Does Sigma Lithium Resources Corp (CVE:SGMA) will have the greenest large-scale mining development project in the world?
It just might.
The Grota do Cirilo project in Brazil has several things going for it. First off, it’s the largest hard rock lithium deposit in the Americas. Second, all mining and processing will use clean hydro-electric power. Third, 90% of the water that’s used in the processing plant will be recirculated back into the operation. Fourth, no hazardous chemicals are used to separate the lithium from the host rock. And fifth, if ongoing discussions are eventually successful, a significant portion of the resultant dry stack tailings will be recycled into the ceramics industry.
That’s not a bad start. But add into the equation that lithium itself is playing a central role in the ongoing green revolution through its use in electric cars, and Sigma Lithium’s green credentials really do come out top of the class.
It’s good on the social side too, in the medium term it is leading a development committee focused on attracting to their town industries that could, for example, recycle Sigma´s tailings, eventually making it “tailings free”. In the immediate term, it is helping the vulnerable community with activities that include the gift of tonnes of disinfectant and sanitisers to local hospitals, and an ongoing distribution of thousands of food baskets to poor communities in the state of Minas Gerais, where Grota do Cirilo is situated.
So how have the stars aligned so well in the creation of this project, and why is it that the company isn’t consistently featuring on everyone’s list of major lithium companies?
After all, when it gets going, production in 2022 will catapult Sigma into the ranks of the serious players in the lithium sector, and once a second phase of production is initiated output will be of a similar magnitude to that of famous billion-dollar names like SQM (NYSE:SQM) and Pilbara Minerals (ASX:PLS).
The answers are straightforward enough.
First, this is a company that’s been tightly held since inception, to the point where only around 43% of the shares float freely on the Venture Exchange. An imminent move to a major US stock exchange is likely to boost visibility and turnover, but don’t hold your breath at this point for any further share issuance – the company is already fully funded into production.
Nevertheless, the new US listing is likely to coincide with the beginning of a significant re-rating for the company as the execution risk falls away.
“We’ve been working on detailed engineering and pre-construction work to further increase precision of construction capex,” says Ana Cabral-Gardner, Sigma’s co-chairman and chief strategy officer. “The plan is to commence production in the summer of 2022.”
That’s not too far away now in terms of standard mining development timelines, and so it’s perhaps not surprising to learn that three of the five major buyers of the world’s lithium have already locked in deals with Sigma.
“We’ve pre-sold all of our phase one production,” says Cabral-Gardner. “And the market changed so significantly in 2021, that we could have pre-sold all our phase two production too.”
The major buyers, she says, like the continuity enabled by the large scale allowing them toplan at least five years ahead to ensure security of supply in the long-term. In the case of Sigma, production is likely to run for over twenty years or more, and plans are already afoot to step up from the initial output rate.
Phase two will likely follow on rapidly from the commencement of phase one, given how hot the commodities markets are currently running. It will take production up from the initial rate of 220,000 tonnes of ore per year to 440,000 tonnes, or 65,000 tonnes of lithium carbonate equivalent.
So it’s greener than almost any other project, and the product has buyers. But how about the economics?
There again, Sigma and Grota do Cirilo score well. The grades and the purity are extremely good, meaning that the returns per tonne of rock will be very favourable. As a result of the high quality spodumene, it uses a simpler processing plant, and together with the hydropower, that means operational costs are kept way down.Sofavourable indeed that Cabral-Gardner refers to it as “the second richest hard rock lithium deposit in the world, with these large crystals of high purity spodumene.”
It all adds up to a situation, she says, where Sigma “is in a unique position to become a core supplier in the global lithium market.”
Bear in mind too that the current production plans represent only a fraction of the potential on offer at Grota do Cirilo. The project comprises nine formerly worked mines, of which only two will be put into production in phases one and two. Those two mines alone will take Sigma up to the level of SQM today, so by gradually bringing others on stream, the company has flexibility to further scale up and keep pace with lithium demand, preserving its putative position as a “new major.”
This is why, says Cabral-Gardner, “Sigma is very relevant and very large.”
The green credentials are in the bag. And as far as investors are concerned, the plan is “to be incredibly profitable with large operating margins.”
In today’s complicated mining and ESG environment, that looks like a rare win-win.
Story by ProactiveInvestors
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