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TABLE OF CONTENTS
As filed with the Securities and Exchange Commission on December 2, 2021
Registration No. 333-260787​
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM F-10
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMENDMENT NO. 1 TO
Form F-10
SIGMA LITHIUM CORPORATION
(Exact name of registrant as specified in its charter)
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Canada
(Province or other jurisdiction of
incorporation or organization)
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1000
(Primary Standard Industrial
Classification Code Number, if applicable)
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Not applicable
(I.R.S. Employer
Identification No., if applicable)
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2200 HSBC Building
885 West Georgia Street
Vancouver, British Columbia
V6C 3E8
+55 11-2985-0089
(Address and telephone number of Registrant’s principal executive offices)
CT Corporation System
28 Liberty St., New York, New York 10005
Tel: (212) 894-8940
(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)
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Copies to:
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Ana Cabral-Gardner
Co-Chief Executive Officer
Sigma Lithium Corporation
885 West Georgia Street
Vancouver, BC V6C 3E8
Tel: +55 11-2985-0089
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Christopher J. Cummings
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Tel: 212-373-3000
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Chad Accursi
Cassels Brock & Blackwell LLP
Suite 2100, Scotia Plaza, 40 King Street West
Toronto, ON M5H 3C2
Tel: 416-869-5300
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Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
Province of British Columbia, Canada
(Principal jurisdiction regulating this offering)
It is proposed that this filing shall become effective (check appropriate box below):
A.
☒
upon filing with the Commission pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada).
B.
☐
at some future date (check the appropriate box below):
1.
☐
pursuant to Rule 467(b) on ( ) at ( ) (designate a time not sooner than 7 calendar days after filing).
2.
☐
pursuant to Rule 467(b) on ( ) at ( ) (designate a time 7 calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on ( ).
3.
☐
pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the Registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.
4.
☐
after the filing of the next amendment to this Form (if preliminary material is being filed).
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf prospectus offering procedures, check the following box. ☒
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PART I
INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This short form base shelf prospectus has been filed under legislation in each of the provinces and territories of Canada, other than Québec, that permits certain information about these securities to be determined after this prospectus has become final and that permits the omission from this prospectus of that information. The legislation requires the delivery to purchasers of a prospectus supplement containing the omitted information within a specified period of time after agreeing to purchase any of these securities, except in cases where an exemption from such delivery requirements is available.
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This short form base shelf prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State.
Information has been incorporated by reference in this short form base shelf prospectus from documents filed with securities commissions or similar regulatory authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of Sigma Lithium Corporation at c/o Sigma Lithium Corporation, 2200 HSBC Building, 885 West Georgia Street, Vancouver, British Columbia V6C 3E8 telephone 55 1129850089, and are also available electronically at www.sedar.com.
SHORT FORM BASE SHELF PROSPECTUS
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New Issue and/or Secondary Offering
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December 1, 2021
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[MISSING IMAGE: lg_sigma-4clr.jpg]
SIGMA LITHIUM CORPORATION
US$250,000,000
Common Shares
Debt Securities
Subscription Receipts
Warrants
Sigma Lithium Corporation (“Sigma” or the “Company”) may from time to time offer and issue the following securities: (i) common shares of the Company (“Common Shares”); (ii) debt securities of the Company (“Debt Securities”); (iii) subscription receipts (“Subscription Receipts”) exchangeable for Common Shares and/or other securities of the Company; (iv) warrants (“Warrants”) exercisable to acquire Common Shares and/or other securities of the Company, or any combination thereof having an offer price of up to US$250,000,000 in aggregate (or the equivalent thereof, at the date of issue, in any other currency or currencies, as the case may be) at any time during the 25-month period that this short form base shelf prospectus (including any amendments hereto, the “Prospectus”) remains valid. The Common Shares, Debt Securities, Subscription Receipts, and Warrants (collectively, the “Securities”) offered hereby may be offered separately or together, in separate series, in amounts, at prices and on terms to be set forth in one or more prospectus supplements (collectively or individually, as the case may be, “Prospectus Supplements”). This Prospectus qualifies the distribution of Securities by the Company and by selling securityholders, as described below. In addition, Securities may be offered and issued in consideration for the acquisition of other businesses, assets or securities by the Company or a subsidiary of the Company. The consideration for any such acquisition may consist of any of the Securities separately, a combination of Securities or any combination of, among other things, Securities, cash and assumption of liabilities. One or more selling securityholders may also offer and sell Securities under this Prospectus.
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The specific terms of any offering of Securities will be set forth in the applicable Prospectus Supplement and may include, without limitation, where applicable: (i) in the case of Common Shares, the number of Common Shares being offered, the offering price, whether the Common Shares are being offered for cash, and any other terms specific to the Common Shares being offered; (ii) in the case of Debt Securities, the specific designation, aggregate principal amount, the currency or the currency unit for which the Debt Securities may be purchased, maturity, interest provisions, authorized denominations, offering price, whether the Debt Securities are being offered for cash, the covenants, the events of default, any terms for redemption or retraction, any exchange or conversion rights attached to the Debt Securities, and any other terms specific to the Debt Securities being offered; (iii) in the case of Subscription Receipts, the number of Subscription Receipts being offered, the offering price, whether the Subscription Receipts are being offered for cash, the terms, conditions and procedures for the exchange of the Subscription Receipts into or for Common Shares and/or other securities of the Company, and any other terms specific to the Subscription Receipts being offered; and (iv) in the case of Warrants, the number of Warrants being offered, the offering price, whether the Warrants are being offered for cash, the terms, conditions and procedures for the exercise of such Warrants into or for Common Shares and/or other securities of the Company, and any other terms specific to the Warrants.
All shelf information permitted under applicable securities legislation to be omitted from this Prospectus will be contained in one or more Prospectus Supplements that will be delivered to purchasers together with this Prospectus, unless an exemption from the prospectus delivery requirements is available. Each Prospectus Supplement will be incorporated by reference into this Prospectus as of the date of such Prospectus Supplement and only for the purposes of the distribution of the Securities to which that Prospectus Supplement pertains.
This Prospectus does not qualify for issuance Debt Securities, or Securities convertible into or exchangeable for Debt Securities, in respect of which the payment of principal and/or interest may be determined, in whole or in part, by reference to one or more underlying interests including, for example, an equity or debt security, a statistical measure of economic or financial performance including, without limitation, any currency, consumer price or mortgage index, or the price or value of one or more commodities, indices or other items, or any other item or formula, or any combination or basket of the foregoing items. This Prospectus may qualify for issuance Debt Securities, or Securities convertible into or exchangeable for Debt Securities, in respect of which the payment of principal and/or interest may be determined, in whole or in part, by reference to published rates of a central banking authority or one or more financial institutions, such as a prime rate or bankers’ acceptance rate, or to recognized market benchmark interest rates such as CDOR (the Canadian Dollar Offered Rate) or a United States federal funds rate, and/or that are convertible into or exchangeable for Common Shares.
The Company and any selling securityholder may sell the Securities to or through underwriters or dealers purchasing as principals and may also sell the Securities to one or more purchasers directly, through applicable statutory exemptions, or through agents designated by the Company and/or the selling securityholders from time to time. The Prospectus Supplement relating to a particular offering of Securities will identify each underwriter, dealer or agent engaged in connection with the offering and sale of the Securities, as well as the method of distribution and the terms of the offering of such Securities, including the net proceeds to the Company and/or the selling securityholders and, to the extent applicable, any fees, discounts, concessions or any other compensation payable to underwriters, dealers or agents and any other material terms. See “Plan of Distribution”.
Unless otherwise specified in the relevant Prospectus Supplement, in connection with any offering of the Securities, the underwriters or agents may over-allot or effect transactions that are intended to stabilize or maintain the market price of the offered Securities at a level above that which might otherwise prevail on the open market. Such transactions, if commenced, may be interrupted or discontinued at any time. See “Plan of Distribution”.
The outstanding Common Shares are listed and posted for trading on the TSX Venture Exchange (the “TSXV”) and on The Nasdaq Capital Market (“Nasdaq”) under the symbol “SGML”. On November 30, 2021, the last trading day prior to the date of this Prospectus, the closing price of the Common Shares on the TSXV was $12.07 and on Nasdaq was US$9.35. Unless otherwise specified in the applicable Prospectus Supplement, the Debt Securities, Subscription Receipts, and Warrants will not be listed on any securities exchange. There is no market through which such Securities may be sold and purchasers may not be able to resell such Securities purchased under this Prospectus. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such Securities, and the extent of issuer regulation. See “Risk Factors”.
Prospective investors should rely only on the information contained or incorporated by reference in this Prospectus. The Company has not authorized anyone to provide investors with additional or different information. An investment in the
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Securities is highly speculative and involves significant risks that should be carefully considered by prospective investors before purchasing such Securities. Such investment should only be made by those persons who can afford the risk of loss of their entire investment. The risks outlined in this Prospectus and in the documents incorporated by reference herein should be carefully reviewed and considered by prospective investors in connection with an investment in such Securities. See “Cautionary Note Regarding Forward Looking Information” and “Risk Factors” in this Prospectus and “Forward Looking Information” and “Risk Factors” in the Company’s then-current annual information form, as well as the risk factors described in the Company’s then-current annual management’s discussion and analysis and then-current interim management’s discussion and analysis, if applicable, prior to investing in such Securities.
Prospective investors should be aware that the acquisition of the Securities described herein may have tax consequences both in Canada and the United States. Such consequences for investors who are resident in, or citizens of, the United States may not be described fully herein. Prospective investors are advised to consult their own tax advisors regarding the application of Canadian and U.S. federal income tax laws to their particular circumstances, as well as any other provincial, territorial, foreign and other tax consequences of acquiring, holding or disposing of the Securities, including the Canadian federal income tax consequences applicable to a foreign controlled Canadian corporation that acquires the Securities.
No underwriter, agent, or dealer has been involved in the preparation of this Prospectus or performed any review of the contents of this Prospectus.
The Company is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this Prospectus in accordance with Canadian disclosure requirements. Prospective investors should be aware that such requirements are different from those of the United States. Financial statements included or incorporated herein have been prepared in accordance with International Financial Reporting Standards, and may be subject to foreign auditing and auditor independence standards, and thus may not be comparable to financial statements of United States companies.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Each of Calvyn Gardner (Co-Chair, Co-Chief Executive Officer and Director), Felipe Peres (Chief Financial Officer), Ana Cristina Cabral (Co-Chair, Co-Chief Executive Officer and Director), and Marcelo Paiva (Director) reside outside of Canada. The Company and each of the individuals named above have appointed Cassels Brock & Blackwell LLP, 2100 Scotia Plaza, 40 King Street West, Toronto, Ontario, M5H 3C2, as their agent for service of process in Canada. Homero Delboni Jr., Guilherme Gomides Ferreira, and Porifrio Cabaleiro Rodriguez, each being authors of the Updated Feasibility Study Report (as defined herein), reside outside of Canada. Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process.
The enforcement by investors of civil liabilities under U.S. federal securities laws may be affected adversely by the fact that the Company is incorporated under the laws of Canada, that all of its officers and directors are residents of a foreign country, and that all of the assets of the Company and said persons are located outside the United States. See “Enforceability of Civil Liabilities”.
The Company’s registered and head office is located at 2200 HSBC Building, 885 West Georgia Street, Vancouver, British Columbia V6C 3E8.
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ABOUT THIS SHORT FORM BASE SHELF PROSPECTUS
