SIGMA LITHIUM ANNOUNCES EXCEPTIONAL PEA RESULTS SUPPORTING DOUBLING PLANNED PRODUCTION CAPACITY TO 440,000tpa (66,000 LCE) ______________________________________________________________________________________________________________ Phase 2 Production Highlights
SIGMA LITHIUM ANNOUNCES EXCEPTIONAL PEA RESULTS SUPPORTING DOUBLING PLANNED PRODUCTION CAPACITY TO 440,000tpa (66,000 LCE) ______________________________________________________________________________________________________________ PHASE 2 PRODUCTION HIGHLIGHTS
- Project’s near-term production capacity of battery grade high-purity green lithium will be potentially
doubled:
- Production is planned to increase from 220,000 tpa (33,000 LCE) planned for 2022 in Phase 1, to
440,000 tpa (66,000 LCE), within approximately one year.
- Phase 2 production has a projected life of mine of approximately 13 years: vertically integrated to
Sigma’s second deposit, Barreiro with 20.5 Mt of measured & indicated high-grade and high-purity lithium resources at 1.43% Li2O.
- Low-risk execution strategy: Phase 2 construction is planned to start once Phase 1 concludes
commissioning and ramps up production in 2022.
- The Company has significantly advanced multiple Project workstreams with the objective of
preparing for Phase 2 production after 2023.
PHASE 2 FINANCIAL HIGHLIGHTS
- Phase 2 has the potential to more than double total NPV of the Project to US$844 million:
- NPV of Phase 2 Production US$449 million.
- Low initial capital expenditures of US$44.5 million.
- Phase 2 after-tax cash flow generation during 13 years is projected as follows:
- Net revenue of US$2.1 billion (annualized US$165 million).
- After Tax Free Cash Flow of US$ 766 million (annualized US$60 million).
- EBITDA of US$1 billion (annualized US$83 million).
- IRR of 208%.
- Located close to Atlantic emerging supply chain for electric vehicles in North America and Europe, Phase 2
would enable Sigma to continue to be amongst the lowest cost producers in the industry.
- PEA projects Phase 2 average total cash cost to be US$256/t (FOB Plant, life of mine) and US$360/t
(CIF China Port, life of mine).
PHASE 1 CONSTRUCTION UPDATE
- All Detailed Engineering and Pre-Construction workstreams continued to advance to achieve production in
the third quarter of 2022. https://vimeo.com/554389108 to Video with 3D rendering of Production Plant
- Construction site early works are ongoing (clearing and grubbing, laydowns & topsoil removal).
- Concluded all field Pre-Construction activities for the Production Plant.
- Completed trade-off studies for the optimization and expandability/scalability of the overall plant
design, evaluating multiple design options, performing tests and analysis to select the preferred option.
- Concluded the definition of the streamlined scope and design of the non-process, non-plant
infrastructure (building infrastructure).
- Completed several critical workstreams involved in the Pre-Construction of the Phase 1 Mine within
the scheduled and budgeted parameters, including all field-based activities required for the geotechnical as well as hydrogeological validations.
____________________________________________________________________________________________________
VANCOUVER, British Columbia, June 2, 2021 (GLOBE NEWSWIRE) -- Sigma Lithium Resources Corporation (“Sigma” or the “Company”) ( TSX-V: SGMA ) ( OTC- QB: SGMLF ) is pleased to announce the exceptional results of a Preliminary Economic Assessment (the “PEA”) for an expansion of its Grota do Cirilo Project (the “Project”), doubling its annual production capacity of battery-grade, high-purity, environmentally sustainable 6% lithium concentrate (“Green Battery Grade Lithium Concentrate”) to approximately 440,000 tpa (66,000 LCE).
