Sigma Lithium Corporation (NASDAQ:SGML) Q1 2024 Earnings Call Transcript

Sigma Lithium Corporation (NASDAQ:SGML) Q1 2024 Earnings Call Transcript May 17, 2024

Operator: Good morning, everyone. My name is Dennis, and I will be your operator today. Welcome to the Sigma Lithium First Quarter 2024 Earnings Conference Call. Today’s call is being recorded and broadcast live on Sigma’s website. On the call today is company CEO, Ana Cabral-Gardner and company Executive Vice President at Matthew DeYoe. We will now turn the call over to Matthew DeYoe.

Matthew DeYoe: Thank you, Dennis, and good morning, everyone. Thank you for joining us on our first quarter 2024 earnings conference call. On the call with me today is company CEO. Ana Cabral. This morning before market open, we published our 1Q earnings release and posted our financial results, which would be available through SEDAR and SEC. Before we begin, I’d like to cover two items. First, during the presentation, you’ll hear certain forward looking statements concerning our plans and expectations. We note that actual events or results could differ materially from changes in market conditions and our operations. Additionally earnings referenced in this presentation may exclude certain noncore and nonrecurring items. Reconciliations to the most comparable IFRS financial measures and other associated disclosures, including descriptions of adjustments can be found in the back of the release. With that, I’ll pass it over to Ana.

Ana Cabral-Gardner: Good morning, everyone. We’re delighted to present you with our first quarter 2024 results. I without further ado, I encourage you to go to the following page. We are extremely enthusiastic about our prospects as we have been advancing towards key catalysts of our plan to double production capacity by 2025. The four key deliveries of this quarter were fast, the delivery of an increased premium pricing where we achieved a fixed floating formula of 9% of the London Metals Exchange Lithium equivalent, basically reaching a $1,290 pricing. That represents an 11% increase to the April 24, realized pricing up the numbers we released for the first quarter of 2024. So that clearly demonstrates that the pricing trend is upwards.

An 11% increase from previous months and an overall almost 30% increase from the average pricing of the previous quarter. The second catalyst is that we have been reaching our marks on achieving a low cost of production. We became the world’s second lowest cost Lithium concentrate producer this quarter, reporting the cost of $397 per ton. So more importantly, we have also managed to increase the operating life of the Company to 25 years. We increased mineral reserves by 40% auditing 77 million tons, . We also made a final investment decision on a fully funded expansion to double production to 520,000 tons annually, equivalent to 70,000 tonnes LCE. So on the next page, we demonstrate that we’ve been delivering on our vision to combine this large-scale production with low cost and highest standards of environmental and social sustainability Lithium.

These three elements are really achieved together more often than not scaling cost are achieved at the expense of traceability and environmental high standards. Alternatively, scale and traceability and environmental and social high standards are achieved at the expense of delivering a resilient business, maintaining lowest production costs. So here we are delivering on all the three rather paradoxically fronts. The next slide illustrates one of our key deliveries for the quarter. Demonstrating how we became the four largest producing lithium industrial mineral complex globally. So Sigma now is the first non-Australian in the top five. We are trailing behind Greenbushes, Pilbara and Wodgina. I’m gratified to see the flow is now at 4.8 million tonnes of LCE equivalent with a very high grade averaged at 1.4%.

And that’s the result of a very well catenated exploration development in feasibility deliveries achieved over the last 12 months. In this quarter, we delivered visibility and therefore we declared mineral reserves of 77 million tonnes, which were increased in 40% is a significant milestone. Why is that? Because it lengthens the life of the project to 25 years. And therefore, as we expand to double capacity, we now have a operation that is sustained for 25 years. That is a moving target. In other words, as we move forward with our expansion plans, we will continue to unlock and transform the mineral resources, we have into mineral reserves backing up a similar duration in operational life. Therefore, with this mineral resource work executed, we demonstrate that Sigma lithium is not at all constrained by the scale, the sheer scale of the mineral resources available on these properties.