An investor should rely only on the information contained in this Prospectus (including the documents incorporated by reference herein) and is not entitled to rely on certain parts of the information contained in this Prospectus (including the documents incorporated by reference herein) to the exclusion of the remainder. The Company has not authorized anyone to provide investors with additional or different information. The Company (or any selling securityholder) is not offering to sell the Securities in any jurisdictions where the offer or sale of the Securities is not permitted. The information contained in this Prospectus (including the documents incorporated by reference herein) is accurate only as of the date of this Prospectus (or the date of the document incorporated by reference herein, as applicable), regardless of the time of delivery of this Prospectus or any sale of the Common Shares, Debt Securities, Subscription Receipts, and Warrants. The Company’s business, financial condition, results of operations and prospects may have changed since the date of this Prospectus.
CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION
This Prospectus and documents incorporated by reference herein contain “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of applicable United States securities laws (collectively referred to herein as “Forward Looking Information”). All such Forward Looking Information is made under the provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). All statements, other than statements of historical fact, may be Forward Looking Information, including, but not limited to, mineral resource or mineral reserve estimates (which reflect a prediction of mineralization that would be realized by development). When used in this Prospectus and documents incorporated by reference herein, such statements generally use words such as “may”, “would”, “could”, “will”, “intend”, “expect”, “believe”, “plan”, “anticipate”, “estimate” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date such statements were made. Forward Looking Information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and does not necessarily provide accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the Forward Looking Information, which is based upon what management believes are reasonable assumptions, and there can be no assurance that actual results will be consistent with the Forward Looking Information.
In particular (but without limitation), this Prospectus and documents incorporated by reference herein contain Forward Looking Information with respect to the following matters: statements regarding anticipated decision making with respect to the Project (as defined herein); capital expenditure programs; estimates of mineral resources and mineral reserves; development of mineral resources and mineral reserves; government regulation of mining operations and treatment under governmental and taxation regimes; the future price of commodities, including lithium; the realization of mineral resource and mineral reserve estimates, including whether mineral resources will ever be developed into mineral reserves; the timing and amount of future production; entering into binding offtake arrangements; currency exchange and interest rates; expected outcome and timing of environmental surveys and permit applications and other environmental matters; the Company’s ability to raise capital and obtain project financing; expected expenditures to be made by the Company on its properties; successful operations and the timing, cost, quantity, capacity and quality of production; capital costs, operating costs and sustaining capital requirements, including the cost of construction of the processing plant for the Project; competitive conditions and anticipated trends post-COVID-19 pandemic and the ongoing uncertainties and effects in respect of the COVID-19 pandemic; and the use of proceeds from the sale of Securities hereunder.
Forward Looking Information does not take into account the effect of transactions or other items announced or occurring after the statements are made. Forward Looking Information is based upon a number of expectations and assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those disclosed in or implied by such Forward Looking Information. With respect to the Forward Looking Information, the Company has made assumptions regarding, among other things:
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General economic and political conditions
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Stable and supportive legislative, regulatory and community environment in the jurisdictions where the Company operates
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Stability and inflation of the Brazilian Real, including any foreign exchange or capital controls which may be enacted in respect thereof, and the effect of current or any additional regulations on the Company’s operations
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Anticipated trends and effects in respect of the COVID-19 pandemic and post-pandemic
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Demand for lithium, including that such demand is supported by growth in the electric vehicle (“EV”) market
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Estimates of, and changes to, the market prices for lithium
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The impact of increasing competition in the lithium business and the Company’s competitive position in the industry
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The Company’s market position and future financial and operating performance
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The Company’s estimates of mineral resources and mineral reserves, including whether mineral resources will ever be developed into mineral reserves
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Anticipated timing and results of exploration, development and construction activities
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Reliability of technical data
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The Company’s ability to develop and achieve production at the Project
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The Company’s ability to obtain financing on satisfactory terms to develop the Project
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The Company’s ability to obtain and maintain mining, exploration, environmental and other permits, authorizations and approvals for the Project
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The timing and possible outcome of regulatory and permitting matters for the Project
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The exploration, development, construction and operational costs for the Project
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The accuracy of budget, construction and operations estimates for the Project
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Successful negotiation of definitive commercial agreements, including off-take agreements for the Project
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The Company’s ability to operate in a safe and effective manner
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Although management believes that the assumptions and expectations reflected in such Forward Looking Information are reasonable, there can be no assurance that these assumptions and expectations will prove to be correct. Since Forward Looking Information inherently involves risks and uncertainties, undue reliance should not be placed on such information.
The Company’s actual results could differ materially from those anticipated in any Forward Looking Information as a result of various known and unknown risk factors, including (but not limited to) the risk factors referred to under the heading “Risk Factors” in this Prospectus and documents incorporated by reference herein. Such risks relate to, but are not limited to, the following:
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The Company may not develop the Project into a commercial mining operation
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There can be no assurance that market prices for lithium will remain at current levels or that such prices will improve
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The market for electric vehicles and other large format batteries currently has limited market share and no assurances can be given for the rate at which this market will develop, if at all, which could affect the success of the Company and its ability to develop lithium operations
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Changes in technology or other developments could result in preferences for substitute products
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New production of lithium hydroxide or lithium carbonate from current or new competitors in the lithium markets could adversely affect prices
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The Project is at development stage and the Company’s ability to succeed in progressing through development to commercial operations will depend on a number of factors, some of which may be outside its control
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The Company’s financial condition, operations and results of any future operations are subject to political, economic, social, regulatory and geographic risks of doing business in Brazil
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Violations of anti-corruption, anti-bribery, anti-money laundering and economic sanctions laws and regulations could materially adversely affect the Company’s business, reputation, results of any future operations and financial condition
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The Company is subject to regulatory frameworks applicable to the Brazilian mining industry which could be subject to further change, as well as government approval and permitting requirements, which may result in limitations on the Company’s business and activities
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The Company’s operations are subject to numerous environmental laws and regulations and expose the Company to environmental compliance risks, which may result in significant costs and have the potential to reduce the profitability of operations
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Physical climate change events and the trend toward more stringent regulations aimed at reducing the effects of climate change could have an adverse effect on the Company’s business and future operations
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As the Company does not have any experience in the construction and operation of a mine, processing plants and related infrastructure, it is more difficult to evaluate the Company’s prospects, and the Company’s future success is more uncertain than if it had a more proven history of developing a mine
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The Company’s future production estimates are based on existing mine plans and other assumptions which change from time to time. No assurance can be given that such estimates will be achieved
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The Company may experience unexpected costs and cost overruns, problems and delays during construction, development, mine start-up and operations for reasons outside of the Company’s control, which have the potential to materially affect its ability to fully fund required expenditures and/or production or, alternatively, may require the Company to consider less attractive financing solutions
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The Company’s capital and operating cost estimates may vary from actual costs and revenues for reasons outside of the Company’s control
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The Company’s operations are subject to the high degree of risk normally incidental to the exploration for, and the development and operation of, mineral properties
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Insurance may not be available to insure against all such risks, or the costs of such insurance may be uneconomic. Losses from uninsured and underinsured losses have the potential to materially affect the Company’s financial position and prospects
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The Company is subject to risks associated with securing title and property interests
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The Company is subject to strong competition in Brazil and in the global mining industry
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The Company may become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health and safety matters, which could result in consequences material to its business and operations
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The Company’s mineral resource and mineral reserve estimates are estimates only and no assurance can be given that any particular level of recovery of minerals will in fact be realized or that identified mineral resources or mineral reserves will ever qualify as a commercially mineable (or viable) deposit
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The Company’s operations and the development of its projects may be adversely affected if it is unable to maintain positive community relations
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The Company is exposed to risks associated with doing business with counterparties, which may impact the Company’s operations and financial condition
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Any limitation on the transfer of cash or other assets between the Company and the Company’s subsidiaries, or among such entities, could restrict the Company’s ability to fund its operations efficiently
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The Company is subject to risks associated with its reliance on consultants and others for mineral exploration and exploitation expertise
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The current COVID-19 pandemic could have a material adverse effect on the Company’s business, operations, financial condition and stock price
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If the Company is unable to ultimately generate sufficient revenues to become profitable and have positive cash flows, it could have a material adverse effect on its prospects, business, financial condition, results of operations or overall viability as an operating business
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The Company is subject to liquidity risk and therefore may have to include a “going concern” note in its financial statements
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The Company may not be able to obtain sufficient financing in the future on acceptable terms, which could have a material adverse effect on the Company’s business, results of operations and financial condition. In order to obtain additional financing, the Company may conduct additional (and possibly dilutive) equity offerings or debt issuances in the future
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The Company may be unable to achieve cash flow from operating activities sufficient to permit it to pay the principal, premium, if any, and interest on the Company’s indebtedness, or maintain its debt covenants
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The Company has not declared or paid dividends in the past and may not declare or pay dividends in the future
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The Company will incur increased costs as a result of being a public company both in Canada listed on the TSXV and in the United States listed on Nasdaq, and its management will be required to devote further substantial time to United States public company compliance efforts
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If the Company does not maintain adequate and appropriate internal controls over financial reporting as outlined in accordance with National Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings or the Rules and Regulations of the SEC, the Company will have to report a material weakness and disclose that the Company has not maintained appropriate internal controls over financial reporting
