Sigma Lithium Announces a Positive Feasibility Study with Forecast LOM Net Revenue of US$1.4 Billion and EBITDA of US$ 690 Million for the High-Grade, Low-Cost Xuxa Deposit Positive results confirm an after tax NPV of US$ 249 million with cash operating costs for the Xuxa deposit of US$238
Sigma Lithium Announces a Positive Feasibility Study with Forecast LOM Net
Revenue of US$1.4 Billion and EBITDA of US$ 690 Million for the High-Grade,
Low-Cost Xuxa Deposit
Positive results confirm an after tax NPV of US$ 249 million with cash operating costs for the Xuxa deposit of US$238
per tonne of battery grade 6% lithium oxide concentrate, amongst the lowest costs globally
The positive economics of the bankable Feasibility Study for Xuxa provide a strong platform for Sigma to continue to
develop its extensive mineral properties, which include 9 past-producing lithium mines
___________________________________
Sigma will host an investor call on October 7 th, 2019 at 11:30 a.m. (EDT).
Webcast Link: https://sigmalithium.clickmeeting.com/sigma-lithium-resources
Dial in:
Participant Code: 232164#
New York: +1 (917) 338-1451, Toronto: +1 (647) 497-7729, São Paulo: +55 (11) 3230-2305
Dial-in from other locations: https://account-panel.clickmeeting.com/dialplan
Sigma will present at the TSX Latam Mining Day on October 2 nd, 2019 at 10:30 a.m. (EDT).
Location: TMX Gallery
130 King Street W - Toronto, ON
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VANCOUVER, British Columbia, Oct. 01, 2019 -- Sigma Lithium Corporation´s (the “Company” or “Sigma”) (TSX-V:
SGMA) (OTCQB: SGMLF) is pleased to announce the positive results of the independent Feasibility Study (“FS”) prepared for
the Xuxa deposit (“Xuxa”) with the initial development of a 1.5 million tonnes per annum (“Mtpa”) open-pit mine and lithium
concentrator (“Xuxa Plant”) at Sigma’s 100% owned Grota do Cirilo Project (“Sigma Project”) located in the Vale do
Jequitinhonha, State of Minas Gerais, Brazil.
Feasibility Study Highlights
• Forecasts a life-of-mine (“LOM”) revenue from the Xuxa Plant of US$1.4 billion and an EBITDA of US$690 million over
an estimated LOM of 9.2 years, at an assumed 2021 nominal arms-length price of US$ 650 per tonne for 6% lithium
oxide (“Li2O”) concentrate cost insurance and freight (“CIF”) at China port.
• The FS envisages an average annual production rate at the Xuxa Plant of
~220,000 tonnes of coarse green and high-quality battery grade 6% lithium oxide concentrate with low impurities
(“lithium concentrate”) at operating costs of US$ 238 per tonne and total cash cost CIF China of US$ 342 per tonne,
which is amongst the lowest costs globally.
• The estimated initial capital cost (“capex”) including 10% contingency of US$ 98.4 million results in an after-tax net
present value of US$249 million at 8% discount rate (“NPV 8%”) and US$299 million before-tax. The after-tax internal
rate of return (“IRR”) of 43.2% and project payback period of 3.1 years illustrate the Project’s compelling economics.
• The Xuxa Plant will benefit from a unique feed of spodumene ore with large crystals, high grade and low impurities. The
average grade of 1.46% over a 9.2 year mine life is amongst the highest globally. Impurities of iron oxide (“Fe₂O₃”) are
below 1% and alkalines (sodium and potassium, respectively “Na₂O” and “K₂O”) are below 0.55% each.
• The Xuxa Mine will produce an “environmentally responsible” lithium concentrate. The Xuxa Plant will be powered by
Brazil’s clean and low-cost hydroelectricity. More than 90% of the water used in the processing will be recycled and
the Xuxa Plant tailings will be managed using dry-stacking technology.
