Sigma Lithium Corporation (SGML) Earnings Call Transcript & Summary

And we are starting. Well, good morning, everyone. I am Ana Cabral-Gardner. I'm the Co-Chairperson and CEO of Sigma Lithium. It is my pleasure to welcome all of you to our 2022 much-awaited earnings result call. I have fantastic developments to share with you. I'm here on site actually for the remainder of this week, but I want to just highlight a few disclaimers. I'm going to make quite a number of forward-looking statements in this presentation to give you a bit of a glimpse of the year to come. So please kindly read the disclaimers and take my comments in light of the disclaimer. So it's a delight to have this earnings call as a producer. It's our first earnings call as a producer. So this marks a huge milestone for all of us. And then some of us have been here for almost 10 years working for this moment. And there are quite a number of fantastic developments to come as we go from here to becoming an even more relevant player in the global lithium industry. So firstly, I want to start with guidance for 2023. So we produced the first green lithium concentrate on schedule in April, and we have been prudently ramping up ever since and the goal is to get to what we call nameplate capacity by July, early August. And why prudently? Because please bear in mind that we are actually running the first environmental circuit for dry stacking in the industry. So we do not want to overload the circuit. We want to make sure that the DMS runs at the pace with which we're comfortable with running that circuit. So it's been all going very well. The guidance for Phase 1 is 130,000 tonnes for 2023. So that will be up until December. By then, we're going to move into annual [indiscernible] to 272,000 tonnes of concentrate, which is the nameplate capacity. As we discussed, we're producing a premiumized high-purity battery-grade lithium. This was validated in our first sales, which is essentially the culmination of years of work that started with our pilot plant. We achieved 9% lithium hydroxide premium pricing. More importantly, that sale was done in tandem with a 3-year offtake on tailings, crowning the 0 tailing strategy, which is the first for the industry. So we are delighted to formally validate the premiumization of our lithium. It is high-purity granular coarse 0.5 to 6.5 millimeters and therefore, it performs better. It brings the efficiency [indiscernible], measurable efficiency to do 20% to 30%, and that translates into a premium. We do not yet have a carbon green premium, but we believe that in decades to come, that might happen as well. More importantly, given that all has gone very well at the start, we are very confident to expand the production, which just means building more throughput. So we are tripling the output, building 2 more line trains in our industrial zone here in Vale do Jequitinhonha. The detailed engineering is ongoing is being conducted by DRA, which is a very well-known global construction company. We're partnering with the same team that built this block for us. We are fully funded, again, between the debt that we acquired in December and the cash flows, we feel very comfortable with the pace of disbursements. And again, we would triple production to 766,000 tonnes of green lithium once it's done. We'll talk a bit more about the expected ramp going forward. We also believe that once that is done, we will be further derisk towards the $15 billion net present value we put forth when we presented the prefeasibility studies in December for Phase 2 and 3. So another step in derisking towards achieving those [indiscernible]. And again, another important development is around Phase 4. We are expecting, as we gave guidance, no change at least 15 million tonnes. We already got that. Now the conversation around Phase 4 is where does it go? Does it go in the back of the Phase 1 production, maybe 8 years from now? Or do we bring fourth as a fourth line train perhaps beginning construction next year. So that's the current conversation given that this excess returns in lithium probably will prevail for 3 to 5 years, and we're going to take advantage of extracting as much material from the ground and transforming it within that period to maximize value for our shareholders. Talking a bit more about Phase 1, this is the picture of the site we're in. You can see the picture from the ROM pad down towards the plant plus the crusher, then the silo to store material and then DMS. The next picture shows our beautiful material. You can see the particles. It's green lithium, its coarse, it's premiumized, it's stunning material, like beautiful. Here is a picture of our North pit looking down to the South pit, you can see again the preserved seasonal [indiscernible], which is a symbol of environmental preservation and sustainability as a company. And again, we are very proud of it. In the middle, you can see the white that's the run of the pegmatite, the ore body where the lithium is. So we delivered on every front. I mean for the last 6 years, we have been talking to you about where we were going. We've been very consistent. We never stopped investing. We never stopped working even during the bear cycle. So the result is that every single milestone that we discussed has been achieved as planned, commissioned the crusher, initiating commission in December, commission completed in February, commissioned the water pump which is a major work of engineering as it goes all the way from the river to the plant 6 kilometers, as it preserve the nearby creek. We obtained the operating license in March, initiated production in April, commissioned the dense media separation plant, commissioned the first dry stacking tailing circuit in the world. Now we're ramping up the dry stacking tailing circuit with the pumps to the belt filters testing capacity. Then we delivered on zero tailings. I mean we [ sold ] [indiscernible] the dry stack material into a 3-year [ update ]. The material is very, very well received by client is high of purity. After all, it's slightly granular as well even though it's technically ultra fine. We affected our first [indiscernible] of the green lithium. We crystallized the premium, the 9% value ramp to the price of lithium hydroxide chemical. So we established how much value we own in the supply chain. That's a premium meant for us. And then we started the stockpiling of material at port to effect for shipment, which will be 30,000 tonnes, 15,000 of tailings and 15,000 of concentrates. And then we're going to be gradually ramping up nameplate capacity throughout the North American summer. [indiscernible] Next page shows a bit more detail on the, again, [indiscernible] putting the milestones into time lines, the commissioning of the crushing circuit, the DMS circuit commissioning and then the initial production in April, the ramp-up to nameplate capacity that's happening as we speak. First shipment here in the middle, and then we're going to start producing nameplate capacity initiating in August. So all of that within a context, we have a beautiful picture taken from the thickeners of all of our dry stacked circuits here at the left bottom corner of it, right? Here is in more context, the ramp-up and the ability that we have -- the demonstratable ability we have to scale up production. In other words, how do we manage to get here? And where are we going from here? So we're giving initial guidance to the year-end as a pitstop of 130,000 tonnes of lithium concentrate until December 2023. And then we'll continue to deliver by then a nameplate capacity. And then we get to 277,000 tonnes of material on a run rate, annualized. And again, then if all goes well, if the construction final investment decision is made by our [ board ] this summer, we will be embarking on a construction. It's a lot simpler because it's just 2 line trains on an industrial park that exists. So it's an expansion of the production capacity of the existing industrial park. And that will lead us towards the 766,000 tonnes annualized nameplate capacity. By December 2024, you could actually infer guidance, if we manage to