Good morning, everyone. My name is Rob, and I will be your operator today. Welcome to the Sigma Lithium Third Quarter 2024 Earnings Conference Call. Today's call is being recorded and is broadcast live on Sigma's website. On the call today is the Company's CEO, Ana Cabral; CFO, Rogerio Marchini; Company Executive Vice President, Matthew DeYoe; and Vice President, Investor Relations, Irina Axenova. We will now turn the call over to the Sigma team.

Thank you, Rob. Good morning, everyone, and thank you for joining us on our third quarter 2024 earnings conference call. On the call with me today are Company's CEO and Co-Chairperson, Ana Cabral; and CFO, Rogerio Marchini. Earlier this morning, we published our 3Q press release and posted our financial results, which are available through both SEC and SEDAR. Before we begin, I'd like to cover two items. First, during the presentation, you will 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 in our operations. And additionally, earnings referenced in this presentation may exclude certain non-core and nonrecurring items. Reconciliations to the most comparable IFRS 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?

Hi. Good morning, everyone. Well, this quarter, we achieved a production in low industry cost targets. We generated robust free cash flow, and we demonstrated our operational resilience to lithium cycles. We also benefited from a shift in our commercial strategy, which helped us navigate industry seasonality and price volatility, enabling us to secure final higher average realized prices compared to the price bulleting benchmarks. Over the last year, you followed us on this journey, and we are very proud to have transformed Sigma from an emerging producer into this industry leader, demonstrating the operational and financial resilience of a mature producer showing dependability and consistency. Meanwhile, we have managed to deliver all of our climate goals, and we reached net zero one-year in advance of our target, 27 years ahead of the industry with our Quintuple Zero Green Lithium, which became a brand. Well, we are very confident that over the lithium cycles, our capabilities to deliver on the execution of our strategy will ensure long-term value for Sigma in all of its stakeholders. So without further ado, I will initiate this presentation going through the highlights of our quarter. Well, on the operational aspect of our operations, we continue to deliver operational excellence. We first further increased the cadence of quasi monthly volumes to 22,000 tons sold per month. We also managed to surpass third quarter production targets set initially at 60,000 tons, we've done better than our targets. We successfully executed a shift in commercial strategy that helped us weather seasonality, meaning we achieved higher realized prices versus the industry and increased substantially our resilience to lithium cycles. More importantly, we keep on working on our Greentech plant technology perfecting it. We successfully concluded the Plant 1 efficiency revamp we talked about in our Investor Day, which has the potential to increase production by 10% to 15% just like we said. More importantly, we continue to advance the construction of the second plant, and we are going to show you quite a lot of pictures here of our construction side. I think more importantly to all of us partner employees, we created this culture of ownership and operational excellence, which continue to deliver in the zero accidents with our lost time achievement. We've gone out 43 days without accidents, without lost time to work and zero fatalities, staying at the very top of the ICMM rankings. I'll pass it on now to Rogerio, our CFO.

Good morning, all. So Sigma delivered robust financial performance. The principal financial highlights that we have in Q3, we signed the BNDES Development loan agreement, fully funded construction of Phase 2. We maintained low CIF cash cost at target $513 per ton, lowest [indiscernible] industry, $34.5 million in generated operational cash flow, $65 million cash in the bank, continue to lower interest rate of export credit rate lines something around 9%. So we [indiscernible] execution deliver operational performance on targets. Production volumes 6,237 GLT, sales volume, 57,483 GLT, cash costs 449 per ton, CIF in China 413 per ton; sales revenue $44.2 million; operational cash flow $34.5 million; cash in the bank $65.7 million; provisional price adjustment $23.3 million. This provisional price adjustments is final account settlement of sale open invoice. And we had a cash gross margin of 38%.

I'll talk a bit about the superior industrial performance of our Greentech industrial plan. So on production, we delivered on very, very ambitious targets. The strong performance of the plant basically achieved results that were never before achieved in DMS. Basically, it is a result of our unique Greentech technology. So we delivered production above targets of 60,237 dry metric tons. We achieved plant DMS recoveries of 70%, which is a record for this type of technology in lithium. And we achieved global recoveries of 55%, demonstrating what we are going to say next. By concluding the optimization project in record time, we are going to boost global recoveries to near the levels of DMS recoveries by increasing this plant efficiency in this quarter and in all the quarters thereafter. More importantly, this is going to allow us – these changes are going to allow us to reprocess our tailings basically or upcycling the lithium oxide contained in the tailings into more lithium concentrate. Now in a clear demonstration of operational readiness, our team managed to execute the shutdown in only four days and implemented and installed all the equipment necessary for this optimization project. So the team is very ready to build Plant 2. Now I would highlight here something that sometimes we missed. We use a different technology than the rest of the industry. We use dense media separation versus flotation. For many reasons, environmentally, our technology together with the dry stacking doesn't create a tailings dam. Also importantly, for our other stakeholders, for our shareholders, these technologies will allow us in great part to achieve some of the lowest cost in the industry as a result of the more – the simplicity of the processing of lithium that takes place in a DMS. So demonstrating that, when…