Summary of Key Xuxa Feasibility Study Outcomes
The FS for the Xuxa Mine and Xuxa Plant envisages a 1.5 Mtpa spodumene ore mining and lithium concentrate processing
operation. Building the Xuxa Mine and Xuxa Plant constitutes a low-risk execution strategy for the Company. The economics
are highlighted by high operating margins generated over an estimated 9.2 years of mine life: life-of-mine (LOM) net revenue of
US$ 1.4 billion and LOM EBITDA of US$ 690 million.
The FS is only based only on the current open-pit mining plan without contemplating an underground mine plan.
The FS is based on a 2021 arms-length nominal price forecast of US$ 650 CIF China, and a LOM average price of US$ 733
CIF China or US$629 free on board (“FOB”) Brazil for 6% lithium concentrate. Sigma contracted Roskill to provide an outlook
and overview of the lithium market. Roskill provided a comprehensive updated market study in August 2019 analyzing current
and future trends in the market, prices of lithium chemicals such as lithium hydroxide, lithium carbonate, as well as prices of
6% lithium concentrate for vertically integrated and non-integrated chemical producers.
Table 1 summarizes the financial results from the FS.
Table 1. Financial Results Summary of Feasibility Study for the Xuxa Mine and Plant
Item Unit Total
Economic Returns
Net present value (NPV 8%) After-Tax US$ 249 million
Internal rate of return (IRR) After-Tax % 43.2%
After-Tax Payback period years 3.1
Financials
Life of Mine (LOM) years 9.2
Net Revenue during LOM US$ 1.4 billion
EBITDA during LOM US$ 690 million
Initial Capital Expenditure (Capex) (1) US$ 98.5 million
Exchange rate BRL/US$ (2) BRL/US$ 3.85
Costs
Cash costs per tonne of lithium
concentrate (3)
US$/t 238
Freight costs to China (3) US$/t 104
Total Cash Cost (CIF China) US$/t 342
Market Prices Roskill Forecast in FS
Lithium concentrate CIF China port in
2021
US$/t 650
Lithium concentrate CIF China port
average LOM
US$/t 733
Lithium concentrate FOB Brazil port
average LOM
US$/t 629
Notes:
1. Initial capital includes pre-production working capital of $10.96 million and 10% contingency of $10.47 million.
2. A conservative two-tier exchange rate was used as a base to the feasibility study. BRL 3.85 / USD 1.00 for quotes
provided from third party information providers and BRL 4.10 / USD 1.00 for the amounts provided in dollars from Sigma.
3. Cash spodumene concentrate costs include mining, processing, selling, general and administration expenses (SG&A).
4. Freight costs include road transport to Port of Ilheus in Bahia, port storage, loading and shipping to Shanghai Port.
Background of Sigma’s Project Development Strategy
1. Current Feasibility Study for Xuxa Mine and Construction of Xuxa Plant:
• The positive economics of the Xuxa FS provides a strong platform for Sigma to continue to evaluate and develop its
extensive 191 km 2 mineral properties, which include nine past-producing lithium mines and 11 first priority exploration
targets.
• Sigma adopted a development strategy with includes low-technical execution risk and low-capital expenditures for the
Grota do Cirilo Project. As a result, Sigma decided to conduct its first feasibility analysis exclusively on the Xuxa
deposit. The FS contemplates a 1.5 Mtpa open-pit mine and processing plant.
• Xuxa deposit was selected for FS evaluation because it has a unique combination of:
◦ (i) A high-average grade of 1.55% Li ₂O with low levels of alkaline and iron impurities, enabling ore processing
through a lower technical risk dense media separation (“DMS”) plant with lower production costs. while
achieving economically positive recovery results.
◦ (ii) Proven and Probable Mineral Reserves totaling 13.8 Mt grading 1.46% Li2O
◦ (iii) Mineralization with large crystals of spodumene enabling the production of a coarse lithium concentrate,
which will have commercial competitive advantages.
• Sigma successfully produced, on a continuous basis using DMS technology, a coarse lithium concentrate grading
more than 6% lithium oxide at its pilot plant on site in Brazil.
• Commercially, Sigma’s coarse high-quality lithium concentrate is considered a premium product by customers in the
chemical industry as it allows converters to achieve higher margins and operational efficiencies. It is understood that
the coarse size of the concentrate has the potential to increase the increased recoveries that can be achieved in the
lithium hydroxide and carbonate chemicals production process. Table 2 summarizes the projected Xuxa Mine and Xuxa
Plant forecasts at the anticipated 1.5 Mtpa production rate.