stay on the same timetable we achieve here as similar. We will be at 277 plus 260, which is 2 line trains at 130. So you will be roughly 530,000 tonnes of product expected if all goes well. Final investment decision made, and we managed to maintain that construction on schedule, and budget, which is essentially delivering on the same playbook. So we're basically consistently marching towards what we have been aiming for, which is adding 3 line trains running. And here, where does that places us. So it's indeed a very large-scale operation. Even when you contemplate the mergers that took place in the industry recently, we're still up there with a great and more importantly, with the body of resources and reserves to drop from, to continue to grow organically as a major. So the challenge in this industry is to reap the benefits from the winner take all that happens in lithium, given that it's a concentrated industry from a client standpoint, there are very few battery makers fixed to be precise, which are large scale. And therefore, we do believe that they have a concentrated set of suppliers, and we want to be 1 of those suppliers. Being geographically diverse, being in Brazil because it supports our [indiscernible] derisking their supply, but also the large-scale producing ultra-high quality product, purified product and green product also ensures our place in global supply chains for pretty much every battery manufacturer. So we're in an incredible position to benefit from the growth of the industry. As the industry grow, our demand grows concomitantly throughout cycles. In this slide, one point, it's important. You can clearly see in light gray is the current production of the existing producers. In dark gray is the planned production for 2025. And so with 100,000 tonnes LCE, we're up there with the largest players in the industry. So we're delighted to have reached this position as a producer no longer as an emerging developer. Here is, again, something we're very proud of. The picture of the [ thickener ] [indiscernible] and the dry stacking tailing circuit. You can see that's the entire appendix to the plot and it's the secret of our environmental success ultimately because we dry stacking these tailings and we're selling them. So we're very proud of this, and this is dictating the pace of commissioning the main DMS plant because we're testing this equipment for the first time in the industry. So it's a phenomenal achievement. This shouldn't be underestimated. And here is the picture of the product. We're very proud of this product. This is the tailing. So it shows that this beautiful greenish quality, low iron oxide, slightly granular, is in place even in this ultrafine tailings. So we're very proud of this material, and that explains how [ sought after ] [indiscernible] this material is. And that explains how we managed to achieve, again, the same premiumization formula applied to this product because it's essentially processing a flotation plant upcycle by our clients, which means it's fantastic for the environment. It's basically 2 sets of lithium production with the same 1 [indiscernible]. So we're very proud of this. This page shows the ramp-up in quite a lot of detail, and we wanted to take our time to go through this, so that you would understand how it all comes together. So our operating teams are managing all the normal challenges and we're completely on track to get to the commercial production in the Q3. So first, we start with crusher. So the target design was -- the capacity is main there. And then we've got the April, May achieved results and then June, July, we're kind of on the way to achieving what we see here in June. So we're doing pretty well. Percentage crush and utilization, again, we see here the percentage crush utilization. The crushers stopped a few times. Again, we're working with a [ test and made ] [indiscernible] large jaw crusher. And we had its challenges there, too, but it's now going well, we have stopped [indiscernible] crush material. So that's why this never been a bottleneck nor an issue because the crusher commissioned a few months ahead of the plant, right? Then it was done for that reason because we're also testing a 1,200-millimeter jaw crusher for the first time. Then again, we go to DMS throughput. As you know, it's measuring tonnes per hour. That's the capacity of each DMS and that's how we measure that. And we've been ramping sort of conservatively towards our goal, so not to overload the back end of the circuit. This is where we're really managing the [indiscernible] conservatively and slowly so that we make sure that the filter mechanism, the tail end of it responds well. And so it's a consistent march towards getting to target design -- prudent, consistent march, classic Sigma, prudent and consistent should be our tag line. Then we go to DMS utilization is the mirror of the throughput. So we've been going through getting to the 85% target design. We never targeted this to be 100% utilization, so 85%. But again, a sort of prudent and consistent march to get into that level. And then the recoveries. The one interesting thing on recoveries is that we're now feeding the materials as fresh rock as opposed to the weathered rock that was at the beginning of the feed because that was the first portion of the [ Susha ] [indiscernible] mine, the Phase 1 mine that got removed. So as we reach fresh rock, naturally, the recovery is increased as well is a natural progression of the kind of material that gets fed into the plant. And then production. Again, we've gone very slowly, very conservatively, making sure everything works. And then once we test it, then we can hit the accelerator more confidently, which is what we're doing right now to get up to the nameplate capacity. And the prudence here was mainly related to staffing these plants on the back end of the process, right? Because again, think about the scenario. The pumps don't work, the dry stacking doesn't work. We haven't planned for tailing down, right? So we didn't have a plan. So essentially, we were hinging this success on that circuit working. So therefore, we were very prudent on making sure it worked, so that we would have our tailings dry stack the way we planned. So guidance that we gave you, and that's an important point here is based on a number for capacity. That's not the target design. So this plant is designed for 20,000, 22,000 tonnes a month, and we are giving guidance around 16,000 tonnes a month, which is numbers we're already hitting starting July. So by July, we're going to get to guidance, but then the design actually can get us further, and we probably will get to design throughout the year. Hence, the discrepancy between the guidance and the full annualized number. So we're going to hit guidance. Then the question is how quickly we hit the full annualized numbers and most likely will happen throughout the third quarter as well. So here's a very detailed operational x-ray, so that everybody gets comfortable that we're actually going in the progress that we said prudently and consistently. Here is what it would look like for us after the first year. And I think, we selected the main numbers. What I think what we want to do is to divert your attention to the chart on the right. I mean, essentially, there's quite a lot of debate about when your markets are going, what are the prices, the prices all back up. I think the main point here is Sigma is a low-cost producer. We're probably the third lowest cost producer in the world -- the fourth lowest cost producer in the world. So what does that mean? It means we're here to stay. No matter the price environment, we are earning excess returns. So think about the recent bear Wall Street upgrade. They're saying $19,000 per tonne of hydroxide long term. Well, in that scenario, with our premium pricing, we're still earning $1,300 a tonne -- per tonne of material excess returns. I mean that cost is $550 a tonne, steady state. So bottom line, no matter what [ consumer ] prices, we are going to be earnings excess returns which is we're going to be generating robust after-tax earnings. So that's the