The expansion of Project achieves significant operational economies of scale resulting from adding a second environmentally friendly dense media separator processing line train to its digitally automated production plant (the “Production Plant”). The second line is expected to produce an average of 222,000 tpa (33,000 LCE) of Battery Grade Green Lithium Concentrate (“Phase 2”), doubling the initial planned annual production capacity of 220,000tpa (33,000 LCE) (“Phase 1”).
Phase 1 is described in the Sigma’s technical report titled “Grota do Cirilo Lithium Project, Araçuaí and Itinga Regions, Minas Gerais, Brazil, National Instrument 43-101 Technical Report on Feasibility Study Final Report” dated October 18, 2019 (the “2019 Feasibility Study Report”).
The exceptional PEA results demonstrate the cost benefit of vertically integrating the second production line and utilizing as a feedstock spodumene ore from the Project’s second deposit Barreiro (the “Second Deposit” or “Barreiro”), mining an average of 1.68Mt per year during 12.7 years of mine life. Barreiro is a high-purity, high-grade lithium deposit, with 20.485Mt of measured & indicated mineral resources at 1.43% Li2O and 1.909Mt of inferred mineral resources and shallow, near surface mineralization ideal for open pit mining. The Second Deposit’s mineral reserve is expected to be declared later this quarter when the ongoing pre-feasibility study (“PFS”) is completed.
The PEA projects capital expenditures of US$44.5 million (year 0) including plant and mine construction, based on an optimized mine plan. Incremental expenditures of US$28.9 million (additional mine stripping on year 5) and US$9.6 million (additional mine stripping on year 6) is expected to be covered by the Company’s internal cash flow generation. As Phase 2 construction is planned sequentially to the commissioning and production ramp up of Phase 1, the Company is expected to be fully operational with Phase 1 by the time Phase 2 is commissioned. Therefore, additional working capital for commissioning of the second DMS line as well as certain deferred capital expenditures may potentially also be covered by the internal cash flow generation of the business.
According to the PEA, Phase 2 could potentially double total estimated NPV of the Project to US$844 million:
NPV of Phase 2 Production is estimated to be US$449 million by the PEA.
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- NPV of Phase 1 Production is estimated to be US$395 million by the 2019 Feasibility Study Report (calculated with price curves starting from US$650/t in 2021, below current market prices at CIF China port, and operational expenditures reductions limited by the sensitivity analysis in 2019 to be 20%, despite Brazilian currency devaluation since 2019 of approximately 35%)
Barreiro, the Project’s second deposit, has a similar exceptional mineralization to the Project’s first deposit, Xuxa, with large crystals of coarse spodumene. As a result, the lithium achieves outstanding recoveries in an environmentally friendly DMS plant, with similar flowsheet (and capital costs) to the first production line, without requiring a significantly more capitalintensive flotation process.
During Detailed Engineering for Phase 1, the Company evaluated operational and capital expenditure trade-offs to be achieved in the expansion of the Production Plant capacity, including design features to allow for the seamless incorporation of a second production line.
Metallurgical HLS tests performed on the spodumene ore for Phase 2 in sizes of 6.3mm and 10mm achieved excellent lithium 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. This is consistent with Sigma’s intention to continue to process its lithium ore in a “green” environmentally friendly and sustainable manner.
The Company has been working with SGS and Primero to prepare a PFS for the Phase 2 production, targeting its completion in June 2021, further continuing towards feasibility analysis in the second half of 2021. The Company and Primero completed all the metallurgical and variability DMS pre-feasibility test work at SGS laboratories.
The Project is located in one of the world’s largest mining provinces in southeast of Brazil: with full mining infrastructure and highways linking the Project to a commodities shipment capable port. Site infrastructure has been mostly in place and is currently being upgraded for Phase 1 production. The Project is powered by 100% clean energy: transmission towers and lines on site link the Project to a hydroelectricity plant 50km away.
SIGMA PHASED PRODUCTION APPROACH FOR THE PROJECT AND COMMERCIAL STRATEGY
As a result of the substantial size of its mineral resources, the Company has sub-divided the development of the Project into an incremental and phased build-out.