Table 2. Xuxa Mining and Concentrate Plant Forecasts at 1.5 Mtpa
Item Unit Total
Ore Processed
Total ore quantity milled (LOM)
Annual run of mine (ROM) ore milled
Spodumene ore feed grade LOM average
Strip ratio
tonnes
tonnes
%
Ratio :
13.8 million
1.5 million
1.46
9.6: 1
Concentrate Produced LOM Average
Lithium concentrate produced
Lithium recovery rate
Lithium concentrate grade
Lithium carbonate equivalent (LCE) produced
Tonnes
%
% of Li2O
Tonnes of LCE
220,000
60.4
6
33,000
Run of Mine Costs
Mining costs per waste and ore mined
Processing costs per tonne (ROM)
US$/t mined
US$/t ROM
2.12
11.03
2. Subsequent development of Barreiro mine and construction of an additional module to Xuxa Plant
• A Pre-Feasibility Study ( “PFS”) has commenced at Barreiro, Sigma's second deposit slated for development at the
Grota do Cirilo Project. The Project NI 43101 mineral resource updated as of January 6, 2019 outlined a measured and
indicated mineral resource at Barreiro of 20.5 Mt of spodumene lithium with an average grade of 1.43% Li2O.
• As under Brazil law a Plano de Aproveitamento Economico ( “PAE”) was filed with the Brazilian mining regulator
(“ANM”, Agencia Nacional de Mineracao), for which approval is still awaited. The PAE is not a NI 43 101 compliant
document. The Barreiro-Xuxa PAE envisages an integrated 3.0 Mtpa two-stage development of the Grota do Cirilo
Project, beginning with 1.5 Mtpa initial production from Xuxa mine and Plant. The PFS commissioned by Sigma will
study the viability for a separate on-surface mining operation at the nearby Barreiro mine, along with the construction of
an additional module to the Xuxa Plant to process an additional 1.5 Mtpa from Barreiro mine.
• Xuxa FS and the commissioned Barreiro PFS envisages a sequenced development strategy for Sigma’s Grota do Cirilo
Project with a modular, integrated, expanded joint development of Xuxa-Barreiro deposits, aiming to process a total of 3
Mtpa and an envisaged increase in production to around
440,000 tons annually.
Sigma Lithium Resources CEO Calvyn Gardner says: “This successful Feasibility Study demonstrates that Sigma’s strategy
to select Xuxa as the first deposit to be developed in the Grota do Cirilo Project has proven to be the right approach. Xuxa’s
low-capital intensity creates the financial robustness to support the economics of a standalone Project. The FS shows that
Xuxa has one of the lowest production costs of battery grade lithium concentrate globally, which is also a significant
commercial competitive advantage, as it ensures the project is profitable even in the current challenging lithium market
environment. The high-quality, coarseness and low impurities of Xuxa’s unique battery grade lithium concentrate has the
potential to transform Sigma into a leading supplier to the largest global customers in the electric vehicles and battery supply
chain. I am very enthusiastic about the results of this feasibility study, as it shows that Xuxa can unlock the door to develop
the entire Grota do Cirilo Project and will pave the way for project bank financing.”
“The Grota do Cirilo Project development strategy is to also bring Barreiro into production potentially using the same Xuxa
Plant. Barreiro is a large-sized, high-grade, with a low strip ratio,” adds Mr. Gardner.
Sigma Lithium Resources Chief Strategy Officer Ana Cabral says: “Sigma recognizes and appreciates the collaboration of the
new federal and state governments of Brazil and Minas Gerais, who are lending widespread institutional support for the
significant advancement of the Project. The specialty coarse high-grade, low impurities and low-cost lithium concentrate of
the Xuxa deposit has the potential to position Brazil as a leading “green lithium” supplier to the electric vehicles’ industry
globally. Sigma will use green, environmentally clean energy, powering the Xuxa Mine and Xuxa Plant from a hydroelectric
plant and Brazil’s green electricity grid. Financially, Sigma’s proposed plant construction pre-payment agreement with Mitsui,
could significantly lower the initial equity capital required and thus, has continued to generate wide-spread interest including
memoranda of understanding (MOUs) for low-cost project financing from the commercial banks. Results of the Feasibility
Study clearly indicate that the Project offers lowered execution risk by bringing together high-grade low-cost Mineral Reserves
at Xuxa with existing infrastructure which includes power, roads, and office building, to create a low-risk brownfield project
that is expected to deliver significant value to shareholders and local communities.” adds Ms. Cabral.
