Sigma Lithium Resources’ (TSX-V: SGMA) preliminary economic assessment (PEA) for the second deposit at its Grota do Cirilo project, released on Wednesday, doubles production capacity of battery-grade lithium concentrate to around 440,000 tonnes per year (66,000 lithium carbonate equivalent).
At 66ktpa LCE capacity, which could be reached before the end of 2023, Grota do Cirilo would fall just outside the top five in terms of output capacity after Albemarle, Ganfeng, SQM, Pilbara Minerals and Galaxy.
A pre-feasibility study is expected in the third quarter this year, but phase 2 is likely only the beginning for Grota do Cirilo which is wholly-owned by Sigma – the project area covers nearly 200 square kilometres and includes nine past producing lithium mines of roughly equal size.
Phase 1 at the project located in Minas Gerais state exploits the Xuxa deposit and construction is set to begin in the third quarter this year. First production at the fully funded project following a C$42 million private placement in February is targeted for Q3 2022 at a capacity of 220ktpa (33ktpa LCE).
Phase 2, on the Barreiro orebody, should follow a year later. According to the PEA, phase 2 production has a projected life of mine of approximately 13 years with 20.5 million tonnes of measured and indicated resources. At 1.55% Li2O grade ore Grota do Cirilo is the third richest hard-rock deposit in the world after Greenbushes and Manono and phase 2 grades of 1.42% places it at no six behind Wabouchi and Mt Cattlin.
According to Sigma, phase 2 has the potential to more than double total NPV of the overall project to $844 million for a capital outlay of only $44.5 million.
Ana Cabral, chief strategy officer and co-chairperson, said in a news release that phase 2 transforms the company’s scale and relevance and with half the price tag for phase 1 by leveraging existing purification plant and site infrastructure.
Sigma has been running a volume demonstration plant at the site for two years and Cabral said it is the purity of the concentrate and an ability to extend the business into the midstream of the battery supply chain that supports the company’s projections of $1 billion earnings before interest, tax, depreciation, and amortization (EBITDA) for the project over the mine life and an internal rate of return of 208%.
Sigma signed an offtake agreement Japanese trading house Mitsui under a take-or-pay clause for 100% of phase 1 production. Sigma shares in midstream profits under tolling arrangements with chemical converters as part of its partnership with Mitsui. It also affords Sigma the flexibility of offering lithium carbonate or hydroxide as the market demands, said Cabral.
The PEA estimates average operating cash cost to be $256 per tonne (FOB Brazil, life of mine) and $360 a tonne (CIF China portside, life of mine). Spodumene concentrate prices (6% FOB Australia) are up more than 40% so far this year topping $560 a tonne in April according to Benchmark Mineral Intelligence with expectations of further price rises into next year.
The company said metallurgical tests on the ore for the expansion in sizes of 6.3mm and 10mm achieved recoveries of 70.2% and 66.1%, respectively, producing a 6% Li2O battery-grade spodumene concentrate “within the highest levels of specifications demanded by the chemical lithium market without the use of flotation or hazardous chemical reagents, in the concentration process.”
The proposed mine would be powered by a hydroelectric project located 50km away from the site and serve what Sigma dubs the emerging Atlantic supply chain for batteries and electric vehicles manufactured in North America and Europe.
Cabral expects a bifurcation in the market as growth outside of China accelerates with environmental factors including water, energy use and tailings becoming increasingly important factors in the supply chain and how producers are assessed.
Sigma is worth $440 million on the Toronto Venture Exchange after rising 60% so far this year. Plans to list the tightly held stock with a public float of some 77 million shares on a US exchange are advanced.