Sigma is working to advance Phase 2 to a construction ready status by the end of 2021 or early 2022. Phase 2 construction is projected to commence once the commissioning and production ramp up of Phase 1 is completed, which is expected in the third quarter of 2022.
This phased approach to development of the Project increases financial flexibility and reflects the Company’s ethos and discipline in managing construction risk, while seeking to create substantial shareholder value. It also reduces commercial risk by aligning commercial integration of the Project’s production growth profile with the demand of its customers in the lithiumion battery supply chain.
As a result of the high quality and low impurities of its lithium products, the Company has experienced significant commercial success with various customers in the electric vehicle supply chain. As a result, the Company made a decision to accelerate the required studies for the development of Phase 2, to potentially respond to a significant increase in demand from its customers, following the significant improvement in the outlook of global demand for ESG-sustainable lithium products.
By demonstrating its ability to expand production in the near term, the Company seeks to take advantage of the current strong demand, and solidify its unique commercial advantage in delivering environmentally, socially sustainable and low carbon high purity lithium products to like-minded cathode and battery producers.
The technical report for the PEA will be filled on SEDAR (and will also be available at www.sigmalithiumresources.com within 45 days of this news release. Readers are encouraged to read the technical report in its entirety, including all qualifications and assumptions related to the PEA results announced in the news release.
FIRST QUARTER 2021 RESULTS: PHASE 1 CONSTRUCTION & PROJECT DEVELOPMENT UPDATE
The Company has reported unaudited financial and operating results for the first quarter ended March 31, 2021 (“1Q 2021”). Overall, the Company made significant progress towards construction, despite the circumstances created by the COVID-19 pandemic.
Highlights of Phase 1 construction update include:
- All Detailed Engineering and Pre-Construction workstreams continued to advance to achieve production in the third quarter of 2022.
At the end of Detailed Engineering, the Project will move to the Implementation/Deployment Stage (FEL 3 / o Class 3) in the third quarter of 2021, with increased accuracy from the capital estimates included in the Feasibility Study Report.
- Strict COVID-19 health and safety protocols are in place. Without any cases of COVID-19 reported at site since April 30, 2021.
- Construction site early works are ongoing (clearing and grubbing, laydowns & topsoil removal):
- Followed by additional topsoil removal and foundation preparations, once results and geotechnical modelling of Production Plant foundation are concluded.
- Concluded all field Pre-Construction activities for the Production Plant.
- Primero conducted a review of the current designs, assessing the impact on the foundation design and earthwork quantities, based on the geotechnical assessment for the civil engineering and concluded that the soil condition does not create any risk for construction of the foundations of the Production Plant.
- Completed trade-off studies for the optimization and expandability/scalability of the overall plant design, evaluating multiple design options, performing tests and analysis to select the preferred option.
- Expansion design features are being determined in order to allow for the incorporation of a second production line for Production Phase 2.
- Concluded the definition of the streamlined scope and design of the non-process, non-plant infrastructure (building infrastructure).
- Completed several critical workstreams involved in the Pre-Construction of the Phase 1 Mine within the scheduled and budgeted parameters.
- This includes all field-based activities required for the geotechnical validation at detailed engineering level, as well as critical field work of hydrogeological validation.
- All remaining state permits required to commence construction are forecasted to be issued by the third quarter of 2021.
Highlights of ESG:
- Significantly advanced the life cycle analysis and carbon credits audit workstreams, planning to publish results in the third quarter of 2021, including more information on its carbon in-setting and offsetting strategy.
- Continued to progress on the creation and structuring of an independent agency for private investment promotion and economic diversification of the region (“Investment Agency”), with institutional support from the development bank of the state of Minas Gerais (“BDMG”), from the secretary of special development projects (“INDI”) and from the Mayors of the two municipalities.