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As a foreign private issuer, the Company is subject to different U.S. securities laws and rules than a domestic U.S. issuer, which may limit the information publicly available to its shareholders
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Failure to retain key officers, consultants and employees or to attract and, if attracted, retain additional key individuals with necessary skills could have a materially adverse impact upon the Company’s success
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The Company is subject to currency fluctuation risks
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From time to time, the Company may become involved in litigation, which may have a material adverse effect on its business financial condition and prospects
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Certain directors and officers of the Company are, or may become, associated with other natural resource companies which may give rise to conflicts of interest
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The market price for the Company’s shares may be volatile and subject to wide fluctuations in response to numerous factors beyond its control, and the Company may be subject to securities litigation as a result
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If securities or industry analysts do not publish research or reports about the Company’s business, or if they downgrade the Common Shares, the price of the Common Shares could decline
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The Company will have broad discretion over the use of the net proceeds from offerings of its securities
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There is no guarantee that the Common Shares will earn any positive return in the short term or long term
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The Company has a major shareholder which owns 55.5% of the outstanding Common Shares and, as such, for as long as such shareholder directly or indirectly maintains a significant interest in the Company, it may be in a position to affect the Company’s governance, operations and the market price of the Common Shares
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As the Company is a Canadian corporation but most of its directors and officers are not citizens or residents of Canada or the U.S., it may be difficult or impossible for an investor to enforce judgements against the Company and its directors and officers outside of Canada and the U.S. which may have been obtained in Canadian or U.S. courts or initiate court action outside Canada or the U.S. against the Company and its directors and officers in respect of an alleged breach of securities laws or otherwise. Similarly, it may be difficult for U.S. shareholders to effect service on the Company to realize on judgments obtained in the United States
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The Company is governed by the corporate and securities laws of the Province of British Columbia and of Canada, which in some cases have a different effect on shareholders than U.S. corporate laws and U.S. securities laws
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The Company is subject to risks associated with its information technology systems and cyber-security
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The Company may be a Passive Foreign Investment Company, which may result in adverse U.S. federal income tax consequences for U.S. holders of Common Shares
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Readers are cautioned that the foregoing lists of assumptions and risks is not exhaustive. The Forward Looking Information contained in this Prospectus and documents incorporated by reference herein is expressly qualified by these cautionary statements. All Forward Looking Information in this Prospectus and documents incorporated by reference herein speaks as of the date of such statements were made. The Company does not undertake any obligation to update or revise any Forward Looking Information, whether as a result of new information, future events or otherwise, except as required by applicable securities law. Additional information about these assumptions, risks and uncertainties is contained in the Company’s filings with securities regulators, including the Company’s then-current annual information form, which are available on SEDAR at www.sedar.com. and on EDGAR at www.sec.gov.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company was incorporated under the Canada Business Corporations Act (the “CBCA”). All of the Company’s directors and officers reside outside of the United States, and all of the Company’s assets are located outside of the United States. The Company has appointed an agent for service of process in the United States; however it may nevertheless be difficult for investors who reside in the United States to effect service of process in the United States upon the Company or any such persons, or to enforce a U.S. court judgment predicated upon the civil liability provisions of the U.S. federal securities laws against the Company or any such persons. There is substantial doubt whether an action could be brought in Canada in the first instance predicated solely upon U.S. federal securities laws.
The Company filed with the SEC, concurrently with its Registration Statement (as defined herein), an appointment of agent for service of process on Form F-X. Under the Form F-X, the Company appointed C T Company System as its agent for service of process in the United States in connection with any investigation or administrative proceeding conducted by the SEC and any civil suit or action brought against or involving the Company in a U.S. court arising out of or related to or concerning the offering of Securities under this Prospectus.
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION
This Prospectus and the documents incorporated by reference herein contain references to United States dollars, Canadian dollars and Brazilian Reais. All dollar amounts referenced, unless otherwise indicated, are expressed in Canadian dollars “Cdn$”. United States dollars are referred to as “US$”. Brazilian Reais are referred to as “R$”.
The following table sets forth the high and low, average and period-end exchange rates for one US dollar expressed in Canadian dollars and Brazilian Reais for each period indicated, based upon the daily exchange rates provided by the Bank of Canada and FactSet:
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​ ​ ​
United States Dollars into Canadian Dollars
and Brazilian Reais
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​ ​ ​
2020
​ ​
2019
​
High
​ ​
Cdn$1.45/R$5.93
​ ​
Cdn$1.36/R$4.27
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Low
​ ​
Cdn$1.27/R$4.02
​ ​
Cdn$1.30/R$3.64
​
Rate at end of period
​ ​
Cdn$1.27/R$5.19
​ ​
Cdn$1.30/R$4.02
​
Average rate for period
​ ​
Cdn$1.34/R$5.15
​ ​
Cdn$1.33/R$3.94
​
On November 30, 2021, the rate for Canadian dollars (as quoted by the Bank of Canada) and Brazilian Reais (as quoted by FactSet) in terms of the United States dollar was US$1.00 = Cdn$1.2828/R$5.6486.
CAUTIONARY NOTE REGARDING MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
Technical disclosure regarding the Company’s properties included in this Prospectus and in the documents incorporated by reference herein has not been prepared in accordance with the requirements of U.S. securities laws. Without limiting the foregoing, such technical disclosure use terms that comply with reporting standards in Canada and certain estimates are made in accordance with National Instrument 43-101 — Standards of Disclosure for Mineral Projects (“NI 43-101”). Unless otherwise indicated, all mineral reserve and mineral resource estimates contained in the technical disclosure have been prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards on Mineral Resources and Reserves (“CIM Definition Standards”).
Under the SEC rules regarding disclosure of technical information, the definitions of “proven mineral reserves” and “probable mineral reserves” are substantially similar to the corresponding CIM Definition Standards, and the SEC recognizes “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” which are also substantially similar to the corresponding CIM Definition Standards. However, there are still differences in the definitions and standards under the SEC rules and the CIM Definition Standards. Therefore, the Company’s mineral resources and reserves as determined in accordance with NI 43-101 may be significantly different than if they had been determined in accordance with the SEC rules.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been incorporated by reference in this Prospectus from documents filed with the securities commissions or similar regulatory authorities in Canada. Copies of the documents incorporated by reference herein may be obtained on request without charge from the Corporate Secretary of the Company at c/o Sigma Lithium Corporation, 2200 HSBC Building, 885 West Georgia Street, Vancouver, British Columbia V6C 3E8 telephone 55 1129850089, and are also available electronically under the profiles of the Company at www.sedar.com and www.sec.gov.
As of the date hereof, the following documents filed by the Company with the securities commissions or similar regulatory authorities in Canada are specifically incorporated by reference into, and form an integral part of, this Prospectus:
(a)
the amended and restated annual information form of the Company dated December 1, 2021 for the year ended December 31, 2020 (the “AIF”);
​
(b)
the audited consolidated financial statements of the Company for the years ended December 31, 2020 and 2019, together with the notes thereto and the auditor’s report thereon (the “Annual Financial Statements”);
​
(c)
the management’s discussion and analysis of financial condition and results of operations of the Company for the year ended December 31, 2020 (the “Annual MD&A”);
​
(d)
the condensed interim consolidated financial statements of the Company for the three and nine months ended September 30, 2021 and 2020, together with the notes thereto;
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(e)
the management’s discussion and analysis of financial condition and results of operations of the Company for the three and nine months ended September 30, 2021 (the “Interim MD&A”);
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(f)
the material change report of the Company dated February 19, 2021 with respect to the closing of a non-brokered private placement of 9,545,455 common shares of the Company at a price of C$4.40 per common share, for aggregate gross proceeds of approximately C$42.0 million; and
​
(g)
the management information circular of the Company dated May 28, 2021, regarding the annual and special meeting of shareholders of the Company held on June 29, 2021.
​
Any documents of the foregoing type, and all other documents of the type required by National Instrument 44-101 — Short Form Prospectus Distributions to be incorporated by reference in a short form prospectus including, without limitation, any material change reports (excluding material change reports filed on a confidential basis), comparative interim financial statements, comparative annual financial statements and the auditor’s report thereon, management’s discussion and analysis (“MD&A”), information circulars, annual information forms, marketing materials and business acquisition reports filed by the Company with the securities commissions or similar authorities in any of the provinces and territories of Canada, subsequent to the date of this Prospectus and during the 25-month period this Prospectus remains valid, shall be deemed to be incorporated by reference in this Prospectus. In addition, all documents filed on Form 6-K or Form 40-F by the Company with the SEC on or after the date of this Prospectus shall be deemed to be incorporated by reference into the registration statement on Form F-10 (the “Registration Statement”) of which this Prospectus forms a part, if and to the extent, in the case of any Report on Form 6-K, expressly provided in such document. The documents incorporated or deemed to be incorporated herein by reference contain meaningful and material information relating to the Company and readers should review all information contained in this Prospectus, the applicable Prospectus Supplement and the documents incorporated or deemed to be incorporated by reference herein and therein.
Upon new annual financial statements and related MD&A of the Company being filed with the applicable securities commissions or similar regulatory authorities in Canada during the period that this Prospectus is effective, the previous annual financial statements and related MD&A and the previous interim financial statements and related MD&A of the Company most recently filed shall be deemed to no longer be incorporated by reference into this Prospectus for purposes of future offers and sales of Securities hereunder. Upon new interim financial statements and related MD&A of the Company being filed with the applicable securities commissions or similar regulatory authorities in Canada during the period that this Prospectus is effective, the previous interim financial statements and related MD&A of the Company most recently filed shall be deemed to no longer be incorporated by reference into this Prospectus for purposes of future offers and sales of Securities hereunder. Upon a new annual information form of the Company being filed with the applicable securities commissions or similar regulatory authorities in Canada during the period that this Prospectus is effective, notwithstanding anything herein to the contrary, the following documents shall be deemed to no longer be incorporated by reference into this Prospectus for purposes of future offers and sales of Securities hereunder: (i) the previous annual information form; (ii) any material change reports filed by the Company prior to the end of the financial year in respect of which the new annual information form is filed; (iii) any business acquisition reports filed by the Company for acquisitions completed prior to the beginning of the financial year in respect of which the new annual information form is filed; and (iv) any information circulars filed by the Company prior to the beginning of the financial year in respect of which the new annual information form is filed. Upon a new management information circular prepared in connection with an annual general meeting of the Company being filed with the applicable securities commissions or similar regulatory authorities in Canada during the period that this Prospectus is effective, the previous management information circular prepared in connection with an annual general meeting of the Company shall be deemed to no longer be incorporated by reference into this Prospectus for purposes of future offers and sales of Securities hereunder.
A Prospectus Supplement containing the specific terms of an offering of the Securities will be delivered to purchasers of such Securities together with this Prospectus, unless an exemption from the prospectus delivery requirements is available, and will be deemed to be incorporated by reference into this Prospectus as of the date of such Prospectus Supplement only for the purposes of the offering of the Securities to which that Prospectus Supplement pertains.
Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded, for purposes of this Prospectus, to the extent that
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a statement contained herein or in any other subsequently filed document that also is, or is deemed to be, incorporated by reference herein modifies, replaces or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes.
The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.
WHERE YOU CAN FIND MORE INFORMATION
