Sigma Lithium Corporation (SGML) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of Sigma Lithium Corporation. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of [indiscernible]. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtained all required consent for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. During the meeting, we'll have a question-and-answer session. [Operator Instructions] It is now my pleasure to turn today's meeting over to Ana Cristina Cabral. Ana, the floor is yours.

Thank you. Well, good morning. My name is Ana Cristina Cabral and as the CEO of the Sigma Lithium Corporation and the Co-Chair of the Board of Directors, I'm here joined by my Co-Chair, [indiscernible]. I will act as Chair of this meeting. It is my pleasure to welcome you to the Annual Special Meeting of the Shareholders of Sigma Lithium Corporation. The Board and management very much appreciate your interest and attendance today. As this meeting is held virtually via live webcast, we think it is necessary to set out a few rules for the orderly conduct of the meeting. Questions in respect of a motion can be submitted by any registered shareholder or duly appointed proxy holders at any time by clicking on the message icon. Please note that there will be a slight delay in the publication of the communications received. When asking a question, please...

Ladies and gentlemen, we are experiencing some technical difficulty. Please remain on the line, and the call will resume momentarily. [Technical Difficulty] Ladies and gentlemen, thank you for standing by. We will now resume today's call. Ana, the floor is yours.

So as we were disconnected, we were setting out a few rules for the orderly conduct of the meeting, and I stopped at the end of rule #1, making a point that there will be a slight delay in the publication of the communications received by the registered shareholder or duly appointed proxy holder when they click on the message icon. Point number 2 will be so that when asking a question, please indicate your name, which entity you represent, and please confirm that you are a registered shareholder or a duly appointed proxy holder. Item number three, questions will generally appear shortly after they are submitted but will only be addressed during the question period at the end of the meeting, provided the questions regarding procedural [indiscernible] or directly related to the motions before the meeting may be addressed during the meeting. For the purpose of the meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. When you're asked to vote, you'll be able to cast your vote by clicking on the buttons for or withheld or against, as applicable, that are under the vote icon for each business item. You will only have a certain amount of time to do so when the polls are open. We shall now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move and second all motions. So Item #2 is the call to order and appointment of Secretary. I now ask that the annual and special meeting of the shareholders of the company come to order. As such, I appoint [indiscernible], Legal Director of the company, as Secretary of the meeting. Item 3, appointment of scrutineers. For the purpose of this meeting, I appoint Computershare Trust Company of Canada through its representatives as scrutineer to compute the votes of any polls taken at this meeting and to report thereon to me. Item 4, constitution of the meeting. The purpose of today's meeting are set out in the management information circular of the company dated June 14, 2024. The notice calling this meeting, the circular and the formal proxy were mailed to shareholders on or around June 18, 2024, along with the audited consolidated financial statements of the company for the fiscal period ended December 31, 2023, and related MD&A to shareholders of the company who requested such statements and related MD&A. Unless there is any objection, I will dispense the reading of the notice of meeting. Copies of the management information circular and other meeting materials are available under the company's profile on the SEDAR website. Our transfer agent, Computershare Trust company of Canada has attested to the proper mailing of the notice calling the meeting. There has been filed with me proof of service of such mailing provided by the company's transfer agent. I directed a copy of such proof of service to be annexed to the minutes of this meeting as scheduled. Item 5, quorum. The bylaws of the company provided a quorum that a shareholders meeting is met, if there are 2 persons present holding or representing by proxy an aggregate of at least 25% of the outstanding common shares entitled to vote at the meeting. I've been provided the preliminary report of the scrutineer, which indicates that there are shareholders present in person or represented by proxy at this meeting representing more than 25% of all outstanding common shares of the company present. And therefore, a quorum of shareholders of the company is present, and the meeting is properly called and duly constituted for the transaction of business. I have received the scrutineer's report in a direct [indiscernible] the formal report to be annexed to the minutes of this meeting as a schedule. Item #6, financial statements. As the first item of business on the agenda for today's meeting, I now present to the meeting the audited consolidated financial statements of the company. As at and for the fiscal period ended December 31, 2023, together with the auditor's report to the shareholders