cash generation foundation here. The fundamentals of it is being a low-cost producer. Everything else, the function of how you have your forecast around the market. And obviously, our own forecast on delivering the units, delivering the volumes, which as the previous slide highlighted is marching as planned, normal commissioning in the first 3 months of operations, right? So for example, if you look at on an average basis in total, even with steady-state prices, let's say, averaging $3,400, we would be putting for $2.8 billion of earnings. If you look at one line only and if you adjust the prices, take it 20% down, which is where they would be today on spot for our numbers. We'll still be putting out about $1 billion in earnings annualized. So these are very robust earnings numbers and cash generation numbers. So no matter what the math is here, we're ultra excess returns or we are in excess returns. Irrespectively, the margins are always above 70%, 65% earnings, which are net profit margins that are quite significant. And here is, again, the re-rate potential translating numbers. As we become a producer, as we continue to consistently deliver towards being a producer, we still see a disconnect if you compare to other pure play lithium producers of our scale. And again, as we're now a producer, you can see the color ball being our annualized reduction, the gray ball, the steady state in [indiscernible] production with 3 line trains. And then you look at our peers, which are the same scale, the discrepancy evaluation to us. Clearly, that happens because we just became a producer. But as the months go by and as we demonstrate our ability to ramp towards main play, to deliver on the construction of Phases 2 and 3, to ship material, continue to earn operating prices, we do believe that next year, the year after next, we are going to become much closer to these peers. So there's quite a significant pickup in value to be earned in a year here in this company, assuming we get to our milestones of building to more 2 more line trains and continuing to deliver production consistently, which we are demonstrating we can. So we're super confident that we're here to stay and it's pretty clear where we're going. So I think the best is yet to come really, as a shareholder of Sigma, we always think about it that way. I mean, so we're very excited about the future, and this chart is the demonstration of it. That's a good segue about why are we so excited about the future because we're delivering the things that brought us here to begin with 6 years ago. I mean we delivered our zero trailing. We're actively working here on a strategy to zero all of our carbon that includes the diesel we use in the generators throughout construction, a zero [indiscernible]. And we've already done it, right? So we delivered this dry stacking. We're delivering zero tailings and why zero tailings because obviously, we're not selling all of our tailings. I mean when you think about the mass balance of the plant, about 700,000 tonnes of coarse gravel material is produced. So what happens to it? Well, it's becoming road covering here in Vale do Jequitinhonha Valley preparing for the wet season. So we will be able to do a few hundred kilometers of road coverings throughout the month based on basically donating the coarse gravel to the community, which has little to no lithium and that gets mixed with some of the material from the waste piles, the shift that we've been crushing in a separate plant, tiny plant and that becomes this beautiful coverage that you see that's been a blessing to these communities, that couldn't reach the towns for 3, 4 months during the wet season. So we're very proud that what the tailings are becoming in the communities. And obviously, what we're monetizing for tailings as we sell 300,000 tonnes run rate expected of these ultrafine ultrahigh purity tailings with about 1.5% -- 1.3% of lithium oxide. So high content of lithium oxide, price of the premium index of 9% lithium hydroxide minus the processing costs on flotation, that's our tailings pricing. First shipment comes out with tailings will publish then and proof is in the pudding. You look at the quality, it speaks a thousand words. It's fantastic material. So we're very proud of this. So essentially, key actions. We met our objectives. We met our target SDGs, recycling the tailings, upcycling the tailings, 100% water reuse, so closed water circuit. At that, we're using sewage grade water. It's a sad reality that the Jequitinhonha River is actually full of sewage grade water that's not even suitable for industrial use. That's the water we use. We [indiscernible] in a sewage treatment plant inbound that water stays in the circuit. It doesn't go back to the environment until it evaporates, gets lost. So perfect water efficiency. We're connecting to the grid. By the time it happens, it'll be clean energy, 100% clean energy. We have a very thorough biodiversity preservation starting with the areas we thought for piles, which were a priority -- on a priority basis, areas where we -- where there were pastures with suppressed vegetation. So we avoided to every extent suppressed vegetation for dry stack tailings for tailings piles. We just suppressed around the pits where it was inevitable. And at that, we donated 2:1, 5:1, tropical forest for each cactus or each caatinga piece of vegetation we suppressed. More importantly, even -- is environmental sustainability, leaving no one behind. We're making a life project. It's a lifetime legacy to make sure the region benefits from all these wealth being created here for shareholders. And the way to do this is to direct these programs to economic development initiatives that globally have been proven to have maximum development impact. The World Bank has an enormous value of research [indiscernible] value of research. So we chose 3 initiatives, water, hydro security, the water safety, meaning water for everybody. 3,000 water tanks for everybody because the water truck program of the government in the towns would sometimes deposit the water in collective cisterns that were far from the actual houses. So we earmarked 3,000 individual cisterns for each house and this number is bound to increase. So in concentric circles around our operations. Then the zero drought. We pioneered this what we call climate mitigation initiatives of creating these basins for rainwater capture, so it's irrigation year-round for the smallholder farmer, for subsistence agriculture. So that's, again, economic development by providing year-round ability to subsistence agriculture to thrive. And then lastly, microcredit. What we're doing in microcredit is just something to make us all proud. We have 10,000 lines of microcredit earmarked. More importantly, we have initiatives of holding the hand of the entrepreneur -- of female entrepreneurs. The impact of this is equivalent to over 50% of the economically active population in the region. So we're reaching everyone. And that ensures that other businesses in other areas, nonancillary to mining will drive. So we're creating economic development in different economic sectors than the indirect jobs than the ancillary ecosystems created by metallurgy, mining, for economic activity. So it's a spread of economic welfare. First, the safety net of water safety. I mean, the population would have water insecurity. They will go thirsty once the rain stopped, right? It was that serious. Then, again, ensuring that these small farms with -- and then lastly, I mean fostering the female entrepreneur to create this mini businesses, this very small businesses, which eventually would drive and employ more people, more [indiscernible]. So going at production expansion here is then how we're going to continue to do what we do. We're proceeding on schedule. I think it hasn't been appreciated on the expansion that there's a tremendous amount that's been done in this first half of the year towards detailed engineering. I mean we were more forthcoming on detailed engineering when we are now producer. Now we're so busy talking about production, we neglected to tell you how detailed engineering