To Sigma Lithium 2025 Second Quarter Earnings Conference Call. We would like to inform you that this event is being recorded, and all participants will be in listen-only mode during the company's presentation. There will be a replay for this call on the company's website. After the prepared remarks, there will be a question and answer session for participants. At that time, further instructions will be provided. I would now like to turn the call over to Anna Hartley, Vice President of Investor Relations. Please go ahead. I'd like to welcome everyone to our conference call this morning. Joining me on the call today to discuss our second quarter results is Ana Cabral, CEO of Sigma, and Felipe Peres, CFO of Sigma, who will be available to answer questions during our Q&A session. Before we begin, I'd like to cover a few items. Our press release with our second quarter results was issued yesterday after market closing, and the release, along with its corresponding documents, are available on our website. I'd like to remind you that some of the statements made in this call, such as any production guidance, expected company performance, the time of our projects, and market conditions, may be considered forward-looking statements. Please note the cautionary language of our forward-looking statements in our presentation and news release. I will now turn the call over to Ana. Thank you, Anna. I'd like to welcome the participants of this call who are new to the shareholder registry. I also want to express our gratitude to our longstanding shareholders for your support in our recent AGM. Sigma is the world's second-largest independent lithium industrial mining producer. Our independence provides us with agility and responsiveness in a fast-changing global market. As a multinational company, we are the largest lithium pure-play producer listed in the United States. We own 100% of the fifth-largest industrial mineral-producing complex in the world, located in Brazil, a low-cost jurisdiction in a centuries-old mining region with very strict labor laws. More importantly, we enjoy excellent relationships with both of our host countries. Next September, we're celebrating four years of being listed in Nasdaq. In fact, Nasdaq helped establish Brazil Lithium Valley at Vale do Jequitinhonha and helped lift directly from poverty over 50% of the economically active population of one of the poorest regions in Brazil. For those who are new to the company, I'm going to start the call by reiterating our competitive advantage and resilience. The resilience comes from operational excellence, low-cost production, and unique commercial support from our clients. This quarter, we delivered production at large scale, and we are on track to meet our guidance of 270,000 tons of lithium oxide concentrate, which is equivalent to approximately 40,000 tons of LCE. We achieved it by perfecting clean processing industrial technology, basically reaching 70% recovery at our Greentech Industrial Plant. Another source of our resilience is being one of the world's lowest cost producers. That allows us to navigate market down cycles, and that also gives us commercial flexibility. For example, we achieved final sales in August, now basically at $966 a ton. I'm also very, very pleased to say that this August, we celebrated two years without accidents with lost time. Also, two years where we have had zero fatalities. In fact, we had never had a fatality in our 14 years of existence. This company was incepted by a very disciplined group of long-term private equity investors that believed in the energy transition, and that left us with a DNA of financial discipline. We've been always focused on capital efficiency. This quarter, it has translated into a decrease of short-term debt of the magnitude of 16%. If you compare that with a year ago, we have decreased our short-term debt by 40%. Therefore, we're able to continue to execute on our expansion project. We have very diversified funding sources, and we rely significantly on our clients. We have been awarded $100 million of subsidized government debt by BNDES. In parallel, we have ongoing negotiations of definitive agreements for offtake, long-term offtake, coupled with prepayments, and we will be talking about that in this presentation. Let me start by celebrating the most important milestone, the achievement that demonstrates the operational excellence of our team. We got to two years without accidents with lost time and zero fatalities. Our utmost focus has been to send our team members back home safely to their families every single day. Sigma, in fact, became the very first company in the upstream EV supply chain to reach this record. We remained as top two in the ICMM rankings with a TIR/FR of 1.92, among the lowest in the whole metals and mining industry. This is a direct result of our safety culture, engagement, and continued strengthening of our workforce. Now, we want to talk about the highlights of our second quarter of 2025. Three key highlights: we decreased costs, we maintained production scale, and we deleveraged. In the quarter, we managed to lower our operating costs even further across the board. We maintained production cadence and continued to deleverage, overall decreasing our all-in cash costs, making us even more resilient. On costs, at plant gate, the costs were decreased by 4% year-on-year to $348 per ton. The CIF