Good morning, everyone. My name is Dennis, and I will be your operator today. Welcome to the Sigma Lithium Fourth Quarter and Full-Year 2023 Earnings Conference Call. Today's call is being recorded and is broadcast live on Sigma's website. On the call today is company CEO, Ana Cabral Gardner; and Company Executive Vice President, Matthew DeYoe. We will now turn the call over to Matthew.

Thank you, Dennis. This morning before market opened, we announced a final investment decision for our Phase 2 expansion, as well as preliminary, unaudited 4Q and full-year 2023 financial results. Before we begin, I would like to cover a few items. First, during the presentation, you'll hear certain forward-looking statements concerning our plans and expectations. We note that actual events or results may differ materially given changes in market conditions and or our operations. Additionally, earnings referenced in this presentation may exclude certain non-core and non-recurring items, and have been based on unaudited financial statements. Reconciliations to the most direct comparable IFRS, financial measures, and other associated disclosures will be made available. The slides will be posted on our website, and following the call, we'll post additional slides with added financial performance information. With that, I will pass the call over to Ana.

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 270,000 tons of lithium concentrate per year to 520,000 tons of lithium concentrate per year. 2023 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 all of you, our shareholders. I'm 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 are 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 premiumizable material, we call Lithium 5.0, 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. 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 2 is going to be the same build team of Phase 1, which delivered Phase 1 successfully on budget and on time. More importantly, and I think lastly, a key point in this confidence behind the investment decision was that, as a result of the very successful drilling campaign of 2023, we managed to increase the project life to over 25-years. So we have now permanence and longevity at 109 million tonnes of mineral…

Thank you, Ana. So our reported FOB costs in the fourth quarter as we had highlighted in the release was $549 per tonne. Within 4Q were a number of costs associated with commissioning expenses that were more of a 3Q phenomenon, but booked within the October-November timeframe. They're real costs 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 we say, non-recurring. That would drive a pro forma FOB Vitoria cost of about $455. If we strip out the $70-ish per tonne in high-grade freight, we end up with a 4Q pro forma Plant Gate cost of about $385 within the fourth quarter. That's not very far, as we said, from the $370 that we were highlighting for the 3Q average. And again, we haven't even really begun to benefit from the transition of contract labor to salary, domestic labor, some of the diversification of our suppliers or the optimized maintenance schedule. So we think we have plenty of room or good line of sight again to hitting that $370 number. Obviously, as you build this back up to get to what we hope is a recurring reported COGS all in, you add back that spodumene, freight, royalties, and 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 4Q. Other items that impacted the fourth quarter, low-grade trucking and warehousing. We're not trucking our tailings to port anymore at the moment, given market conditions, so we don't expect those costs to continue. As we mentioned, those commissioning expenses here and there, and we got some tailwinds from equipment, tax and credit, 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 the direction we're headed. Ana, 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 non-cash items and for commissioning costs. So we delivered what we call an adjusted EBITDA of $49 million. So we ended our very first year of 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 $135 million. Then we have operating costs, non-recurring, transport and warehousing, we get to the gross profit, right? So at the gross profit, then we have SG&A, ESG and others, and then with cash EBIT. So then we start moving back into the items for adjustment. Meaning, stock-based compensation gets added back, because it's a non-cash item, is an IFRS accounting item, then we get the D&A added back, and then we get the EBITA. So all of this is accounting straight from our non-audited financial information. So then we get to the $25 million of EBITDA, which I just showed you on the previous page. And then we add back the non-recurring SG&A, which is part 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 have a -- 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.…

Thanks. Yes, I'll pass it to Dennis to open up the Q&A.

[Operator Instructions] Now we have a question from the phone line. It comes from the line of Steve Byrne with Bank of America. Please go ahead.

Yes. Thank you. Is it fair to assess your net cash position in the first quarter is dropping by $30 million? Is that a fair assessment? And if not, what usuals might have led to the cash drain? I'm asking because you're moving forward with an outlook of generating free cash flow in these subsequent quarters, I just want to make sure that squares with what the results were in the first quarter.

Matt, do you want to take the question or should I take it?

Ana, you can grab this. Yes.

Yes. So, Steve. Well, we're giving you the snapshot of the cash for now. So $109 million is March 30 cash position, right? So that's an important point. What happened between then and now, well, we drew down -- and this is why we wanted to give you clarity on the trade lines. We drew down the trade lines, but we did not use it. So what we have there is a combination of drawn trade lines, but unused trade lines. And then, if you take the cash page here, you're going to see that we got -- there you go. Can you see this page? Yes, 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 advanced interest payment that was made on the long-term loan we have from a shareholder in our balance sheet. So maybe that's probably the -- we call the clutter, when you look at the cash position in December. Not sure, if I answered your question.