is going for you is a very detailed time table around all the steps we've been doing towards the construction of those 2 additional line trains, which again, are very simple, given that they're just production expansions. We've been running this since December, we hired DRA. We're continuing with the teams here of [ Promo ] and the construction, the Brazilian engineering companies is going to do superb job for us. We've done the trade-off studies. We confirmed the design. And now what we're doing is what we call circuit adjustments, final designs, recycling lessons learned in the start-up of the plant into the design of these 2 new line trains. There's been quite a number of lessons learned, especially in the new circuit that we're now incorporating into the detailed engineering. So that would basically entail more trade-off studies. Then we're going to have a final process layout for a final processing chart -- a final processing flow sheet and then we're going to -- the equipment data sheet, 3D model be built as a result of that. And we will have the, what we call holy grail of prudent project management, which is the FEL3 quoted CapEx, which means that we are going to do exactly what we did on Phase 1. We're going to obtain actual quotes with suppliers and these quotes would then be acted upon for all the equipment over 150-day lead time and 120-day lead time. We call long lead item equipment. So of this quote and of these conversations with suppliers and prepayment or deposit payment arrangements then we will have a PEP, which is a project execution plan, which is a very detailed document, which is, again, the center piece, this command central good project management and that is what ensures good project delivery, which shows every single month where every piece of equipment comes about. And the FEL3 quote is where we base up contract negotiations with suppliers, which means we are purchasing our timeliness, our ability to deliver this on schedule. And we are ensuring that there's a road map for the project. It's exactly the same playbook as Phase 1 with the benefit of the incorporation of the lessons here, that's what we're doing, right? April, May, all these lessons on the startup of the plant, equipment malfunction, this supplier, that supplier, electric place, this guy [indiscernible] all are gets factored into more experience and better designs and better sourcing of equipment for Phase 2 and 3. So every time we go at this, we're actually better. So once that happens, we're expecting the ordering to take place in July, assuming final investment decision is undertaken by our Board. And then we go straight at earthwork, a small [ stats ] to be prepared. And as early as October, we are hoping to start receiving equipment deliveries on site, just very much like before, 3, 4 months into this equipment deliveries, and then we are going to hopefully fall back into the same timetable as the Phase 1 where we would be commissioning the processing plant, DMS, crusher and then initial production starting in April, May. So we're hoping to catch up on the back end differently than Phase 1, we don't need that much about -- between the crusher and the DMS, we can basically getting closer together, given that this is the second time around and essentially put this construction timetable on a similar schedule to Phase 1, hence when we provide guidance, we provide the guidance mirroring the apportionment we do of production for Phase 1. Here is a picture, again, just to validate how much simpler this is now. We've got an industrial site, it is licensed. So it's a licensing of production expansion we're doing. We're going to be leveraging on the existing Greentech Plant and Infrastructure. We don't need to build a new one. And then we have a little swap for expansion here. And probably if we do it with more line trains, we're going to go jump over and around to another area where you can see all the way here is faster. So you have like no trees if you can look at this picture here. So it's probably environmentally even better to skip over this area and go straight to the back here where there's just no suppression, like little to no suppression, which is kind of what we're looking into doing to minimize suppressing this portion here of vegetation, right? So again, very straightforward proposition, very small area to the earthworks, and a very small area to be built. Again, where are we licensing? Why? Well, we're good, given that it is what we call a UTM license. This is called the equivalent of LI/LP when you're expanding is a UTM, which is a 3-month time line license is basically communicating to the regulator that we are expanding throughput, right? And then next year, when this is running -- we have filed for our pit 2 license in '22. Next year, it'll be '24, that license will be long gone and we'll be just awaiting LO for that industrial unit once we finish building just like now. So very straightforward, very derisked. Again, why we filed for the license last year? So this has been filed a while ago. So we've given ourselves 2 years for the licensing process, which, as you know, in Brazil, it doesn't take this long, it is a very streamlined process, very efficient because it rewards good projects. It's a very good system. It rewards first-class projects with low impact. It measures impact at entry. And then Phase 3 is same. We're going to file now, a year in advance. So again, very well-managed licensing process. We're always filing way in advance so that we give the regulator enough time to review our processes and award our licenses. Here is one of the closing slides we just want to go back to the production profile and talk a bit about Phase 4. Why it's changed on Phase 4? We're kind of reframing our thinking given where the global lithium industry is going. In other words, lithium is a resource that's not valuable, it is valuable when you extract it, when you benefit and when you sell it. Currently, we have a lead advantage on Green lithium, and we have a lead advantage given that we actually crossed the finish line early, meaning we were fortunate to be able to be a producer at this moment in time for the lithium industry, where there's a clear symmetry and we can earn excess returns. So our thinking now has been framed around phase 4 along the following lines. If detailed engineering, FEL CapEx for the expansion, validates the cost of capital, the CapEx, capital expenditure per line train as being on and around $75 million to $85 million. In the current price environment, projected for the next 3 to 5 years, the payback period of this is actually very short. In some instances, it is measured in weeks, right? So what does that mean, that we could potentially build a fourth line train starting next year. That's the thought that we are going to finesse over the months as we file our appropriate disclosures and preliminary economic analysis and feasibilities and so on and so forth. So the Phase 4 now group of resources is now being evaluated along the lines of could we actually bring it forward into this environment, so that we actually increase throughput in the current market environment, given that between 2023, 2024, '25 and 2028, there's still an uptake in demand, there may [indiscernible] low cost lithium. We know there's a lot of high cost lithium. There's a bit of life in all these great things people talk about, but we all know expensive and environmentally horrendous that is. So what we're trying to do is to deliver environmentally friendly, sustainable zero tailings, perhaps 0 carbon material of incredible quality, low cost in that window as much as we can on it, right? So that would be, I think, a fantastic way to maximize the mission of this company for the planet, for the environment, for the shareholders, for all the stakeholders, right? So that's the strategic thought process going on here at Sigma at the moment. So we're holding back to discuss it until we have the strategic thought process finesse. And in the meantime, we're showing what actually are we doing, right? So recapping. This is our entirety. This is our area. So in green our