thereon. Copies of such documents have been mailed to the shareholders who requested such statements and is not proposed to read them at the meeting. We now move on to the resolutions for voting. A, number of directors. The first item of business is to set the number of directors for the ensuing year. Management proposes to set the number of directors to be elected to the Board at 5. I move and second the number of directors for the ensuing year to be set at 5. Unless there are any questions, I will move to the next item of business. Item B, election of directors. The next item of business is the election of directors. The company did not receive notice of any director nominations in connection with the meeting in accordance with its advanced notice bylaw. Accordingly, the only person eligible to be nominated for election to the Board of Directors of the company are the management nominees. The directors elected by the shareholders of the company shall hold office until the close of business of the next annual meeting of shareholders of the company or until the successors are elected or appointed by the Board. Ana Cristina Cabral, Marcelo Paiva, Bechara Azar, Alexandre Rodrigues Cabral and Eugênio de Zagottis have been nominated as directors for the ensuing year or until their successors are elected or appointed. Each of the persons nominated has confirmed that he or she is prepared to serve as a director. Since there are no other nominations, I move and second that Ana Cristina Cabral, Marcelo Paiva, Bechara Azar, Alexandre Rodrigues Cabral, and Eugênio de Zagottis be nominated for election as directors of the company to hold office until the next Annual Meeting of Shareholders or until the successor is elected or appointed. Unless there are any questions, I will move to the next item of business. Item C, appointment of auditors. The next item of business is the appointment of auditors of the company for the ensuing year and to authorize the directors of the company to fix the remuneration of the auditors. Upon consideration by the company and its Audit Committee following corporate governance best practices, the company believes that the change in external auditors from the current auditors, KPMG Auditores Independentes Limited, auditor of the company for the last 7 years. The change is made to appoint Grant Thornton Auditors, Auditors Independentes Limited. That change will improve the independence of the external auditors. I will move and second, the Grant Thornton Independentes Limited to be appointed auditors of the company until the next Annual Meeting of Shareholders and that the Board of Directors be authorized to fix the remuneration. Unless there are any questions, I will move to the next item of business. Item D, bylaw amendment. The next item of business is to consider and if thought advisable, to pass with or without variation an ordinary resolution of shareholders approving the amendment of the company's current bylaws, altering the signing authority and the execution of documents by signing officers on behalf of the company and designating the Chief Executive Officer of the company as President of the company. The summary of the bylaw amendment is set forth under the heading summary of bylaw amendment of the circular, and the full text of the amendments to the bylaws of the company is attached to Schedule A to the circular with [indiscernible]. I move and second a motion to approve the ordinary resolution of shareholders in respect of the bylaw amendment. Unless there are any questions, I will move to the next item of business. Item E, approval of the continuance of the company under the laws of Ontario. The next item of business is to consider and if thought advisable to pass with or without variation, a special resolution to approve the continuance of the company to the jurisdiction of Ontario under the Business Corporation [indiscernible]. Management believes that it is in the company's best interest to continue into Ontario. In order provide the company with greater flexibility to attract and nominate the most suitable candidates for Board of Directors from a global talent pool with the expertise and skills required by the company's global business operations and leading lithium global operations. Unless there are any questions, I will move to the voting portion of the meeting. As we mentioned, voting today will be conducted by electronic ballot. I will now take a moment to [indiscernible] the ballots be opened to registered holders and appointed proxy holders. [indiscernible] and start a timer for 5 minutes. Opening the polls. The polls are now open. And at this point, all registered holders and proxy holders who have properly logged in with their control numbers or user name and wish to vote will be able to see on the screen all motions being brought forth at this meeting. [Voting]

Voting on items of business. Please kindly register your vote by accessing the voting page and selecting the for or against buttons next to the name of each proposed director and for or withhold next to the resolution with respect to the appointment of Grant Thornton Auditores Independentes Limited as the company's auditors. Please register your votes by accessing the voting page and selecting the for or against buttons next to the ordinary resolution with respect to the amendment to the bylaws. Please register your votes by accessing the voting page and selecting for or against next to the special resolution with respect to the continuance under the laws of Ontario. [Voting]