Independent Consultants Preparing the Feasibility Study
Sigma’s Feasibility Study has been completed to the highest standard. The following international consultants were
commissioned to prepare the study:
• Geology and Mineral resources – SGS Geological Services Canada (SGS).
• Mining, mine design and Mineral Reserves, pit geotechnical – MCB (Deswick Brazil)/GE21.
• Crushing, processing plant and plant infrastructure – Primero Group Americas Ltd. (Primero).
• Processing plant non-process infrastructure – Worley Parsons.
• Metallurgical test work – SGS Lakefield Canada (SGS).
• Tailings and mine waste storage design – 3S/DF Spain (3S/DF).
• Financial modelling – Primero.
• Market analysis – Roskill Consulting Group, UK (Roskill).
Mining & Mineral Reserves
Sigma commissioned MCB (Deswick Brazil) to complete the mine plan portion of the FS. The proposed mining operations
include a conventional open-pit using hydraulic excavators and a fleet of haul trucks. The FS considers contract mining. Two
separate pits will be developed, and four waste piles, which will co-store waste rock from the open pits and Xuxa Plant residue
will be constructed.
Key parameters used as part of the pit optimization process include (but are not limited to):
• Mining costs derived from submissions received from mining contractors.
• Processing costs provided by Primero.
• Metallurgical recoveries provided by Primero.
Excavated material will be loaded to trucks and hauled to either the ROM pad or the waste piles. Ore excavation and haulage
will be monitored by quality-control personnel and details of material movement will be recorded by a radio dispatch system.
Weathered material is considered to be free dig with transitional material to be lightly blasted to loosen it for digging. Fresh
rock will be typically blasted on 6m benches for ore domain and 12m benches for waste domain. In order to reduce dilution
and maximize mine recovery, controlled blasting (pre-splitting) will be used.
The engineered pit designs include the practical geometry that is required for an operational mine such as the haul road to
access all the benches, recommended pit slopes with geotechnical berms, proper benching configuration and smoothed pit
walls.
Table 3 summarizes the Proven and Probable Mineral Reserves for the Xuxa deposit.
Table 3. Xuxa Mine Open-Pit Mineral Reserve table:
Mineral Reserve ROM (Mt) Li₂O (%)
Proven 10.27 1.45
Probable 3.52 1.47
TOTAL 13.79 1.46
Notes:
1. CIM (2014) definitions were followed for Mineral Reserves.
2. Mineral Reserves have an effective date of 05 June 2019. The Qualified Person for the estimate is Porfirio Cabaleiro
Rodriguez, BSc. (MEng), MAIG, an employee of GE21.
3. Mineral Reserves are confined within an optimized pit shell that uses the following parameters: lithium concentrate
price: US$700/t concentrate; mining costs: US$ 2.15/t mined; processing costs: US$10.51/t processed; general and
administrative costs: US$3.8 M/a; logistics costs: US$82/t wet concentrate; process recovery of 60.4%; mining
dilution of 9%; pit inter-ramp angles that range from 40.5 – 74.8º.
4. Tonnages and grades have been rounded in accordance with reporting guidelines. Totals may not sum due to rounding.
5. Full Mineral Resource table for Xuxa included in Appendix 1.
Figure 1 shows the anticipated general site layout plan resulting from the FS.
Figure 1 is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/2d23d23f-8b9c-41f5-a638-097c7e7068fe
Xuxa Plant and Facilities
A three-stage metallurgical test work program was completed by SGS Lakefield.
The Xuxa Plant will be located approximately 1.7 km and 2.3km from the north and south Xuxa mine open-pits, respectively.