So talking about BNDES. As I mentioned, we signed BNDES low on transaction. This is a very fantastic target that we got. The total amount is $487 million, that files 99% of our CapEx, the expansion on Phase 2. The first loan disbursement is pending a bank guarantee. And this lining will reimburse CapEx spend since one quarter of 2024. The terms is pretty good. The maturity is 16 years, the grace period is 18 months and fixed rate, it's a really, really good rate, $2.5, and there is no requirement of collateral in assets. So with BNDES, we are creating a long-term partnership for developing new funds to finance our expansions like to upcycling Phase 3 lithium intermediates and other expansions that we are planning.

So with that, we got confidence to continue to plow through in advance through our Plant 2 construction. So you can see the areas here, and this is kind of a different picture than what we used to show. We used to show in yellow the plant and then in green the infrastructure. So now we kind of switched over the area so that you can see the whole construction area to the left of the plant going all the way in something around two to three square kilometers a year within our already licensed environmental areas. So we are executing earthworks and engineering according to plan exactly as planned. Well, moving on to cost targets. Again, we delivered on all of our cost targets as always, mainly this is because we have a very strict cost discipline here at Sigma. So we just maintained what we've always done. And therefore, we remain as one of the lowest cash costs in the whole industry. So actually these systems and cadence and consistency and discipline in maintaining low cost is what actually demonstrates how resilient our company is to all the lithium cycles. We are always going to be in the black. Now more importantly, that execution discipline of keeping a little of our cost and maintaining low cost levels generated positive cash flow in the third quarter. So again, we are weathering the floor, which happened in the third quarter of the lithium cycles, which has been another data point. I mean, a positive cash flow generation is not a data point about the resilience of our business. So as you can see in these four charts, the operational cash flow generated, which was US$34.5 million, all the figures here are in U.S. dollars, enable us to continue on delivering…

Thanks, Ana. I think Rob, we will pass it on to Q&A. I think we have a few questions on the line, if you'd like to start moving to the list.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question today comes from the line of Steve Byrne from Bank of America. Your line is open.

Yes. Thank you. I have a couple of questions really directed at your commercial team. Are they perceiving any changes in interest level from your converter customers in your spodumene, is that interest level changing? Are they seeing increased interest? Is it flattish? Is it slipping? And is there a change here because of any increased interest in your product because it has the processing benefits? Or is there a sense out there that supply and demand may be inflecting here? So a question on that. And then also, how far out do you book orders? Is there anything there that you can comment on for us with respect to what you think net realized pricing could go to from here in this quarter or next? Is there any inflection that you're seeing?

No, these are two very good questions. The first question is you hit the nail in the head here. As we now have basically a year of data points or at the time we decided to make this change, we had about six months of data points on the performance of our material with the customers. It became clear to us that because we haven't been able to fully monetize the metallurgical premium of our product, our product would always sell. But not only that, it would always sell and it was seen as a source of blending material whereas a source of gross margin by the towing and the downstreamers that engage in towing arrangements because that debt metallurgical premium is actually enabling a 20% to 30% cost savings to the customers, which were not priced in the product. So we had that confidence that we would always be able to sell our entire cargo loads. With that confidence, we were able – we decided to switch into, what we call, the traders distributor commercial policy strategy. Why? Because that is how we managed to navigate the seasonality by essentially organizing with the trader to resell the product just after seasonality, which ties back to your second question. We kept on taking orders in the order book throughout the year. And this is sort of how we get our own data points on the ground of the switch in sentiment from the other element that is there, which is a pickup in demand in China given the initial results of the stimulus in the new energy vehicle industries. And the auto sales increase of 44% in September showed that. So by collecting orders throughout the down cycle of the low of the summer and then entering in the fall…

And Ana, maybe just one follow-up on that. With some shuttered capacity in Australia recently, are you holding back again? Or are you perceiving any increased interest in buying from your customers?