When you say that the two...

We can take it offline too. The math is a little bit -- I think your math is a little off.

Okay. Could maybe just...

Our net debt would have increased only modestly between year-end '23 and March. And then obviously, as we've been able to kind of articulate more recently in our press releases, we're now locking in price at pretty good economics. So we would expect cash to accrue quite considerably, should markets kind of sustain these levels, which we for now see that they are doing. But we can -- we can talk a little bit more offline.

Exactly. Because, -- Yes, if you take a snapshot of like today, and that's an easy snapshot, right? We got $100 million of long-term debt from shareholders. We got all US dollars, $10 million from BDMG, so that's long-term debt, not amortizable. But the interest on the long-term debt has to be paid upfront. So it was decreased from the cash position on December 31. It wasn't paid then. It was paid in January. Then what we've done, we drew all the trade finance lines, but we didn't use it. We got $90 million, we got $88 unused. So when you think about the overall position of net debt, we got roughly $110 million sitting long term, 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, they're 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 deduct $109 million minus the trade finance, it's 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 2024 interest for the long-term shareholder line.

Okay, thank you for that. And maybe one follow-up on the idea of at least considering going downstream into lithium sulfate. Do you have any preliminary cost estimates of what that project might cost? And would you do that at the mine, where you would there operate a calcine at the site, and some of that material would then be put back into the excavated areas?

Well, that is the centerpiece of BNDES industrial strategy. We will put it whatever natural gas is going to be made available to us at the lowest cost per BTUs. 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 Vitoria port 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. 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 is the natural evolution for a lithium concentrate producer and we demonstrated why. Now, what's the advantage of Brazil? Clean, cheap power. I mean electricity costs $0.02 per kilowatt hour. We can obtain a very, very favorable $1 per BTU gas contract at a pre-south port 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 of how much this plant is going to cost. I can't divulge it now, but this was one of the centerpieces of the conversation with BNDES. This is the ambition and it's pretty straightforward, because it's basic chemistry. An intermediate plant is a kiln and an acid wash. The kiln makes spodumene into beta spodumene and the acid wash produce the sulfate. Now, what is the real key? And that's a key competitive advantage we built into this company, residues,…

Pretty good. Thank you.

You're welcome.

Your next questions from the line of Joel Jackson with BMO. Please go ahead.

Good morning, Ana and everyone. I have a few questions. I'm going to ask them one by one. So, can we talk about SG&A? You talked about earlier this year about trying to get SG&A down to, I think, about $11 million run rate annualized. I think you did about a CAD10 million run rate in Q4, so getting there -- CAD10 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, what it was, how much of that -- how much of the burn rate might be in SG&A for the strategic review?

Yes. 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 million. So if you deduct $24 million from $42 million, we're still at double the guidance we gave you. We try to give you guys a reason of why is that? And we do believe that this cluttering of SG&A will not be here in all its entirety in Q1, but some of it's still going to be here, such as the legal. We still have the teams working on our SAP. So the Q1 is still going to be work in progress. We're still going to be getting there. Matt, when we look at the bridge though and that goes back to your point, Joel, on the operating cost, we're almost hitting it, right. So the SG&A becomes a working progress of actually decluttering and evolving into what we call steady-state SG&A. But on the operating side, we're almost at the guidance we gave at BMO's conference for, what we call a run rate operating cost. Matt, do you want to compliment?

Sure. I mean, Joel, some of this is going to be tightening the belt, 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 will be additive. But from a bottoms up perspective, if you think about the costs that 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 2, because we won't have to add nearly as many heads as we would when we double capacity, right? We'll get key operating leverage through SG&A and port traffic primarily as we double. But from our perspective, if we take a more stringent approach to spending and perhaps spending that's more in line with I would say, where the economics of the market are versus, if you rewind to really the first half of the year, when price expectations were much higher and we were spending to ramp the facility, we think we've got a pretty credible path to getting there. But it's a little bit more of a lift perhaps, than the operating cost side, but numbers all the same that Ana and team feels pretty comfortable about.

Okay. And so what's the monthly burn rate on this strategic review?