- Expanded humanitarian relief during the months of COVID-19 pandemic for the population living in extreme vulnerability in the region, as follows:
- Distributed 1,200 basic food baskets in two months, feeding approximately 2,400 people per month.
- Agreed to extend the initiative in a collaboration with Rotary Club, distributing an additional 1,000 food baskets (feeding an additional 4,000 people).
- Repeated COVID-19 prevention initiatives from March 2020, and distributed 12,000 units of hospital disinfectant, as well as 2,400 hand sanitizers “family size”, totaling 840 kg of the product.
- Initiatives funded at cost as a result of financial sponsorship from Sigma’s key shareholders and stakeholders.
Corporate:
- As at the date of this MD&A, the Company has $41.3 million (US$33.6 million) in cash and cash equivalents, out of which approximately $33.8 million (US$28 million) is held in a construction segregated savings account.
- Additionally, it has an undrawn credit line balance of US$4,037,150 under the US$5,000,000 unsecured revolving credit facility (the “A10 Credit Facility”)
- The Company has announced that it is considering a potential listing of the Common Shares in a major U.S. stock exchange market with a view to increasing access to U.S. capital markets and enhancing overall shareholder value.
- Consistent with its retention policies to manage human capital as well as with its ethos of aligning incentives amongst all stakeholders and shareholders, most of the compensation of the Company’s key personnel is equity based. To that regard, the Company grated an aggregate of 996,333 Restricted Share Units to officers and an o aggregate of 385,000 Restricted Share Units to key employees and consultants. As per the ESOP, Ana Cabral- Gardner and Calvyn Gardner were not awarded equity compensation.
Calvyn Gardner, Sigma CEO said that “We continue to progress updating the current Feasibility Study Report with the pre- feasibility for the Phase 2, which would be fully integrated into the production complex for the Phase 1, currently in pre- construction. The previous work undertaken when completing our 2019 Feasibility Study Report, as well as detailed engineering phase of pre-construction for Phase 1, means that substantial plant engineering design as well as mining cost databases are available to support the technical studies required for this update, expediting and de-risking its execution.”
Ana Cabral-Gardner, Sigma President and Chief Operating Officer stated that “The doubling of Sigma’s near-term planned capacity to 66,000 LCE, with low additional capex has the potential to significantly transform our scale and relevance. It further increases our uniqueness as a global supplier of environmentally sustainable green lithium concentrate, while consolidating our strategic importance upstream as a source of high-purity green lithium products for our current and new customers, as they advance their plans for cathodes and battery cell production facilities in Europe and the United States, effectively building a sizable Atlantic lithium supply chain”.
Figure 1a: Plant 3D layout of the industrial complex and production facility for Phase 1 and Phase 2
Figure 1b: Plant 3D layout of the industrial complex and production facility for Phase 1 and Phase 2
1 - SUMMARY OF PROJECT FINANCIAL PERFORMANCE RESULTS
1.1 Project Economics
An economic analysis for Phase 2 was developed using the discounted cash flow method and was based on the data and assumptions for capital and operating costs for mining, processing and associated infrastructure. The basis for forecasted spodumene concentrate lithium pricing was provided by Roskill’s arm’s length price curve with an internal adjustment starting with 2022 price of US$750/t (below current 2021 spot market). Although approximately 70% of the Company’s operational costs are incurred in Brazilian reais, the assumptions were fixed in USD, the base currency for the financial model. Key assumptions and results of the economic evaluation are displayed in the tables 1 and 2 below.
