Earnings Call Transcript - SGML Q1 2023

Operator, Operator

On the first page, I'm citing the disclaimer. We're going to make a number of forward-looking statements here. So I encourage you all to read the disclaimer regarding the forward-looking statements. Sigma became the first global producer of zero carbon, zero tailings, zero chemicals, green lithium. In other words, we're enabling a transformation in the electric vehicles industry. And that's the excitement of what I'm going to share with you. Ultimately, we achieved the golden crown of sustainability by basically focusing on the impact on land that tailings dams would have, focusing on mitigating the impact on air by lowering our GHG carbon footprint, and on water by not using hazardous chemicals in our production plant. Here's an aerial shot of our plant. You can see the dense media separator and the tailings third module to your right next to the thickener, which is the first of its kind to dry-stack ultra-fine tailings to 12%. Here is another aerial view of our plant. And you can see it from the view of the ROM pad where we feed the first module, the crusher, with this spodumene ore to be transformed into a battery-grade Triple Zero Lithium concentrate. The ramp-up has been a success. We are on our way to expand this plant to triple production capacity. So there are 5 aspects of the call today, and I'm going to try to cover them to some level of depth here. The first, we're confirming guidance, reaffirming guidance of 130,000 tonnes of concentrate for ERM. By December '23, we're going to reach this target. We also have conducted our inaugural shipment of the Triple Zero Green Lithium and by-products at the end of last month. We're now going to be doing them at a cadence. We're also in the midst of advanced detailing engineering, producing CapEx to FEL3 level for the expansion of our production. And at that, we're also expanding our mineral resource with tapping into Phases 5 and 5, testing a few teasers of adjournment of Pegmatites so that we will be able to perhaps ramp-up our potential production even further with a potential forward line. More importantly for all of us here, we have been successfully implementing at a very steady pace all of our landmark social development initiatives, which feels like a pride and delivers on the promise of lifting the community as we achieve our milestones. So here is a picture of our industrial blind audience. Nothing better than a video to show you the highlights of this month. Essentially, you just saw the dense media separation module, which is called Module 2. The ramp-up has been a success. We're reiterating guidance. We will be producing 130,000 tonnes of this beautiful material. We've been able to achieve the incredible success of concentrating even to higher levels than 6%. So, 95% of throughput capacity was reached in August. It's important to remember that the main plate utilization is 85%, and we shouldn't confuse utilization with capacity. Utilization is the number of hours the plant stays on, is a 200 tonne an hour plant. So through utilization, we are able to calculate production. Now the design capacity of this plant is supposed to produce 270,000 tonnes of material. In August, we were able to reach that level. The plant is operating at that capacity. But more importantly, we have actually advanced into innovation territory by doing something unique and pioneering in our industry, which is to fully dry-stack our tailings. We have then on that same tone, achieved daily production records of approximately 150 tonnes. The granularity is getting to about 6.5% on average. Essentially, it's beautiful, it's beautiful granular lithium concentrate. So we are very, very confident that we're going to be probably reaching nameplate capacity in the fourth quarter as expected. And I think the most important thing on the dry-stacking, we were calibrating the moisture. As we mitigated that and got rid of the byproducts, we were able to zero the carbon. So we were able to offset the remaining carbon in the operation, which was very small. It was 0.26 tonnes of carbon per tonne of lithium, which is a fraction of the industry. We have a very strong and stellar book of customers because it's a combination of environmental sustainability and basically unquestionable credentials of the product, but with the premium pricing because of the superiority of the product on technical merits alone. The product is granular, average grain size 6.5 millimeters. It's going up to 9 millimeters. So it's granular course, which increases productivity downstream, to our clients. The index is an average of Korean, Japan and China lithium hydroxide pricing, but nevertheless, we are price setters at this point because of these characteristics, high purity, high quality course, granularity, and the free attribute, which is the most sustainable product in the industry. We made our inaugural shipment in July. So we shipped 15,000 tonnes of the Triple Zero Green Lithium and 16,500 tonnes of the Triple Zero Green Lithium. So now we have the cadence, we have monthly shipments planned. We are using very successfully dense media separation instead of chemical flotation. We've got Zero Tailings because, as I said, we actually are getting rid of these byproducts. So we're monetizing these green byproducts. We believe that now, again, we have the right circuit to grow, which means we're going to grow without leaving a legacy of harming the environment. That's how the clients downstream, automakers, battery makers, sort of gave us this enormous competitive advantage as far as this material is concerned, because it's a sustainable way to grow and to cater to this industry, which is building the green cars. So we're planning to put our 2 more line trains. So we're getting to the full 37,000 tonnes LCE annualized capacity, which is the 270,000 tonne of lithium concentrate. We can do better. So we would only enter a business where we can compete to be the best in the world, to beat the incumbents on sustainability. We look to keep our units very close to us because they have massive strategic value. Basically, somebody wants to see the head grade, concentrate grade, mining cost, progressions, lines again. We'll put this on the website. So, what we had going for us? The significant number of members of the community that were employed by this company. Also, well, fewer trucks, more people and easier to redeploy drivers that were driving trucks in other applications towards driving off-pit trucks. This is key to understanding our unique, incredible social license with this community, with the Lithium Valley region, with the country, with federal, with state. I mean, we become an engine of positive change. It's a force for good. We typically don't do it. So we will go straight into what we call an anthropophytes vegetation area where there's no trees to cut. Once we get our arms around 2 plants, 3 plants. This is an 8-month build. So it's actually quite fast now that we're pretty done with all the infrastructure, including the substation. This is a visual, and you can see here where my arrow is. I'm not sure if you can see that. This is pasture. So this is also what our environmental team loves to see. So we probably will build 3 more lines by 2025, 2026. We are solid but careful with our expansion plans. And we will work on our 9 former mines to build up longevity of the project. So again, this company, the resources are so vast that it's a matter of being able to or deciding to build this line train and what's the throughput capacity we believe we can actually place in the industry. The only way for this to happen is through demand. So it's there. We see the supply chain not shortened, but integrated with cross-participations. Will render itself obsolete essentially, right? This is a huge source of pride for all of us, because it took us 6 years of incredible hard work. And this is something we seriously consider on basic chemistry, but never on specialty chemicals. We're not paying for freight. This is FOB prices. So we are publishing FOB prices, right? So I would say, today the freight cost is sitting between $65 and $75 a tonne. Let me be very clear. Even though we sell spot, we're not hostages to the spot protagonist here. I mean, we're selling spot into very well-known downstream supply chains. We think there's industry everywhere. I mean, China's a huge market. They need to supply themselves. So that's a big thing there too. On us, the industry, the critical materials industry, all of us, nickel, manganese, cobalt, copper, lithium, the lot, right? And this is the important thing. The only thing I can control for sure is our capacity to deliver, it cannot be dismissed. There's a strategic value here that won't be ignored. So thank you for your patience. Thank you for listening. Thank you for being here until the end.