The DMS plant will use proven and well-established technology, and is designed to produce 220,000 tonnes per annum of
minimum 6.0% Li ₂O concentrate with an iron content of below 1% Fe ₂O₃. The lithium concentrate particle size is anticipated
to be between +0.5mm to 9.5mm. Figure 2 shows the planned layout for the in-house crushing system and DMS plant.
Figure 2 is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/c1cc4aca-97b5-4bb8-a4f3-648489af15e8
The plant throughput capacity is based on 1.5 Mtpa (dry) of ore fed to the crushing circuit. The current Xuxa Plant design also
contemplates a modular and integrated expansion option, with the installation of an in-house crushing circuit to potentially
increase processing capacity to 3.0 Mtpa.
The Xuxa Plant will include the following:
• A three-stage conventional crushing and screening circuit.
• DMS screening and mica removal via up-flow classification.
• Two-stage DMS circuit for coarse fraction.
• Two-stage DMS circuit for fines fraction with a magnetic separation step.
• Single-stage DMS circuit for ultra-fines fraction.
• Thickening, filtration (belt filter) and dry stacking of hypofines fraction with the waste.
• Optical sorting and / or magnetic separation on the concentrate.
• Tailings from the DMS plant trucked for co-disposal with the waste rock from the open pits.
The simplified process flow diagram for the proposed Xuxa Plant design is provided in Figure 3.
Figure 3 is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/3abd80b6-e0a7-4833-829b-17a755e8fe29
Financial Evaluation
The positive FS economics demonstrate that Xuxa is a financially positive standalone project. The key factors influencing the
study outcome include the mine average high grade of 1.46% Li₂O and the low levels of impurities leading to high levels of
process recoveries with a DMS plant. These in turn lead to low capital expenditures and low ongoing operating costs.
1. Capital Expenditures Estimates
The initial FS capital cost estimate to construct a new 1.5 Mtpa plant and infrastructure, including all direct and indirect costs
and 10% contingencies, is estimated at US$98.4 million (with an accuracy of +/- 15%). Costs are summarized in Table 4.
Table 4. Initial Capital Cost Estimate
Capex Item
Initial Capex
(US$ M)
Description
Processing Plant $33.2 DMS, Ultrafines DMS, Tails and Concentrate Handing
Site Infrastructure $32.8 Earthworks, Infrastructure, Water & Sewage, Buildings
Owner’s Costs & Spares $5.1 Labor, Admin, Environmental Fees
Mining Pre-Production Cost $13.3 Pre-Stripping (Blasting, Drilling, Haulage, Loading)
Plant Pre-Production Costs $3.0 Mob/Demob, Process Plant Labor, Pre-Production Admin
Pre-Production Working Capital $11.0 Mining and Processing Costs from Commission to Cashflow
Initial Capital Cost $98.4 Funded via Creditors and Offtake Agreements
Note: Additional non financeable deferred capex and plant and mine closure costs are estimated at US$ 15.2 million to be
disbursed by year 9, is detailed as follows: (i) Deferred capex of US$ 5.8 million includes Pit 2 Haul Roads, Balance Pile 1
Excavation, Bridge Between Pit 1 and Pit 2, Waste Piles 3 and 4 Excavation (Clear & Grub, Excavation, Ponds Cuts); (ii)
Closure costs for plant and mine closure of US$ 8 million; (iii) Capex of US$ 1.5 million to execute various operational
recommendations to be implemented in production.
2. Operating Cost Estimates
Operating cost estimates are based on an owner-operated model and have an accuracy of +/- 15%. The operating cost for the
mining was provided by MCB. The crushing contracting, substation rental, mobile equipment rental and product transport
operating costs were incorporated in the overall operating cost.
The cash operating costs were developed based on third party contract mining and outsourced crushing, as well as on the
Xuxa Plant processing cost. The Xuxa Plant is forecasted to have very low operating costs at US$238 per tonne of concentrate
as a result of its high grade, high DMS recoveries, low levels of impurities, low cost of electricity and general low country
costs.
Table 5 shows the anticipated average operating costs over the LOM. Table 6 presents the forecast revenue and costs on
both a total and average LOM basis.