Table 1.1.1: Financial Results Summary for Phase 2 During the Estimated Life of Mine
| Financial Summary | Unit | Total | |||
| Net Present Value (NPV 8%) After-Tax Internal Rate of Return (IRR) After-Tax After-Tax Payback Period Capital Intensity (Initial Capex/ Annual Production) NPV: Capex (ratio) | US$ M % Years US$ per tonne Ratio X:1 | $ 449 208% 0.4 $200 per tonne 10:1 |
Table 1.1.2: Key Assumptions Utilized in the Project Economics
| Assumptions | Unit | Total | |||
| Annual Lithium Concentrate Production at 6% Project Estimated Life (Integrated Mine/Plant) Discount Rate Total Royalty (1) Average Corporate Tax (2) CAPEX Year 0 (plant construction and starter mining pit) Year 5 (pit expansion) Year 6 (pit expansion) OPEX Average total cash cost (FOB Plant) All-in sustaining cost (“AISC”) CIF China Average Selling Price | tonnes years % % % US$ M US$ M US$ M US$/t US$/t US$/t | 222,147 12.7 8 3 15.3 44.5 28.9 9.7 256 360 750 |
(1) CFEM and NSR#1 Royalties
(2) Sudene Corporate Tax Benefit During 8 first years. 34% for the following years
Table 1.1.3: Phase 2 Estimated Revenue, Operating Costs and EBITDA
| Production: Total tonnes of lithium concentrate | 2,870,444 tonnes | ||||
| Average Price for project life | $750/t | ||||
| Annualized | Total | ||||
| US$ M | US$ M | ||||
| Gross Revenue | $ 170 | US$ 2,153 | |||
| Less: Total Royalties | ($5) | ($61) | |||
| (-) CFEM (-) Net Smelter Royalties | ($3) ($1) | ($43) ($18) | |||
| Net Revenues | $165 | $2,092 | |||
| Less: Site Operating Costs | ($84) | ($1,066) | |||
| (-) Mining (-) Processing (-) Selling, General & Administration (-) Transportation Costs (-) Depreciation | ($45) ($12) ($1) ($24) ($2) | ($571) ($156) ($8) ($299) ($32) | |||
| EBIT | $81 | $1,026 | |||
| % EBIT Margin | 49% | 49% | |||
| (+) Depreciation | $2 | $32 | |||
| EBITDA | $83 | $1,058 | |||
| % EBITDA Margin | 51% | 51% | |||
| (-) Taxes (+/-) WC (-) Capex | ($16) ($0) ($7) | ($203) ($3) ($85) | |||
| After-Tax Free Cash Flow | $60 | $767 | |||
| % Margin | 37% | 37% |
1.2 - Capital and Operating Costs
SGS and GE-21 completed the Class 5 estimate (+/- 30%) of the capital and operating costs, incorporating engineering from the ongoing detailed engineering and FEED (front end engineering design) of Sigma’s Phase 1 Production Plant. The Capex has been prepared to reflect optimized site layouts, mine scheduling, plant and equipment design and installation. Phase 2 development significantly leverages the Production Plant infrastructure that will be constructed for Phase 1. Site infrastructure has been mostly in place (Sigma’s assets are from a brownfield project) and is currently being upgraded for Phase 1.
Operating cost estimates were provided by GE-21 and are based on an owner-operated model and have an accuracy of +/-30 %. 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 Phase 2 Plant processing cost. The Phase 2 Production is forecasted to have very low operating costs at US$256 per tonne of concentrate as a result of its high grade, high DMS recoveries, low levels of impurities, low cost of electricity and general low country costs. Table 1.2.1 shows the anticipated average operating costs over the LOM. Table 1.1.3 presents the forecast revenue and costs on both a total and average LOM basis.
Table 1.2.1: Operating Cost Estimate
| Cost Category | LOM Average | |
|---|---|---|
| US$/t | ||
| Mining Processing SG&A | $ 199 54 3 | |
| Sub-Total | $ 256 | |
| Transportation by Truck Mine to Port Shipping to China Port (average) | 34 70 | |
| Sub-Total | 104 | |
| Total | $ 360 |
The CAPEX has been prepared to reflect optimized site layouts, mine scheduling, plant and equipment design, supply and installation. Phase 2 development significantly leverages the plant infrastructure that will be constructed for Phase 1. Site infrastructure has been mostly in place (Sigma’s assets are from a brownfield project) and is currently being upgraded for Phase 1.