The Company files certain reports with, and furnishes other information to, each of the SEC and certain securities regulatory authorities of Canada. Under a multijurisdictional disclosure system adopted by the United States and Canada, such reports and other information may be prepared in accordance with the disclosure requirements of the provincial and territorial securities regulatory authorities of Canada, which requirements are different from those of the United States. As a foreign private issuer, the Company is exempt from the rules under the U.S. Exchange Act prescribing the furnishing and content of proxy statements, and the Company’s officers and directors are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the U.S. Exchange Act. The Company’s reports and other information filed or furnished with or to the SEC are available, from EDGAR at www.sec.gov, as well as from commercial document retrieval services. The Company’s Canadian filings are available on SEDAR at www.sedar.com.
The Company has filed with the SEC under the U.S. Securities Act the Registration Statement relating to the Securities being offered hereunder, of which this Prospectus forms a part. This Prospectus does not contain all of the information set forth in the Registration Statement, certain items of which are contained in the exhibits to the Registration Statement as permitted or required by the rules and regulations of the SEC. Items of information omitted from this Prospectus but contained in the Registration Statement will be available on the SEC’s website at www.sec.gov.
STRUCTURE OF THE COMPANY
Sigma Lithium Corporation is domiciled in Canada and was incorporated under the CBCA on June 8, 2011 originally under the name Margaux Red Capital Inc. The current business of Sigma was acquired through a reverse take-over transaction on April 30, 2018 pursuant to which the Company acquired Sigma Lithium Resources Inc (“Sigma Holdings”) which held (and continues to hold) the Grota do Cirilo Project, located in the state of Minas Gerais in Brazil through a Brazilian wholly-owned subsidiary, Sigma Mineração S.A. (“Sigma Brazil”). On completion of the reverse take-over transaction, the Company implemented a share consolidation. On July 5, 2021, the Company changed its name from “Sigma Lithium Resources Corporation” to “Sigma Lithium Corporation”.
The head office of the Company is at Suite 2200, HSBC Building, 885 West Georgia St. Vancouver, BC V6C 3E8 Canada and its web site is www.sigmalithium.ca.
Intercorporate Relationships
The corporate structure of the Company, its subsidiaries, the jurisdiction of incorporation of such corporations and the percentage of equity ownership are set out in the following chart:
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[MISSING IMAGE: tm2128224d2-fc_equity4clr.jpg]
DESCRIPTION OF THE BUSINESS
Overview
Sigma is a Canadian-based mineral processing and development company, focused on advancing, with an environmental sustainability directed strategy, one of the largest hardrock lithium projects in the Americas — its wholly-owned Grota do Cirilo Project in Brazil (the “Project”), with the goal of participating in the rapidly expanding lithium-ion battery supply chain for electric vehicles (“EVs”).
In order to secure a leading position supplying environmentally sustainable lithium for the next generation of EV supply chains, the Company has adhered consistently to the highest principles and standards of environmental, social and governance (“ESG”) practices, which were established as part of its core purpose at inception in 2012. As a result, the Company has undertaken an ESG-centric management strategy, whereby its environmental and social sustainability purposes determine its strategic steps.
Lithium Properties
The Project comprises four properties owned by Sigma Brazil: Grota do Cirilo (the area of the Project where the First Mine and Second Mine are located), and the Sao Jose, Genipapo and Santa Clara properties. The Project consists of 27 mineral rights (which include mining concessions, applications for mining concessions, exploration authorizations and applications for mineral exploration authorizations) spread over 191km2. Within the Project area there are nine past producing lithium mines and 11 first-priority development targets.
The Project is located in the northeastern part of the state of Minas Gerais, in the municipalities of Araçuaí and Itinga, approximately 25km east of the town of Araçuaí and 600km northeast of Belo Horizonte, the state capital. The Project is approximately 500km from the Port of Ilheus, from where samples have been shipped for product certification and testing and from where future production is planned to be shipped.
Current Status of the Project
The Project will be vertically integrated, as the Company’s own mining operations will supply mineralized spodumene material with exceptional mineralogy to its lithium production and processing plant (the “Production Plant”). The Production Plant is designed to be environmentally friendly, fully automated and digitally controlled separating, purifying and concentrating the spodumene in an environmentally friendly process to produce 6% battery-grade high purity and environmentally sustainable lithium concentrate (“Battery Grade Green and Sustainable Lithium”), engineered to the specifications of the Company’s customers in the rapidly expanding lithium-ion battery supply chain for EVs.
The Production Plant is planned to have two separate production lines with similar processing flowsheets, which are projected to share certain elements of a common plant infrastructure. The first phase of production
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for the Project (“Production Phase 1”) is the subject of the feasibility study analysis included in the Updated Feasibility Study Report. It will initially utilize as feedstock spodumene from the Project’s Xuxa deposit (the “First Mine”). Its detailed design has been completed and the capital expenditures are being confirmed with firm quotes by suppliers to reach FEL-3 stage of precision. Based on the Updated Feasibility Study Report, the Company plans to produce 220,000 tonnes per year of Battery Grade Green and Sustainable Lithium (33,000 tonnes per year of lithium carbonate equivalent (“LCE”)) in Production Phase 1 and expects to be amongst the world’s lowest cost producers.
The next production phase of the Project (“Production Phase 2”) has been the subject of the preliminary economic assessment (the “PEA”) included in the Updated Feasibility Study Report, and could potentially increase production utilizing feedstock from the Project’s Barreiro deposit (the “Second Mine”). GE2 Consultoria Mineral, based on the mineral resource, prepared the PEA for the Second Mine. The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. It is noted that the Company has not yet made a production decision in respect of the Second Mine. The Company expects that it will assess the results of a pre-feasibility study and a definitive feasibility study before making a production decision in respect of the Second Mine. All statements regarding mine development or production in respect of the Second Mine in this Prospectus are expressly qualified by this statement.
The Company completed the PEA with the objective of potentially responding to a significant increase in demand from its customers and solidifying its unique market position as a future supplier of Battery Grade Green and Sustainable Lithium. As reflected in the Updated Feasibility Study Report, the PEA projects significant economies of scale for Production Phase 2 (if warranted, following completion of the ongoing pre-feasibility study and definitive feasibility study), resulting from the low capital expenditure (“CAPEX”) of adding a second environmentally-friendly lithium processing line and vertically integrating it to the Project, mining an average of 1.68 million tonnes (“Mt”) per year during approximately 12.7 years of projected mine life.
The Company also commenced a further pre-feasibility study for Production Phase 2 contemplating the addition of a second processing line with similar capacity of 220,000 tonnes per year of Battery Grade Green and Sustainable Lithium from Production Phase 1 (once onstream in 2022), therefore potentially doubling the Project total capacity to 440,000 tonnes per year (66,000 tonnes per year of LCE) of Battery Grade Green and Sustainable Lithium. Production Phase 2 is expected to benefit from economies of scale by utilizing most of the Production Plant infrastructure established for Production Phase 1.
This approach is the result of a thorough review of the Company’s strategic priorities in light of the significant change in lithium market conditions and aims to significantly increase both the scale of the Project and its commercial and market importance on three fronts: future production, scale of mineral resources and of mineral reserves, all the while maintaining its battery grade green lithium products and the Company’s strategic leadership in ESG in the lithium supply chain.
The Company is accelerating its site exploration activities for the Project with the goal of increasing the Project mine life or potentially increasing production at expanded production levels in Production Phase 2, if warranted after completing the ongoing pre-feasibility study (and definitive feasibility study) or a third production expansion phase (“Production Phase 3”) if warranted following completion of further feasibility study.
The Production Plant has a lithium processing design that includes dense media separation (“DMS”) technology which does not utilize hazardous chemicals in the separation and purification of the lithium. The Company will apply a customized algorithm developed to contemplate the specificities of the mineralogy in each of the Company’s mines to digitally control the dense media levels in the Production Plant.  In addition, the Production Plant will be 100% powered by clean energy and it will use water efficiently, while preserving land ecosystems when production scales. As a result of state-of-the-art recirculation and tailings management circuits:
•
the tailings will be dry stacked (and therefore will not create a tailings dam). Because the DMS technology of the Production Plant does not utilize hazardous chemicals, the dry-stacked tailings materials could also be entirely recyclable as feed for ancillary industries, such as ceramics
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•
the water utilized in the production process is 100% recirculated into the plant. Approximately 10% of the water is either lost or evaporates, with 90% of water consumed in the production process reutilized back into the Production Plant, achieving a high level of water efficiency
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Since the fourth quarter of 2018, Sigma Brazil has been producing low carbon high purity lithium concentrate at an on-site demonstration plant (the “Demonstration Plant”) and has shipped samples to potential customers for product certification and testing.
This demonstration production has been an important part of the successful commercial strategy of the Company for its Battery Grade Green and Sustainable Lithium.
The Company expects to submit a net zero execution plan to achieve its emission reduction targets after its second year of full operations, expected to be in 2024, partly as a result of its strategic decision to decrease emissions through the introduction of biofuels to fuel the trucks and other heavy equipment of the mining fleet starting in the second year of production. The Company also plans to pursue generation of carbon credits through “in-setting” strategies such as preserving water streams and developing the agroforestry systems within its regional ecosystem. As part of that strategy, the Company is studying future partnerships with generators of renewable power for self-generation of the electricity required to power the Production Plant.
For additional information with respect to the Project and the business of the Company, readers are referred to the Company’s then-current annual information form, annual MD&A and interim MD&A, if applicable, all of which are incorporated by reference herein, as well as the Updated Feasibility Study Report. See also “Risk Factors” in this Prospectus and the Company’s then-current annual information form, and the risk factors set forth in the then-current annual MD&A and interim MD&A, if applicable.
Wes Roberts, P.Eng., a member of the technical committee of the Company, is the “qualified person” under NI 43-101 who reviewed and approved the technical information disclosed in this Prospectus and the documents incorporated by reference herein.
Summary of the Updated Feasibility Study Report
The AIF contains a summary of the technical report dated November 22, 2021, with an effective date of June 2, 2021, titled “Grota do Cirilo Lithium Project, Araçuaí and Itinga Regions, Minas Gerais, Brazil, Amended and Restated Phase 2 (Barreiro) Update of the NI 43-101 Technical Report on Feasibility Study” and prepared by Homero Delboni Jr, B.E., M.Eng.Sc., Ph.D., Guilherme Gomides Ferreira (MEng) MAIG, Marc-Antoine Laporte, P. Geo, Stephane Normandin, P. Eng., Jacques Parent, P.Eng., Jarrett Quinn, P.Eng., Porifrio Cabaleiro Rodriguez, MEng., and Jacqueline Wang, P.Eng. (the “Updated Feasibility Study Report”) and the detailed disclosure in the Updated Feasibility Study Report is incorporated by reference therein. The summary in the AIF does not purport to be a complete summary of the Project and is subject to all of the assumptions, qualifications and procedures set out in the Updated Feasibility Study Report and is qualified in its entirety with reference to the full text of the Updated Feasibility Study Report. Readers should read the summary in the AIF in conjunction with the Updated Feasibility Study Report which is available electronically under the profiles of the Company at www.sedar.com and www.sec.gov.
If, after the date of this Prospectus, the Company is required by Section 4.2 of NI 43-101 to file a technical report to support scientific or technical information that relates to a mineral project on a property that is material to the Company, the Company will file such technical report in accordance with Section 4.2(5)(a)(i) of NI 43-101 as if the words “short form prospectus” refer to “shelf prospectus supplement”.
CONSOLIDATED CAPITALIZATION
As at September 30, 2021 and as at the date hereof, there are 87,368,212 Common Shares issued and outstanding, as well as 50,000 options, 8,797,667 restricted share units and 532,860 Common Share purchase warrants of the Company outstanding which, if exercised, would result in the issuance of an additional 9,380,527 Common Shares.
The applicable Prospectus Supplement will describe any material change in, and the effect of such material change on, the share and loan capital of the Company that will result from the issuance of Securities pursuant to such Prospectus Supplement.
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USE OF PROCEEDS
Unless otherwise specified in a Prospectus Supplement, the net proceeds to the Company from the sale of any Securities are intended to be used for general corporate purposes, including funding ongoing operations and/or working capital requirements, to repay any indebtedness outstanding from time to time and for discretionary capital programs. Specific information about the use of the net proceeds to the Company of any offering of Securities under this Prospectus and the specific business objectives which the Company expects to accomplish with such proceeds will be set forth in the applicable Prospectus Supplement relating to that offering of Securities.