Well, I think there's a deeper issue behind this. And that's related to traceability, lithium source from artisanal mining, illegal lithium and all that we've been watching in the market this year. As we all know, the volume of the shuttered capacity wasn't meaningful to actually have a real effect in the market. It had a psychological effect in the market because it kind of demonstrated that some of the mines in higher-cost jurisdictions are not economic at current lithium prices. But that leads to the question of who is economic in current lithium prices. And essentially, when you run the math, you have the two large-scale producers in Australia. They are economical because they have the scale and they're very efficient and then Latin America and then Africa. But then you examine some of the supply that comes from Africa, that's okay, it's industrial lithium, fair game, excellent, lifting to people, but some of that supply is untraceable. So I think the market – the real market dynamics we are experiencing on the ground in the industry this quarter is an increased scrutiny over the source of raw materials of that chemical. And some of the carmakers, they are very aligned to sustainability and ESG practices are actually leading that charge with their supply chain. So we've been seeing joint procurement initiatives between battery makers and carmakers are clients, right? We see quite a lot of interesting developments. So the real development here is now there's a spotlight in the industry, basically asking, well, do your employees wear helmets, are your minds traceable, is this artisanal, are you ethically sourcing your lithium, which probably will displace a much larger quantity from some of these materials mined and complete this regard to the 21st century and the new era of valuing the individual and valuing human beings that we see taking place in the century.

Your next question comes from the line of Katie Lachapelle from Canaccord Genuity. Your line is open.

Hi, Ana. Congrats on a good operational quarter. I do want to understand the provisional pricing adjustment a little bit more this quarter. It was quite a bit higher than what I was expecting. I noticed in the prepared remarks, you stated that it was related to a shipment from Q4. So I'm just trying to understand why such a significant delay, like why was this only being reported now in Q3? And then going forward, are any of these adjustments expected to continue into the fourth quarter? Or are we kind of through the worst of it now?

No. I mean, it's – we closed out this open trades. And we – this is basically an accounting closeout of the trades. And essentially, you can see in the year-to-date – yes, that's there. We can see in year-to-date, that's why we did year-to-date. Every quarter, we've been getting these questions about this provisional price adjustments. So I'll start with a picture in year-to-date. As you can see here, basically, most of it is related to the fourth quarter of last year, right? So $20 million of the $29 million is related to the fourth quarter last year. So why the delay? Because this trade stayed open, and they will be rolling into these commercial relationships and sell with the previous – with the unpaid portion of the previous shipments. As we change the contracts and change the commercial relationships completely, we just closed out this in our books. So essentially, what we're showing here is basically the complete closeout of all these open trades, G2, G3, G4, basically, all the trades – the six boats all the way from the fourth quarter and the first quarter closed out completely on an accounting basis, right? So interestingly enough, this closeout generated a positive cash inflow of US$7 million because that was the remained unpaid portion of those trades that actually we got to receive, and we were no longer rolling out into the subsequent boat to absorb either upward adjustment or negative cash adjustments. We can go through that in quite a lot of detail with you in the call, we have a page in a posted material online that kind of shows that Matt did that – it was very good work. If we reallocate all these adjustments to each respective quarter, you can clearly see how they even each other out and show that – the trades are actually accurately marked in our book. And again, this was a closeout of all the open book trades, right? So mostly related to the fourth quarter. Now why the fourth quarter? Because that's when the price dropped precipitously. We had done the markup, it had been – we suffered that cash hit throughout the year, but then the accounting books, given that these boats got shipped in the first quarter, we were evaluating whether those prices were actually correct because they seemed too low if compared to the benchmark in December. But as we all know, the price actually fell lower than the benchmark could capture throughout the fourth quarter. So it was what it was. So it took us a while because we were closely examining each one of the deliveries to be absolutely sure that, that was the actual correct realized price.

Got it. Maybe a follow-up question. I just want to pivot a bit to Phase 3 and 4. You are talking about those expansions more. I know it's still early days, but how are you thinking about maybe the capital cost for both of those or how you're thinking about funding those? Because we are sitting almost in 2025, so 2026 and 2027 is pretty soon.