The Company has evaluated operational and capital expenditure trade-offs to be achieved as a result of possible design alternatives for the crushing circuit to be installed at the Production Plant. These trade-offs aim to further de-risk and optimize the construction of the Production Plant. The scalability of the Production Plant was also studied to determine expansion design features to allow for the incorporation of a second production line for Phase 2 high-grade green lithium production.
The total initial development CAPEX for Phase 2 is estimated to be US$ 44.5 million. The estimate is detailed in Table 1.2.2 and includes processing, mine equipment purchases, infrastructures, contingency and other direct and indirect costs. Incremental expenditures of US$28.9 million (additional waste mine stripping in year 5) and US$9.6 million (additional waste mine stripping in year 6) can be funded by internal cash flow generation.
Table 1.2.2 Summary of Capital Costs Estimates and Operating Cost Infrastructure Phase 2
| Capex Item (US$ Thousands) | Year 0 | Year 5 | Year 6 | MC |
|---|---|---|---|---|
| Processing Line (Plant) Plant Additional Infrastructure Owners Cost Mine Preparation & Infrastructure Further Opening of Mining Pit (Year 5) Further Opening of Mining Pit (Year 6) Mine Closure | 29,884 6,959 1,172 6,511 – – – | – – – – 28,975 – – | – – – – – 9,658 – | – – – – – – 2,180 |
| Total Capex (Phase 2) | 44,527 | 28,975 | 9,658 | 2,180 |
Table 1.2.2 Detailed Capital Costs Estimates for Second Line Plant and Infrastructure
| AREA | DIRECT | INDIRECT | CONTINGECY | RECOVERABLE | TOTAL | |
|---|---|---|---|---|---|---|
| (USD) | (USD) | (USD) | (USD) | (USD) | ||
| PROCESSING PLANT | ||||||
| 010 - Engineering, Procurement and Management 015 - Commissioning 030 - Vendor Representatives 040 - Construction Indirects - Contractors 200 - Process Plant Overall 220 - Contract Crushing 310 - DMS 314 - Ultrafines DMS 340 - Concentrate Handling 350 - Tails Handling 370 - Process Plant Services | – – – – 130,000 4,044,823 13,853,000 2,599,000 1,014,000 1,945,000 194,000 | 2,562,000 1,096,000 114,000 1,722,000 – – – – – – – | 384,000 164,000 18,000 258,000 12,000 621,545 1,694,000 305,000 110,000 197,000 23,000 | (88,000) (30,000) (1,000) (35,000) (24,000) (2,173,000) (401,000) (110,000) (290,000) (24,000) | 2,858,000 1,230,000 131,000 1,945,000 118,000 4,666,368 13,374,000 2,503,000 1,014,000 1,852,000 193,000 | |
| Subtotal Processing Plant | $ 23,779,823 | $ 5,494,000 | $ 3,786,545 | $ (3,176,000) | $ 29,884,368 | |
| SITE INFRASTRUCTURE | ||||||
| 010 - Engineering, Procurement and Management 020 - Subconsultants 040 - Construction Indirects - Contractors 120 - Bulk Earthworks 370 - Process Plant Services 390 - Plant Buildings 600 - Infrastructure 620 - Water & Sewerage 630 - Infrastructure General 650 - Substation 660 - Buildings - Admin 770 - Mine Mobile Equipment - LME 780 - Fuels | – – – 2,220,300 107,000 151,000 756,000 483,000 327,000 8,000 558,000 60,000 152,000 | 1,662,000 – 293,000 – – – – – – – – – – | 22,000 – 5,000 263,100 7,000 16,000 55,000 52,000 60,000 1,000 18,000 6,000 14,000 | (30,000) – (11,000) (75,900) (16,000) (6,000) (110,000) (45,000) (11,000) – (19,000) (2,000) (11,000) | 1,654,000 – 287,000 2,407,500 98,000 161,000 701,000 490,000 376,000 9,000 557,000 64,000 155,000 | |