cash cost for China ports, including royalties, has decreased by 14% to $442 per ton. Our all-in sustaining costs dropped by 24% to $594 per ton. That is a remarkably low number for a company with our environmental, social, safety, and health records. On deleveraging, our short-term finance debt was reduced by 57% versus the second quarter of last year and by 15% versus the first quarter of this year. Our production cadence was maintained, so production increased 40% year -over- year, keeping us on track to achieve our full- year 2025 annualized guidance of 270,000 tons. On our next slide, we demonstrate that we continue to deliver strong production results and outperform our 2025 targets. We're comfortably on track to achieve our 2025 guidance of 270,000 tons per year. It's interesting to compare where we are versus where we were just a year ago. The numbers showcase how Sigma has progressed significantly to become a strategic player of the global EV supply chain. Our annualized sales are up 40% from the second quarter of last year. On the next slide, we demonstrate that we continue to focus on execution, delivering our operational performance on targets. We sold approximately 40,350 tons, generating gross sales revenues of $21 million. The sales for the second quarter were calculated based on a very conservative average provisional price of $637 for SC6, which netted about $500 per ton, adjusted by grade at 5% approximately, which means this quarter we had final and provisional price adjustments of approximately $5.5 million only. More importantly, that preserved our ability to achieve higher realized prices in subsequent quarters. Basically, our commercial discipline led us to temporarily store 28,000 tons of product during the weeks with more intensive price volatility, ensuring that we maintained our pricing power. We sold just the break-even amount to cover our costs so that we sold to the clients that agreed to our standardized provisional pricing contracts, again, preserving our ability to achieve higher realized prices in subsequent quarters, as it just happened. This week, for instance, some of our clients concluded their final resales at over $960 a ton, which we expect to result in positive adjustments in the next quarter. As we tightly manage our burn rate, we closed the quarter with $15 million in cash and approximately $16.8 million in accounts receivable. A relatively comfortable position for a company with low burn rate in a low-cost jurisdiction such as Brazil. Now we're going to talk about our phase II update. As we've shown here, we continue to make progress in our phase II expansion. However, we adopted a very disciplined, paced approach this quarter, basically leveraging upon our existing operational teams, operational infrastructure in order to expedite construction. We refocused our CapEx on tackling aspects of that expansion where we could immediately benefit from the deployment of the CapEx, for example, by lowering our operating costs, such as widening the geometry of mine one in order to prepare it for delivering volume expansions for two plants at one point next year. On the next slide, we demonstrate this focus and the widening of mine geometry that we've been achieving in order to potentially feed two Greentech Lithium Processing Plants in 2026. Now we're going to talk about our financial highlights. We demonstrate with these three blocks of charts how we have managed to further decrease our costs. Our costs were the second lowest cost globally, and we further decreased them significantly. We consolidated our cost leadership. We are unmatched in our industry for a company of our scale. Therefore, we plan to immediately benefit from any recoveries in lithium prices because they will become excess returns. Our plant gate costs are stable. We decreased them a bit further, they stabilized at $348 per ton. Our CIF Asia or China cash costs, including royalties, are at $442 per ton. We lowered them 14% if compared to last year. Our all-in sustaining costs are at $594 per ton. We decreased that by 24% if compared to a year ago. That's a significant reduction. On the next page, we break down our all-in sustaining costs. They remain better than our own targets, supporting our ability to weather and navigate the lithium price cycles. As you can see, one of the main elements of that cost is financial expenses and what we call non-cost of goods sold expenses, out of which we have SG&A and environmental and social. Both of them continue to be the target of our cost reduction initiatives, mainly interest expenses, which are bound to decrease as we deleverage and receive larger portions of government-subsidized debt for our expansion. On our next page, we show how the provisional price strategy underpins upside and risk-sharing relationships with our clients. In other words, by taking in contracts with provisional pricing, we are actually boating the company, positioning the company for lithium market price recoveries because we have a share in the upside of the market, as it just happened. For example, we've had provisional price sales at $630 SC6, and we just achieved the final price resale through one of our clients at $960 SC6. On the page, we show then the differences between gross sales revenues reported and net sales revenues reported, which are basically final and provisional price adjustments. If we compare to