Sigma Lithium(SGML) - 2025 Q1 - Quarterly Report

Management's Responsibility for Financial Reporting Management is responsible for preparing unaudited interim financial statements under IAS 34, with oversight from the Board's Audit Committee to ensure fair presentation - Management is responsible for preparing the unaudited condensed interim consolidated financial statements in accordance with International Accounting Standard 34 (IAS 34) [6][7] - The Board of Directors, primarily through its Audit Committee composed of independent directors, oversees this process to ensure fair presentation [8] Unaudited Condensed Interim Consolidated Financial Statements Statements of Financial Position Total assets increased to $348.3 million by Q1 2025, driven by receivables and PP&E, with liabilities and equity also rising Consolidated Statement of Financial Position Highlights (in thousands of USD) | Account | 3/31/2025 | 12/31/2024 | | :--- | :--- | :--- | | Total Current Assets | 97,865 | 92,771 | | Total Non-Current Assets | 250,448 | 234,347 | | Total Assets | 348,313 | 327,118 | | Total Current Liabilities | 114,603 | 108,771 | | Total Non-Current Liabilities | 127,617 | 126,007 | | Total Liabilities | 242,220 | 234,778 | | Total Shareholders' Equity | 106,093 | 92,340 | Statements of Income (Loss) Q1 2025 saw a net income of $4.7 million, a turnaround from a $6.9 million loss in Q1 2024, driven by a 28% revenue increase Income Statement Summary (in thousands of USD) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales Revenue | 47,673 | 37,202 | | Gross Profit | 13,455 | 8,560 | | Operating Income (Loss) | 6,790 | (329) | | Financial Income (Expenses), Net | 2,938 | (7,051) | | Net Income (Loss) for the period | 4,728 | (6,909) | | Basic and Diluted EPS | $0.04 | ($0.06) | Statements of Comprehensive Income (Loss) Total comprehensive income reached $12.0 million in Q1 2025, a significant improvement from a $11.8 million loss in Q1 2024, aided by foreign currency gains Comprehensive Income (Loss) Summary (in thousands of USD) | Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (loss) for the period | 4,728 | (6,909) | | Foreign currency translation adjustment | 7,264 | (4,858) | | Net comprehensive income (loss) | 11,992 | (11,767) | Statements of Cash Flows Cash and cash equivalents decreased by $14.8 million in Q1 2025, ending at $31.1 million, primarily due to financing and investing outflows Cash Flow Summary (in thousands of USD) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | (2,186) | (11,472) | | Net cash used in investing activities | (4,793) | (5,764) | | Net cash (used in) provided by financing activities | (10,772) | 78,610 | | Increase (decrease) in cash | (14,807) | 59,607 | | Cash, beginning of period | 45,918 | 48,584 | | Cash, end of period | 31,111 | 108,191 | Statements of Changes in Shareholders' Equity Shareholders' equity increased to $106.1 million by Q1 2025, driven by $4.7 million net income and $7.3 million from foreign currency translation - The main drivers for the increase in total shareholders' equity during Q1 2025 were the net income of $4.7 million and other comprehensive income of $7.3 million [17] Notes to the Financial Statements Note 1: Corporate Information Sigma Lithium Corporation is a commercial producer of lithium oxide concentrate, with primary operating assets located in Minas Gerais, Brazil - The company is a commercial producer of lithium oxide concentrate with its operating assets located in the Jequitinhonha Valley region of Minas Gerais, Brazil [18][20] - The company's common shares trade on the TSX Venture Exchange (TSXV) and Nasdaq under the symbol "SGML", and it also has unsponsored Brazilian Depositary Receipts (BDRs) on the B3 exchange [21] Note 2: Basis of Preparation Financial statements are prepared under IAS 34, with a retrospective change to USD as the presentation currency from CAD effective January 1, 2025 - Effective January 1, 2025, the company changed its presentation currency from Canadian Dollars (CAD) to United States Dollars (USD) [28] - Comparative financial information has been restated accordingly [28] - The company's functional currency remains the Brazilian Real (R$), as its primary operations, inflows, and outflows are based in Brazil [27] Note 9: Property, Plant and Equipment PP&E net book value increased to $152.5 million by Q1 2025, driven by $3.7 million in additions and $11.1 million from foreign currency translation PP&E Movement in Q1 2025 (in thousands of USD) | Description | Amount | | :--- | :--- | | Balance as of Dec 31, 2024 | 141,025 | | Additions | 3,668 | | Depreciation and depletion | (3,232) | | Foreign currency translation adjustment | 11,072 | | Balance as of Mar 31, 2025 | 152,533 | - Investments related to the Phase 2 capacity expansion are ongoing, with expenditures classified as 'Assets under construction' [42] Note 11: Related Parties' Transactions The company conducts various transactions with related parties, including cost-sharing, land leases, royalty payments, and a $15.9 million loan to Tatooine for property acquisition - Sigma Brazil has a facility agreement to loan up to $15.0 million to Tatooine Investimentos S.A. to fund property acquisitions in areas of interest [50] - As of March 31, 2025, the outstanding loan amount was $15.9 million [50] - The company