There may be circumstances where, based on results obtained or for other sound business reasons, a reallocation of funds may be necessary or prudent. Accordingly, management of the Company will have broad discretion in the application of the proceeds of an offering of Securities. The actual amount that the Company spends in connection with each intended use of proceeds may vary significantly from the amounts specified in the applicable Prospectus Supplement and will depend on a number of factors, including those referred to under “Risk Factors” in this Prospectus and in the documents incorporated by reference herein, with specific reference to the risk factor titled “The current COVID-19 pandemic could have a material adverse effect on the Company’s business, operations, financial condition and stock price” in the AIF, and any other factors set forth in the applicable Prospectus Supplement. The Company may invest funds which it does not immediately use. Such investments may include short-term marketable investment grade securities. The Company may, from time to time, issue securities (including debt securities) other than pursuant to this Prospectus. See “Risk Factors”.
The Company has reported net losses and comprehensive losses for the financial years ended December 31, 2020 and December 31, 2019. The Company’s business does not currently operate on a self-sustaining basis and until it is successfully able to fund its expenditures from its revenues, its ability to continue as a going concern is dependent on raising additional funds. The Company expects to continue to sustain operating losses in the future until it generates revenue from the commercial production of its mineral properties. As a result, the Company may need to allocate a portion of its existing working capital or certain of the net proceeds from any offering of Securities to fund such negative cash flow from operating activities in future periods. See “Risk Factors — If the Company is unable to ultimately generate sufficient revenues to become profitable and have positive cash flows, it could have a material adverse effect on its prospects, business, financial condition, results of operations or overall viability as an operating business”.
The net proceeds to any selling securityholder(s) from any secondary offering of Securities will be set forth in the applicable Prospectus Supplement relating to that secondary offering of Securities. The Company will not receive any of the proceeds payable to any selling securityholder(s) under any secondary offering of Securities. See also “Selling Securityholders”.
PLAN OF DISTRIBUTION
The Company or a selling securityholder may, during the 25-month period that this Prospectus remains valid, offer for sale and issue, as applicable, the Securities, separately or together: (a) to one or more underwriters or dealers; (b) through one or more agents; or (c) directly to one or more purchasers through applicable statutory exemptions. The Prospectus Supplement relating to a particular offering of Securities will identify each underwriter, dealer or agent engaged in connection with the offering and sale of the Securities, as well as the method of distribution and the terms of the offering of such Securities, including the net proceeds to the Company (or, if applicable, the selling securityholder(s)) and, to the extent applicable, any fees, discounts, concessions or any other compensation payable to the underwriters, dealers or agents and any other material terms. Only underwriters, dealers or agents so named in the Prospectus Supplement are deemed to be underwriters, dealers or agents, as the case may be, in connection with the Securities offered thereby.
The Securities may be sold, from time to time in one or more transactions at a fixed price or prices which may be changed or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices, including sales made directly on an existing trading market for the Common Shares, such as the TSXV or the Nasdaq, or sales made to or through a market maker other than on an exchange. The prices at which the Securities may be offered may vary as between purchasers and during the period of distribution.
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If, in connection with the offering of Securities at a fixed price or prices, the underwriters have made a bona fide effort to sell all of the Securities at the initial offering price fixed in the applicable Prospectus Supplement, the offering price may be decreased and thereafter further changed, from time to time, to an amount not greater than the initial offering price fixed in such Prospectus Supplement, in which case the compensation realized by the underwriters will be decreased by the amount that the aggregate price paid by purchasers for the Securities is less than the gross proceeds paid by the underwriters to the Company.
Underwriters, dealers and agents who participate in the distribution of the Securities may be entitled under agreements to be entered into with the Company (or, if applicable, the selling securityholder(s)) to indemnification by the Company (or, if applicable, the selling securityholder(s)) against certain liabilities, including liabilities under securities legislation, or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in respect thereof. Such underwriters, dealers and agents may be customers of, engage in transactions with, or perform services for, the Company (or, if applicable, the selling securityholder(s)) in the ordinary course of business.
Any offering of Debt Securities, Subscription Receipts, or Warrants will be a new issue of Securities with no established trading market. Unless otherwise specified in the applicable Prospectus Supplement, the Debt Securities, Subscription Receipts, or Warrants will not be listed on any securities exchange. There is no market through which such Securities may be sold and purchasers may not be able to resell such Securities purchased under this Prospectus. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such Securities, and the extent of issuer regulation. Certain dealers may make a market in these Securities but will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given that any dealer will make a market in such Securities or as to the liquidity of the trading market, if any, for such Securities. See “Risk Factors”.
Underwriters, dealers and agents may make sales of Securities in privately negotiated transactions and/or any other method permitted by law, subject to limitations imposed by and the terms of any regulatory approvals required and obtained under, applicable Canadian securities laws which includes sales made directly on an existing trading market for the Common Shares, or sales made to or through a market maker other than on an exchange. In connection with any offering of Securities, except as otherwise set out in a Prospectus Supplement relating to a particular offering of Securities, the underwriters, dealers or agents may over-allot or effect transactions which are intended to stabilize or maintain the market price of the Securities offered at a level above that which might otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any time.
EARNINGS COVERAGE RATIO
Earnings coverage ratios will be provided in the applicable Prospectus Supplement relating to any issuance of Debt Securities having a term to maturity in excess of one year, as required by applicable securities laws.
DESCRIPTION OF COMMON SHARES
The Company is authorized to issue an unlimited number of Common Shares without par value of which, as of the date hereof, 87,368,212 Common Shares are issued and outstanding. All rights and restrictions in respect of the Common Shares are set out in the Company’s articles and the CBCA and its regulations. The Common Shares have no pre-emptive, redemption, purchase or conversion rights. Neither the CBCA nor the constating documents of the Company impose restrictions on the transfer of Common Shares on the register of the Company, provided that the Company receives the certificate(s) representing the Common Shares to be transferred together with a duly endorsed instrument of transfer and payment of any fees and taxes which may be prescribed by the Board from time to time. There are no sinking fund provisions in relation to the Common Shares and they are not liable to further calls or assessment by the Company. The CBCA and the Company’s articles provides that the rights and restrictions attached to any class of shares may not be modified, amended or varied unless consented to by special resolution passed by not less than two-thirds of the votes cast in person or by proxy by holders of shares of that class.
The Common Shares entitle the holders to: (i) notice of and to attend any meetings of shareholders and one vote per Common Share at any meeting of shareholders; (ii) dividends, if as and when declared by the
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board of directors of the Company; and (iii) upon liquidation, dissolution or winding up of the Company, on a pro rata basis, the net assets of the Company after payment of debts and other liabilities.
As of the date of this Prospectus, the Company has not declared dividends and has no current intention to declare dividends on its Common Shares in the foreseeable future. Any decision to pay dividends on its Common Shares in the future will be at the discretion of the Company’s board of directors and will depend on, among other things, the Company’s results of operations, current and anticipated cash requirements and surplus, financial condition, any future contractual restrictions and financing agreement covenants, solvency tests imposed by corporate law and other factors that the board of directors may deem relevant.
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of the Debt Securities. The particular terms and provisions of Debt Securities offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement, and the extent to which the general terms and provisions described below may apply to such Debt Securities, will be described in such Prospectus Supplement.
The Debt Securities will be issued in series under one or more trust indentures to be entered into between the Company and a financial institution to which the Trust and Loan Companies Act (Canada) applies or a financial institution organized under the laws of any province or territory of Canada and authorized to carry on business as a trustee. Each such trust indenture, as supplemented or amended from time to time, will set out the terms of the applicable series of Debt Securities. To the extent applicable, the trust indenture will be subject to and governed by the U.S. Trust Indenture Act of 1939, as amended. A copy of the form of the trust indenture has been or will be filed with the SEC as an exhibit to the Registration Statement and has been or will be filed with the securities commissions or similar authorities in Canada when it is entered into. The statements in this Prospectus relating to any trust indenture and the Debt Securities to be issued under it are summaries of anticipated provisions of an applicable trust indenture and do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of such trust indenture, as applicable. Each trust indenture may provide that Debt Securities may be issued thereunder up to the aggregate principal amount which may be authorized from time to time by the Company.
Any Prospectus Supplement for Debt Securities will contain the terms and conditions and other information relating to the Debt Securities being offered, including:
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the designation, aggregate principal amount and authorized denominations of such Debt Securities;
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the currency for which the Debt Securities may be purchased and the currency in which the principal and any interest is payable (in either case, if other than Canadian dollars);
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the percentage of the principal amount at which such Debt Securities will be issued;
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the date or dates on which such Debt Securities will mature;
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the rate or rates at which such Debt Securities will bear interest (if any), or the method of determination of such rates (if any);
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the dates on which any such interest will be payable and the record dates for such payments;
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any redemption, retraction, purchase for cancellation or surrender term or terms under which such Debt Securities may be defeased;
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any exchange or conversion terms;
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any sinking or purchase fund provisions relating to such Debt Securities;
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the nature and priority of any security interests for such Debt Securities, including the principal properties subject to lien or charge;
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any restrictions on issuance of additional Debt Securities, the incurring of additional indebtedness and other material negative covenants; and
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any other specific terms.
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Each series of Debt Securities may be issued at various times with different maturity dates, may bear interest at different rates and may otherwise vary.
The Debt Securities will be direct obligations of the Company. The Debt Securities will be senior or subordinated indebtedness of the Company as described in the relevant Prospectus Supplement.
DESCRIPTION OF SUBSCRIPTION RECEIPTS
The following sets forth certain general terms and provisions of the Subscription Receipts. The Company may issue Subscription Receipts that may be exchanged by the holders thereof for Common Shares and/or other Securities of the Company upon the satisfaction of certain conditions. The particular terms and provisions of the Subscription Receipts offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement, and the extent to which the general terms and provisions described below may apply to such Subscription Receipts, will be described in such Prospectus Supplement.
The Company may offer Subscription Receipts separately or together with Common Shares, Debt Securities or Warrants, as the case may be. The Company will issue Subscription Receipts under one or more subscription receipt agreements. Under each subscription receipt agreement, a purchaser of Subscription Receipts will have a contractual right of rescission following the issuance of the Common Shares and/or other Securities of the Company, as the case may be, to such purchaser, entitling the purchaser to receive the original amount paid for the Subscription Receipts, and any additional amount paid upon exchange thereof, upon surrender of the Common Shares and/or other Securities of the Company, as the case may be, if this Prospectus, the relevant Prospectus Supplement, and any amendment thereto, contains a misrepresentation, provided such remedy for rescission is exercised within 180 days of the date the Subscription Receipts are issued.
Any Prospectus Supplement for Subscription Receipts will contain the terms and conditions and other information relating to the Subscription Receipts being offered, including:
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the number of Subscription Receipts;
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the price at which the Subscription Receipts will be offered and whether the price is payable in installment;
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any conditions to the exchange of Subscription Receipts into Common Shares and/or other Securities of the Company, as the case may be, and the consequences of such conditions not being satisfied;
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the procedures for the exchange of the Subscription Receipts into Common Shares and/or other Securities of the Company, as the case may be;