It varies. That's the problem. And this is what's called shooting a moving target. You know, it really varies and that's one of the items we don't control. That's one of the reasons why we can't fully declutter this. It's one of the non-predictable elements. It 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. It's much, much alleviated, 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 overly marked. So it's different, It's a lot easier, but it's still here, right? It's still cluttering the numbers. But it's one of the non-predictable items, totally outside of our control.

Okay. You said Q1 spodumene production was 53,000 tonnes. It was 60 -- 59,000 tonnes in Q4. So you're down about 7,000 tonnes in the quarter sequentially. Talk about why you're at lower utilization in the first quarter?

Well, it's a funny quarter in Brazil. It's 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 a capacity. So we kind of lose -- 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 sober, not fully productive and it happens, it's cultural. These people have been working like crazy, right? So Carnival is a problem. And then it -- we also caught the, you know, what we call the pressure valve of the first week of the year, because we put all systems go to deliver the 2023 last shipment, which sailed. I'm not sure if you remember this, but it literally sailed on the 30th, right. So the first week of January was like, oh! yes, we're going to relax. No, we won't, because we're going to have to make first quarter. So it was a combination of what we call collective vacations, where we're working with downshift in the first week of the year, plus the Carnival. And it's kind of always like that. This is -- it's the Brazil version of the Lunar New Year. You might want to build into your calendar. First quarter has Carnival and 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 24/7 crazy hard. Our general manager for the plant didn't spend Christmas nor New Year with his family and his new granddaughter in South Africa, that man stayed here. He didn't meet his granddaughter to make that shipment. So that was the level of commitment of this team. They were like really all out to ship that boat in December and make the cutoff for the year, right?

Okay. And just finally, you gave color around, so you've obviously given Q4 pricing. You talked about what the April shipment is going to be final. For the two shipments in Q1, can you give an idea of what pricing looks like and how much is provisional on that?

Yes, well, I think what you see on the screen is a pretty good indication where we sit on the first -- on the first -- on a Q1, with fluctuations, but we're kind of averaging the industry, a little bit of a premium, but not really. Q1 was a tough quarter from an industry-perspective, because you see what happened in Q1, clients were stocked, but they were still buying our product. Why was that? Because of this slide. Given that life was so difficult for the clients, they were putting other products aside and processing our product just to bank that margin that we are literally giving to them. And we were told this much. So just the fact we had people buying full boats and paying us, I mean, not the full premium, but a tiny bit of a premium 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, we're delivering for free. So it was a fascinating quarter. We learned quite a lot and we just got a team coming back from China, like, they were there for 32 days, and 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 the that's auction bid this boat was a result of the clients having experienced this for now six shipments, seven shipments, and ascertaining for themselves, that they do need 2 tonnes less, sometimes 3 tonnes less of our product versus the comparable. So they're banking that difference, right, which kind of ties back to the question. Steve was asking us about why lithium suffered? Well, we want this money too. So that's -- this is value in use, floating around. We're either going to get it through a premium or we're going to just bank it ourselves in a lithium sulfate plant. We're not going to let it hang 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, average -- your actual average delivery price similar, higher or lower?

You can use…

Explicitly glide 1Q, yes, Joel.

Yes, you can use what's here. It's okay. It's -- this indication.

That's what I was asking. Because you're giving Q4 and you're giving kind of April, but you're not giving mark -- the February, March…

Yes. There's about $100 of a difference. So there's $100 floating. So you can just take a pick, but it's -- we don't have the finals, right, because they were still on provisional. But it's going to be between this number 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.

Well, I just want to thank everyone for the support, for the patience, and for sticking to us. I mean, I think we are on to build probably one of the most resilient lithium businesses in the industry. We're building the next major. The mathematics shows this numbers talk for themselves. Math has no opinion and we're here to stay. And you look at -- when you look at this picture, we now have the longevity, which was the missing link of the sustainability when it comes to project years of Sigma given that we have prioritized cash flow and now it's clearly demonstrated why it was so important, because we were able to hit the tail end of the bull market, and we earned quite a bit of cash. So then this year, we reprioritize, 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 with the third largest lithium industrial mining complex in hard rock. We're quickly closing in on the number five producer. By next year, we're going to probably be on top of number four and number three. So it's a force for good. So here we are, aiming to be number three very soon with a product that is clearly, metallurgically better from a physical and chemical scientific standpoint. So it's the mathematics of savings for our clients, the mathematics of valuing use, numbers are numbers. So thank you so much for being here with us, for supporting us, for encouraging us, and for 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 we're here to follow this journey with you.

This concludes the Sigma Lithium fourth quarter and full-year 2023 earnings conference call. Thank you for participating. You may now disconnect.