And here we just are demonstrating the mineral resources in one of our four properties. With that, I move forward to the following page to Page 7, where we up again, deliver on the mathematics of our numbers. And we love mathematics because numbers don’t really bring an opinion with them. And in 2024, as we discussed, we are delivering on every operational target we set out for ourselves. Some of those were quite ambitious. And again, the numbers demonstrate the resilience and the longevity of our project, essentially combining scale costs and the highest global standards of environmental and social sustainability. We are sustaining nameplate capacity since we have been sustaining nameplate capacity since December 2023. In the first 10 months of production, we already reached 178,000 tons, which delight dissolve given our pioneering dry stacking circuit of the dense media separation, industrial plant, the Greenpac plant.

In parallel, the highest premium in the highest quality that our product exhibits is translated into premium pricing, and we have been able to do that consistently. The economics for our ninth shipment is again reaching our mark of capturing a 9% share of the value of the lithium hydroxide posted at the London Metals Exchange. Which now equivalent is equivalent to $1,290 per ton. That number is a fixed floating formula and it will be adjusted by that little Metal Exchange price one month after the delivery. We were able to achieve that and in parallel to deliver on our very low marks on our very ambitious marks of a low cash cost at the plant. So we got to $397 per tonne at industrial plant gate, which basically places as the lowest cost producer amongst all lithium concentrate, Hard Rock produces all of our peers in Australia.

So we’re demonstrating that despite not yet getting to that scale, we have the cost discipline to be at the second up position, which makes us incredibly resilient to lithium cycles. So we’re here to stay. In the meantime, we’ve also maintained our liquidity. So our cash position in March 31 at the end of the quarter was USD108 million. So the Phase 2, the second green plant construction that will deliver double capabilities is fully funded with cash at hand in the balance sheet, and we will continue to work on improving the capital structure to fund that construction. But regardless the funding is in the bank as we speak. So we’ll keep going with the construction project to meet our delivery time tables of around this time next year. We’ve been initiating the construction with earthworks engineering design, the teams.

We have our second construction team in place. So we bifurcated our teams so that we ensure reliable timely and on-budget delivery of the second Greentech plant. And again, you lead us to double capacity to approximately 70,000 tons of LCE equivalent or 520,000 tonnes of lithium concentrate. And lastly, we already talked about this we delivered the longevity that will backup the operational life for 25 years with a 77 million tons of proven and probable mineral reserves. And again, it’s always a very it makes us very proud to remind everyone that we’re the only global producer that has achieved the zero-carbon very sought-after objective so that we delivering lithium products aligned with the up at those of the electric car industry that we service.

So on the next page, I’ll initiate this section and then I’ll hand over to my partner Matthew DeYoe, we want again reiterate how resilient and how reliable and how consistent our business has been. Since we made our first shipments. We have reached scale during 2023, and we have been shipping like clockwork, 22,000 tonnes approximately of lithium concentrate materials every 35 days. More importantly, at the trough of the market, we actually initiated a premiumization drive that have been delivering these bring in prices through auctions last price discovery, conversations of our customers. That demonstrates that we’ve been increasingly gaining commercial leverage as our clients strive and experience the savings they can achieve with our product, which reached 20s to 20% to 30% over competing products in the marketplace.

And that translates in commercial leverage. So mathematically, we demonstrate that we have a 25% increase from the realized prices in the first quarter. So the page illustrates also in the two colors in yellow color what we believe to be the market benchmark and in the blue color, what we believe to be our own pricing benchmark. So as you can see, in the arrows from the February, which is the Lunar New Year, it drops of the industry onward, we’ve been able to premiumize 25% our prices. From last month alone, we were able to achieve an 11% price increase. So that’s, again a mathematical numeric demonstration of increased commercial leverage. I need to result in a partnership in a win-win partnership with our clients, given that our product does bring the clients, measurable chemical savings if compared to other available competing products in the marketplace.

So by no means win-lose gain is just the flourishing of commercial partnerships with our clients. And at the chart, we also illustrate the translation of our prices into value capture of the lithium hydroxide as priced in the London Metals Exchange, we’ve gone from 8.75% of it to 9% of the index. So an increased value capture over the lithium hydroxide chemical and again, in a mathematical demonstration of this partnership with clients that win as they acquire our products. Typically the average premiumization would been achieved hovers around 10% over the similar competing products, which again, given that we’re bringing 20% to 30% of cost savings to our clients, it clearly demonstrates that the clients are still achieving a 20% to10% saving.

