days, if we whipped up our team as we did we lost about five six days, where people kind of show up not exactly so the not fully productive and he happens. It's cultural these people have been working you know like Crazy right. So carnival is a problem.
Then it we also caught the.
You know what we call the pressure of all of the first week of the year, because we put all systems go to deliver the 'twenty to 'twenty three last shipment, which failed I'm not sure. If you remember this but he literally sailed on the 30th right. So the first week of January it was like Oh, Yeah, We're gonna relax no we won't because we.
Gonna have to make first quarter. So it was a combination of what we call a collective vacations, where we're working with down ships in the first week of the year plus the carnival and it's kind of always like that this is it is the Brazil version of the lunar new year, you might Wanna built into your calendar first quarter has carnival.
First quarter has the hangover of new year.
And in our case it was a hard hangover because let me tell you to make that shipment. We made people work 24, seven crazy hard our general manager for the plant.
Didn't spend Christmas knowing your ear with his family and his new granddaughter in South Africa that man stayed here.
He didn't meet his granddaughter to make that shipments. So that was the level of commitment of this team. They were like really all out to ship Ah Ah that boats are in December and and and make the cut off for a year right.
Yeah.
Okay and just finally, you gave color around so you've obviously given Q4 pricing you talked about what the what the April shipments gonna be a final.
For the two shipments in Q1 can you give an idea of what pricing looks like and how much of a professional on that.
Yeah, well I think what do you see on the screen is a pretty good indication of where we sit on the first on the first on on a Q1 with fluctuations, but where we're kind of averaging the industry a little bit of a premium but not really Q1 was a tough quarter.
Up from an industry perspective, because you see what happened in Q1.
Got it.
Star bulk.
Two things.
Our problem.
Why was that.
Because.
Okay.
Yeah.
Life was so difficult for the clients they were putting other products aside and processing our product just your bank that margin that we're literally giving to them and we were told as much. So we just the fact, we had people buying food boats and paying us.
I mean, not the full premium, but a tiny bit of a premium.
Ah Ah meant something for us, but what they were really doing is that they were banking this much.
Extra margins that's provided by the metallurgy of the product that's kind of a delivering for free. So it was a fascinating quarter, we learned quite a lot and we just got a team coming back from China for like they were there for 32 days and we they were told just that so part of this enormous premium we were able to obtain.
In this very we call price discovery process, where we got 18 clients to that talk some bid. This boat was a result of you know the clients.
Having experienced this for now six shipments seven shipments and ascertaining for themselves that they do need a two.
Two tons less sometimes three times less of our product versus the comparable so their banking that difference right, which kind of ties back to the question, Steve was asking us about why let them serve it well we want this money too. So that's this is this is value in use floating around.
We they're going to get it to a premium over you're going to just bank. It ourselves in a in a let himself as plant, we're not going to let Hank for that long, but one thing at a time now is to double.
Sorry, so Q1 pricing would be similar to Q4 pricing or like your actual average delivered price.
You can use.
Explicitly glide.
Oh, Yeah, you you can use what's here. It's okay. It's indicates a good indicator that's why I was asking because youre, giving Q4 and are giving kind of April but you're not giving mark yeah, absolutely. There's about 100 Bucks of a difference right. So there's $100 floating so you can just take a pick but it's it's we don't have to.
Finals, right because there were still some provisional but it's gonna be between this number and and the number we achieved for this last auction somewhere in between.
Okay. Thank you.
That's good thank you very much.
And at this time there are no further questions I will now turn the call over for any closing remarks.
Oh, well I just want to thank everyone for the support for the patients are and for sticking to US I mean, I think we are on to build up probably one of the most resilient lithium businesses in the industry. We're building the next major the mathematics show.
Those shows this hum numbers talk for themselves math is no opinion and.
And we're here to stay so and you look at when you look at this picture. We now have the longevity, which was the missing link off the sustainability.
Sustainability when it comes to project ears off Sigma given that we have prioritized cash flow and now it's it's clearly demonstrated why it was so important because we were able to hit the tail end of the bull market.
And we are in quite a bit of cash so.
Then this year, we we re prioritize lengthening the project life. So we're one of the greatest forces of the industry. The fourth complex. When you attribute the names of the projects to the owners. We're the third largest lithium industrial mining complex in hard rock with quickly closing in.
On the you know number five producer by next year, we're going to probably be on top of number four and number three so it's it's it's it's a force for good. So here we are aiming to be number three very soon with.
A product that is clearly a metallurgical it better from a physical and chemical scientific standpoint. So is the mathematics of savings for our clients. The mathematics of valuing use numbers are numbers.
So thank.
Thank you so much for being here with us for supporting us for encouraging us and four up being partners with our team and I can only close by saying we're in this together.
I have never sold a single share of this company. So we're here to stay and.
Where here too you know.
Follow this journey with you.
This includes the Sigma lithium fourth quarter and full year 2023 earnings conference call. Thank you for participating you may now disconnect.