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the number of Common Shares and/or other Securities of the Company, as the case may be, that may be exchanged upon exchange of each Subscription Receipt;
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the designation and terms of any other Securities with which the Subscription Receipts will be offered, if any, and the number of Subscription Receipts that will be offered with each Security;
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escrow release conditions, if any;
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the dates or periods during which the Subscription Receipts may be exchanged into Common Shares and/or other Securities of the Company;
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whether such Subscription Receipts will be listed on any securities exchange;
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any other rights, privileges, restrictions and conditions attaching to the Subscription Receipts; and
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any other specific terms.
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Prior to the exchange of their Subscription Receipts, holders of Subscription Receipts will not have any of the rights of holders of the securities issuable on the exchange of the Subscription Receipts.
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DESCRIPTION OF WARRANTS
The following sets forth certain general terms and provisions of the Warrants. The Company will deliver an undertaking to the securities regulatory authority in each of the provinces and territories of Canada, other than Québec, pursuant to which the Company will agree not to distribute pursuant to this Prospectus, as it may be supplemented or amended, any Warrants that are “novel” ​(as such term is defined in NI 44-102), including Warrants that are convertible into or exchangeable or exercisable for securities of an entity other than the Company or its affiliates, unless the applicable Prospectus Supplement(s) pertaining to the distribution of the novel securities is either (a) first approved for filing by the securities commissions or similar regulatory authorities in each of the provinces and territories of Canada where such novel securities are distributed, or (b) 10 business days have elapsed since the date of delivery to the applicable securities regulatory authority of the draft Prospectus Supplement in substantially final form and the applicable securities regulatory authority has not provided written comments on the draft Prospectus Supplement.
The Company may issue Warrants for the purchase of Common Shares and/or other Securities of the Company. The particular terms and provisions of the Warrants offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement, and the extent to which the general terms and provisions described below may apply to such Warrants, will be described in such Prospectus Supplement.
The Company may offer Warrants separately or together with Common Shares, Debt Securities and Subscription Receipts, as the case may be, and such Warrants may be attached to, or separate from, any such offered Securities. The Company will issue Warrants under one or more warrant indentures to be entered into between the Company and a warrant agent named in the applicable Prospectus Supplement. Each such warrant indenture, as supplemented or amended from time to time, will set out the terms and conditions of the applicable Warrants. The statements in this Prospectus relating to any warrant indenture and the Warrants to be issued under it are summaries of anticipated provisions of an applicable warrant indenture and do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of such warrant indenture, as applicable.
Any Prospectus Supplement for Warrants will contain the terms and conditions and other information relating to the Warrants being offered, including:
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the exercise price of the Warrants;
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the designation of the Warrants;
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the aggregate number of Warrants offered and the offering price;
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the designation, number and terms of the Common Shares and/or other Securities of the Company purchasable upon exercise of the Warrants, and procedures that will result in the adjustment of those numbers;
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the dates or periods during which the Warrants are exercisable;
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the designation and terms of any securities with which the Warrants are issued;
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the currency or currency unit in which the exercise price is denominated;
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any minimum or maximum amount of Warrants that may be exercised at any one time;
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whether such Warrants will be listed on any securities exchange;
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any terms, procedures and limitations relating to the transferability, exchange or exercise of the Warrants;
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any other rights, privileges, restrictions and conditions attaching to the Warrants; and
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any other specific terms.
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Prior to the exercise of their Warrants, holders of Warrants will not have any of the rights of holders of the securities issuable on exercise of the Warrants.
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SELLING SECURITYHOLDERS
This Prospectus may also, from time to time, relate to the offering of Securities by way of a secondary offering by certain selling securityholders. The terms under which the Securities will be offered by selling securityholders will be described in the Prospectus Supplement. In connection with any secondary offering, in respect of any selling securityholder that is resident outside of Canada, the Company will file a non-issuer’s submission to jurisdiction form on behalf of such selling securityholder with the corresponding Prospectus Supplement. The Prospectus Supplement for, or including, any offering of the Securities by selling securityholders will include, without limitation, where applicable:
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the names of the selling securityholders;
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the number or amount of Securities owned, controlled or directed by each of the selling securityholders;
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the number or amount of Securities being distributed for the account of each selling securityholder;
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the number or amount of Securities to be owned, controlled or directed by each of the selling securityholders after the distribution, and the percentage that number or amount represents out of the total number or amount of outstanding Securities of the class or series being distributed;
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whether the Securities are owned by the selling securityholders both of record and beneficially, of record only, or beneficially only;
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if the selling securityholder purchased any of the Securities held by it in the two years preceding the date of the Prospectus Supplement, the date or dates the selling securityholder acquired the Securities; and
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if the selling securityholder acquired the Securities held by it in the 12 months preceding the date of the Prospectus Supplement, the cost thereof to the selling securityholder in the aggregate and on an average cost-per-security basis.
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PRIOR SALES
Information in respect of prior sales of Common Shares and other Securities distributed under this Prospectus and for securities that are convertible or exchangeable into Common Shares or such other Securities within the previous 12-month period will be provided, as required, in a Prospectus Supplement with respect to the issuance of Common Shares and/or other Securities pursuant to such Prospectus Supplement.
TRADING PRICE AND VOLUME
The outstanding Common Shares are traded on the TSXV and Nasdaq under the symbol “SGML”. Trading prices and volumes of the Common Shares for the previous 12-month period will be provided, as required, in each Prospectus Supplement.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
Owning any of the Securities may subject holders to Canadian federal income tax consequences. The applicable Prospectus Supplement may describe certain Canadian federal income tax considerations generally applicable to investors described therein of purchasing, holding and disposing of applicable Securities, including, in the case of an investor who is not a resident of Canada, Canadian non-resident withholding tax consideration. Prospective investors should consult their own tax advisors prior to deciding to purchase any of the Securities.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
Owning any of the Securities may subject holders to U.S. federal income tax consequences. The applicable Prospectus Supplement may describe certain U.S. federal income tax considerations generally applicable to investors described therein of purchasing, holding and disposing of applicable Securities. Prospective investors should consult their own tax advisors prior to deciding to purchase any of the Securities.
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RISK FACTORS
An investment in the Securities is speculative and involves a high degree of risk. Prospective investors in a particular offering of the Securities should carefully consider, in addition to information contained in this Prospectus and in the Prospectus Supplement relating to that offering and the information incorporated by reference herein and therein for the purposes of that offering, the risk factors set forth in the Company’s then-current annual information form, as well as the Company’s then-current annual MD&A and interim MD&A, if applicable, to the extent incorporated by reference herein for the purposes of that particular offering of Securities.
Any such risk factors could materially affect the Company’s business, financial condition and/or future operating results and prospects and could cause actual results and events to differ materially from those described in the Forward Looking Information relating to the Company. The risks described herein and therein are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems to be immaterial, may also materially and adversely affect the Company’s business, financial condition, operations or prospects.
In addition, the following risk factors should be carefully considered by investors:
There is currently no trading market for certain of the Securities and no assurance can be given that an active or liquid trading market for such Securities will develop or be sustained.
There is currently no trading market for any Debt Securities, Subscription Receipts, or Warrants that may be offered and purchasers may not be able to resell such Securities purchased under this Prospectus. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such Securities, and the extent of issuer regulation. No assurance can be given that an active or liquid trading market for such Securities will develop or be sustained. If an active or liquid market for such Securities fails to develop or be sustained, the prices at which such Securities trade may be adversely affected. Whether or not such Securities will trade at lower prices depends on many factors, including liquidity of such Securities, prevailing interest rates and the markets for similar securities, the market price of the Common Shares, general economic conditions and the Company’s financial condition, historic financial performance and future prospects.
The continued development of the Company may require the Company to raise additional financing in the future through the issuance of additional equity securities or convertible debt securities.
The continued development of the Company may require the Company to raise additional financing in the future through the issuance of additional equity securities or convertible debt securities. If the Company raises additional funding by issuing additional equity securities or convertible debt securities such financings may substantially dilute the interests of shareholders of the Company and reduce the value of their investment. Additional financings and share issuances may result in a substantial dilution to shareholders of the Company and decrease the value of the Company’s securities.
The failure to raise or procure such additional funds as required could result in the delay or indefinite postponement of business objectives. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, will be on terms acceptable to the Company.
The market prices for securities of mining companies, including those of the Company, historically have been and may continue to be volatile.
The market prices for securities of mining companies, including those of the Company, historically have been and may continue to be volatile. Future developments concerning the Company or its industry, including downward fluctuations in the price of lithium, may have a significant impact on the market price of the Common Shares.
There may not be an active liquid market for the Common Shares and there is no guarantee that an active trading market for the Common Shares will be maintained on the TSXV or Nasdaq.
There may not be an active liquid market for the Common Shares. There is no guarantee that an active trading market for the Common Shares will be maintained on the TSXV or Nasdaq. Investors may not be able to sell their Common Shares quickly or at the latest market price if trading in the Common Shares is not active.
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Management will have discretion in the use of proceeds and the use of available funds.
Management will have broad discretion concerning the use of the net proceeds from the offering of any Securities and the use of available funds, as well as the timing of their expenditures. Depending on fluctuations in lithium prices and other factors, the intended use of proceeds from the offering of any Securities and use of available funds may change. As a result, an investor will be relying on the judgment of management for the application of the net proceeds from the offering of any Securities and use of available funds. Management may use the net proceeds from the offering of any Securities and available funds in ways that an investor may not consider desirable if they believe it would be in the best interests of the Company to do so. The results and the effectiveness of the application of proceeds from an offering of any Securities and available funds are uncertain. If the proceeds and available funds are not applied effectively, the Company’s results of operations may suffer.
The Company’s business does not currently operate on a self-sustaining basis and its ability to continue as a going concern is dependent on its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due and ultimately generate future profitable operations.
