Good day, everyone. Welcome to Sigma Lithium's Third Quarter 2023 Earnings Conference Call. Today's call is being recorded and is broadcast live on Sigma's website. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matthew DeYoe, Executive Vice President of Corporate Affairs and Strategic Development at Sigma. Please go ahead.

Thank you, Jason. Good morning, everyone. Thank you for joining us on our 3Q earnings call. On the call with me today is company's CEO, Ana Cabral. This morning, before the market opened, really actually last night, we posted our 3Q '23 financial results as well as SEC filings. Before we begin, I'd like to cover two items. First, during the presentation, you'll hear certain forward-looking statements concerning our plans and expectations. We note that actual events or results could differ materially from changes in market conditions and in our operations. And additionally, earnings referenced in this presentation may exclude certain noncore and nonrecurring items. Reconciliations to the most comparable GAAP financial measures and other associated disclosures, including descriptions of adjustments, can be found in the back of the release. With that, I will pass the call over to Ana. Ana?

Yes. Hi, everyone. Thank you, Matt. Well, first of all, it's a pleasure to be here with all of you to present our third quarter 2023 financials. We are delighted to present to our very first operational quarter, and we are profitable right at the onset. So with that, I'll go straight into the first page with the operational highlights. Well, we're now a large producer. We are a force for good in the lithium industry. And we basically achieved what many believed to be impossible. We are delivering zero carbon, zero tailings, lithium produced without toxic chemicals. We have basically been producing the very best product in the lithium industry as far as concentrate. We have always managed to do that, delivering a very successful ramp-up. As you can see, our Greentech Plant has reached 90% throughput. We've been consistently shipping monthly 20,000 tonnes of the Triple Zero Green Lithium concentrate. Our fourth shipment is expected by the end of November, which is going to be sized minimum 20,000 tonnes. It goes to Glencore. In fact, on that, I just came back from almost two weeks in China, Chengdu, all over, where we ascertained on the ground the fantastic receptivity of our product as far as behavior throughout the refining. We'll talk a lot more about that. As a result, we are moving forward with the detailed engineering for the expansion. I mean there's not enough of this material to supply the demand for what we are bringing as value-added. So the selection of the design engineering comes in as connected to the strategic review conclusion. Depending on the strategic review, partner of choice or winner of choice, we are going to select an engineering company. But we're going ahead of expansion because we can basically sell every gram…

Pardon me, everyone. It looks like the speaker line has disconnected. Please stand by while we reconnect. Thank you for your patience. Thank you for your patience. We have reconnected with the speakers. Ana, you may please proceed.

Yes. So I got disconnected accidentally. So I was talking through the slides where we have the chart with the demonstrated efficiencies driving demand for Sigma product in any market. And I think basically, wrapping up that slide with that chart, comparing the premium product driving measurable efficiencies for the client, you can clearly see why the clients with the spot - the client today has two choices: Buy the competitor's product at spot market and buying Sigma's product at a premium value. That's the chart you all see on the screen now. And we showed you on a graph that our clients achieve higher margins, no matter what happens. In other words, by purchasing Sigma's product, he's always better off. So essentially, that drives the commercial success that we've been achieving in this industry. And our commercial team is still camped in China, basically working with our partners for the low grade, ultrafine and with Glencore for the high-grade Triple Zero concentrate, and the response has been spectacular from carmakers, battery makers than the solars or refiners themselves. So we're very proud of what we've built. We're very proud to have been able to deliver a product that's not only the leader or the reference environmentally. Common, it’s like zero carbon, no one does that, zero tailings dam, and we don't use hazardous chemicals. But also, we actually have physical and chemical properties that deliver value needs for the customers. So this is - I've been going through this point repeatedly to make it clear that we don't have a demand problem because we, Sigma, will place every gram at our price, given all these competitive advantages and values in use. The next page shows then the summary of all that I've been saying, where does it all lead…

[Operator Instructions] Our first question comes from Joel Jackson from BMO Capital Markets. Please go ahead.

Hi, good morning, Anna, everyone. Ana, I think I read in your disclosure that you still expect 500,000 tonnes of spodumene production or sales next year, That will be about double what 20 - what your run rate is now, means - can you talk about the milestone you've got to hit? Because you haven't put the feasibility study out yet for Phase 2, 3. So what do you have to hit? What needs to be in production? How do you have to ramp? How have lessons learned that you can get to 500,000 tonnes of production for next year [Technical Difficulty].

