Sigma Lithium Corporation Q4 FY2025 earnings call

• Sigma is the largest industrial mineral producer in the Americas with operational excellence, low-cost operation, and high-growth strategy. - It is 100% sustainable with Quintuple Zero lithium: zero tailing dams, zero drinking water use (water reused/recycled), zero hazardous chemicals, zero dirty power, and 0 accidents with lost time for almost 3 years. - Delivered operational and financial highlights in 2025: signed $146 million offtake agreements, achieved $67 million in net sales in fourth quarter 2025 and first quarter 2026, deleveraged balance sheet with 60% of short-term debt repaid and 35% of total debt repaid, upgraded and restructured mining operations. - Built a new line of business selling lithium fines high purity from dry stack tailings, increased mineral reserves by 40%, strengthened commercial strategy by monetizing seasonality, and demonstrated financial discipline with cost reductions faster than revenue decreases

Sigma is the largest industrial mineral producer in the Americas. In 2025, it delivered operational excellence as a low-cost operation. It produced 183,000 tonnes of high-grade premium lithium oxide in the full year, down 24% from 2024's 240,000 tonnes. It generated a new line of business by selling high-purity lithium fines reprocessed from dry stack tailings. It signed $146 million in offtake agreements, repaid 60% of short-term debt and 35% of total debt. Fourth quarter 2025 net sales were $67 million, with a 41% decrease from third quarter due to mining restructuring. First quarter 2026 estimate showed compensation with new lithium fines business and mine restructuring results. Revenue contribution % not explicitly detailed in absolute terms but key segments are lithium oxide production and lithium fines from dry stack tailings

• For 2026, guidance for all-in sustaining costs plus interest is $532 for all-in sustaining costs plus $60 for interest. - Cash flow forecast at various realized lithium prices: if lithium is at $1,500 a tonne, expected to generate about $158 million in free cash flow after interest; if between $1,800 and $2,000 a tonne, can generate between $218 million to $266 million of free cash flow with one phase; doubling capacity by end of next year could lead to more cash flow. - Plant 2 expected to be fully commissioned early 2027, with guidance for 2027 being for installed production capacity

• Volatility in lithium prices which can impact revenues. - Uncertainties related to fuel costs and power costs, although measures like biofuels in diesel and fixed power costs with 5-year agreement are in place. - Risks associated with plant construction and commissioning timelines and potential delays

Q: The company has indicated a production target of 520 kt in 2027. Does this imply that Plant 2 is expected to reach full capacity by the end of 2026? More specifically, when do you currently expect Plant 2 to begin commissioning? And how long do you expect the ramp-up to full capacity to take?

A: We are going to have another presentation on plant construction, but we'll tell you what we're planning to do now. As we've shown in the slide previously, what there is between us and new production is essentially resuming ordering equipment, assembling equipment and commissioning that plant. That can be done quite rapidly. If we use the timetable from the previous plant, it could be easily done in under a year. We are going to order equipment in the summer after the close of the second quarter. The reason being the offtake we just signed will be the main driver for us to deposit and prepay the equipment that we need to build Plant 2. We believe that it will take us anything between 8 to 12 months to actually build and commission that line. So Plant 2 will be fully commissioned early 2027. And as a result, the guidance for '27 is not a guidance for production, it's a guidance for installed production capacity, and we will be further updating the market as that unfolds. But what we can say is we're almost there with three-fifths of our timetable accomplished in the construction of Plant 2. And what stands between us and that level of production is purchasing, building and commissioning, which we've shown we can do quite rapidly.

Q: In the guidance section titled cash flow forecast at various realized lithium prices, could you please clarify whether the price assumptions of $1,500 and $1,700 refer to Sigma's expected average realized selling price for its concentrate or the benchmark SC6 China FOB price. For Sigma's concentrate grade of approximately 5.2% to 5.5% lithium oxide, what is the typical realized price as a percentage of the SC6 benchmark price?

A: So we are using -- we're not using the gross prices. We're using adjusted prices. So when you think about the nameplate price, we take nameplate price from SMM. And then we typically ship 5.2, 5.3 lithium oxide grade product. So the adjustment is done dividing that level of oxide by SC6 in older contracts. In the newer contracts, we divide by 5.5. The results are kind of the same. So when you look at the prices on that table, they are net prices. As you probably are all aware, gross prices have reached $2,400 just 2 days ago. So $1,800 and $1,500 are far below the current level of nameplate prices at Shanghai Metals Market.

Q: Can you give us your directional sense of how much each plus USD 10 per barrel increase in oil prices impacts the demand for lithium?