Table 5. Operating Cost Estimate
Cost Category LOM Average
US$ / t
Mining $149
Processing $75
Transportation (CIF China) $104
Selling, General and Administrative $13
Total Cash Cost (CIF China) $342
Table 6. Xuxa Estimated Revenue and Operating Costs for 1.5 Mtpa Production
Item Total
US$ M
LOM Avg.
US$ / t
Gross Revenue
Lithium Concentrate $1,482 $733
Less: Realization Costs
Royalties
Mitsui Prepay Repayment (50,000t)
Freight & Insurance & Storage
Total Realization Costs
$52
$48
$211
$311
$26
$24
$104
$154
Net Sales Revenue Less Freight & Storage $1,171 $579
Less: Site Operating Costs
Mining
Processing
Selling, General & Administration
Total Site Operating Costs
$302
$152
$26
$480
$149
$75
$13
$238
Net Operating Margin
% Net Operating Margin of Net Sales
$691
59%
$341
59%
Sensitivity Analysis
The FS includes sensitivity analysis of Project NPV 8% using variable CIF China price, recovery rate, ore grade, exchange
rate, initial capex, discount rate, operating expenses.
Table 7 shows the impact of a +/- 20% variation of these key factors. Table 8 presents the after-tax NPV results of each factor
variance.
Table 7. After-Tax Net Present Value Sensitivity Assumptions for Each Scenario +20% and -20%
Input Assumption Unit -20% -10% Base +10% +20%
CIF Spodumene Price LOM Avg [US$ / t] 586 660 733 806 879
CIF Spodumene Price 2021 [US$ / t] 520 585 650 715 780
Recovery Rate [%] 48% 54% 60% 66% 73%
Total Opex [US$ M] (532) (599) (665) (732) (798)
Discount Rate [%] 6.4% 7.2% 8.0% 8.8% 9.6%
Total Capex [US$ M] (91) (102) (114) (125) (136)
Ore Grade [%] 1.17% 1.31% 1.46% 1.60% 1.75%
Exchange Rate BRL / US$ [BRL/US$] 3.28 3.69 4.10 4.51 4.92
Note: A conservative two-tier exchange rate was used as a base to the feasibility study. BRL 3.85 / USD 1.00 for quotes
provided from third party information providers and BRL 4.10 / USD 1.00 for the amounts provided in dollars from Sigma.
Table 8. After-Tax Net Present Value Results for Each Scenario
After Tax NPV (US$ M) Unit -20% -10% Base +10% +20%
CIF Spodumene Price LOM Avg [US$ M] 102 175 249 322 395
Recovery Rate [US$ M] 123 186 249 311 374
Total Opex [US$ M] 335 292 249 205 161
Discount Rate [US$ M] 283 265 249 233 218
Total Capex [US$ M] 266 257 249 240 231
Ore Grade [US$ M] 233 241 249 256 264
Exchange Rate BRL / US$ [US$ M] 235 243 249 253 257
Note: All NPVs calculated using all-in Initial, Sustaining and Deferred Capex of US$ 113.6 M, which adds to initial capex the
non-financeable deferred capex of US$ 15.2 million.
The positive economics of the economic feasibility of the Project is further demonstrated in Table 9 by the IRR yield of the
combined sensitivity analysis of the after-tax NPV to both 6% lithium spodumene concentrate CIF China prices and discount
rate.
Table 9. Combined Sensitivity of Xuxa NPV to Prices and Discount Rate
After-Tax NPV
(US$ M)
Spodumene Price CIF
US$ / t
586 660 733 806 879
6.4% 123 203 283 363 444
Discount
Rate
7.2% 112 188 265 342 419
8.0% 102 175 249 322 395
8.8% 93 163 233 303 374
9.6% 84 151 218 286 353
After-Tax IRR 22.9% 33.2% 43.2% 52.9% 62.7%
NOTE: All NPVs Calculated using all-in Initial, Sustaining and Deferred Capex of US$ 113.6 M, which adds to initial Capex the
non-financeable deferred capex of US$15.2 million.