Pardon me, everyone. It appears the speaker line has again dropped. Please stand by while we reconnect. We thank you for your patience. We have reconnected with the speakers. Ana, you need to proceed.

Do you want me to repeat the question again?

Yes. Can you please repeat the question cause I...

Sure. I would love to. In your disclosure, you talked about 500,000 tonnes of spodumene production in 2024 to next year. We're there about double the run rate right now. So what has to happen - you haven't put the feasibility study out yet for the expansion. What has to happen for you to ramp up, get in production and get to 500,000 tonnes next year? Maybe you could talk about lessons learned from Phase 1.

Absolutely. Well, we learned quite a lot, as you all know, specifically when it comes to the trans-packing of the tailings, which significantly delayed us reaching nameplate capacity of the production. So we refined that circuit, we learned a lot on flatulation in chemicals that we could use in order to make that circuit very efficient. Again, it's the first circuit in the world, is an innovation, we've pioneered it. But we get it down to a stream now, it's dry stacking beautifully. So that was factored into the new engineering. So I think this was actually a very important learning because all the learnings from actually commissioning this plant and enhancements to the flow sheet, we're going to be - or were factored already on the design. And so we think we are very confident that what we have now is a fantastic flow sheet because it comes battle tested by all the pain and all the lessons we've been through in the commissioning.

So what milestones you have to hit? Like would you have to be commissioned - you would have to be commissioned by this state to hit 500,000 tonnes next year? What's the milestone? Maybe walk through that.

We basically - it's interesting because we use the same slash and cut that we applied to Phase 1, even though we don't foresee waiting like April, May, June, July to get to the stride, I mean, because with the dry stacking circuit that works from the get go, we can actually unleash and turn on plant 2, which is the dense media separation, immediately because now we know what is the right flow sheet for actually getting to the 12% moisture, which is the ideal moisture to be maintained in the case that goes into the main brains of the dry-stacking filter and hence, go into the conveyor belt into the dry stack. So that was actually the one black box we had to solve. Again, it's innovation, right? And this is why we've been here as financial sponsors and investors for six years. We promised that to our stakeholders in Brazil, and we delivered it. So we're not going to have that weight anymore. So that cut commissioning significantly. I mean, four months is quite a lot. And then more importantly - yes, more importantly, we also know what the issue is with the water. When we first started this, we didn't realize that the water was actually sewage grade and we had to build a sewage treatment station to actually get the water from the river and remove the solid [pico] residues and make it suitable for the plant. So there is a myriads of lessons here that factor - that we actually incorporated into the design of these two new plants. And therefore, we see a construction time line, giving a lot more streamlined way more than the first construction timeline to be a lot more streamlined, way more than the first construction timetable. And then…

Just following up on that, and then I'll pass over the baton. But as you talk about the strategic review and you're talking about words like guardian, counterparty, a lot of broad different terms there, how - maybe you can give us a sense of sort of how has the process gone, the range of bids, the range of kind of plans or proposals? And how are you managing this in an environment of, okay, yes, lower lithium prices, but it's a commodity, things go up and down, people can now handle that? How do you manage it in a time of clearly lower lithium multiples in the industry across the year?