A: Unfortunately, I don't have that number, and I am not really an oil expert. What we can say, though, is 15% to almost 20% of the fossil fuels we use here are just the fuels that power the trucks that run around our operations. In other words, every liter of diesel in Brazil has mandatorily 15% of biodiesel. Now that percentage is slated to increase. So we actually are, let's put it that way, 20% less impacted by the increase in diesel prices than any other country in the world because we have this fantastic, we call, biofuels program in the country, which was actually created 30 years ago during the last oil crisis for this exact reason for energy security of Brazil. And we are the beneficiary of that when it comes to our emissions. So our trucks generate 20% less emissions because the fuel by law has 15% and we're putting 20-ish percent biofuels for every liter of diesel.

Q: Please detail the timing of Phase 2 and 3 to completion both 2028. Anything more specific?

A: Well, I was mentioning what we're going to do on Phase 2. And again, we're going to keep giving the market updates pretty regularly on that. Phase 2, by the summer, we're going to be ordering equipment. So close second quarter order equipment. As we demonstrated, that will be funded by the growth offtake we signed, $50 million or more than enough to prepay or deposit towards the equipment we need. To be specific, now what's between that order equipment and production is essentially assembly. In the previous plan, we had 1,000 man on site assembling that plant, that line. That was done in 8 months. We use what we call air procurement for some of the parts that were delayed so that we could cut short delivery times. We use a lot of what we call acceleration techniques, which in this budget are factored in. If we use the accelerated timetable, it means we're going to spend another $7 million for extra man, extra shifts and air freight for some of the equipment. What does that mean? It means that we could have a built plant by the first quarter of 2027, assuming we start in the summer. And then there's commissioning. What is the advantage of doing a plant that is a carbon copy of a plant we've been operating by then for almost 4 years. That is the plant we really know. And as a result, we believe we can cut commissioning times significantly. And more importantly, start benefiting from the get-go, begin with the same levels of recoveries instead of going through the curve of going -- starting with 50% recoveries up to 70% recoveries we underwent from the 2.0 version of the plant to the 3.0 version of the plant. So without being more specific, we're quite confident that we're going to have Plant 2 by any time in the first half of next year. But that's the reason why we're making a clear distinction between installed production capacity and production. Production is dependent on the commissioning, and we're going to keep the market vastly updated as we go along. Now Plant 3. Plant 3 is what we're very proud of actually because given our operational success, given our cost resilience and given our strength as a business throughout cycles, what we've shown basically in 2025 has not gone unnoticed by the main development banks throughout the world, by the main players throughout the world, by the main financiers throughout the world. So we do have dialogues going on for building Plant 3. Building Plant 2 and 3 together is not new. In fact, in December '22, when we filed our DFS for expansion, that was the plan. So much so that we invested in building infrastructure for 3 lines. The goal was to do 1, 2 and 3 sequentially and maximize what we call construction synergies. Unfortunately, lithium took a tumble in '24, and we quickly aborted that plant, and we stuck to just the first plant. By the end of '24, we resumed Plant 2, and we went all in, again, with the volatility of tariffs in '25, we aborted that plant and we stuck to Plant 1. But doing 1, 2, 3 is actually what we have been designing this industrial complex for. Why? We spent the money in the infrastructure, and that was not a small feat, meaning we have the water to feed 3 lines. We licensed to feed 3 lines. We have the sewage inbound treatment station to feed 3 lines. We have the power substation to build -- to feed 3 lines. So from an infrastructure point of view, we are ready for 3 lines. And this is why we're delighted to actually say that, that has not gone unnoticed. And we have, let's say, no shortage of choices from where to get funded with the appropriate kind of debt, development financing debt to build these 3 lines.

Q: Can we have some color on how Sigma would mitigate any potential fluctuations in fuel costs and power costs? What percentage does diesel costs account for in your cash cost or AISC?

A: I don't have the number by heart, but I can talk about power. It will have 0 effect in power. In other words, when you think about power, our power is fixed at $2 per kilo -- $0.02 of $1, meaning $0.02, $0.02 of $1 per kilowatt hour. This is fixed. One important point, power is renewable here in Brazil. So it's coming from a hydroelectricity dam. And we have a 5-year agreement, which is set to expire 2.5 years from now. So we're going to be good with power. Diesel is the element that is a little bit less straightforward to explain. First, because we got biofuels on the mix, and that is mandatory by law. Secondly, because our oil company is state-owned, and they have what we call a diesel compensation account, which works like a shock absorber during oil crisis. In other words, the diesel costs don't go straight to the consumer as they increase globally. Petrobras absorbs some of that shock initially using what we call the oil compensation account and then it releases in the market. And that was created because all transport in the country mostly is done by trucks so that -- and trucks are individual entrepreneurs so that they have time to plan to actually send that cost into their customers. So we're going to revert back to you on the percentage of diesel in our costs with that knowledge