| Subtotal Site Infrastructure | $ 4,822,300 | $ 1,955,000 | $ 519,100 | $ (336,900) | $ 6,959,500 | |
| OWNERS COST | ||||||
| 810 - Owners Project Costs 811 - Owners Temporary Infrastructure 840 - Spares | – – – | 973,000 – 91,000 | 146,000 – 13,000 | (33,000) – (18,000) | 1,086,000 – 86,000 | |
| Subtotal Owners Cost | – | 1,064,000,0 | 159,000,0 | (51,000,0) | 1,172,000,0 | |
| TOTAL CAPEX FOR THE PHASE 2 PRODUCTION | $ 28,602,123 | $ 8,513,000 | $ 4,464,645 | $ (3,563,900) | $ 38,015,868 | |
| PLANT |
Table 1.2.3 Detailed of Capital Costs Estimates for Phase 2 Mining
| Capex Item (US$) | Year 0 | Year 5 | Year 6 | MC | |||||
|---|---|---|---|---|---|---|---|---|---|
| Mine Preparation & Infrastructure Further Opening of Mining Pit (Year 5) Further Opening of Mining Pit (Year 6) Mine Closure | $ 6,511 – – – | – $ 28,975 – – | – – $ 9,658 – | – – – $ 2,180 | |||||
| Total Capex | 6,511 | 28,975 | 9,658 | 2,180 |
1.3 - Sensitivity Analysis
As displayed in Table 1.1.1, the PEA projects potential strong financial outcomes with a pre-tax NPV (discounted at 8%) of US$449 million and IRR of 208%. Table 1.3. analyses the impact on NPV when spodumene pricing and recovery percentages fluctuate.
The Project NPV is most sensitive to movements in the price of spodumene, metallurgical recovery rate of the lithium at the Second Plant. Foreign exchange fluctuations impact operating cash costs (mostly derived from Brazilian Real) and development capital (approximately 70% derived from Brazilian Real prices)
Table 1.3: Sensitivity Analysis: NPV to Price and Recovery
| Sensitivity Matrix | After-Tax | |||
|---|---|---|---|---|
| NPV (US$ M) | ||||
| Spodumene Price (CIF China) | Recovery (%) | |||
| (US$/t) | 60.4% | 66.0% | ||
| $ 650 | $ 260 M | $ 320 M | ||
| 700 | 319 | 384 | ||
| 750 | 378 | 449 | ||
| 800 | 437 | 513 | ||
| 850 | 496 | 578 |
1.4 – Commercial and Offtake Strategies
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 has been negotiating offtake agreements with fixed volumes with a multiyear duration.
Sigma plans to develop Phase 2 following a similar integrated strategy of delivering green lithium chemicals to customers, through tolling partnerships for chemical lithium products. Discussions are underway with a number of interested parties, whereby (similarly to Phase 1 production) Phase 2 Battery Grade Green Lithium Concentrate will be treated at an offsite downstream conversion facility to produce lithium carbonate or lithium hydroxide for its life of mine.
1.5 - Project Schedule
The Company has significantly advanced multiple Project workstreams in geology, geotechnical, metallurgical, environmental and regulatory permitting with the objective of preparing for Phase 2 production after 2023. Sigma is advancing Phase 2 with the goal of being construction ready by the end of 2021. Phase 2 construction is planned to initiate sequentially to the commissioning and production ramp up of Phase 1 (which is expected in summer of 2022).
The Company has been working with SGS and Primero to prepare a PFS for Phase 2 production, further continuing towards feasibility. The Company and Primero completed all the metallurgical and variability feasibility test work at SGS laboratories with the aim of customizing a flowsheet for the second processing line of Phase 2 production with Barreiro. The Company completed all the field work for the PFS, including geotechnical drilling.
