Sigma Lithium is a multinational company, listed on the TSX and Nasdaq, with operations in Brazil, focused on the sustainable production of high-purity lithium concentrate used in electric vehicle batteries and energy storage solutions.
Ana, you have started your career in banking. What led you to mining?
In my banking career, I have always been involved in natural resources. Most of my M&A career was focused on this sector. One of the largest projects I worked on was the privatization of Vale with Merrill Lynch. During this time, Vale had a market cap of $3 billion and underwent major restructuring to interact with capital markets as a privatized company. We had to reorganize the business, creating verticals and advising on its structure to make it palatable for privatization.
From there, I handled clients across various metals, including diamonds, iron ore, and copper. As a foreigner in New York and London, I often managed international projects in places like Mongolia, Africa, and Brazil, which are now significant in the industry. My exposure to diverse projects and transformation in the industry, such as the Kimberly Process in diamonds and traceability initiatives in cobalt and tantalum, provided a vast experience. This led me to senior roles and eventually to start my own business with a partner, focusing on impact investment in natural resources, drawing from my extensive background.
Let’s talk lithium. What is behind the recent drop in lithium prices and the general volatility of the metal’s price?
It is a mix of several issues. Firstly, lithium is not rare, and when its prices rose significantly, there was excess supply last year, which caused the prices to crash. This year, the market is testing a stable price level amidst untraceable materials produced unsustainably entering the market. At the lower end of the cost curve, there are very few players, and we are among the lowest cost producers in the world, only behind Greenbushes in Australia. Most Australian mines are at the midpoint of the cost curve, making other operations less feasible at current prices.
Many operations are losing money, and we may see high-cost producers phasing out until prices justify profitability, similar to the depuration observed in 2018-2020. Car makers and battery users are implementing initiatives to trace material sources, reminiscent of the cobalt situation in 2018-19. Unsustainable production conditions, such as artisanal mining and child labor, account for around 10-15% of supply. This untraceable supply affects market dynamics, and a concerted effort for traceability from automakers and battery makers is essential to stabilize the market and ensure sustainable production practices.
Since you mentioned automakers, there was talk in January that you are negotiating a deal with the Chinese EV company BYD. Could you update us on that and, more generally, on your strategy with carmakers?
We have conversations with all the large automakers about supply deals, as it is standard practice for producers. The goal is to find clients who value what we offer, not just for paying more, but for the superior quality of our product. We sell our material at a premium because it is better, not just because it is green. Our lithium is unique, both chemically and physically, due to our state-of-the-art green tech plant and the geology specific to our resource. This preprocessed, high-purity lithium saves automakers 20-30% in material costs to produce one ton of chemical, making it a significant technical advantage in cost reduction for battery production.
Our strategy could eventually involve having half of our production allocated to one-year contracts with automakers, ensuring consistency and reliability in our supply. This approach has made us eligible to negotiate as major suppliers within our first year of production, demonstrating our capacity and consistency. Our production chart shows consistent delivery of 22,000 tons per month over the past year, positioning us as a reliable commercial supplier in the sector.
You have previously referred to Chinese demand for lithium as ‘unstoppable’. In that sense, are you not wary of becoming too dependent on this market? Do you seek diversification?
We are very egalitarian in distributing our supplies, reflecting the market's makeup, which is 50% China and 50% the rest of the world. This impartiality in our agreements ensures we remain balanced and diversified.
Our focus is on premiumizing our product, partnering with clients who value our traceability and technical advantages. Sustainability comes as a bonus, but our primary commercial drive is the value in use that our product offers. We have maintained a disciplined and impartial approach, which has established us as a force for good in the industry.
Regarding China's unstoppable demand, it is driven by a necessity for urbanization and improving living conditions. China's consistent investment, even during down cycles, contrasts with Western companies' reliance on capital markets, which can be short-sighted. The rapid growth in China, with EV sales growing at 36%, reflects a broader market trend that Western investors sometimes overlook. The holistic view of the global market shows 20% overall growth, emphasizing the need for continued investment and adaptation to meet rising demand for sustainable materials.
Can you tell us more about your expansion and the meaning behind being ‘the only global procurer of quintuple zero-green lithium’?
We are doubling production next year, which is a substantial step forward for us. Our expansion includes a second plant, reinforcing our commitment to meeting growing demand. As for our quintuple zero-green lithium achievement, it is a testament to our dedication to sustainability. We have been triple zero (zero tailings, zero water usage, and zero toxic chemicals) since 2019, using innovative processes like dense media separation and gravity-based centrifugation. We have recently achieved zero net carbon by addressing diesel and explosives at the mine, further lowering our carbon footprint.
At the recent United Nations Climate Conference (COP), we were acknowledged for our use of 100% clean energy, earning us the quintuple zero status. This is significant, especially considering many global lithium producers still rely on diesel generators. While we take our mostly green energy grid for granted in Brazil, this is a notable achievement globally. Although we do not get paid a green premium, our environmentally sustainable practices provide a commercial advantage with automakers who value traceability and sustainability. This has helped us become a branded supplier of the most environmentally sustainable lithium material in the world, verified by our five-zero status.