So clearly a win-win relationship with our steam customers. On the next page, it’s interesting when we placed costs in perspective, we’re demonstrating that Sigma is one of the lowest cost producers in the world. We clearly secured our position in the global supply chain. We have a low cost and traceable sustainable product. And more interestingly, we show that this market hinges on a, let’s say, fine balance, given that the Trinity we discussed earlier, is not always easily achieved by lithium producers. In other words, to combine low-cost sustainability and scale is actually the only thing that’s rare in the lithium industry, in other words, exceptional execution. So that’s what we’ve been able to deliver in year in Green. You can see Sigma, the second lowest cost producer.

This is actually a benchmark minerals up standard cost curve and we’re also highlighting in a brown the producers that sit on the traceability zone of producing countries. So when you add up those players, this is a hard rock cost curve with the other brine source material from the traceability zone, you actually end up with just 900,000 tonnes of LCE equivalent, projector for 2025. If you add up everyone in the low-cost traceability up a quartile all the way up to the midpoint of the cost curve, you end up with a million tons of LCE. Why am I making this point? If you please turn over to the next page, page 11, you can clearly see that lithium demand being robust in the supply of medium to low cost sources being what it is in a previous page.

And again, that’s a benchmark Minerals’ cost curve. If you look at ’24 this year, we’re ranging on a fine balance of being decent amounts of estimates, again from benchmark minerals. And when you look at ’25 and unless something miraculous happens, we’re going to be reaching a slight tension point, what does that mean? It means something very similar. Simple prices will have to move again, upwards inching towards hire up a production cost zone. So that its brings forth the product from the higher-cost producers are there to meet the supply demand equilibrium. So the numbers on this page have to be observed in tandem with the numbers on a previous page. So that when we look at the gap, we can mathematically see why the gap it has been covered well will be covered increasingly with high cost products unless another signal pops up.

In on that, it is important to note that if the 2030 projections are projections are correct and we do believe they are based on sharing with them easy growth in China alone. As you can see on the charts on the right, the volume will need between 30 and 50 new segments and that will have to pop up between now in 2030, which again demonstrates that on the low cost, traceable and large scale, there’s clearly a shortage of operational companies. So prices will eventually have to move to make feasible the high cost in traceability challenge of products on the right end of the cost curve that we saw on the previous page. And with that, I will move to the next section and I’ll pass over to Matthew DeYoe, my partners here. So that he can discuss some of our financial first quarter ’24 earning highlights.

Matthew DeYoe: Thank you, Ana. So in the first quarter, the company sold 52,857 tonnes of lithium concentrate, which composed of two full shipments and a partial sale of warehouse inventory to Glencore towards the end of the quarter. Production totaled just over 54,000 tonnes. Reported revenue on the quarter totaled $37.2 million, which included a $12 million impact from provisional adjustments associated with prior shipments, particularly our November shipment. This reduction or this is a reduction versus the $30 million we experienced in 4Q. The company assesses revenue for business conducted during the first quarter at $49 million and against our volumes. That would imply a realized price for business again conducted in the first quarter of $930 a ton.

Operating cash cost per ton at plant gate of $462 a ton, down about 16% sequentially and delivers a 50% FOB margin against that $930 per ton price. Reported adjusted EBITDA of $6 million drives a margin of nearly 16%. So again, we assess EBITDA for business conducted in 1Q, and that’s excluding the provisional implications. It was $17 million, which reflects an EBITDA margin closer to 35%. Importantly, as we want to note, as prices rallied during the first quarter, the implications of these provisional adjustments subsided and given our fixed shipment in April and the material correction we’ve seen in market prices. These adjustments should be immaterial going forward. When I move, I guess, to our cost bridge. We believe our guided targets are very much in reach.

Importantly, as well as we’re moving past much of the noise associated with commissioning activity, it’s really helping us deliver a much cleaner quarter and a much cleaner look into the company’s advantage cost structure. Cash cost per ton, as Ana had mentioned earlier, was $397 for the first quarter, which drives an FOB cost at Victoria of $462 differential here to COGS represents only royalties, non-cash D&A and a small stocking effect associated with production of concentrate in 1Q, that we’ll sell in the second quarter. As we said, the guidance is clearly within reach. Recall from earlier conversations, the company expected $370 a tonne plant gate and $420 FOB Victoria during the second quarter for the 3Q, absolute dollar costs are already there.

