Sigma Lithium Resources' PEA shows Phase 2 expansion at Brazil project could double its value to US$844 million

Sigma Lithium Resources Corp (CVE:SGMA) (OTCQB:SGMLF) has reported what it called the "exceptional" results of a preliminary economic assessment (PEA), which considered a second phase expansion of its Grota do Cirilo project in Brazil that could see the net present value (NPV) of the asset more than double to US$844 million. The study shows the benefit of bringing the project’s second deposit called Barreiro on stream following mining out the first deposit called Xuxa. That will lift output from 220,000 tonnes per annum (tpa) in Phase 1, which is planned for 2022, to 440,000 tpa in Phase 2 within around one year. Barreiro is a high-purity, high-grade lithium deposit, with 20.485 million tonnes (Mt) of Measured & Indicated (M&I) resources, which would see an average of 1.68Mt mines per year during a mine life of 12.7 years. READ: Sigma Lithium may just have the world’s greenest large-scale lithium project at Grota do Cirilo   Chief Operating Officer Ana Cabral-Gardner noted that this "doubling" of Sigma’s near-term planned capacity, with low additional capex had the potential to significantly transform the company's "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," she said. Sigma is already working to advance Phase 2 to a construction-ready status by the end of 2021 or early 2022 and is preparing a preliminary feasibility study (PFS) for the Phase 2 production, targeting this to be completed in June 2021. Phase 2 construction is forecast to begin once the commissioning and production ramp-up of Phase 1 is complete, which is expected in the third quarter of 2022. In terms of the financials of Phase 2, the NPV in the latest PEA was pegged at US$449 million (Phase 1 NPV according to a 2019 study was US$395 million), while the after tax-free cash flow was put at US$766 million and net revenue of US$2.1 billion. The internal rate of return (IRR) was put at 208%. Phase 2 average total cash cost was put at US$256/t (Free on board (FOB) plant, life of mine) and US$360/t (cost, insurance and freight (CIF) China Port, life of mine). 1Q results Also in the statement, Sigma reported its 1Q results ended March 31, in which it said it made "significant" progress towards construction at Grota do Cirilo, despite circumstances created by the pandemic, including completing several critical workstreams involved in  pre-construction of the Phase 1 mine. On its ESG work, it said it "significantly" advanced the life cycle analysis and carbon credits audit workstreams and plans to publish results in the third quarter of 2021. As of June 1, the company had C$41.3 million (US$33.6 million) in cash and equivalents, out of which around C$33.8 million (US$28 million) is held in a construction segregated savings account, it added. Sigma is developing, with an ESG-centric strategy, the largest hard rock lithium deposits in the Americas, at its wholly owned Grota do Cirilo project aiming to be a part of the rapidly expanding global supply chain of electric vehicles. Since 2018, the company has been producing low carbon high purity lithium concentrate at an on-site demonstration pilot plant with the objective to ship samples to potential customers for product certification and testing. Grota do Cirilo sits in one of the world’s largest mining provinces in southeast Brazil, with full mining infrastructure and highways linking the project to a shipping port. Site infrastructure is mostly in place and is currently being upgraded for Phase 1 production. The project is powered by 100% clean energy as the transmission towers and lines are linked to a hydroelectricity plant 50km away. Contact the author at giles@proactiveinvestors.com