The Company’s ability to continue as a going concern is dependent upon the ability to ultimately generate future profitable operations and to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company has reported net losses and comprehensive losses for the three and nine months ended September 30, 2021 and for the year ended December 31, 2020. The Company’s business does not currently operate on a self-sustaining basis and until it is successfully able to fund its expenditures from its revenues, its ability to continue as a going concern is dependent on raising additional funds. The Company expects to continue to sustain operating losses in the future until it generates revenue from the commercial production of its mineral properties. There is no guarantee that the Company will ever be profitable.
LEGAL MATTERS
Unless otherwise specified in the Prospectus Supplement relating to an offering of Securities, certain legal matters relating to the offering of Securities will be passed upon on behalf of the Company by Cassels Brock & Blackwell LLP with respect to matters of Canadian law and by Paul, Weiss, Rifkind, Wharton & Garrison LLP with respect to matters of United States law. As at the date hereof, the partners and associates of Cassels Brock & Blackwell LLP beneficially own, directly and indirectly, in the aggregate, less than 1.0% of the outstanding Common Shares.
In addition, certain legal matters in connection with any offering of Securities will be passed upon for any underwriters, dealers or agents by counsel to be designated at the time of the offering by such underwriters, dealers or agents, as the case may be, with respect to matters of Canadian and, if applicable, other foreign law.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditor of Sigma Lithium Corporation is KPMG LLP who have confirmed that they are independent within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations.
The transfer agent and registrar for the Common Shares is Computershare Investor Services Inc., with its principal office in Toronto, Ontario.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been or will be filed with the SEC as part of the Registration Statement of which this Prospectus forms a part: (a) the documents listed under the heading “Documents Incorporated by Reference”; (b) powers of attorney from our directors and officers, as applicable (included on the signature page to the registration statement); (c) the consent of KPMG LLP; (d) the consent of each expert or “qualified person” ​(for the purposes of NI 43-101) referred to in this Prospectus under the heading “Interests of Experts”; and (e) the form of indenture for any Debt Securities issued hereunder. A copy of the form of warrant indenture, subscription receipt agreement or statement of eligibility of trustee on Form T-1, as applicable, will
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be filed by post-effective amendment or by incorporation by reference to documents filed or furnished with the SEC under the U.S. Exchange Act.
INTERESTS OF EXPERTS
The consolidated financial statements of Sigma Lithium Corporation (formerly Sigma Lithium Resources Corporation) as of December 31, 2020 and 2019, and for each of the years then ended, have been incorporated by reference in this Prospectus and the Registration Statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The following are the names of each person or company who is named as having prepared or certified a report, valuation, statement or opinion described or included herein or in a document incorporated by reference, and whose profession or business gives authority to such report, valuation, statement or opinion:
1.
Homero Delboni Jr, B.E., M.Eng.Sc., Ph.D., senior consultant of HDA Serviços S/S Ltda., is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm he works with had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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2.
Guilherme Gomides Ferreira (MEng) MAIG, mining engineer and manager for GE21 Consultoria Mineral, is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm he works with had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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3.
Marc-Antoine Laporte, P. Geo, senior geologist with SGS Canada Inc. (Geological Service), is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm he works with had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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4.
Stephane Normandin, P.Eng., a study manager with Primero Group Americas Inc., a division of Primero Group Ltd., is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm he works with had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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5.
Jacques Parent, P.Eng., senior advisor with Primero Group Americas Inc., a division of Primero Group Ltd., is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm he works with had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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6.
Jarrett Quinn, P.Eng., consulting process engineer for Primero Group Americas Inc., a division of Primero Group Ltd., is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm he works with had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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7.
Porifrio Cabaleiro Rodriguez, MEng., Mining Engineer and Associate Consultant at GE21 Consultoria Mineral, is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm she works with had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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8.
Jacqueline Wang, P.Eng., currently a process engineer with DRA Global, who at the effective date of the Updated Feasibility Study Report was a process engineer who worked with Primero Group Americas Inc., a division of Primero Group Ltd., is a qualified person who authored certain portions of the Updated Feasibility Study Report and who reviewed, approved and verified certain technical information disclosed in the AIF relating to the Updated Feasibility Study Report. To the knowledge of the Company, none of the author nor the firm she works at currently nor the firm she worked at as at the effective date of the Updated Feasibility Study Report had an interest in any securities or other properties of the Company, its associates or affiliates as at the date of the Updated Feasibility Study Report or as at the date hereof.
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9.
Wes Roberts, P.Eng., a member of the technical committee of the Company, is a qualified person who reviewed and approved the technical information disclosed in this Prospectus and the documents incorporated by reference herein. To the knowledge of the Company, Mr. Roberts does not have an interest in any securities or other properties of the Company, its associates or affiliates as at the date hereof, other than 50,000 restricted share units of the Company.
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STATUTORY AND CONTRACTUAL RIGHTS OF WITHDRAWAL AND RESCISSION
Unless provided otherwise in a Prospectus Supplement, the following is a description of a purchaser’s statutory rights. Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission, revision of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for the particulars of these rights or consult with a legal advisor.
In an offering of Securities which are convertible, exchangeable or exercisable for other securities of the Company, investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the prospectus is limited, in certain provincial and territorial securities legislation, to the price at which the Securities which are convertible, exchangeable or exercisable for other securities of the Company is offered to the public under the prospectus offering. This means that, under the securities legislation of certain provinces and territories, if the purchaser pays additional amounts upon conversion, exchange or exercise of the Security, those amounts may not be recoverable under the statutory right of action for damages that applies in those provinces and territories. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of this right of action for damages or consult with a legal advisor.
Original purchasers of Securities which are convertible, exchangeable or exercisable for other securities of the Company will have a contractual right of rescission against the Company in respect of the conversion, exchange or exercise of such Securities. Other than in the case of an offering of warrants that may reasonably be regarded as incidental to the offering as a whole, the contractual right of rescission will entitle such original purchasers to receive, upon surrender of the underlying securities, the original amount paid for the applicable convertible, exchangeable or exercisable Securities and any additional amount paid upon conversion, exchange or exercise thereof in the event that this Prospectus, the relevant Prospectus Supplement or an amendment thereto contains a misrepresentation, provided that: (i) the conversion, exchange or exercise takes place within
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180 days of the date of the purchase of such Securities under this Prospectus and the applicable Prospectus Supplement; and (ii) the right of rescission is exercised within 180 days of the date of the purchase of such Securities under this Prospectus and the applicable Prospectus Supplement. This contractual right of rescission will be consistent with the statutory right of rescission described under Section 130 of the Securities Act (Ontario), and is in addition to any other right or remedy available to original purchasers under Section 130 of the Securities Act (Ontario) or otherwise at law.
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PART II
INFORMATION NOT REQUIRED TO BE DELIVERED
TO OFFEREES OR PURCHASERS
Limitations on Liability and Indemnification of Directors and Officers
Under the Canada Business Corporations Act (the “CBCA”), the Registrant may indemnify the Registrant’s directors or officers, the Registrant’s former directors or officers, or another individual who acts or acted at the Registrant’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of his or her association with the Registrant or another entity. The CBCA also provides that the Registrant may advance moneys to a director, officer or other individual for costs, charges and expenses reasonably incurred in connection with such a proceeding; provided that such individual shall repay the moneys if the individual does not fulfill the conditions described below.
The Registrant’s by-laws require the Registrant to indemnify to the fullest extent permitted by the CBCA each of the Registrant’s directors or officers, the Registrant’s former directors or officers, and each individual who acts or acted at the Registrant’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including, without limitation, an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of his or her association with the Registrant or another entity, provided that the individual fulfill the conditions described below.
Indemnification by the Registrant is prohibited under the CBCA and the Registrant’s by-laws unless the individual:
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acted honestly and in good faith with a view to the Registrant’s best interests, or the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Registrant’s request; and
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in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that his or her conduct was lawful.
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The Registrant’s by-laws authorize the Registrant to purchase and maintain insurance for the benefit of each of the Registrant’s directors or officers, the Registrant’s former directors or officers, and each person who acts or acted at the Registrant’s request as a director or officer, or an individual acting in a similar capacity, of another entity.
The Registrant has entered into indemnity agreements with the Registrant’s directors and certain officers which provide, among other things, that the Registrant will indemnify him or her to the fullest extent permitted by law from and against all liabilities, costs, charges and expenses incurred as a result of his or her actions in the exercise of his or her duties as a director or officer.
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Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is therefore unenforceable.
The exhibits listed in the exhibit index, appearing elsewhere in this Registration Statement, have been filed as part of this Registration Statement.
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PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
Item 1.   Undertaking
The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form F-10 or to transactions in said securities.
Item 2.   Consent to Service of Process
A written Appointment of Agent for Service of Process and Undertaking on Form F-X for the Registrant and its agent for service of process was filed concurrently with the initial filing of this Registration Statement.
Pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939, as amended, the Registrant will designate at a later date a trustee (the “Trustee”) under the indenture included as Exhibit 7.1 hereto, and will file at such later date an application for determining the Trustee’s eligibility under the Trust Indenture Act of 1939, as amended.
Any change to the name or address of the agent for service of process of the Registrant shall be communicated promptly to the Commission by amendment to Form F-X referencing the file number of this Registration Statement on Form F-10.
III-1
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EXHIBIT INDEX
Exhibit
Number 		​ ​
Description
​
4.1**
​ ​ ​
4.2
​ ​ ​
4.3
​ ​ ​
4.4
​ ​ ​
4.5
​ ​ ​
4.6
​ ​ ​
4.7
​ ​ ​
5.1**
​ ​ Consent of KPMG LLP ​
5.2*
​ ​ Consent of Cassels Brock & Blackwell LLP. ​
5.3*
​ ​ Consent of Guilherme Gomides Ferreira, B.Sc., M.Eng. ​
5.4*
​ ​ Consent of Marc-Antoine Laporte, P.Geo. ​
5.5*
​ ​ Consent of Jacques Parent, P.Eng., Ph.D. ​
5.6*
​ ​ Consent of Jarrett Quinn, P.Eng. ​
5.7*
​ ​ Consent of Porfirio Cabaleiro Rodriguez, B.Sc., M.Eng. ​
5.8**
​ ​ Consent of Homero Delboni Jr. B.E., M.Eng.Sc., Ph.D. ​
5.9*
​ ​ Consent of Jacqueline Wang, P.Eng. ​
5.10**
​ ​ Consent of Stephane Normandin, P. Eng. ​
5.11**
​ ​ Consent of Wes Roberts, P.Eng. ​
6.1*
​ ​ Powers of Attorney (included on page III-4 of the initial Registration Statement). ​
7.1**
​ ​ ​
​
*
Previously filed.
​
**
Filed herewith.
​
III-2
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-10 and has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, British Columbia, on December 2, 2021.
SIGMA LITHIUM CORPORATION
By:
/s/ Ana Cristina Cabral Gardner
​
​
Name: Ana Cristina Cabral Gardner
Title: Co-Chief Executive Officer
III-3
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Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed below by the following persons in the capacities indicated and on the dates indicated.
​
Signature
​ ​
Capacity
​ ​
Date
​
​
*
​
Calvyn Gardner
​ ​
Co-Chairman, Co-Chief Executive Officer and Director (Principal Executive Officer)
​ ​
December 2, 2021
​
​
*
​
Felipe Peres
​ ​
Chief Financial Officer
(Principal Financial and Accounting Officer)
​ ​
December 2, 2021
​
​
/s/ Ana Cristina Cabral Gardner
​
Ana Cristina Cabral Gardner
​ ​
Co-Chairman, Co-Chief Executive Officer and Director
​ ​
December 2, 2021
​
​
*
​
Gary Litwack
​ ​
Director
​ ​
December 2, 2021
​
​
*
​
Frederico Marques
​ ​
Director
​ ​
December 2, 2021
​
​
*
​
Marcelo Paiva
​ ​
Director
​ ​
December 2, 2021
​
​
*By:
/s/ Ana Cristina Cabral Gardner
​
​
Name: Ana Cristina Cabral Gardner
Title: Attorney-in-fact
III-4
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AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, as amended, the undersigned has signed this Amendment No. 1 to the Registration Statement, in the capacity of the duly authorized representative of the Registrant in the United States, on December 2, 2021.
PUGLISI & ASSOCIATES
(Authorized U.S. Representative)
By:
/s/ Donald J. Puglisi
​
​
Name:   Donald J. Puglisi
Title:   Managing Director
III-5