year-to-date, or if we show year-to-date, we demonstrate that we're tightening the difference between final and provisional price adjustments, but nevertheless, they are a key feature of our commercial strategy because they provide us with the ability to share in the upside on the cyclicality of lithium prices. On this next page, we have a chart that clearly illustrates that phenomenon, and it dates back to the fourth quarter of last year. In green, you can see the final price of resales by our clients. In red, you can see the provisional price at which we sold to our clients. The difference becomes upside or downside. As lithium price cycles are now clearly mapped out, and we have worked in partnership with our clients, we are able to time quite well the way we navigate lithium price seasonality. Again, we highlight the final resale by one of our clients at $966 on a contract that is provisionally priced in our current financial statements at $630. It positions us to receive a positive price adjustment in the next quarter, in the current third quarter. On the next slide, we demonstrate the immediate consequence of this commercial strength and our ability to rely on our diversified clients for working capital financing. We have an array of clients that are willing to finance us, therefore enabling us to deleverage by decreasing more expensive trade finance facilities. We do so, though, at a pace because we want to maintain liquidity and financial discipline. For instance, we paid down $8 million of short-term trade finance debt in the second quarter, and we paid down an additional $4 million in August. If you compare over the last year, we have decreased our short-term trade finance facilities by 42%, basically by relying on our clients. In the third quarter, we further decreased our short-term debt facilities by another 10% to $39 million. When you compare the first quarter of this year to today, we have decreased our short-term trade finance debt by 24%, a clear sign of deleveraging. This is one of the key reasons why we have remained resilient on an all-in cash cost basis, because our interest cost per ton has been steady at 9%, but we have decreased the overall amount of trade finance balance. The steadiness of our interest cost per ton reflects also the stability of our creditworthiness that we've established by relying on our best diversified global clients who have a very strong balance sheet. On the next slide, we talk about our offtake strategies. We have a very geographically diversified offtake strategy, and we have about three different counterpart categories. We're going to continue to deleverage as a result of these. Essentially, coupling offtake agreements with prepayments is a demonstration of the commercial strength and high quality of our lithium oxide materials. We're currently actively engaged in negotiating three - to four-year offtake agreements with some of our clients within these three main categories across different geographies. In terms of the value of these agreements, illustratively, we can say that at today's prices, each 80,000 tons for a three-year offtake brings a potential prepayment value of $100 million. These contracts don't lock in prices; this is just an advancement of future revenues. Our strategy is to maintain operational resilience by executing this offtake agreement strategy, coupled with prepayment, as geographically diverse as possible, with three different counterpart categories, basically Western trading companies, Asian trading companies, corporations, and users. This page shows a cash flow bridge for the second quarter, and it demonstrates how the financial discipline of our long-term private equity investors has translated into the resilience and ability of this company to navigate lithium price cycles by focusing on burn rate and generating operational cash flow. For example, from the beginning of the quarter to the end of the quarter, our cash balance declined by $16 million, but it increased subsequently by $10 million upon collection of receivables from clients. This is a result of the typical cutoff dates for the quarter. The pro forma cash generated from operations was $9 million, or $4 million after covering SG&A. This spiked the market environment, and this spiked our decision to warehouse some of our production. This reduction was primarily driven by operational costs and expenses and the deleveraging from trade finance lines. Even in the current market conditions, even though we sold part of our production, we were still able to cover our costs and expenses and deleverage from trade finance lines. More importantly, we continued our expansion, but we reduced CapEx in the second quarter to just $3 million because we managed the expansion to focus on the elements of phase II that would help us prepare for the next upcycle. For instance, widening mine geometry, which has the potential of further lowering the costs. This page demonstrates how we are very well prepared for the next upcycle. The following page, we show our reported cash costs. Basically, we're starting to benefit from the economies of scale as production volumes increase and stabilize. Stable plant gate costs, efficient freight shipping negotiations, efficient port long-term contracts and operations, and lower CIF China costs drove this performance. Now, we're going to our conclusions. We would like to wrap up this