pays royalties to Miazga, a related party, for mineral exploration on its land [49] - In Q1 2025, $0.52 million in royalties were recognized as an expense [52] Key Management Compensation (in thousands of USD) | Compensation Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Stock-based compensation | 306 | 913 | | Salaries, benefits and director's fees | 209 | 248 | | Total | 515 | 1,161 | Note 13: Loans and Export Prepayment Total loans and export prepayments reached $168.7 million by Q1 2025, with $20.8 million in new proceeds and $31.0 million in repayments Loan and Export Prepayment Balances (in thousands of USD) | Type | Current (3/31/2025) | Non-Current (3/31/2025) | | :--- | :--- | :--- | | Export prepayment trade finance | 51,111 | - | | Export prepayment agreements - Synergy | 3,384 | 100,000 | | Finame - BDMG (Reais denominated) | 1,291 | 14,210 | | Total (before transaction costs) | 55,786 | 114,210 | - In Q1 2025, the company entered into new export prepayment agreements totaling $20.8 million with interest rates between 9.0% and 9.6% p.a. [60] - The company repaid $31.0 million of existing agreements [60] - The company has a signed agreement for a R$486.8 million development loan from BNDES to fund the Phase 2 plant [72] - No drawdowns had occurred as of March 31, 2025 [72] Note 19: Financial Instruments The company manages foreign exchange, interest rate, market price, credit, and liquidity risks, utilizing provisional pricing and interest rate swaps - The company has significant exposure to the U.S. dollar, with net liabilities of $99.0 million denominated in USD as of March 31, 2025 [92] - A 10% adverse change in the USD/BRL exchange rate could result in a loss of approximately $8.6 million [95] - Market price risk exists due to provisional pricing on lithium sales [100] - A 20% decrease from the probable price on 73,230 kt of lithium oxide concentrate would negatively impact sales revenue by $11.6 million [101] - The company manages credit risk by receiving advance payments for a substantial portion of its sales or by using letters of credit [102] Note 20: Share Capital As of Q1 2025, 111.3 million common shares were outstanding, with A10 Investimentos Ltda. holding 42.85%, and a tax incentive reserve increased by $187 thousand Major Shareholders as of March 31, 2025 | Shareholder | % of Voting Capital | | :--- | :--- | | A10 Investimentos Ltda. | 42.85% | | Fitpart Fund Administration Services Limited | 7.40% | | Appian Way Asset Management LP | 4.23% | | Others | 45.52% | - The company benefits from a 75% reduction in income tax for ten years, starting in 2024 [115] - The saved amount is recorded in a tax incentive reserve and cannot be distributed to shareholders [115] - In Q1 2025, $187 thousand was added to this reserve [115] Note 22: Sales Revenue Net sales revenue for Q1 2025 increased to $47.7 million from $37.2 million in Q1 2024, despite a $1.6 million negative provisional price adjustment Sales Revenue Breakdown (in thousands of USD) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Lithium oxide concentrate | 49,227 | 43,246 | | Provisional price adjustment | (1,554) | (6,044) | | Total Net Revenue | 47,673 | 37,202 | Note 23: Costs and Expenses by Nature COGS increased to $34.2 million in Q1 2025, up from $28.6 million in Q1 2024, primarily due to higher logistics, royalties, and blasting/fuels costs Cost of Goods Sold Breakdown (in thousands of USD) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Mining costs | (15,842) | (16,185) | | Processing costs | (9,626) | (8,853) | | Logistics costs | (6,879) | (2,498) | | Royalties | (1,871) | (1,106) | | Total COGS | (34,218) | (28,642) | - Starting in 2025, stock-based compensation for certain operational personnel ($611 thousand in Q1 2025) is now allocated directly to cost of goods sold [118][120] Note 26: Stock-Based Compensation Total stock-based compensation expense was $1.6 million in Q1 2025, allocated across operating expenses, COGS, and capitalized assets, with 349,102 RSUs outstanding Stock-Based Compensation Expense Allocation (in thousands of USD) | Allocation | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Stock-based compensation expense (G&A) | 805 | 2,266 | | Cost of goods sold | 611 | - | | Property, plant and equipment | 14 | (408) | | Deferred exploration and evaluation expenditure | 144 | 46 | | Total | 1,574 | 1,904 | Note 27: Legal Claim Contingency The company has provisioned $1.9 million for probable legal losses and faces $6.2 million in possible losses, with a new arbitration initiated by LG Energy Solution - On March 18, 2024, LG Energy Solution initiated arbitration against the company, alleging a breach of an offtake term sheet [138] - The company's legal counsel has assessed the probability of loss as 'possible', and the amount involved is currently undetermined [138] Legal Contingencies as of March 31, 2025 (in thousands of USD) | Classification | Contingency Amount | Net Amount | | :--- | :--- | :--- | | Probable Loss | 3,772 | 1,934 | | Possible Loss | 12,240 | 6,168 | Note 29: Subsequent Events Subsequent to Q1 2025, the company entered into additional export prepayment trade finance agreements totaling $18.3 million in May 2025 - In May 2025, the company secured an additional $18.3 million through export prepayment trade finance agreements [140]