As you can see, the main hindrance for achieving these numbers in 1Q was production as a normalization for cost base for 4Q production. We lead plant gate cost of $359 in the first quarter. Production improved through the course of the first quarter, leaving us confident again that we can hit these targets, which would put us comfortably. We already are at the second lowest cost Hardrock project in the world, at least that we know. Next I’ll move to our cash balance. So as Ana mentioned, we ended 1Q at $108 million, which primarily reflects the cash gains from trade finance or trade facilities, partially offset by an annual interest payment and a modest build in working capital. Operations proved to be neutral to our earnings formula as revenues were offset by a partial adjustment in operating costs.

Going forward, as we had mentioned, as prices improve, we should move past provisional headwinds, we should begin to accrue substantial amounts of free cash. The next slide points to what we believe to be the cash flow potential on the recurring basis. The model — the column at current price a reflects broadly the current market. While the cost to our targets, though, as stated above within reach. This isn’t an explicit cash flow guidance for this year. As the numbers just portray at capacity and don’t reflect perhaps the realities of 1Q, but it gives a good idea of the potential of the Company on a go-forward basis. And as you can see, we are comfortably above the $100 million required to fund our expansions. So with that, I’ll pass it back to Ana.

Ana Cabral-Gardner: So going to up straight to the point where Matt left off of doubling production capacity. Again, we show the drone aerial picture of the simplicity of that project. And you can clearly see in the back, the expansion area highlighted in red, where we already have the truck maintenance patio. So it’s an area without vegetation. It’s pretty it’s basically former pasture areas. So very straightforward perpendicular to the elevation of the terrain perfect for the installation of our ROM pad, that will feed a second green tag production plants. That second line train will be equivalent to the one outlook I highlighted in yellow. And it will be sustained by the existing infrastructure in Green, which also could sustain a third green tag line expansion, which we do plan to execute the moment we commissioned the second green light Greentech plant.

So infrastructure, which cost is almost a $45 million. It is no longer necessary because it sustains two additional Greentech plant expansions. So with that, we again would like to reiterate that the cash to build it is at hand. We’ve been able to secure a robust and resilient trade lines, as a result of our consistent resilient performance of production, shipping delivery and customer acceptance of our product throughout the first 10 months of operation. So that reliability gives us access to trade line mandatory funding. It’s called ACEs in Brazil. Advancement on export contracts, which are the main source of funding for this construction at the moment is cash sitting in our treasury up right now. We will continue to work to improve the capital structure for the construction of the project.

And we have a very interesting plan to adapt that capital markets, debt loan markets throughout the course of the next few months. But without it or irrespectively of it or irrespectively of any additional source of financing, we are confident that we can carry on and execute our doubling of production capacity plans. And again, the commercial uptake is there. We could be selling far more boats if we had the material to deliver. So ultimately, we’re sitting in a very comfortable position in the industry now. So our objective is to continue to bank on the comfort of our business position in the global lithium industry at the moment. So here, the following page just shows, again, the only thing that’s rare in the lithium industry, which is exceptional execution.

So we’re going to do it again. We’ve already done the licensing of the industrial plan. We’ve achieved the initial financing through securing of the trade lines. We completed the engineering FEL 3, CapEx quoting throughout the course of the last year. Essentially, we’ve been working at this for actually more than 12 months as of now. We actually are comfortable with the capital structure we have we’re going to work to improve it and finance it. But again, it averaged 9.3% a cost for trade lines. That’s a pretty reasonable cost considering returns, we will achieve our volumes and production on a cash generation basis. And so with that confidence and with the confidence in the execution ability and execution prowess of our team, our Board of Directors cleared and gave us the final approval and final investment decision for the construction of Phase 2 in the quarter.

With that, I go on to the next page. So Matt, I’m passing on to Matt.

