HIGHLIGHTS
Sigma Lithium achieved strong operational performance at its Greentech industrial plant.
Produced 60,237t of Quintuple Zero Lithium Concentrate in 3Q24, higher than the 60,000t guidance
Further increased shipping cadence to quasi monthly volumes sold of 22,000t
Sales volumes totaled 57,483t in 3Q24, increasing 9% q-on-q
Successfully executed Plant 1 efficiency capex revamp implementation
Expects 4Q24 production and sales volumes of at least 60,000t
Maintained one of the lowest cash unit operating costs in the industry, with CIF China averaging US$ 513/t, down from US$ 515/t in 2Q24.
Commercial strategy adapted to capitalize on seasonal restocking trends, weather seasonality more effectively, and outperform market price benchmarks
Average CIF sales price for the third quarter of US$ 820/t
Robust operating cash flow generation of US$ 34 million in the third quarter enabled the Company to maintain a healthy cash position of US$ 66 million at quarter-end while reducing debt by $40 million
Signed final development loan agreement with the BNDES, fully financing its plant 2 expansion, further de-risking construction
Term: 16 years with 18 months amortization grace period
Sub-Treasury Interest Rate: BRL 7.53%, or USD 2.5% at prevailing swap rates
Continued to advance Plant 2 construction with earthworks and engineering
Conference Call Information
The Company will conduct a conference call to discuss its financial results for the third quarter at 8:00 a.m. EST on Friday, November 15, 2024. Participating in the call will be Co-Chairperson and Chief Executive Officer, Ana Cabral, Chief Financial Officer, Rogerio Marchini, and Executive Vice President for Corporate Affairs and Strategic Development, Matthew DeYoe. To register for the call, please proceed through the following link Register here. For access to the webcast, please Click here.
Sigma Lithium Corporation, a leading global lithium producer dedicated to powering the next generation of electric vehicles with carbon neutral, socially and environmentally sustainable lithium concentrate, announces its results for the third quarter ended September 30, 2024.
Ana Cabral, Co-Chairperson and CEO said: "This quarter we achieved our production and low industry cost targets, generating robust free cash flow and demonstrating our operational resilience to lithium cycles. We also benefited from our shifted commercial strategy to navigate industry seasonality, enabling us to secure higher average realized prices compared to benchmarks.
"Over the last year we are proud to have transformed Sigma from an emerging producer into an industry leader, demonstrating the operational and financial resilience of a mature producer, with dependability and consistency. Meanwhile we have delivered on all of our climate goals, reaching Net Zero one year in advance of our target and 27 years ahead of the industry, with our Quintuple Zero Green Lithium. We are confident that over the lithium cycles, our capabilities to execute to strategy will deliver long-term value for Sigma and all of its stakeholders", Ms. Cabral concluded.
Revenues in the third quarter totaled US$44.2 million or US$20.9 million net of provisional price adjustments.
The Company has undergone a significant evolution in its commercial relationship with trading companies, strengthening commercial conditions. As a result of this change in strategy the Company concluded the final settlement of provisional sales invoices from previous quarters conducted through our traders, generating an accounting adjustment of US$(23.3) million. Importantly, these are primarily non-cash accounting closing settlements and do not have an effect on the future earnings potential of the Company.
In 3Q, Sigma Lithium maintained one of the lowest cash unit operating costs in the industry, with CIF China averaging US$ 513/t, down from US$ 515/t in 2Q24, in line with target levels.
Cash unit operating costs(3) for lithium concentrate produced at the Company's Grota do Cirilo operations in the third quarter averaged US$ 395/t (including a temporary US$25/t for mobile crushers).
On an FOB Vitoria(3) basis (which includes transportation and port charges) costs averaged US$449/t.
On a CIF China basis(3) (includes ocean freight, insurance and royalties) costs averaged US$513/t.
Robust operating cash flow generation of US$ 34 million in the third quarter enabled the Company to maintain a healthy cash position of US$ 66 million, ultimately reflecting the non-cash nature of the accounting adjustments to the quarter.
The Company delivered third quarter cash adjusted EBITDA(4) of US$(10.6) million. Reported EBITDA for the third quarter totaled US$(12.8) million.
The cash adjusted EBITDA number excludes US$0.8 million of non-recurring expenditures, primarily related to capital markets and cost initiatives, and US$1.4 million in non-cash stock-based compensation expenses.
Net income in the quarter totaled US$(25.1) million or US$(0.23) per diluted share outstanding. These reported results were affected by the aforementioned US$(23.3) million in accounting adjustments.