We will provide registered shareholders and duly appointed proxy holders approximately 1 more minute to complete the electronic ballots. [Voting]

Bear in mind that once the electronic balloting closes, the voting page will disappear and your votes will be automatically submitted. [Voting]

Voting is now closed. Based on the proxies received [indiscernible] each motion has been passed. However, I would like to ask that the scrutineer compile the report regarding the results of the voting on all business matters and the results will be published on SEDAR and by press release. Item #10, termination, presentation and question period. Termination. The formal items of business as set out in the notice of meeting have now been dealt with. I move and second that this meeting is now terminated. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. [indiscernible] my presentation, after which, I'll be pleased to answer any questions you may have. I'll be joined at the presentation by my Co-Chair, Marcelo Paiva. So please finally turn to the presentation on the screen. Please kindly note the disclaimer as we're going to make quite a number of forward-looking statements throughout this presentation. We're very pleased to be here and to present to all shareholders the accountability of what we've achieved over the last 12 months in this company. Sigma has transitioned from a construction site or a project into a fully fledged producer. More importantly, there is a cohesiveness in our shareholder base. We are an investor operator team who still owns over 50% of Sigma. We have not sold any of our shares [indiscernible] and personally, Marcelo, my Co-Chair and I have not sold any of our shares, which brings our tenure as shareholders of Sigma to 12 years. The key 5 distinguishing elements of this company are large scale. We basically demonstrated and audited that we are the fourth largest mineral industrial lithium complex for hard rock in the world, and we became one of the top 10 global lithium producers encompassing dry and rock producers. Low cost, we've accomplished scale without losing cost discipline. We're now the second lowest cost amongst our peers in hard rock mining. That is an incredible accomplishment for a company who hasn't yet completed its first year as a producer. Premiumization, we've managed to premiumize our material on both fronts. Chemically and physically, we have high purity [indiscernible] materials that command a slight premium in the marketplace, but more importantly, for which there's always demand as we provide a cost savings in the order of 20% to 30% to our customers. Moreover, we're delivering the [indiscernible] lithium, which is the most sustainable lithium in the world in a quantifiable manner, attributing [indiscernible] key environmental elements, such as zero carbon, zero tailing dam, zero use of drinking water, zero use of toxic chemicals and zero use of [indiscernible]. All of our power is clean and renewable. Another important milestone for the year was that we made a final investment decision to build and to double our production scale. Phase 2 is going to be built and operated by the same team as Phase I. It is the same team that's now very well versed in cadence and in operational prowess to deliver predictable quantities every month, which is what they have been doing for now going into 11 shipments. On budget and on time is how we built Phase 1, and that's how we plan to build Phase 2. Item 5, we managed to also increase the project life to 25 years, which is a visible period of cash flow. Therefore, at any given time, this company is going to have 25 years of operation visibility which means there's permanence in longevity at 109 million tons of mineral resources and 77 million tonnes of mineral reserves audited by NI 43-101. We also have an estimated mineral resource of 150 million tonnes. Going to the next slide, we became the fourth largest lithium mineral industrial complex in the world. And here, I'd like to invite my Co-Chair to make a few comments. It's been a very disciplined arduous trajectory to unlock all this mining potential. Marcelo, the floor is yours.

Yes. It's a pleasure to join in this call. First of all, I would like to thank all of you who have been part of this journey since we listed the company in 2018. We are happy to share that Sigma delivered so far have been some [indiscernible] in the industry. Okay. Sigma is the first major producer to come to the market since 2018. As the company [indiscernible] lithium mining complex in the world. And the team that put this operation together, they are sitting with us and working on the expansion of our capacity. As you can see in the slide [indiscernible] we will be seeing like without any doubt among like the top producers in the world and with the largest and mineral resource basis. And these accomplishments have been relentless by our CEO, Ana Cabral, who navigated all sorts of market conditions and put together this team that follows her leadership without blinking. And with that, I pass it to Ana.