Matthew DeYoe: Yes, I mean, again, from the perspective of the company, right, we have a unique track record of being able to build on time and on budget, and we’re going to do that again. So as Ana had mentioned, April 1, Sigma’s Board of Directors issued the Phase 2, FID. As we said, the CapEx budget is only about $100 million to add 250,000 metric tons, which is enough lithium equivalent for about 850,000 EVs. EPCM teams or finishing earthworks engineering and mobilization is ongoing. In Phase 2, flowsheet importantly follows Phase1. The goal is to reduce risks as much as possible as we go through this process, the local EPCM team is the same. The parts design team is the same, but we’re going through Phase 2 with the knowledge and experiences gained through Phase 1, which should mean a faster ramp and a faster path to free cash flow as we move forward.

This is just in a higher level path to where we’re going. And as Aan mentioned, there’s a third phase coming on the end, which is already supported through the infrastructure.

Ana Cabral-Gardner: Yes. So here is kind of the whole picture, right? This is the industrial plan we submitted to our development Bank into our investors earlier in the year. And that kind of shows graphically where we are, and where are we headed, and how disciplined we have been in adding production capacity based essentially on the one element in short supply, our ability to execute on time and on budget and comfortably. Because we’re maintaining our operations at the highest standards of performance we set out for ourselves. So we got here in ’23 what we’ve delivered over the last 12 months. So ’23 today actually is under 75,000 tons produced. So that goes over to now. Then we have that cash flow to propel us into give us a base.

That’s our safety net. Let’s put it that way. And then if you annualize ’24 from now, we would have 270,000 tons of production and again, furthering that safety net of cash generation. So we’re building double capacity approximately double capacity, another green backlog line at 250,000 tons. So we’re in construction of what equates to 35,000 tonnes LCE. And then again, we’re going to do the third line, as I showed you earlier with the drone pictures that’s supported by the existing infrastructure that will get us to another 250,000 tons, so you get us to 770,000 tons. So of annual capacity. So approximately it will be called the magic number of 100,000 tonnes of LCE a year. Gentlemen and ladies, there are very few companies that can actually deliver and operate at these levels and they are called the supermajors and with our careful, conservative and disciplined execution.

We plan to get there most likely at the beginning of 2026 with three Greentech production lines. And we are already on the way with the ongoing earthworks construction for the second one. One point that’s important. If warranted. And again, it will be a function of the premiumization. We do have plans to in 2026, potentially building an integrated intermediate chemicals line connected to the third line. And again, that is already in the works. We’ve been scouting locations for a potential setting of this industrial plant. Given that, as we like to say in our industry, 2026 is literally around the corner in the metals industrial industry, talking 18 months away. So with that, I go on to the closing remarks. I mean, essentially, the future has arrived.

I mean, Sigma is the sixth largest producer globally, we are on the way to become the fourth as soon as we conclude the construction of the second Greentech plant, we have the same team, the same execution, the same engineers, even the same suppliers. That’s how conservative we have been. So the one unfortunate thing that hasn’t happened is that we have not repriced from developer to producer, but we believe that with our resilience and with the cadence and the continued successful execution that shall happen in due course. So and clearly, you can see on this slide, an illustration of the disconnect between Sigma and its peer, peer producers. The following page illustrates that further using fractions, which is a very clear way of Pro-rating valuation to production.

So if we were to do that exercise comparing to an Americas player or an Australian player, we would end up with similar disconnect, asymmetrical results. So this is an exercise that just shows why are we so steady our steadfast on delivering Acadian’s execution consistent execution throughout the year because we do plan to close that gap with mathematical deliveries. And again, is just a fraction Pro-rating of our current market cap with the market cap of players in the Americas or players in Australia. These are the production they actually deliver currently today, our power production, for instance, it compared to a player in the Americas is essentially a fifth. However, our market cap is in a fifth of their. If you’re over to the west to the east to Australia.

Our production is half of a very large player in Australia. But our market cap is a lot less than half. It’s almost a fourth of their market cap, which again, demonstrate such disconnect. And with that, I’ll close and again, with the key valuation with the key valuation benchmarks that we have already delivered and again, outlining the targets that we set out for ourselves, which are actually quite ambitious. I mean, first, we are planning to have achieve the cost guidance we set out for ourselves. We are already the industry’s second lowest cost player and we do plan to stay that way. However, we have a few more dollars of costs to shave from our C1 plant up a plant cash costs, and we’re planning to mark towards that further cost savings as we reach an operational cadence of reaching a year of operations.