presentation by showing you a global lithium cost curve. This page is from Benchmark Minerals, and it shows the global cost curve of hard rock lithium producers, meaning producers of industrial lithium oxide sourced from mining. Sigma remains positioned at the very bottom of the global hard rock lithium cost curve. Our lithium processing plant has reached 70% recoveries at plant level. We have now efficient mine operations, and therefore, we're driving this cost leadership in the industry, but we're not compromising sustainability or health and safety commitments to our teams. We continue to deliver on the Holy Trinity of lithium materials production. Large scale, low cost, traceability, and ethical production with extremely high Westernized safety and health standards. This page underscores how we are well positioned for the turn of the lithium price cycle. We're the only company that has lower costs than African miners, industrial or artisanal. They're here shown in pink just to our right. The only other lithium player that has lower costs than Sigma is Talison, which has 5x our scale. On this page, we have outlined our platform for continuous expansion and continuous growth. We're certainly going to cement our global leadership in the lithium industry. As we look ahead, we are very, very enthusiastic about the magnitude of the opportunity emerging across our industrial platform in our industrial mineral complex in Brazil. We have access to capital from various sources: our government in Brazil, our global offtake clients, the U.S. debt capital markets, and the global capital markets. Our long-term growth plan targets 120,000 tons of LCE equivalent capacity in place by 2027. We expect phase II completion to take place by 2026, and then a further expansion with the third industrial line, we call it phase III, by 2027. All of the three lines can leverage upon our current infrastructure in place to support our phase I industrial plant and mining operations. This scalability positions us to lead what is expected to be one of the largest and most environmentally sustainable lithium companies in the world, the perfect example of a protagonist in the energy transition with the benefit of scale and developing advanced green technology. This is what we built at Sigma. Over the past year, we transformed Sigma Lithium into a leading producer, resilient through market cycles with significant volatility. We have reached our cost guidance. We have maintained operational discipline. We've increased our mineral reserves by 40%. We have advanced on our phase II expansion, and we have secured subsidized transformative financing from the Brazilian Development Bank, BNDES. As we move forward, we remain committed to growth, sustainability, delivering value to all of our stakeholders, and lifting the people in our region. We will now open for questions, and I'm going to be joined by my two partners, Felipe Peres, our CFO, Executive Vice President of Administrations, Site Operations, and Finance, and Anna Hartley, our Vice President for Investor Relations and Global Banking. Thank you very much for the presentation. We will now begin the Q&A section for analysts. To ask questions on audio, click on "Raise Hand" and state your name and company. You will then receive a request to activate your microphone. Please activate your microphone to ask the questions. To ask questions in writing, just QA the question in the Q&A button. Please be aware that your company's name should be visible for your question to be taken. The first question comes from Mr. Joel Jackson from BMO Capital Markets. Hello, Joel. Hi, do you hear me now? Yes, I can hear you perfectly well. Okay, Ana and team, thanks for being here. Let's talk commercial a little bit. Should we expect your inventories to normalize at the end of Q3? You're going to sell your excess volume, and it seems like, in your prior two quarters, you disclosed that IRH was your number one trader of your product. You don't have that disclosure this quarter. Can you talk about your trading relationships, if they've changed, and if that was part of the strategy across Q2 to warehouse inventory? Absolutely. We've been diversifying our trading relationships further and further. We basically now commercialize material with large trading companies and large downstreamers from all over the world. We've had new trading companies stepping in to become our clients throughout the second quarter, especially as price volatility increased, and we have maintained the discipline of just selling product using our standardized provisional price conditions, which, as we have mentioned on the call, have paid off handsomely, boding well for the lithium price recoveries we are experiencing now in the third quarter. What we have done, the summary is diversification. We now have an array of trading partners that are willing and ready, on the back of the strength of their balance sheet, to finance our operations, especially given the price volatility that we experienced in the second quarter. As far as the inventories, which is the second part of your question, the situation has normalized, as you can see from the cash bridge when we've shown the receivables. It happened essentially during a very volatile few-week period that we lived through in the previous quarter that we all remember, but we would like to forget, where we were not striking