Full Year 2023 Sigma Lithium Corp Earnings Call

April 1, 2024

<unk> 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 first during the presentation you hear a certain forward looking statements concerning our plans and expectations.

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.

The slides will be posted on our website and following the call a post additional slides with a.

At our financial performance information.

With that I will pass the call over to Anna.

Sure.

Well hi, everyone.

Good morning, we are absolutely delighted.

We are announcing the final investment decision and the initiation of construction to double.

Our production capacity from so we're gonna be 70000 tons.

Lithium concentrate per year to 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 this 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 got scale.

More importantly, we have low cost we have achieved the second lowest cost in the industry amongst our peers.

In parallel we are producing a premium risible material, we call lithium five 8.0, which is the quintuple zero.

It is a.

Irrespectively of environmental and social sustainability.

Physically and chemically is the best chemical grade and most sustainable lithium in the world. It 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 as a 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 if you can see.

We want to demonstrate it 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.

12, but 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 2023 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 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 off 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.

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 exceptional 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.

We are a 100% known for 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.

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.

The great responsible to deliver the quintuple 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 Centrifuge technology, we achieved zero carbon we use zero drinking water, we'd be 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 purple are the 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.

So 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 bought them, 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 pub in in Gray you can see the market cap current of these companies clearly when you look at Sigma at 37000 tons of L. C equivalent off 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 put 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 supplier.

Here in this next slide proves it we're going into our 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 up slightly bring uniting over our peers because the product has what we call value.

In us superior metallurgical properties that deliver measurable quantifiable cost savings to the customers. So we're here to stay we're a large scale 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.

Go and chemical properties of the product the product is better 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 chipman, we've achieved a 1333.

Nameplate price, which included the a T metal V. T is a $1160 per ton. So that's a very decent premium for you know the new producer on the block up 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 875% 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 was transparent he was driven through closed 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 <unk> 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 ours.

Is this very light greenish which means spirit tee up course material buses the muddy Doc type wet materials for 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 these journey of being investor operators, and 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 a 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 costs at plant was $427 a tonne.

Fob be adjust the costs at port of Victoria, meaning taking from the villages at 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 part production. So in margins the margins are pretty spectacular.

Our F O B plant 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 ship them out in the price per ton now, let's move on to E. B that we posted an accounting you'd be dark cluttered up meaning with the noise of commissioning of 24.

Dollars 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 you call them. When it comes to cost we always do more with less why well. We're all owners were all investor.

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 likely look after you know the money that goes into our wallets.

So fourth quarter cash unit operating costs 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 amounts 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 adjusted 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 our 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> costs in the fourth quarter as we had highlighted in the release was 400 or $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 time frame, the real caution and 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.

We strip out the $70 per ton in <unk>.

Hi, great freight.

We ended up with a <unk> pro forma plant gate costs of about three five within the fourth quarter, that's not very far as we said from the $3 70 that we were highlighting <unk> average and again.

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 $3 70 number.

As soon as you build this back up to get to what we hope is a recurring reporting 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 tailings to support any more 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.

I'll pass it 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 did.

Live or 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. Accounting 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.

<unk> 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% up and then transaction cost and commercial develop achieving to 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 as our product because we work 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 is 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 was stick to it. So again the estimated oh, well then that concentrate price. We just obtained is the 1160 whatever it is on the cycle.

It doesn't matter because our Cif cost 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 assistant 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 price 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 screen 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 preformed '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.

<unk> 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 double 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>.

That will 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 produce 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 note.

Provisional base is now 85% of our boat of our shipments. So we rely on glencore not only for their incredible marketing and commercial expertise, but also for providing us with the actual trade finance so the.

Trade finance lines, we have in the banking system here are sitting 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 address.

Once the funds for construction as it progresses, 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.

The demonstration that we have the ability to green light this entire construction right.

Right now today with 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 E. V. So we like to say the 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 aren't 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 in 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 what.

Why we were eligible for the Brazilian development Bank innovation line, because theres 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.

We're always 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 work.

So we're basically doing the designs of 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 and in tires few wood treatment station like we did before.

Given that we use sewage water from the ticketing on a river. So it's it's it's a it's a.

Some are 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 is kind of roughly 10% less which is 10% less of a very inexpensive plants. So given the track record given that we'd done this before given that 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 up 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'll 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 family and box, 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.