Thank you, Marcelo. Our next slide, it is complementary to the scale that we showed you previously. We've managed to achieve scale but at the same time, we maintained cost discipline. We are one of the lowest cost producers in the world. And as a result, in the current market environment, we have secured our position in the global supply chain because we're delivering the holy trinity of lithium. We have large scale. We are able to do so and produce lithium at low costs. But more importantly, we do it in a traceable, sustainable manner, with respect to environmental and social credentials. So ultimately, our position is secured. There's always demand for our material. The current slide actually highlights what is actually happening through [indiscernible]. When you look at the producers, we highlighted in brown, producers, they are able to deliver just like us. In this case, the 6 largest producers in the world, most of them based in Australia for rock -- for lithium coming from hard rock, and that's where you stop at the midpoint of the cost curve. And to the right, you've got a high point of the cost curve. And then in the middle, you have material that is not sourced according to traceable environmental and social guidelines or basic [indiscernible]. As a result, when you look at this and compare with total global demand, which is on the next slide, you can clearly see a disconnect. In other words, you -- one can get traceable material for approximately 900 to perhaps 1 million tonnes LCE. When you look at the lithium demand, even for this year, which is considered [indiscernible] market, you're looking at 1.1 million, 1.2 million tonnes of demand. So depending on where it adds up, there's still a disconnect of about 300,000 tonnes of LCE that needs to be sourced from somewhere, either untraceable material, which is what's currently happening or high-cost material. And this is why we believe the lithium market is still in a state of asymmetry where the gap is being closed today up most likely with untraceable, unsustainable material that doesn't meet basic environmental and social guidelines. Going forward, the gap just tends to increase. When you look at growth in EVs, the growth engine is the Chinese auto market, which has been growing north of 35% year-on-year and is now representing 60% of the world's EV market. That growth is not related to slowdown. China has a very clear plan to get to 100% electrification of its fleet. As a result, in 2025, which is just next year, to see the current demand alone, the market will need 1.4 million tonnes LCE of lithium. So the gap widened given that the suppliers are still delivering -- the 6, 7 established suppliers of traceable midpoint of the cost curve at scale, Australia, Brazil and Chile, we're still delivering approximately [indiscernible] of the material. So the gap grows to 400,000 tonnes LCE using their [indiscernible] numbers. And that is a picture that is probably -- it's going to be maintained throughout the rest of the decade. So the next 5 years of the decade are supposed to see the same disconnect, which, again, means when there's a disconnect the gap is still somehow at the moment with low cost and untraceable material or with slightly high cost material that is produced by companies that are willing to sacrifice their profit margin. Marcelo.

Yes. And I'll just add that [indiscernible] regardless of market conditions, [indiscernible] others always in demand. And we have experienced that like [indiscernible] production, even when market prices were falling, what happened was that like there were like some producers despite lower prices, they could not sell the product. And you could see that by their increasing [indiscernible]. While in our case, we've always had [indiscernible] of demand. And that makes us very confident going forward.

And the confidence is based on our ability demonstrated throughout the last year to deliver consistent production and cadence even as a first year producer. As you can see on the chart, the numbers are undeniable. Since our first shipment in July, we decided that what we call cadence levels of production would be around 22,000 tonnes every 30 to 35 days, and we have been consistently delivering that number every single month, which is a team effort of a magnificent sort because it highlights the level of coordination between the mine, the industrial plants, the commercial operations, the trade finance and finance teams working as an orchestra to the same symphony here, which is to deliver these amounts month after month with predictability. That allows us to move to the next level, which would be most likely signing a midterm agreement with a final end user given that we have established ourselves and we're able to demonstrate the cadence of production. Marcelo?

Yes. And the point that Ana made [indiscernible] what we had just said, the market sees us as reliable producers is number one, which, combined with being low cost, they know that they can count on us, because we are profitable at whatever price like clients know that like we are always in the game and they can count on us. And then obviously, if you add that [indiscernible] sustainability credentials, which by now it's given by the industry.