Sigma Lithium Corp. Q3 FY2024 earnings call

• Operational excellence: Further increased quasi monthly volumes to 22,000 tons sold per month, surpassed third quarter production targets, executed a shift in commercial strategy to achieve higher realized prices, completed Plant 1 efficiency revamp with potential to increase production by 10%-15%, advanced construction of Phase 2 plant, and maintained zero accidents with 43 days without lost time.
• Financial highlights: Signed BNDES Development loan agreement fully funding Phase 2 construction, maintained low CIF cash cost at $513 per ton, generated $34.5 million in operational cash flow, had $65 million cash in the bank, and lowered interest rate of export credit rate lines to around 9%.
• Commercial strategy shift: Pivoted from selling to trader as principal to selling into trader as distributor, enabling higher realized prices by capturing seasonality and pricing above benchmark indices, and closing out previous trades with provisional price adjustments.

Sigma Lithium delivered robust financial performance in Q3 2024. Production volumes were 6,237 GLT, sales volume was 57,483 GLT. Cash costs were $449 per ton, CIF in China was $413 per ton. Sales revenue was $44.2 million, operational cash flow was $34.5 million, cash in the bank was $65.7 million, and provisional price adjustment was $23.3 million. The company achieved a production in low industry cost targets, generated robust free cash flow, and demonstrated operational resilience.

• Expect to sell 60,000 tons in the fourth quarter of 2024.
• Plan to initiate commissioning of Phase 2 in the third quarter of 2025.
• Aim to reach 100,000 ton per year of LCE equivalent production capacity by the end of 2026.
• Intend to build 20,000 tons of integrated chemical lithium sulphate capacity by 2027.

• Market volatility: Fluctuations in lithium prices and seasonality can impact realized prices.
• Traceability issues: Scrutiny over the source of raw materials, including illegal or untraceable lithium, which could affect market perception and demand.
• Currency fluctuations: Volatility in the Brazilian real against the US dollar can impact cash flows and costs.

Q: Are converter customers showing increased interest in Sigma's spodumene? How far out do you book orders?

A: Ana Cabral stated that there's increased interest as customers recognize the metallurgical benefits of Sigma's product. Orders are booked throughout the year, and they've been able to triangulate market dynamics with GFEX to execute trades, with recent resale data points showing higher prices than benchmarks.

Q: Why was the provisional pricing adjustment significant and why the delay?

A: Ana Cabral explained that it was a closeout of open trades from previous quarters. The delay was because the trades stayed open and were rolled into previous commercial relationships, but they were completely closed out on an accounting basis, generating a positive cash inflow.

Q: Can we expect increased recoveries in Q4 and beyond?

A: Ana Cabral said yes, expecting global recoveries to increase as they've executed projects to optimize the plant, including addressing issues with mobile crushers and improving ultrafine circuit recoveries, aiming for recoveries to get closer to 60% or more.