I mean, again, it is actually important to remind everyone that this is through our 1st year. So technically, we would should have given ourselves. So margin for commissioning. But we haven’t because the lithium pricing environment didn’t allow us to have any margin of errors. So we set out to meet the ambitious low cost targets almost out of the gate. And here we are the next milestone will be to commission the second Greentech production line, and we are already up with earthworks construction engineering underway. So we do believe that we’re going to meet the same exact construction milestone this last time, we had the same team are similar leadership engineers, the same, everyone’s basically the same, as I said earlier, not even suppliers were risking to change that how conservative we are.

So it’s basically a repeat of what we’ve done before one line at a time. So this is on the left how much we deliver. And you can see for yourselves. I mean, we deliver zero-carbon, we expanded the resource to our estimated resource to 150 million tonnes, and we’re drawing from their resource into proven and probable 2P reserves, which we just increased our visibility up to 77 million tonnes, expanding 40%. We’ve been delivering consistent monthly shipments of around 22,000 tonnes, every 35 days. We mobilized Phase 2 delivered final investment decision of Phase 2 began construction. So again, we set up a target. We focus execution and we deliver, which up as we’ll reiterate again to close the one thing that scars in this industry, superb execution, superb resilience as it has been demonstrated by our team, which face market headwinds in our 1st year of operations and came out in the industry, second, lowest cost producer and our six largest second lowest cost sixth largest producer.

And thank you for a brief. Thank you, everyone, for your trust. Thank you, everyone, for your confidence in us. And and with that, I close our first quarter ’24 earnings presentation, and we’ll take questions.

Matthew DeYoe: Yes, thank you, Dennis. If you can move now to Q&A that would be great.

Operator: [Operator Instructions]. Your first question is from the line of Robert Hoffman with Bank of America.

Robert Hoffman: Just wondering, can you provide the latest regarding the strategic review and is that currently on pause?

Q&A Session

Ana Cabral-Gardner: Yes it is. We’ve been a publicly reiterating that form pause. And again, the reasons are quite clear. I mean, there’s an asymmetrical disconnect between what we believe our fair value should be, and we decided to have given up the strength and resilience of our operation that will just continue to deliver. We have a fantastic business and there’s absolutely no pressure to conduct any review from our end. So we will deliver on the targets we set out for ourselves and probably emerge two years from now. And decide what we were going to do for the next phase of growth.

Robert Hoffman: Understood. And I had just to follow up in regards to the LG press release regarding our arbitration is wondering what the time line is on that and any updates on that process?

Ana Cabral-Gardner: Well, we have a very friendly relationship with the LG Group and with South Korea, and they’re going to be more positive news on that in that we’re going to publicize in due course. But what I can say as of now is that the commercial relationship actually couldn’t be better with the LG Group as a whole. And that includes their trading arms with which was actually visiting our Plant facilities at the time. Another subsidiary of the group initiated arbitration and kind of made everyone rather dumbfounded. But again, that’s been amended. And we just want to reiterate how we have a fantastic relationship with both the government of South Korea and with LG Group as a whole. And we don’t see any reason to worry about that.

Robert Hoffman: Thanks.

Matthew DeYoe: Dennis, if you want to move on to the next question,

Operator: Your next question is from the line of Mac Whale with Cormark Securities.

MacMurray Whale: Good morning, guys. Say congratulations on bringing the cost down quite handily. I was wondering can you speak a little bit to I saw two big items in there versus Q4 in mining services and consumables, but why such a big decrease in those two items in particular.

Matthew DeYoe: So Amec on the consumables side, we got pretty effective in using our ferrosilicon and recycling that through the process. If you recall as well, we installed the magnetic separator in November. And part of that was on the tailings side of the equation and being able to improve our recyclability of ferrosilicon through our process. Also, some of these purchases may be a little bit lumpy, but we are getting better at optimizing and running the plant. So that’s going to explain a good portion of the consumables side. The decrease in the shared services, I’ll have to double check. But look, it is part of what we’ve said. We’re removing a lot of on-site contractors and replacing them with domestic and local labor. So as the roll-off happens, you’re going to see perhaps an overall reduction in costs, but also a little bit of left pocket, right pocket as some of that stuff gets allocated and reallocated through our cost lines, if that makes any sense.

