The lithium industry faced unprecedented challenges this year as price volatility disrupted the global metals markets. Argus spoke with Ana Cabral, chief-executive of Sigma Lithium — Brazil's largest spodumene producer — about hurdles as well as Brazil's cost advantage to other regions, such as Africa, which positions it competitively in the market. Edited highlights follow.
Sigma paused shipments in June and then in August this year because of price volatility. Do you have clear guidelines or criteria that determine when you decide to hold back shipments?
No, we don't. What we faced this year during post 'Liberation Day' was what we call a 'black swan' event in lithium prices. It was Covid for metals, in general.
It wasn't just lithium. All metals and even treasuries behaved abnormally post-April 2nd.
The same happened in August with the turnaround in prices that we observed. Sigma realized that if we agreed to a sale at a final, non-provisional price, we would be crystallizing a loss of $90/metric tonne (t).
No one was making money at those levels, so we felt quite confident in establishing that they would not hold for long, because clearly something was off in the markets. We just decided to hold back not to crystallize the losses.
How do longer shipping times and rates to China, compared with Australian hard rock producers, affect Sigma's all-in sustaining costs?
Our cif China costs were $442/t in the second quarter because we have flexibility on how we manage our shipping logistics.
From our plant gate all the way to China, we spend approximately $40/t on inland logistics, around $10/t on port fees — including storage and handling — and another $40/t for ocean freight to China. That brings us to a total of about $90/t for logistics, including port and warehousing costs in Brazil.
Our total door-to-door cost to China in the second quarter was about $440/t. When you add everything up, our all-in cost is approximately $590/t, which is very competitive.
Looking at the global cost curve for lithium concentrate, we are below the cost levels of African producers, including those in Nigeria and Zimbabwe. In fact, we are below every player in the spodumene market except for one — Greenbushes [in Australia] — which benefits from being vertically integrated with its shareholder refiners.
What factors give Brazil this cost advantage compared with Africa?
Our real edge is industrial competitiveness. Sigma uses dense media separation (DMS), which results in industrial costs that are 75pc lower than many of our peers who rely on more expensive processing methods.
We have managed to achieve plant-level recoveries of up to 70pc, matching flotation recovery levels through our innovations on DMS. This approach is beginning to be recognized as the Brazilian edge.
Brazil has never "de-industrialized". It still has a robust industrial base and a wealth of human capital.
We have chemical, mechanical, electrical and process engineers who maintain our automation algorithms and manage processing. Brazil's knowledgeable workforce is the key asset — and 98pc of the people working on our mine are Brazilians.
What external factors do you see as key to Sigma's success going forward? Could future legislation create upside through green premiums? Or could permitting risks in Brazil slow down your expansion?
I think Brazil is a fantastic jurisdiction.
People often don't realize how strong Brazil is in terms of legal certainty.
Brazil raises the bar and requires adherence to very high, Western standards for health, safety and environmental protection. If companies don't comply, the country enforces these standards rigorously, as we have seen with others having their licenses revoked.
Sigma adheres fully to these standards. Phase two of our project is already fully permitted. So, for us, that's not an issue at all.
That said, costs always worry me. But beyond that, I'm very vocal about traceability. While I would welcome a green premium, I am not waiting on it.
What I do see happening already is that traceability is becoming a critical focus. If energy transition means continuing to rely on materials mined by unprotected women and children, then we might as well stay with oil and gas.