agreements to our standard policy, whereby we have an upside sharing when our trading clients resell their product. If we had sold that material at that period, we would not be able to benefit from the current lithium price cycle. We held back, given that we had the financial capability to do so, and that was quickly normalized after the cutoff date for the quarter, as we've shown in the cash flow bridge. Okay, we should expect sales in Q3 to be 85,000, 90,000 tons. Is that right? Something in that range? They will match. They will be closer to production. Typically, we don't have the policy of holding back inventory. It just happened given the, let's say, out-of-the-ordinary conditions that we lived through during the second quarter as a result of mostly factors way outside of our control. Sorry, I'm confused. Sales will be production plus another 25,000 or 28,000 tons in Q3? Yes, absolutely. Sorry, okay. This is my last question before I pass the baton here. Ana, you've been talking about prepayments and offtakes for many, many months. You've been traveling the world, talking to people, trying to sign these deals. I think a lot of people thought you would have signed some of these already. You haven't. Talk about why you haven't been able to get pen to paper. What's been the pushback on both sides, or what's going on? We have quite a number of parties that have engaged with us. We're now negotiating definitive documents. We have adopted a very strict directive here where we're going to announce the transaction once the definitive documentation is completed and signed. We're not planning to announce term sheets of any nature, binding, non-binding, or not. This is why we felt comfortable putting the value to the transactions. Just sort of to give you a recap of the mathematical deals, and that's a very good question, actually. When you think about current market prices at around $950, $960, or even $900, the implied price for the prepayment, again, this price is not locked. It's currently sitting at $833. It's very easy to ascertain how you get to this. For example, if we talk about an 80,000-ton commitment for three years, we would be committing 240,000 tons of product. These industries typically have the iron ore mathematics where you divide that commitment by two. That is 120,000 tons of product committed. When we say on that page in the presentation that these agreements are worth $100 million, it has an implied prepayment price of $833, well below even current market prices. As time went on and markets have recovered, our prepayment negotiations have become very much of a win-win, especially for our counterparties, which demonstrates, let's say, the willingness of our counterparties to advance these discussions. We are very well positioned to announce prepayments in short order. Again, we will announce definitive documents. Thank you. The next question comes from Mr. Armando Volfried from Fort Aucrey. Could you please explain expected consequences of the U.S. tariffs on your business, if any, and any plans to refine lithium to increase margin and help lower reliance on China? We have a diversified customer base. To your point, China today refines most of the lithium chemicals that are utilized by PCAM and CAM, meaning precursors and cathode producers globally. However, our clients, I mean, the accounts receivable of our company are extremely diversified because we do not necessarily sell to refiners. As far as the refining business, we are adopting a wait-and-see approach in terms of that business. As it is widely known, that business currently has negative margins. You would be margin-decretive to the industrialization of lithium oxide materials that we conduct in Brazil in this beautiful plant you can see in the background. To ask questions on audio, click on "Raise Hand" and state your name and company. We will then receive a request to activate your microphone. Please activate your microphone to ask the questions. To ask questions in writing, just QA the question in the Q&A button. Please be aware that your company's name should be visible for your questions to be taken. Our next question comes from Mrs. Katie Lachapelle by Canaccord Genuity. Hi, Ana. Thanks for taking my question. You walked us through the different provisional pricing adjustments that you're expecting to see in Q3. Can you give us any context on how many tons are still open to provisional pricing on a go-forward basis? In the contracts that you're negotiating, will provisional pricing continue to be a theme? Yes, provisional pricing became a permanent feature of our business. When you think about the sales that we executed throughout the year, all of them were conducted on a provisional price basis. When you look at our sales book, what we've shown is the average of the second quarter provisional price, and the numbers were on the presentation. If you further average it out with the first quarter book, we still do not even reach on a net basis $700 adjusted for grade, which again positions us very well for the upside in lithium prices that is expected, that's already happening in the third quarter. That was a deliberate strategy as we basically began the year with a very volatile lithium price behavior resulting from elements completely outside of the industry, mostly resulting from sentiment around tariff discussions and tariff impacts in our industry. We will