Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sigma Lithium Corp (SGML, Financial) achieved production targets with low industry costs, generating robust free cash flow.
- The company successfully shifted its commercial strategy, securing higher average realized prices compared to industry benchmarks.
- Sigma Lithium Corp (SGML) reached net zero emissions one year ahead of schedule, branding its product as Quintuple Zero Green Lithium.
- The company maintained a strong safety record with zero fatalities and 443 days without lost time due to accidents.
- Sigma Lithium Corp (SGML) signed a BNDES development loan agreement, fully funding the construction of Phase 2 with favorable terms.
Negative Points
- The company faced provisional pricing adjustments related to previous shipments, impacting financial results.
- Sigma Lithium Corp (SGML) experienced issues with mobile crushers, leading to temporary increased costs.
- The company is still in the process of securing funding for future phases, including Phase 3 and 4 expansions.
- There is ongoing scrutiny over the traceability and ethical sourcing of lithium, which could impact market dynamics.
- Sigma Lithium Corp (SGML) needs to continue adapting its commercial strategy to navigate lithium market cycles effectively.
Q & A Highlights
Q: Are you perceiving any changes in interest level from your converter customers in your spodumene? Is there increased interest due to processing benefits, or is it related to supply and demand dynamics? Also, how far out do you book orders, and what are your expectations for net realized pricing in the upcoming quarters?
A: We have observed increased interest in our product due to its metallurgical premium, which offers a 20% to 30% cost savings to customers. This confidence allowed us to switch to a trader-distributor strategy, helping us navigate seasonality and secure better pricing. We continue to take orders throughout the year, and recent data points indicate a positive shift in sentiment, with prices reaching $820 per tonne, above the benchmark. We expect this trend to continue, with recent indications showing prices as high as $920.
Q: With some shuttered capacity in Australia, are you holding back again, or are you perceiving any increased interest in buying from your customers?
A: The shuttered capacity in Australia had a psychological effect, highlighting the economic challenges at current lithium prices. However, the real market dynamics involve increased scrutiny over the traceability of lithium sources. This scrutiny is leading to joint procurement initiatives between battery makers and carmakers, focusing on ethically sourced lithium, which benefits our position as a traceable and sustainable supplier.
Q: Can you explain the provisional pricing adjustment this quarter, which was higher than expected? Why was there a delay in reporting, and will these adjustments continue into the fourth quarter?
A: The provisional pricing adjustment primarily relates to shipments from Q4 of last year. These trades remained open, and as we changed our commercial relationships, we closed them out in our books. This resulted in a positive cash inflow of USD7 million. The adjustments are mostly related to the significant price drop in Q4 2023, and we have now closed out these open trades, so we do not expect similar adjustments going forward.
Q: Regarding Phase 3 and 4 expansions, how are you thinking about capital costs and funding, given the timeline for 2026 and 2027?
A: We have a competitive advantage with our development bank relationship with BNDES. The third plant will be similar to the second, with an estimated cost of around USD95-98 million. The infrastructure supports three lines, and additional capacity for a fourth line will require about USD15-20 million. We plan to partner with a major equipment producer in China for the lithium chemical plant, aiming to deliver a globally competitive product.
Q: Can we expect increased recoveries in Q4 with ongoing plant optimization and the transition from mobile crushers to a fully optimized Phase 1 plant crusher?
A: Yes, we expect increased global recoveries, potentially reaching 60% or more. The recent optimization project will improve lithium oxide recoveries in ultrafines. The mobile crushers were a temporary solution, and we are transitioning to a more resilient crusher design, which will further enhance operational efficiency and reduce costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