No, I mean, we have obviously quite a competitive advantage in now this development bank relationship with BNDES. What you see in front of you is what we presented BNDES with as our complete industrial development plant for processing lithium and for aggregating even more value to lithium in Brazil, delivering the lithium chemical. So they've been an incredible partner for Sigma. And so essentially, the way we see the funding, well, first, the amount of funding. As you recall, and we posted that slide again online, it's more of the same. We're going to build a third plant exactly like the second, which is exactly like the first. Mine was the infrastructure. So looking at the final CapEx for this second plant is going to cost us around US$98 million – US$95 million depending on the BRL rate, which works to our favor. Because about 70% of the equipment is actually nationalize is Brazilian, right? So that's Plant 2. Plant 3 will be the same. So our typical DMS Greentech plan costs about that much, $100 million. Now the current infrastructure supports three lines. And this is why we highlight 105,000 LCEs, right? That's what's built in infrastructure on site. Well, in order to build a fourth concentrator there, what else do we need to do? Well, we need to add capacity in the water treatment area and in the substation, adding more transformers to power the fourth line. That is not a whole lot more infrastructure. That should be around up US$15 million to US$20 million in infrastructure versus the US$50 million in infrastructure that we spent to put it all there. Why? Because the industrial site is prepared, the pipeline that brings the water, the sewage water from the Jequitinhonha River to site is already there. It's…

Not to belabor this because again, we will release more details in the study. But I think just to add, right, the goal is to not compete against China in the carbonate or hydroxide markets, given what we see as a highly subsidized business there and pretty competitive margins. Our goal is to still sell into that market and bank what we think is the value and use we have domestically as well as the local economics. Sorry, Ana for chiming in.

Yes. We will supply China. In fact, the litmus test for this strategic decision was that we received significant interest from our clients in China because I think the cherry on top is that we can deliver negative carbon lithium sulphate to China. So perhaps we could even enable zero carbon lithium carbonate chemicals in China and help decarbonize the entire lithium supply chain. So again, interest from everywhere, we're here to deliver a product that's going to be globally competitive. Half the market is China, half the market is the rest of the world, so competitive all over. It isn't something we're doing just for part of the market. It is, again, like our lithium oxide concentrate is a globally competitive product. And at that, we get the development bank financing because their mindset is to finance what we call the industrial champion, the Brazilian winning companies that actually are gaining market share and positioning Brazil globally in key export industries, in this case, critical minerals lithium.

Our next question comes from the line of Joel Jackson from BMO. Your line is open.

Hi. Good morning, everyone. I'm going to ask a few questions one by one, if that's okay. Just maybe following up on Katie's question. So if we think of the Q4, should pricing be similar to Q3? Can I think about – you've given production, so can I think about grade and cost being similar? And you said you've closed out some of the Glencore stuff, but again, for pricing, can we think about it being similar to Q3, better worse so far?

This is basically third quarter. You can see on the screen. So we actually booked final trades at 820. We will hover – the market oscillated because it became very volatile for a while in October, but it's here. Can you see this screen? Yes. Yes, there you go. Yes, that is – so you can see – yes, we're all seeing the same screen, exactly. So this is third quarter, and it's pretty close to final. In fact, 820 was a trade we booked, final. So it's – you're going to get the same ballpark. And we're showing you the great adjustment as well. So from – it's from 6% to 5.2%. So that's kind of the question now, right? So essentially, how does grade work here at Sigma? We're probably one of the few companies that could be delivering 6% without that much loss to volumes. But because nobody else is, and this is not appropriately priced, clearly, right, what we do, Joe, is we set our product to Australian quality. So we harnessed what was being offered by our trading peers and what kind of grade they are offering in the market. And we adjust our plant down to that grade because it's very easy to adjust that, right, hard is to adjust up, so that we benefit from a rather exponential increase in volumes when we conduct that process or we bank that over as inventory.

Okay. That's helpful. And then a couple of questions. So I wanted to ask about production of Phase I and then thinking about Phase II. So I'll ask a couple of questions at once here. So as recently as a few quarters – a quarter ago, you were really talking about $22,000 a ton production and sales run rate. Now you sell into $20,000 tons – $20,000 a month. Now you seem like you've sell at $20,000 a month. So the first part of the question is, what's kind of changed between the 22 and the 20? And second part of the question is, I think you've maybe made a big contractor change for Phase 2. Can you talk about that? It seems like you spent very little CapEx on Phase 2 in Q3. So talk about the contractor change, how much CapEx you spent on Phase 2 so far maybe October, November. So a couple of questions there.