properties -- just to refresh everyone's memories because we haven't talked about this in ages. Sigma has 18,000 hectares of prime lithium property in valley Jequitinhonha. We're right on the strike north-south. This has been here for years. This investment was made 12 years ago when lithium wasn't fashionable, where most of what we discussed was regarded as science fiction. So we took an enormous risk, enormous risk. And we kept on working at a pace we were comfortable risk wise. So massive property. We focus on Grota do Cirilo where in this property, there were nothing operating mines that we acquired. In Cirilo, there was the largest concentration of those. There were 6 operating mines. So we chose Grota do Cirilo because it was where the existing operating mines were huddled in. And here is the second picture and at that, you can see that [indiscernible] kind of further up Phase 1, but Phase 2, 3, all of these areas are kind of a [indiscernible]. So what are we doing now? We're working to strike. In other words, we started [indiscernible]. These 2 deposits -- these 2 areas are validating. They are currently in our resource reserve statement. What we're doing is drilling fresh rock to achieve, hopefully similar results to what we achieved on Phase 3, which is an increased grade of lithium oxide. And we did that. That's what's going on. When you hit fresh rock, the grades go up significantly, 1.5, 1.6, intersections are great. So to the right, you see the plant. So what we're going to do is connect these 2. So just by adding up what we got today in [indiscernible] you can see to see where this is going. So that's why we're so confidently put forth at this is 15 million tonnes as what I'm allowed to say. But clearly, there's enormous potential. And there's a third area, which is called [indiscernible] which is another -- it wasn't officially a mine because it [indiscernible], but that's all connected. So this, this and this, it's all connected. So we're just trying to uncover that block model that connectivity, and we'll talk about this in the context of bringing it all force into a fourth line train potentially to be built if all goes well as early as the summer of next year. Because, again, the lithium valley is enough [indiscernible] more lithium and that's what we're set out to do more low-cost, environmentally sustainable lithium. That is a challenge, right? So now I move on to Q&A. So I'll stop sharing and I'll go on to Q&A, and I'll get the questions.

Okay, so first, on earnings, right? So the market wants to derive earnings from the production guidance. If we can provide price cost assumptions or EBITDA guidance and more specific guidance. This will be done in a further quarter. I mean, again, remember, this is the year-end earnings call. We're bringing it forth on subsequent events. But ultimately, not even -- we just started production on second quarter. So we are -- a few quarters ahead of it, we're planning to give people a much more, let's say, precise indication of what we call cost factor guidance in the next earnings call. Why? Because right now, when you look at cost, it is a combination of what we call commissioning costs and an actual run rate variable cost. So the cost number is disturbed by the commissioning period. So we're going to start having undisturbed costs, meaning clear cash costs going into periods when we are actually producing. When we post revenues, we're going to be able to isolate disturbance and then actually show audited cost numbers. That's the goal for probably 1 quarter or 2 quarters down. By August 15, we're hoping to be publishing second quarter results. So this is coming. And by the time we give this guidance, it's going to be as always as precise as possible. So for now, all of we are allowed from a regulatory perspective to publish is what we call the feasibility data for cost until we replace that with audited financial numbers for costs, right? So I answered that live. So then the next question we got is around reserves. So do you think Sigma has enough lithium reserves to grow beyond Phase 3 capacity or reserve acquisitions and enable to be considered to leverage the production capacity? Well, as we said, I mean, we got an enormous resource body here, right? We're barely starting. We started with the easy areas, which were the form of producing mines. We got 9 mines on our properties. Phase 1, Phase 2, Phase 3. We got still 6 mines to go. So what we're doing with phase 4, we join them. We're just taking 2 and then perhaps a third just to make sure it's one, right? I mean, that's the goal here is to try to basically bring it all forth to this decade to this market where we earn excess returns. So the answer is resounding yes. I mean these companies -- there are over 200 ore bodies here pegmatite out of which we classify 33 super targets. When we made the investment, the fact that we had 33 super targets basically [indiscernible]. It's all great give us a shorter target list, which is more, let's say, derisked and he narrowed between 11, 9 of which were former mines, 11 were joining [indiscernible] and when bear market came, it said, you know what, just 1 because it's a bear market. We'll continue to invest. We're going to take this 1 to cash flow. And here it is. So it takes time, but now that the world has understood the importance of lithium, capital, hopefully, will never see flow into the sector. And we are a massive cash flow producer anyway. So we are going to accelerate and accelerate, we will essentially, because we want to unlock all of this into production in this decade. That's the goal. The next question, yes, I'll answer that. With such a price base asset, why do we 10 -- when we exit it now? Why not continue to operate for the next 2, 3 years to get the valuation over $10 billion, then exit through capital markets, if not strategic. Well, look, again, I do what I can control, which is bring this asset into production and deliver on environmental and social sustainability for real, right, for real. So why? Because that's what the world needs, environmentally sustainable lithium that shows the road map to lift communities together with it, so that we unlock the antagonism that typically existed between this industry historically in communities. We're still a way forward to an entire industry, a way of conversation, the way of engagement, where communities come with us. It's not perfect, but it's as good as you get. So let's put it that way. And we're creating massive value. So if we stay an extra year, could I do more value, yes, and another, and another, but again, I'm a financial investor. I'm a financial sponsor. We've been here for now going to the seventh year. It's a very long term. And again, you have to think about value as it has to be good for every one. There's got to be value left for the next guy. So it's a broader conversation. In the meantime, clearly, as we discussed earlier, where we were not engaging is because there was what we call low-hanging fruit value to be unlocked. That's what we've been doing consistently. If you look at when some of these rumors started, how much low-hanging fruit value we unlock. We're going to continue to do that. And again, I don't control what other companies think of Sigma. I can show what I can deliver at Sigma and delivery we are. So everything we stay, we mean what we say, we say what we mean. So we're continuing to deliver exactly as we say it here. So that's what's under my control as Chief Executive. So that's the only way I can answer this. I can show what I can show and yes, we are on the way to those double-digit levels of valuation because of its progression. Now the question is what will happen in the meantime. I don't know. I don't control that. What I control is making sure that the foundation and the steps and the KPIs are key so that we can get to the valuation. So next terms there will be double digits of value for sure. That's my job. If I'm not here great, the next guy will achieve quite a lot of value. So these are the things that are outside of my control. That's why we tend not to engage with some of these rumors, right? Next