Commercial and Marketing Strategy and Offtake Agreements
As a result of the high quality and low impurities of its planned lithium concentrate Sigma has experienced significant
commercial success in negotiating offtake agreements with various customers in the electric vehicle supply chain.
Sigma entered the offtake negotiations undertaking a long-term view for the growth of the market and decided to replicate the
longer term (five years) contract structures practiced by the lithium chemicals with their cathode industry and other customers
in the supply chain. Sigma negotiated offtake agreements with fixed volumes with a multi-year duration, without a price floor,
using CIF China market prices as an annual pricing mechanism. By not requesting a price floor, Sigma managed to preserve
potential price upside in its offtake agreements, as these agreements do not include a price cap, fixed prices or prices pegged
to cost structures of customers in the lithium chemical industry. The offtakes are indexed to Roskill’s published “arm’s length
market price CIF China” for spodumene concentrate.
Sigma secured non-binding MOUs to supply 100% of its projected production of 220,000 tpa from Xuxa Plant for a five-year
period, commencing in 2021.
Sigma has entered into a binding heads of agreement (the Agreement) for an offtake, funding and strategic partnership with
Mitsui & Co., Ltd. of Japan (Mitsui) for a significant portion of the funding required for the capital expenditures and construction
of the Xuxa Mine.
Pursuant to the Agreement, Mitsui and Sigma have agreed terms on:
• Production pre-payment to Sigma of US$30,000,000 for battery-grade lithium concentrate supply of up to 55,000 tonnes
annually over six years, extendable for five years.
• Offtake rights of a supplementary 25,000 tonnes of products over a period of six years, extendable for five years.
• Advancement of deposit for long-lead items in support of meeting Sigma’s Project construction schedule.
• Strategic collaboration to leverage Mitsui’s considerable global logistics and battery materials marketing expertise as
well as an agreement to continue discussions regarding additional funding for further exploration and development of
Sigma’s vast mineral properties.
• Mitsui’s right to participate in Sigma’s future capital expenditure financings and offtake rights for production expansion
with other deposits conditional to concluding a feasibility study and Mineral Reserve estimates.
• Selling price is based on quarterly published arms-length price for chemical spodumene concentrate.
Sigma is currently in negotiations with the other potential off-take customers to sign binding heads of agreement for the
160,000 tpa balance of its annual production.
Lithium Price Forecast and Lithium Chemical Supply Dynamics
Sigma contracted Roskill to provide an outlook and overview of the lithium market.
1. Forecast Prices in Feasibility Study
Roskill provided price forecasts through to 2032 for spodumene concentrate prices for the three categories of 6% spodumene
lithium concentrate pricing structures, as described below. This distinction is critical, as the world’s largest spodumene
concentrate producer Talison Lithium in Australia practices inter-company pricing (as that company is 51% owned by Tianqui
and 49% owned by Albermarle). The three-tier pricing forecast published by Roskill is based on the tracking of following
shipments:
• Inter-company priced : Talison Lithium to Tianqi Lithium and Albemarle; and, NA Lithium to CATL.
• Related-party priced : Reed Industrial Minerals to Ganfeng Lithium; Pilbara Minerals to Ganfeng Lithium and General
Lithium; and, Altura Mining to Optimum Nano and Lionergy.
• Arms-length priced : Galaxy Lithium to Blossom Lithium, Shandong Ruifu and General Lithium; AMG to General
Lithium; and, Altura to Burwill Holdings.
Prices for all contracts peaked in 2018, within a range of US$560-1,050 / tonne reflecting Talison to Tianqi/Albemarle inter-
company shipments at the lower end and Galaxy to third party customers at arm’s length at the high end.
Related-party contracts fell in the middle of these two end-members and remain the benchmark average to 2032. Related-
party contracts are expected to fall to US$600/t by 2021 before steadily increasing into the late-2020s.
Arms-length sales are expected to show a premium to related-party sales of around US$100/t, with inter-company contracts at
a US$100/t discount. However, if lithium carbonate and hydroxide prices increase at a greater rate going forward, the
chemical-grade spodumene price could increase towards the high case scenario, and vice versa.
Spodumene concentrate pricing inputs for the FS as provided by Roskill in August 2019 are illustrated in Figure 4.