Look, this screen is not a benchmark for a strategic buyer. I mean it's sort of they don't think quarters, you don't build a resilient business on a quarter-to-quarter basis. I'll give you an example. When it gets to 2028, it isn't like someone is going to appear two quarters earlier and say, oh, now I need to figure this out. I mean these discussions are happening now. Battery test for Euro 2026 is a reality, and it affects battery makers all over the world. Batteries made in China - cells made in China, cells made in Japan, cells made in South Korea, cells made everywhere are affected by it. So there's going to be a lot of lithium needed into the materialization of the plan of some of these giga factories that have been announced and are being built all over or are operating right now. I mean, so ultimately, it's 2024, practically speaking. So the plans for the remainder of this decade, which is a decade of lithium, are happening as we speak. And I mean, I'll give you an example. CATL announced this year in the Shanghai Auto Show that they're going to deliver the zero-carbon battery. They will be zero carbon in '25, zero-carbon battery comes in 2035. That just shows that this is a global concern. It isn't something that just affects the Western because as you all know, CATL supplies the world. So this is a global conversation. And what is Sigma? And just - let's leave commodity cycle aside for a moment because, again, we demonstrated that we'll thrive, no matter what, right? Sigma is a company that has a clean shareholder registry. There's not a single strategic year. It's basically financial investors with a financial sponsor, so we can deliver a transaction without the interloping that's been plaguing recent strategic movement. Two, we have an encumbered, sizable thousands - hundreds of thousands of units, which means we are easily integratable for massive top line M&A synergies. So we are almost like the perfect target. And we are in a country that is extremely welcoming to mining. The population wants it. We actually managed to demonstrate that there's a new model for the industry of mining processing to be followed in terms of lifting the people and sharing prosperity and not being less profitable. I mean, come on, we posted a profit, right? So I think we represent quite a lot for the industry. So this is just a long way to say that the process is going incredibly well. And I can't say much more, given sort of the imminence of it, right? The release is very self-containing.

[Operator Instructions] We have a question over the webcast from [ Marcelo ] at Everest Capital. Good morning, everyone, and congratulations for the results. Does the company expect EBITDA margins and net margin to improve over the next few quarters? Does the company expect net margin to reach 75%, as reported in institutional presentations?

We do. We do. And I think it's part of the process of leaving this period of commissioning. You can tell by the bridge of EBITDA we posted on the institutional presentation on our website, the further we move, the less clouded by nonrecurring items our financials become. So we will become more streamlined and more clear the ability to deliver superior margins. Obviously, that we need to - we're now showing simulations against a price backdrop that has gone down, and that obviously affects our margins, right? So when you - we were not running in so many at $1,500 per tonne of Triple Zero lithium concentrate. We are achieving right now 1,800, 1,900, this was the price for shipment calculation using the formula on spot hydroxide of 23,000. But again, what we are trying to show is that we are profitable - structurally profitable because our cost is so low. We're well below the marginal cost required for the industry to meet the supply expectations of demand. Even when you look at softer demand backdrop, even when you look at what we call the full bear cave, we're always going to be here. We're going to make more profit, less profit, it's a commodity after all. But we are resilient to cycles, and that's what makes Sigma very special, a fundamental asset, fundamental company here. We're here, no matter what. So we are the super major in volume that has managed to keep costs very low. And I think connects to the previous question. Going forward, as we expand, our cost will go down because the G&A is a bit of what happens to Taliesin. They're so big, the G&A gets diluted over. They are now at 1.4 million tonnes of concentrate. So it's a giant number, that is about 5x our size. So we're tripling. So the more we increase the scale of production, the less the G&A matters because it gets diluted down. So when you look at the fundamentals of the cost, it just gets better by simply basically diluting down the fixed cost over a larger number of units, right? So essentially, this is actually the demonstration of the resilience of the business. I mean we can expand confidently because the costs actually decreased.

There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the conference back over to CEO, Ana Cabral, for any closing remarks.

Well, I want to really thank all of our investors that have believed in us, that have stayed with us. We have a very steady roaster of top investors that have stayed with Sigma over the cycle, almost right financial sponsors that we are. And the fundamental investors, you have seen through the value. And what we are hoping to do is to reward them beautifully with the execution, the flawless execution, the strategic vision, the execution of the strategic review. We do see Sigma as a key instrumental player in the global lithium industry, a real force for good because we brought the conversation of zero carbon, zero tailing and environmental sustainability and social sustainability in lifting the people and achieving social goals, achieving climate goals while delivering sheer profitability on the metrics, while delivering an incredibly profitable and incredibly resilient business. So it has not affected us at all to be the most sustainable lithium company in the world as far as metrics, which shows the way forward for the industry. It's a matter of will, right? It's a matter of cost discipline, operational efficiency. And then you become where we are, which is the bedrock of the zero-carbon battery. So we're very, very proud of this quarter. We're very, very proud of being profitable in the first operating revenue quarter, and that's thanks to you all into your unwavering support over the years. So I'm very honored to have the investor base that I have. And with that, I'll close my remarks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.