question, are any other junior greenfield project that Sigma eyeing in Brazil? Well, we're kind of busy here. So the answer is no. We're not doing inorganic M&A growth now, not at all. We're very busy even getting our own resources, reserves to market quickly, as quickly as we can. As we showed on Phase 4, the goal is to just get it all out of the ground quickly because it is this decade. It is in this market that we're going to achieve spectacular results with these shareholders. Why? We're the low-cost producer. We have a premium product. We're environmentally sustainable, we're socially sustainable. These are competitive advantages in -- they're right now and others will follow hopefully. I do not want to be the sustainable producer in the industry at all. And I received all of my competitors here to tell them how we're doing it because we want everybody to follow. So -- but now it's going to evolve, and we're banking on that advantage as you can see with the premium pricing. So the reason why we're moving forward internally with organic growth is the more the merrier, the more [indiscernible] so we're just unlocking everything. Matt DeYoe, we have been hearing for weeks that full quarter earnings will be just days away. What happened is that a plan to consolidate first second quarter earnings? Yes. We try to put forward what happened. We decided to implement SAP in a year where we were thinking we were going to get an exemption from the full audit for Sarbanes-Oxley Section 404 internal controls. There's a 5-year exemption that's typically granted to the new companies. However, we were victims of our success. The increased market capitalization last year made us ineligible for the exemption. So the result was the perfect storm, where we had to be subjected to a full 404 audit when we're not even a producer using basically manual processes because SAP was in implementation. So it was painfully slow. We pulled over 4,700 pieces of documentation for KPMG manually was, because it was a full audit, the analysis was done on a 100% sampling for pretty much most of the major accounts. It wasn't done on sampling. So every major item of accounting above $300,000. That's how low our materiality. Because we are not a revenue earner. So the materiality stayed low. So low materiality, manual process, no SAP, full 404. So perfect storm, for a very, very snail-paced audits. That's what we live through here. So essentially, that's what happened. We clearly upgraded our systems because SAP is now running. We're building up the team very rapidly. We're implementing the Chief Controls Officer role, which is essentially a backup financial department to just streamline these processes, so I think we're in a very good position now, and we're looking forward to going back on time for second quarter, which is August 15, right? Tailing revenues, actually, no, I didn't answer that. Are tailing revenues included in our financial projections? No, not yet. We are going to include them once we earn them, which will be with the first shipment. In the [indiscernible] they are not there -- they are not that large. Remember, there's a deduction for the cost but it's essentially free waste management. So it's a nice number, but it's not matter. Let's just put it that way. But it's trading to profit. It's a profit without cost, right? So it's coming up. And we probably -- we'll probably -- as we talked about financials and guidance, when you start giving financial guidance, we will include guidance for the tailing volumes, which are very healthy, I mean [indiscernible] concomitant amount of tailings versus concentrate. So the same guidance for concentrate works for tailings, but tailings are a lot less pricing, right, because they need to be upgraded and reprocessed. DeYoe, three of the Board members are no longer for reelection, including 1 [indiscernible]. What's happening in Board construction? It's a natural progression of the company. In other words, we've had a Board -- our Board has been incredible. They've been serving on the Board since when the company was private in 2017. And so it's been now 6 years of some of these Board members servicing the company. So it's quite a long time. So the same way we're entering auditor rotation in 6 years, our shareholders who are all new. I mean they're all post that period. Most of them vintage 2020, 2021, 2022 post NASDAQ wanted to see a refresh and a rotation of a Board that they perceive to be essentially our Board. So what we are seeing here is a shareholder led refresh with new names being suggested. We think shareholders gain, we gain of new expertises being brought into the Board. We have now 1 of the 4 most environmental experts in Canada joining our Board. We have a very well renowned Chairman of Audit Committees of companies of operations in Brazil filing in the U.S. on the Board, including former Chairman of the Audit Committee of the Stock Exchange serving on our Board, which is -- so I think everyone wins. And we are eternally grateful to the current Board because they have helped us build this business, right? So essentially, it's been -- they're almost like founders if you think about that, right? But is a refresh is an upgrading to the extent that we are now becoming a shareholder led company, a shareholder-driven company. [indiscernible] next question, but I'm happy to discuss in detail. The circular result. And then there's another question. The new -- the late entrants -- well, the late entrant is the issue about not being Canadian because we need to have 2 Canadians in our Board. And that's a more complex construct given that some of our -- most of our shareholder base is non-Canadian. So the names recommended were overwhelmingly non-Canadian, and therefore, we had to kind of compose and make a composition where we rotated the independence. We added an independent, so we have 4 new Chairs to accommodate the suggestions and the acts of shareholders. So we're actually quite happy that we got the level of engagement by shareholders in our elections. And remember, it's our first election as producer as well. Anonymous attendee. From an IRA eligibility perspective, may we have any idea on your plan for downstream integration into any free trade partners of the U.S.? Well, I don't control trade policy in Brazil, nor in the U.S.. What we are observing though, is that the United States being incredibly agile, I mean it's incredible how the United States has this ability to mobilize resources and agility to achieve its desired objectives, right, in order to fill the gaps of the IRA when it came to critical minerals. So there's been an avenue open around PKAN when -- PKAN is something called capital paste, where you amalgamate the elements of nickel, cobalt, manganese and lithium and produce a paste in some of these producing IRA eligible countries. So the PKAN amalgamation is 1 of the avenues into the IRA. Argentina, which is our trade partners is now negotiating on the behalf of the block an entry into the IRA. So you may even see a direct entry of Brazil, Argentina because of the Mercosur block. But in the meantime, there are all sorts of alternative avenues for the eligibility to the subset. I'm not worried about at all because, again, it's a market for 1 conclusion. America needs all is environmentally sustainable resources, all the environmentally sustainable resources it can get a hold of in order to deliver on the success of its electrification policies, which are now extremely, extremely successful given that the U.S. is the fastest-growing market, and we are very much part of that conversation. Will you be churning out cash once you start shipping? Any dividend partly? No, we don't lend dividends for now. We've got quite a lot of investments to do. So we're backing the heads on distributions until we are done with delivery on this vision, putting all -- just basically reducing at a nameplate capacity its conducive with the kind of the moment in -- we're observing for lithium going back to excess returns, as we talked about. And perhaps once we get there, we will look into intermediate chemical production, which is something