Figure 4 is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/2c3a1bf3-aef7-447f-bc62-211cb5db49ea
2. Key Market Trends Driving Dynamics of Spodumene Lithium Concentrate Supply to Lithium Chemical Industry:
Demand for lithium rose by 20% in 2018 to reach over 261,100t LCE. The rechargeable battery market, led by the automotive
sector increased its consumption of lithium by 30,000t LCE in 2018, representing 93% of the overall increase in lithium
consumption.
The short-, medium- and long-term lithium demand outlook appear strong. Consumption of lithium will continue to be driven by
the rechargeable battery sector, which is forecast to register 19.9%pa growth through to 2033, reaching around 1.8Mt LCE in
Roskill’s base-case scenario. The automotive and energy storage system applications are expected to underpin both battery
and overall lithium consumption growth
As a result of the electric vehicle battery demand becoming the main growth driver for lithium chemical demand, the
dominance of brine operations in global lithium production has been gradually falling.
As the electric vehicle original equipment manufacturers (OEMs) demand more energy efficient batteries with increased range,
the cathode industry increasingly migrates to using lithium hydroxide as the preferred chemical raw material, instead of lithium
carbonate. Lithium carbonate is the main product produced and consumed in the lithium market, although lithium hydroxide
use is growing at a faster rate. Battery-grade lithium carbonate accounted for around 70% of carbonate use in 2018.
Feedback from our potential customers indicate that the conversion of 6% battery grade spodumene concentrate to lithium
hydroxide is the most efficient method of producing it. Moreover, spodumene concentrate with low impurities is less expensive
to process (‘clean’) into hydroxide chemicals, increasing operational efficiencies at the chemical producer, thus becoming a
competitive advantage.
Battery grade lithium carbonate produced from brine must be converted into lithium hydroxide for use in the cathode industry.
Feedback from our potential customers indicate that such conversion has a similar cost to converting to lithium hydroxide the
6% lithium concentrate produced from hard rock ore. Therefore, brine producers of lithium carbonate have been increasingly
stripped of a relative competitive advantage over hard rock producers of lithium.
Sigma’s commercial success competing against brines can be examined in the current bear market and current downturn in
lithium prices. The lowest “arm’s length’ selling price for competing lithium carbonate raw material from brines to be used by a
lithium hydroxide plant is assumed to be the technical grade carbonate from domestic Chinese market, currently priced at
$5500/tonne to $6000/ tonne. In order to be competitive with these prices, a hard rock producer needs to have the ability to
profitably supply 6% spodumene lithium concentrate at a maximum range of $680 - $750 / tonne, the equivalent of $6000 / 8 (it
takes 8 parts of spodumene concentrate to produce one part of hydroxide chemical). These price levels are compatible with
Sigma’s cost curve and profitability as demonstrated in the FS.
Figure 5 shows the lithium consumption actuals and forecasts for the period 2014 to 2033.
Figure 5 is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/0fc66b65-38e9-44b6-8c48-abd7b8478532
Environmental Licenses
In compliance with CONAMA Resolution 09/90, the environmental licensing of mining projects is always subject to the
following study progression. The first stage is an Environmental Impact Study (EIS), which is followed by an Environmental
Impact Report (EIR), which supports the technical and environmental feasibility stage of the project and the granting of a
Preliminary License ( Licença Previa or LP) and/or a concurrent Preliminary Licence with an Installation License ( Licença de
Instalação or LI), collectively referred to as the (LP+LI).
The licensing process in Minas Gerais was developed in accordance with COPAM Regulatory Deliberation N° 217, dated
December 6, 2017, which sets out the criteria that must be addressed based on the size of a planned mine, and its likelihood
of generating environmental damage. Sigma has successfully obtained an environmental license for open-pit mining activities
in respect of metallic minerals except iron ore, with the following parameters:
• A gross production of 240,000 tpa.
• 40 ha for tailings/waste piles.
• Dry and wet mineral processing plants with a capacity of 1.5 Mtpa.
A water usage license for the project of 150 m3 per hour has already been granted.
Recommendations and Execution
The next phase is for Sigma to commence the detailed engineering work. The first phase of the detailed engineering will take 4