Sigma Lithium secures US$125M financing to strengthen balance sheet and fund growth plans

And then you have we have a a chunk of these proceeds which for Sigma is considerable that would enable us to invest in growth. And that would be essentially opening a second pit.

All right, welcome back inside our Proactive News Room and joining me now is Annika Brawl. She is the CEO of Sigma Lithium and Anna, it's good to see you again. How are you?

I'm well. Great to see you, Steve.

Yeah, the company out with the with interesting news today on on your uh upsizing of your convertible bond and the successful pricing that you've had. These are uh key steps obviously in in what you're trying to achieve, Anna.

Absolutely. This is the completion of a two-year journey when we now cleaned up our balance sheet. We have fully deleveraged it. So this convert is just due uh five years from now, is up, it's $125 million dollars of cash of net of proceeds that the company receives, and it enabled us to uh erase our senior secure credit and basically prepare for growth. We're now setting the stage for beginning of unleashing growth and investing in growth in the company.

Yeah. It really gave you some the breathing room that you really needed in order to see this growth start to happen, right?

Absolutely. and and that's my point. is the it's more than breathing room. Now we have a clean balance sheet. and and and this a very good point you raised because we have done it in various steps in very short order. First, we postponed the maturity of the debt due in December uh to June. So, we're working in tandem with our creditor. Uh, we have the credibility with them and they agreed to give us eight months breeding room. And that was about a month ago. With that, we launched this transaction. We launched a $100 million dollar convertible note due in 2031. and the reception of the market because it's credibility that builds on credibility was was phenomenal. We had phenomenal reception across the hemispheres. both in the Hong Kong uh desk where Bank of America successfully executed this, but then we had crossover investors from the New York desk, the same houses, very large investors, the largest investors in the industry. So we had a we had a we had a very positive outcome in terms of investor responsiveness to Sigma's ability to then once the balance sheet was completely cleaned up of any debt, which is the case, uh, we would then step to deploy uh cash flow generation for growth.

Yeah, and that cash flow generation has really shown up in as you announced your your third quarter, you've discussed the third quarter and and you know, production's happening again and and cash is coming in. And that's the key to all this is sort of getting everything restarted as you did.

Absolutely. And and when you think about investors reception, the last time we went to market with an equity transaction was five years ago. So, it it's novelty. Sigma goes to market with equity linked or any transaction of that kind, and we didn't issue equity here. We're issuing debt. So, we came to the market with debt, which has a call option on it, which is a convertible bond. So, the dilution doesn't take place. It's essentially debt cushioned by the call option and the receptiveness was incredible because we demonstrated uh year in year out that we have financial discipline. because it's easy to talk about financial discipline, the proof is in the pudding. We have not gotten outside uh equity in five years. That's one. Two, the instrument, the debt instrument we using the proceeds to repay was the last time we got outside financing capital, which was in 2022. So it's been four years since we got outside financing. So, it's been a period of four years, five years for equity, four years for debt, where we simply have not gone to market. This is the proof that we are self-funded. We have been generating cash flow to build this, to do all we've done essentially. So, so that credibility has carried us successfully through the completion of the transaction. I mean, getting a transaction upsize 25%, considering global volatility, post-elections in Brazil, all of it, was an incredible incredible result. We are elated at the company and the market is responding responding responding positively today. I mean, essentially, we're right back up in our trajectory.

Yeah. Let's talk about operations. You're pretty happy about that part of it, too, right?

Absolutely. I mean, it's cadence, right? So, we've we've now restablished cadence after the stoppage, but as we discussed, I mean, this transaction enables us to do what we call propelled cadence. Now that we have extra capital to invest, part of the proceeds, and and this is the beauty of upsizing. part of the proceeds will be used to repay the debt. and then you have, we have a a chunk of these proceeds, which for Sigma is considerable that would enable us to invest in growth. and that would be essentially opening a second pit. So we are very, very excited because we are very confident, very confident that we will deliver on our growth projections.

And it sounds like uh, you know, the positivity continues and extra production is expected to come in 2027 as well.

Absolutely. We we have put forth two forecasts. Uh, in the next 12 months, we're going to deliver 240,000 tons of lithium concentrate. And then in 2027, we're going to deliver 330,000 tons of lithium concentrate. Both projections do not depend on anything other than our endogenous cash flow generation. So, that's shelved. Now, once we received the proceeds of this transaction and we have extra proceeds because of the upsizing to invest in growth, our confidence increases exponentially that clearly we're going to deliver on our forecast. And again, based on the current infrastructure we have, the current plant, current mine, current everything. How do we even increase this confidence further? Well, we're just going to open another mine. Uh so we're going to invest in growth bottom up so that we are going to enable more cash flow generation. And I'll pause and we will elaborate on that.

Yeah, and how do you get that more cash flow generation?

Exactly. what we call foundational growth because lithium price is part of the challenge of the transaction is that lithium prices have decreased significantly this year. So, we've done the deal against an environment for lithium prices where lithium yesterday was about $1,300 a ton. Our CIF cost is about 520. So, we generate cash flow robustly in this environment. So, what do we do to create foundational growth? Well, we're going to increase the scale of our mining operations so that we further decrease our costs. And by that, I mean, I'm going to open a second mine. Why? It employs a lot of people. Uh it it essentially has an embedded smaller cost in it because it's less overburden per ton. So, at that, we're planning to significantly decrease our production costs and become even more resilient to whatever lithium price environment we see in the next year or two or three. So, we're going to be ultimately cycle proof, which we have been, but now we're going to take it a step further.

Well, exciting day for the company for sure. Anna, thank you so much. Good to see you again.

Thank you, Steve. Thanks for hosting me again.

All right, there's Anna Cabral, the CEO of Sigma Lithium.