Well, let me talk about the production first. 60,000 is guidance because essentially, we conducted our efficiency project this quarter. So we're hoping to guide and beat guidance again. But the cadence of 22,000 is actually a very good – is a great observation. We've always – we try to achieve that cadence. But what we – the real accomplishment as we harnessed our operational capabilities here and increased the performance excellence was to shorten the space or the number of days intervals between each shipment. So as we announce each shipment, you can easily ascertain that by looking at the announcement. They became shorter and shorter and now they're close to 30-day cadence, right? So this kind of gives you an indication where we're going, meaning we're shifting 22,000 every month. So multiply by 12, that's it. So as we haven't done that throughout the whole year, so we're basically guiding and hoping to be guidance. But ultimately here is that frequency decrease of the same volume that is actually the real accomplishment because with that, we are increasing the total quarterly production. So that was your first question. Then your second question is about Phase 2. So we are planning to publish a more comprehensive update on Phase II shortly, and that will have the CapEx disbursed total for the Phase II. But we estimate now that with the first BNDES disbursement, and that's an important point you made that I'm going to reiterate. The first disbursement of BNDES is pending of the bank guarantees. So when it happens, when we get the first actual cash in the banking flow, that reimburses us for all the CapEx spent in arrears since the moment BNDES announced our loan which was February 9 of this year. So everything we spent…

Our final question comes from the line of Shannon Gill from Cormark Securities. Your line is open.

Thanks very much, guys. Just following on from Joe here. Can we expect increased recoveries in Q4 with the ongoing plant optimization and in Q1 of next year as you move from using mobile crushers to a fully optimized Phase 1 plant crusher? Can we expect continued recovery increases? Can you just speak to recovery there?

Absolutely. So you made two excellent questions, and I want to bring this point back again. Essentially, we are indeed going to experience increase in global recoveries. And I want to take the opportunity to clarify a fallacy and a misunderstanding about our plant recoveries. I mean, we're basically getting to plant recoveries in a dense media separation. There are – that is the highest in the world. This has never ever been achieved. It's 70% of DMS recoveries. But then you look at our global recoveries, meaning total recovery, it's 55%. So that gap is up for grabs. It's opportunity for operational improvement, also by managing to reprocess and to treat and concentrate the fines that are responsible – ultrafines that are responsible for this difference into that DMS Greentech plant. We have two projects that we are planning to achieve that. The first one, we just executed. So absolutely yes. That's the answer. We expect these recoveries to kind of reach pretty close to 60% or perhaps more in global recoveries because what we put here was a circuit that in addition to optimizing the capacity of the GMS itself, will actually improve the recoveries of the lithium mark side in the ultrafines, one. Then mobile crushers. Mobile crushes was a different matter. What happened to mobile crushers, it was a design engineering change. In other words, we contracted mobile crushers in – with a local Brazilian supplier. And the method through which this crusher executed their tasks, instead of having the motor and the screen separate, sliding on each other, their design was one where the screens and the motor was connected and they would slide together. So any issues in screens would mean we would have to stop the crusher. We've been dealing with it most…

I'd say one more thing. All of these changes comes back on Phase 2. All this investment, all this work flow will come [indiscernible] that work we have to do again. So less [indiscernible] capitalized. Rob, if you want – Ana, if you want to make any closing comments or...

No, again, I want to thank you for your trust, for your confidence, for believing in us executing through the lithium market ebbs and flows. As we demonstrated, we're one of the most resilient businesses in the industry. We're in a low-cost environment. This is now being underwritten by some of our competitors in other parts of the world, which we're all welcoming here in Brazil. So again, I want to leave the quarter call with a message of, what we call, sober optimism because one thing for sure, we reached the floor, given that so much of the traceable compliant production of lithium is not profitable at these levels, we are, but unfortunately, most of the production of traceable material isn't. And the industry is clearly increasing the game, raising the game on procurement and focusing on examining traceability of the product. So we believe that with the removal of kind of a lot of untraceable material, mainly coming from Africa, we're going to see – we saw the floor being placed in the industry, and we're going to see a decent year in 2025. And I think from there, as you can see then in demand, the dynamics is there. China has been posting very, very robust EV growth numbers for a market than large and with a penetration that large. September was 44%. October is reaching 50%. EV uptake is over 50%, which is a record number. China will be probably almost 60% of the global in the industry by the next quarter. So it's extremely healthy there. One of the key recipients of the stimulus, the various stimulus being directed at the economy. So again, it's a message of sober, cautious optimists entering into the fourth quarter. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.