I discussed before. And again, it goes back to the previous question of delivering to America, to Europe, to other parts of the world, this intermediate chemical that is environmentally sustainable. Waste 3, perhaps low carbon, perhaps zero carbon, which is something we have the ability to do in Brazil, because of carbon credits and a low carbon grid or cheap abundant renewables. So there's no plan for dividends in the next 3 years for sure, until we're done building all this and then we will distribute, right, maybe '23, '24, perhaps '25, but it's [ TBD ] with our CapEx plans. Question, there was a significant jump in stock-based compensation in the fourth quarter. What's the driver? No, there wasn't a jump. What was happening was that a lot of our employees, and we're going to publish the dates these awards were given. A lot of our employees have earned their stock based compensation. Some of them as early as 2020, '21. And these [ vested ] hasn't been delivered. [indiscernible]. My award compensation to reach $2 billion, which back then was an impossible target, was never issued. So what we started to do because of the asymmetry between the fully vested number and the total number of shares outstanding was to actually issue the awards that had been long gone by mostly the older long serving employees. Some people will be here for 9 years, 10 years, 6 years, and they had earned their awards, but they haven't received this. Just to recap, we are not planning to go for more awards or anything. We calculated all of this in the previous election once we asked shareholders to increase stock-based compensation from 13% to 18%. So that's all into that number, and there's a slack for retention. So we still have a slack there for retention. But again, what happened here is essentially us doing the homework of issuing people their awards, their rightfully earned awards and even I remember people who work day and night literally. And the first batch of awards was basically the first generation of senior managers, some of them are long gone. So those are gone. But then this next generation, the crowd that's been here since '18 -- '17, '18, '19, working relentlessly hasn't even received like -- and we can publish -- we're going to publish the date with these awards were actually given, right? So next -- and there's more to come. We're going to be issuing more shares because we're -- again, no new shares. These are awards that's been granted were factored in when we ask shareholders for dilution to last year's meeting or a few -- like last year. And again, it's more of the same, but it's just us giving people what they rightfully earned by hitting their milestones. I mean, just think about this, we became a $4 billion company with very little dilution to shareholders, essentially with the sheer relentless hard workers and key people here. I mean [indiscernible]. This is really a tech company. And we started early to say that we're going to compensate people like a Venture Capital because this isn't metallurgy. This is mining. This is materials servicing the technology industry. And we have to run at a speed of our clients. We're going to run at that speed. And speed is what made us so successful. So these individuals are extremely let's say, that they really deserve. They're very deserving [indiscernible] this committed essentially. Oh, my favorite topic, carbon footprint. How much will it cost to offset the carbon footprint? I'll tell you, of the mine truck fleet what will do to our cost per tonne? I'll tell you what, to offset all of our carbon, I mean again, there is a progression to this, right? We need to work on how to abate. So we worked on a how to abate to the best extent possible. And then we stopped at the biofuel ramp-up, which will have to happen again, consistently and prudently, right? But we're working with smaller trucks. So we're ready for that. We're not working with 100-tonne trucks, we're working with 40-tonne trucks for a whole host of reasons. One of the reasons is social sustainability. It makes it easier to bring in workers from other areas and environmental sustainability is a lot easier to put biofuels on this regular truck. For our entire carbon footprint, it's going to cost us $800,000 a year extra to offset to 0. That's how low we are already. And this is the beauty. This is the reason why we're doing it, it's nothing. Nothing. So with this little commitment and more importantly, we're going to be conserving for 13 years in partnership or 1 of the best-in-class carbon companies in the country, which is partly owned by Shell -- Royal Dutch Shell, the oil company. So it's their project, their company of choice. So we're going to be joining forces in consolidation there, which, in our view, is the way to preserve the Amazon forest. I mean and now I can -- I'll talk about it in detail when we present that strategy in our next call. So it feels a surprise that we managed to lower our carbon to this level and the last step there was tailings, so that we could actually go to 0 and to 0 we go -- and it will happen this summer. So that's 1 of my big milestones as a professional and it's one of my big lifetime achievements here in this company, we set out to do that. And we're going to show that there's a way forward for this, that is possible. Once you work on abating everything you can as far as carbon, water, air and land, you left with an amount of carbon per year that's easily, easily offset with high-quality conservation projects. So yes, $800,000 a year. That's how much it costs to go to 0. Next, anonymous attendee. So is tailing agreement finalized? Yes. So tailing agreements. We're going to ship tailings for 3 years. For now, we just signed the agreement for Phase 1 because that's where we're in production. Remember, this is a producer type agreement. There's a huge level of certainty that has to come on both signers of the agreement. These are not non-producer breed of uptake, which are subject to certain uncertainties. This is a certain uptake, meaning, we produce, they take, right? And what we have is a price adjustment mechanism. So we signed off what we have, which is Phase 1. Clearly, as we move forward with the next phase, we're going to do the same thing. Why? The market is there. In fact, we have 2 more customers willing to take these tailings. Because of the pictures you saw, they're super pure and very high quality. And therefore, once they go into upcycling in a flotation plant, they become ultra purity lithium concentrate. So it's more concentrate out of these tailings. They're milled. So they go straight into that plant beautifully behaved through the flotation process, and then go in and become high purity lithium concentrate, which sees up that level of efficiency for chemical production. So it carries with it our premiumization on efficiency, which is especially purity, right, low iron oxide, low alkaline, low mica. So those attributes are carried through the upcycling. So it's a beautiful product. So when we will learn about the agreement? While Phase 1 is Phase 1. We announced the agreement we talked about it, we will be shipping phases 2 and 3, we will hope to execute a similar agreement with this group of customers we got once we get there with the product, right? Another question. Given the current valuations of your competitors based on your production outlook, where do you see fair value for Sigma. The value of anything is the market is prepared to pay for it. So I went as far as showing the slide where we see us going, if we deliver on our milestones. There's no reason for us not to reach the value of other independent lithium concentrate producers in Australia. There's just no reason why. I mean it's just a matter of getting to that scale and showing we can be a bona fide producer. That's the goal. The more we -- with every quarter of delivery with every milestone reach, the more we march towards becoming an Australian bona fide type of produce. That's the goal here, right? Can you explain the increase in executive incentive plan? Well, we talked about that, the stock option because there wasn't an increase. It