The execution plan for Phase 2 of the Project in 2021 focuses on:
- Continuing the engineering activities to complete a PFS and finalize designs, equipment and plant configurations, which is expected to reduce risks and enhance yield;
- Progression of the environmental and regulatory approvals;
- Continued discussions with potential downstream and offtake partners to achieve a fully integrated operation with the battery industry for electric vehicles; and
- Optimizing the capital structure for the Company and obtain debt and equity financing for the capital expenditures for Phase 2.
2 – MINING
GE-21, prepared the mining section of PEA aiming to assess the economic viability of the Phase 2 of the Project. The Barreiro deposit is located in close proximity to the surface with shallow, near surface mineralization ideal for open pit mining. Therefore, the Barreiro deposit will be mined by conventional open pit methods. Mining will require drilling and blasting and mining material will be removed using hydraulic excavators and haul trucks.
Figure 2.1: Plant 3D layout of the industrial complex and production facility for Phase 1 and Phase 2
The mining operating costs in Table 2.1.1 were based on the proposal of U&M Mineração e Construção SA, presented on July 3rd, 2020, for the Phase 1 contract mining of the Xuxa open pit mine. The scope of services refers to the provision of ore and waste handling services involving the drilling & blasting, excavation, loading and haulage of soil and rock, conservation and dust control, and other ancillary activities. Only the cost of ore haulage from the stockyard to the plant was not part of the scope of the U&M proposal, so it was estimated based on GE21’s inhouse database.
Table 2.1: Key Mining Assumptions Utilized in the Project Economics
| Item | Unit | Total | |||
| Ore Processed Total quantity milled (LOM) Average Annual run of mine (ROM) milled Strip ratio Year 1 Year 5 Year 6 Run of Mine Costs Mining costs per waste and ore mined Processing costs per tonne (ROM) | Mt Mt Ratio: Ratio: Ratio: [US$/t mined] [US$/t ROM] | 21.3 1.68 5.2 : 1 10.8 : 1 15.,5 : 1 2.3 8.6 |
Pit Optimization
The determination of the optimal pit was based on:
- A calculation of the interlocking (nested) of optimal pits using Micromine software;
Certain technical and economic parameters were used for the generation of the optimal mathematical pit, o which consists of the pit that maximizes the value of the enterprise and was obtained through the application of the Lerchs-Grossman algorithm.
- The economic and geometric parameters were defined based first principles, using GE21's database in accordance with projects of similar scale and characteristics. The geotechnical assessment was based on rock quality and visual inspection on undeformed core samples.
- The selection of the minimum optimal pit with enough mineralized material to supply a production of 1.680 Mtpa during LOM.
- All mineralized material was considered in the optimization process, including that classified as inferred.
The sequence of optimal pits was obtained by varying the revenue factor from 10% to 200% with respect to the product's selling price. To determine the evolution of the pits over time, an annual production scale of 1.680 Mtpa of ROM was established.
The waste was divided into: Overburden; Fresh rock; Low grade – Material with a grade below 0.5% LiO2; Percent – Blocks initially assigned as ROM, but with a block factor smaller than 1 (part of the blocks that were not inside the mineralized body); Outside the Model – blocks generated outside the block model box, to cover the entire length of the pit.
Pit Design
The open pit mine design, consists of projecting, based on a selected optimal pit, an operational pit that allows for the safe and efficient development of mining operations.
The preliminary pit design extends approximately 0.92 km NW/SE along strike of the pegmatite mineralization and has an average width of 1.0km. The design is divided into depths of 100m (RL=200m), 220m (RL =100m) and 300m (RL=10m). Mining is scheduled to achieve low waste stripping in the initial years with a gradual increase later in the mine life, as per the table below. The average strip ratio for the LOM plan is 11.6, as follows:
- Year 2: Ratio – 5.2 : 1
- Year 5: Ratio – 8.8 : 1
- Year 6: Ratio – 10.4 : 1