MacMurray Whale: Yes, that’s helpful. And then on the G&A, you’re various sort of under underneath the operations line on the in some of your costs for G&A in particular was lower.Is that a good run rate now and we should look at those line items going forward?

Matthew DeYoe: Yes. Look, G&A is obviously, as we tried to portray on our 4Q call, right? There’s a ton of noise and clutter in the annual SG&A number. I we had a lot of confidence that would come down to the extent the strategic review is pause, obviously, some more costs will come out of the business, but it’s at a pretty good level and considerably lower than where we were and again, some of these productivity initiatives that we’ve been taking take a little bit of time to move through the system. You can’t shut off all costs at the end of the year, some of that stuff bleeds, but the goal is to keep very draconian approach on all costs. Could you talk to me recently when I say that I really and I really love $1,200 a ton spot.

You mean because we can generate cash and we can grow in this market. But it also keeps everybody honest, on costs, and so you should expect the same level of and these were draconian, but you know, intensive cost control internally at Sigma to continue to deliver on these numbers to the best we can.

MacMurray Whale: And do you think this is as the environment for pricing improves, are we going to see and like how will these provisional pricing situations change as we move through the year.

Ana Cabral-Gardner: I’ll take that and pay Mac is on a provisional pricing, which is, we believe, a commercial element of the past. And in our case, it doesn’t really connect with as much with the market environment, but it’s 100% connected to us basically beginning in the marketplace. A lot of what our clients experienced of our product had been to what we call bulk samples, 100 tonne, 200 tonne samples, but in this last 12 months was the first time they actually got to dry full tonnages and as it happens, the declines experienced the 20% to 30% cost savings there are product brought to them by themselves. So they actually I measured in their own refineries, the cost savings. So that actually we’ve moved our commercial conversation.

So completely different level because as we like to say, lithium prices globally are still in its infancy. It is as if copper concentrate. Now Mary, in lithium prices for cotton trait would borrow from each like you would borrow purity from copper concentrate and you would borrow lump size from iron-ore and we don’t we weren’t seeing any of that in our high-purity course lumpy product. So we believe that as the clients experience the product software themselves, the cost savings we brought to the refineries, they will be more amenable to a non provisional and final price conversation. Then we demonstrated that first with the fixed pricing that we deliver last month, it was fixed and final, just like the great players in the industry like a Albion in others.

And then we now this month we moved to what we call the best place, the holy grail of pricing, which is the fixed floating formula where we work with our clients, as I would say, it’s a partnership. We’re now fixing their expense with floating to their quote, which is hydroxide LME, but we’re fixing our value capture to their quote. So we’re being friendly with the industry because it floats with them. So we’re not squeezing anyone’s margins, but we’re capturing what we believe to be our premiumization in those prices. And that’s how we would like to stay throughout the year.

Matthew DeYoe: I’d say, Mac, I think the last thing, right? It’s a little switch rate. You did April was locked in firm price. May we have the firm 9% locked, but on the float and look, we’re fairly confident we’re towards the bottom end of the cycle here on price. So we want to retain some of the optionality of that as the cycle improves over time. And you know, locking the commitment on the 9%, but keeping some optionality on the cycle. That’s we’re a low-cost producer and you’re investing in a lithium company. We want to give everybody and everybody should have the economics on the upside. So that’s awesome.

Ana Cabral-Gardner: Exactly, This is essentially the core of building the customer partnership, which again, you look at the copper concentrate industry, the iron ore industry. That’s how this industry has evolved into the premium pricing. And so we believe in partnership with our customers, and this is exactly what we’re doing.

Matthew DeYoe: Thank you, Dennis, if you want to re-prompt, but otherwise we can close it down.

Operator: [Operator Instructions]. At this time, you may continue with closing remarks.

Matthew DeYoe: So I’ll just leave it there. Thank you, everyone, for joining our call, we look forward to updating you as shipments and the company progresses through our 2Q build, and we’ll look forward to re-engaging on 2Q earnings. So enjoy the rest of your day. Thank you.

Ana Cabral-Gardner: Thank you. Everyone.