expect to see a positive, a very positive adjustment into the third quarter and into the fourth quarter financials. The contracts have a drop-dead date for execution, and our first drop-dead date begins on September 30th, continues into October 30th, November 30th, and December 30th. I think it's a very good question because it's important to highlight that what we're hoping to achieve by establishing now drop-dead dates is to have our client resales, meaning we sell, they resell, we share the upside, common feature of the industry, but we expect the resales to take place within the year so that these effects are now observed, achieved within the fiscal year of 2025. Got it. Maybe a follow-up on phase II. I don't think anyone's surprised to see a more disciplined approach to when that production is coming online, and you're now projecting 2026. Can you give us any guidance into when you're expecting the commissioning to take place in 2026? Is that going to be front-end weighted or perhaps later in the year? It will be probably mid to third quarter of 2026, later in the year. It will depend on whether the current price recovery holds. What we've done, though, we did not stop because, as you've seen, you've been there a few times, we have a high strip ratio on our Mine 1, and Mine 1 will feed Plant 1 and Plant 2 for the first year. What we've done, we redeployed the CapEx for construction into Mine 1, which helped us maintain plant gate costs. It helped us lower overall costs. We basically decided that CapEx for phase II now needs to be translated into an immediate return either for current infrastructure that will help feed phase II or help support phase II or current mining operations that would also feed phase II, which is exactly what we did, meaning a more immediate return for CapEx deployment. If the project in question, I mean, if the request for deployment does not meet that criteria, we simply do not pursue it. Very clear. That's all my questions. Thanks, Ana. Our next question comes from Chris Dix with Brahman. Hi, Ana. Thank you for the presentation. Can you provide me the team's comments on recent price action? How do you see market developments over the next 12 months, and what are Sigma's price expectations? Lithium, there's never a dull moment in lithium, and I don't see any other possible way to answer your question. What we've experienced this quarter was a very sharp recovery, and it happened on sentiment. Putting into context, the main driver of prices now is the GFX futures market in China for lithium chemical prices. What is interesting is that market trades a day about 300,000 tons of LCE. Yes. In a day, there's the equivalent of one-fifth of global demand being traded. It is essentially a paper market not backed by physicals of either nature, which just shows how susceptible to news and susceptible to sentiment the market has become. As a result, I think to your point, as we entered August 11 this week, we saw a very sharp price increase, very sudden, basically a result of news of mine closures, which weren't even attached to volume, but they were attached to an overall concept of there is a limit to loss-making within the supply chain. The last profitable operations were being closed off, and that provoked an immediate reaction in the market. I'm just trying to give you a context to your question. In which way? It's now expected from market participants in Guangzhou, where this futures market is located, where GFX is located, that the bond of 80,000 RMB for lithium chemical prices may hold and may hold throughout the quarter, given that with the closure and the news, certain operations were not able to profitably withstand the second quarter lithium price environments where lithium went as far down as 60,000 RMB per ton for chemicals. We expect that 80,000 RMB per ton of chemicals to hold, which translates kind of on and around the levels of sales that we have been experiencing currently in the industry, on and around between $900 and $950 per ton of lithium oxide concentrate. We do not see further upside for this year, but we wanted to highlight to the listeners of the call the nature of volatility on GFX, given the volume of what we call paper contracts if compared to actual demand in the industry. Ladies and gentlemen, without any more questions, I am returning to Mrs. Ana Cabral for her final remarks. Please, Mrs. Ana Cabral, you may proceed. I would like to reiterate my gratitude to all of you listening to the call, supporting us throughout all of these years, and essentially expressing optimism because we do believe that markets have now normalized in terms of fluctuations of pricing being a little bit closer to the supply-demand dynamics we've been observing in the industry. EV growth has not receded, as all of you know. The latest year-on-year annual changes have been on and around 27% coming from mainly China. Demand is extremely robust, and we expect that to translate into more stability and less volatile pricing environment for all of us industry participants. Thank you so much for being part of this call. Thank you so much for entrusting us with the company. Thus, we conclude the Second Quarter of 2025 Conference Call of Sigma Lithium. For further information and details of the company, please visit the company's website, ir.sigmalithiumresources.com. You can disconnect from now on. Thank you once again.