was just issuing stock that was earned. That hadn't been issued, but it was in the plan that was approved last year. So we haven't changed that -- we haven't changed that the -- we haven't increased the plan. We did that last year, factoring in essentially the new group of managers that was coming from production, the new awards we had to give for the next generation, which is to earning them into '25, '26. And more importantly, to make sure that everybody was accounted for in the old plan because it was very heavy on early founders, people from '12 to '17, right? So '12, '17, '17 to '23 and '23 onwards, 3 different generations of Sigma employees, stock owners, committed partners of our success of you and I, all of the shareholders here. One important point, important point, a matter that we're putting up for voting is to eliminate the change of control provision on the plant because of the stock awards we're giving for retention, if for some reason, is a change of control, it doesn't mean, people leave, right? They will stay on and deliver through their targets. That's a very important point. So it's true retention and maintenance and keeping here incented and retain our current employees. This generation '23 onwards, right? IRA, well, how do I expect Brazil could be added to friendly countries to supply materials? Yes, we talked about this. I'm doing what we can about Brazil. I mean we are presenting what Brazil weighs in the supply chain is, of course, for good. It is a country that delivers environmentally sustainable material. It is a friend of everybody, friendly all blocks of trade. We have our own block here, Brazil, Argentina, so we need to honor our block. Argentina is doing a phenomenal job advocating for the Mercosur block with the U.S. government. So it does the work on behalf of Brazil. And again, Brazil a friend of the U.S., is the defense partner of the U.S., is a friend of China, is a friend of Europe, is a friend of everybody. It's a poor country. We have to be friends of everyone. We cannot afford to have enemies. Let's just put it that way. So I think -- I try to be this ambassador of Brazil, the ambassador how green the [ better ] materials is in this country and how much greener it can even become in the country. So I'm hoping that with our establishing this industry as a force for good, we can earn our seat independently on the suppliers to the U.S., which I do believe we're earning already through the indirect avenues the U.S. is made available to Brazil and Argentina and other countries. So I think it's all good. Next question, the financials published new holes made in [indiscernible], yes, we've been doing a lot of work there. So we gave an update, right? So we're going to provide an update together with the strategic plan. We'll be holding back on the update because we want to make it all set -- we want to all make sense together, but it's coming, and it will probably be along the lines of more lithium sooner versus later. That's the preview here. Within drilling, we have to stop doing drilling, we're drilling the place like there's 6 drills there, nonstop working towards delineating those junctions, right? What are the best block models there to work with sooner rather than later? As you ramp 3 or 4 trains, we have to logistically handle the product moving. Yes, we can. I mean, again, we can handle this a number of ways. Remember, these roles are duplicated, it's perfectly fine. But again, the discussions we have around intermediates as well. So as we go into the 4th train, will we actually process it here or not? And again, with that scale we should be considering processing some of it in intermediates. That's also part of that conversation, but yes. But if not, it's not an issue. I mean, if you think about these roads, some of these guys have actually trucking wood, they are trucking timber on the road. There's a railway being built and most likely the timber guys are going to offload the road in both to the railways. So there's going to be more road capacity available to us. So I don't see it's an issue at all. But as the lithium Valley grows, so a few discussions have been held by government, by infrastructure provider, government around -- should they accelerate the railroad, should they duplicate the road further because it's not going to be just us. They're going to be -- now there are 4 other companies here. So by the end of the decade, you might have infrastructure development, and they're already working on the railway. The railway is already a reality. So it's good news to the ports. IRA Canada access to -- I say what Canada give us a better valuation to this acquisition target? Well, I mean, I'm talking about the IRA. I think we're good. Obviously, the whole world needs environmentally sustainable, high-quality lithium. So I mean you have that not going to be a problem. There's no shortage of customers, just put it that way. And the U.S. being 1 of them. And we're delighted to service everyone, right? We service literally to everyone essentially. Offtake about -- Well, LG and -- like someone connected [indiscernible]. The point here is not -- and you need to think about this from a perspective of the supply chain. In other words, what do we want to do, in which supply chain we want to be, large, resilient, fast growing. So when you think about the refiners we choose, we choose best-in-class refiners because they are in these large resilient supply chains, like a shark. We want to be a little fish connected to shark then strings very fast. That way, our product is connected to a very large customer. So here's what happened here. Yahua is the third largest refiner in the world. And he services the likes of LG, Tesla, a number of other very large resilient supply chain. That's exactly where we want to be. And you see our agreements, especially as we are managing to trade more of the available capacity in spot agreements with that degree of control of end user. That's the question we ask here. Where does it go? Where is the end user? Is it a large resilience? So we're not servicing Tier 2 clients. We're servicing Tier 1 clients all around from battery maker to car makers, and we know where this goes. So I think you rest assured that this confidence we have in CapEx deployment in growth in bringing forth -- Phase 4 has a foundation on the fact that we know exactly who our customers are from an end-user perspective, and we know their projections for growth, and they are kind of mind boggling, if you ask me, for the decade, which is a result of this incredible uptake in EVs in -- continues in China and it goes in Europe and the U.S. to levels that we never thought possible 6 years ago, for instance. Some of the conversations we have in China talk about 50% to 60% adoption levels by 2025. That's like tomorrow in mining terms. So -- hence, we keep on just thinking of new ways of trying to bring forward more products, right? The numbers in the U.S. are incredible. The U.S. went from 0, it was a very small market, to the aspiration of becoming 20% of the market by '25 as well. Europe has been growing in an accelerated pace. So the numbers are very large in terms of percentage of EVs as a percentage of new car sales. So we see what's happening towards '25 to '26, and we are trying to be part and contribute to enabling that. We're enablers. We're trying to enable that in the most environmentally sustainable manner plus [indiscernible] such incredible receptivity to what we do in these large supply chains around the world, right? I think we covered all the questions. I think it was a very productive call. Thank you for the engagement. We've got a lot of questions, which I answered everyone. Again, Jamie Flag, Jamie [indiscernible] teams, 2 parts of the world are here able to you to answer all your questions, schedule calls. We're always here. And again, thank you so much for your support, for your patience with this 2022 annual returns. Again, no surprises, more of the same. We were just slow. And hopefully, we will go back on track for the second quarter on the 15th of August. So thank you once again, and have a wonderful day.