Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Japan’s Mitsui & Co. will invest $30 million in Sigma Lithium Resources’ (TSX-V: SGMA) project in Brazil, as demand for the metal used in the batteries that power electric vehicles is set to continue growing, keeping the market tight.
The funds, together with a $40 million debt offering Mitsui granted Sigma, will allow the Canadian miner to begin building a processing plant at its Grota do Cirilo asset, a hard rock lithium project in the south-eastern Brazilian province of Minas Gerais.
Grota do Cirilo is expected to produce 240,000 tonnes of battery-grade spodumene concentrate per year, beginning in 2020
The trading house is pre-paying Sigma $30 million for up to 55,000 annual tonnes of future battery-grade spodumene concentrate, over six years. The off-take deal can be extended for five years and gives the Japanese firm the right to buy a supplementary amount of 25,000 tonnes a year over 72 months, which can also be renewed for five years.
“We are very pleased to welcome Mitsui as our new strategic offtake and funding partner,” Sigma chairman and chief executive officer, Calvyn Gardner, said in the statement. “Both of our companies share the same vision regarding the growth in the battery metals value chain as well as commitment to supply the world with clean energy.”
Grota do Cirilo is expected to produce 240,000 tonnes of battery-grade spodumene concentrate per year, beginning in 2020. The output will be shipped to China, where it will be converted into lithium hydroxide, the type of lithium used by Tesla in its car batteries.
If Sigma goes ahead with an expansion project that would increase output to 440,000 tonnes a year, Mitsui could buy more material, but it would have to provide extra funding.
That level of output would place Sigma among the largest lithium suppliers in the Americas.
Prices for the white battery metal have largely stabilized this year, following the extended slide seen in 2018. According to Roskill’s outlook released this week, prices have held up thanks to a mix of growing demand and disruptions that have impacted additional supply.
Shares in the company, which listed in Toronto a year ago, were up 2.5% on Friday at C$1.64. They had closed at C$1.60 on Thursday.