Operational Update
Sigma Lithium achieved strong operational performance at its Greentech industrial plant in the third quarter. Production of Sigma Lithium's Quintuple Zero Lithium Concentrate totaled 60,237t, up 22% from 2Q24 and ahead of the 60,000t guidance. This includes numerous daily production records and periods of sustained operations above 860t per day. The Company expects 4Q24 production of lithium concentrate to reach at least 60,000 tonne.
Commercial Strategy Update
Sigma Lithium sold 57,483 tonnes of its Quintuple Zero Green Lithium concentrate in the third quarter, when its operational performance enabled it to further increase shipping cadence to quasi monthly volumes sold of 22,000t. As a result, the Company made two full 22,000t shipments during the quarter and supplemented these volumes with 13,483t sold at the Port customs warehouse.
Operational reliability and a consistent shipment pattern lowered the Company's export credit risk, increasing the availability and lowering the interest rate of its trade finance lines. This generated direct benefits for Sigma's commercial strategy, enabling the Company to further geographically diversify its accounts receivables, shipping to three distributors across the world: Glencore AG (Europe), Mitsubishi Corporation RtM International Pte. Ltd (Japan/ Singapore), and International Resources Holdings (UAE/Abu Dhabi).
The interest rate cost of the Company's trade finance export credit lines decreased substantially over the year from nearly 15.5% in 4Q23 to 9.0% in 3Q24. In parallel, the amount of available export trade lines exceeded US$ 100 million in the year.
The increased financial flexibility enabled the Company to strengthen its commercial strategy and change its distribution relationship with trading companies from "traders as principals" to "traders as distributors". This strategy shift allows Sigma to capitalize on annual restocking trends of chemical refiners, weather seasonality more effectively and outperform market price benchmarks, achieving average CIF sales price for the third quarter of US$ 820/t.
While Sigma Lithium ships and sells monthly to its trading partners, its goal is to build maximum flexibility in the final re-sale to clients to benefit from the established seasonality of refiners' restocking periods. When combined with its superior metallurgical properties and the associated value-in-use driven cost savings to customers, Sigma believes it has positioned itself to drive superior price realizations over time.
This commercial strategy of "trader as a distributor" was not yet in place during Company's second through seventh shipments, when trading partners served as the principals to the transaction. The accounting provisional price adjustment booked in this quarter was mainly a result of the booking of final invoice settlement and closing of these trades.
Phase 2 Expansion
Recall, on April 1, 2024, the Board of Directors announced a Final Investment Decision for the Company's Phase 2 Greentech Plant expansion. The project is expected to add 250,000 tonnes of production capacity to the current Phase 1 operation. Importantly, the Company has already received all relevant licenses to build and operate this second Greentech Plant.
In 3Q, Sigma Lithium initiated earthworks by completing clearing of the terrain for arid and semi-arid vegetation suppression (including fauna capture and classification) for the entire industrial project, including future phase 3 construction of production plant. Total building and commissioning are expected to occur over a 12-month period, with budgeted capex for Phase 2 of BRL492 million (approximately US$90mm at current exchange rates).
On August 29, the National Brazilian Bank for Economic and Social Development (BNDES) delivered a binding commitment to Sigma for a BRL 487mm development loan to finance this expansion.
On October 10, Sigma and the BNDES signed the final binding loan agreement, concluding the closing of the loan package. The first disbursement of the development loan is pending the Company posting bank guarantees with BNDES. This disbursement shall reimburse the capex already disbursed by the Company since first approval of the development bank loan.
The key terms and conditions of the development loan are:
Amount: BRL 487 million
Term: 192 months (16 years)
Interest Rate: BRL 7.53% per year (US$ at approximately 2.5% at prevailing swap rates).
Amortization Grace Period: 18 months – Calendarized Amortization: 174 months
Assets in Collateral: Not required. Development Loan shall be secured by letter of credit ("fianca bancaria") issued by a BNDES registered financial institution.
Balance Sheet & Liquidity
Robust operating cash flow generation of US$ 34 million during the third quarter enabled the Company to maintain a healthy cash position. Sigma Lithium ended the third quarter with US$65.6 million in cash and cash equivalents.
Free cash flow in the quarter totaled US$32 million primarily related to a reduction in working capital associated with the collection of accounts receivable.
Cash generation in the third quarter enabled the Company to repay certain export credit debt, reducing outstanding trade line balances. At the end of the quarter, the Company had US$181 million in short-term and long-term debt. This included US$59 million in drawn and available, but unutilized, additional liquidity through trade finance lines.
Capital expenditures during the third quarter totaled US$2.5 million (C$3.1 million) directed towards maintenance, mining, Phase 2 expansion work, and incremental investments in the Greentech Plant.