Slide kind of illustrates that the construction of a plant is back loaded even though we have the cash sitting in our balance sheet. We could do all of it from 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 gonna built 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'll build another one 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 gonna have aby.

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.

<unk> in 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 good protagonist off.

Mineral transformation our plant is innovative is greentech it changed the conversation in the sector. So we got a license right. If they get go so we're fully license as soon as we're done building we can start.

Got it.

Then we got the financing as we've shown you we got the cash balance it is 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 E. L. Three quoted promo leaded. So we we have the number to precision as 100.5 million U S dollars.

B M D assets 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 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 reimbursement 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.

Mobilization he wasn't overnight.

Yeah.

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 was in 'twenty two '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 your by year.

We're showing in dark green.

Sources of cash flow what are what are the industrial capacity modules, we got running right. So 23, we we produced 105000 tons of lithium concentrate cash flow right.

<unk>.

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 <unk>.

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 hasnt been greenlighted, but this is where we're 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 cig them up.

In 25, we're going to have the benefit off 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.

<unk> three is going to be green lighted to be built most likely integrated with eight 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 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 fate or intermediate or full chemicals, we need less units.

Last 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 X.

For cash flow. So the decision will be made in 25, because we got a whole year to see if we can premier nice to that value in use if we can't we just going to do it ourselves because calcination is a kiln and acid wash is an acid wash. These are intermediate cam.

Nichols, It's basic chemistry, Brazil is an industrial country. So the human capital into capabilities are here, we are not going to do specialty chemicals. What we'll be doing then is shipping last volume two specialty chemical refineries all over.

The world, including to our Dearest Chinese customers, who already agreed to buy this material from us. So we will ship lithium sulfate 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 site. 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 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.

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 app, we have zero tailing dams, not a drop of water to spare where we use the water we reach that zero, which again has been.

For years in the making a and we also delivered a scheme triple 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 tonnes of Reis.

<unk> 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 in prominence to all.

Our industrial plants.

We're gonna audits third or the 150 million ton mineral resource.

And we're Gonna Commission.

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 will 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 and into 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 to onshore telephone keypad.

And we have a question from the phone line that 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 net cash position.

<unk> position in the first quarter is dropping by 30 million is that is that a fair assessment.

And if not what what unusuals might have led to the cash drain I'm asking because you're moving forward.

It was it was an outlook or of generating free.

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 are 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 sort of 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 called the clutter when you look at the cash position in December not sure if I answered your question.

[laughter].

[laughter], where do you see.

You can take it offline.

Right.

Thank you, Matt there's a little off.

Okay.

Yes.

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 walking and price are pretty good economics. So we would expect cash to accrue quite.

Quite considerable Asian market kind of sustain these levels, which we are for.

We're now seeing them they are doing.

We can talk more offline.

Exactly.

Right.

Cause if you look at the trade yeah.

Yeah, if you take a snapshot of like today and that's an easy snapshot right. We got 100 million of long term debt off from shareholders. We got to 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.

That has to be paid up front. So we.

He 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 and unused so when you think about the overall.

Position of not that we got roughly honoring family in U S dollars sitting long term and that's very benign shareholder plus development Bank and we got this straight for Lance lines, which are in Brazil kind of a unique animal there kind of a revolver, which are sole function of our ability to produce.

So we wanted to show that when you look at the cash position. If you did that 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 off about $12 million off at.

<unk> '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 are you 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. We we we will put it whatever natural gas.

Is gonna 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 port which is where it makes most sense.

<unk>.

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 it and we were the first to talk about this to do lithium sulfate ER 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 can 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 the supply is going to cause I can't divulge. It now, but this was one of the centerpieces of the conversation would be Mds. 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.

Up 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 sulfate 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 allowing yourself fades. So they're used by the cleaning products industry.

Which in Brazil is of 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 tailing. 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 shifting 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.

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 N zero tailings. So the west doesn't have to worry about licensing or.

Worry about storing or doing why have you with 12 tons of toxic so fork acid loaded tailings generated in the intermediate chemical process.

Waste is the key to where this industry is that 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.

Pretty 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.

Okay.

So can we talk about SG&A you had talked about earlier this year are out trying to get SG&A down to.

Got it on 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 Q1 of this year when it was how much of that how 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 you shouldn't deduct 24 from 40 to you you were still a double the guidance. We gave you we try to give you guys a reason.

All right.

And and we do believe that these cluttering of SG&A.

Not yet.

In all at parity.

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 if you want.

We're going to work.

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