 

Exhibit 4.1

 

 

 

 

 

Annual Information Form (Amended and Restated) 

For the year ended December 31, 2020 

December 1, 2021

 

 

 

 

 

 

TABLE OF CONTENTS

 

INTERPRETATION      6
Definitions      6
CIM Definition Standards      6
CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION      7
CAUTIONARY NOTE REGARDING MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES      11
OTHER INFORMATION      11
Currency      11
Third Party Information      11
Non-GAAP Measures      12
Date of Information      12
STRUCTURE OF THE COMPANY      13
Name, Address and Incorporation      13
Intercorporate Relationships      13
GENERAL DEVELOPMENT OF THE BUSINESS      14
Overview      14
Three Year History      14
Operations      14
Environmental Social and Governance      16
DESCRIPTION OF THE BUSINESS      20
Overview      20
Lithium Properties      20
Royalties      27
Life Cycle Analysis and Net Zero Strategy      27
Environmental Licensing and Permitting      28
Surface Rights and Other Permitting      29
Specialized Skills and Knowledge      29
Mineral Price and Economic Cycles      29
Economic Dependence      29
Bankruptcy and Similar Procedures      29
Reorganizations      29
Foreign Operations      29
Employees      30

 

 

 

 

 

 

Environmental Protection      30
Social and Environmental Policies      30
SUMMARY OF UPDATED FEASIBILITY STUDY REPORT      30
Property Description and Location      30
Accessibility, Climate, Local Resources, Infrastructure and Physiography      31
History      31
Geological Setting and Mineralization      31
Exploration      32
Drilling      32
Sample Preparation, Analyses and Security      33
Data Verification      35
Mineral processing and Metallurgical Testing      35
First Mine      35
Second Mine      36
Mineral resource estimates      36
Mineral Reserve Estimates      40
Mining methods      41
First Mine      41
Second Mine      41
Recovery methods      42
Processing Plant Description      42
Design Criteria and Utilities Requirements      42
Project Infrastructure      43
Buildings, Roads, Fuel Storage, Power Supply and Water Supply      43
Waste Rock and Tailings Disposal and Stockpiles      43
Control Systems and Communication      44
Market Studies and Contracts      44
Demand and Consumption      44
Supply      44
Contracts      44
Price Forecast      45
Environmental Studies, Permitting and Social or Community Impact      45
Applicable Legal Requirements for Project Environmental Permitting      45
Current Project Environmental Permitting Status      45

 

 

 

 

 

 

Authorizations      46
Land Access      46
Social License Considerations      46
Rehabilitation, Closure Planning and Post-Closure Monitoring      47
Second Mine Environmental Work to Date      47
Capital and Operating Costs      47
Capital Costs First Mine      47
Operating Costs First Mine      48
Plant CAPEX and OPEX Second Mine      49
Mining Capital Costs Second Mine      49
Mining Operating Costs Second Mine      49
Economic Analysis      50
Production Phase 1      50
Production Phase 2      53
Interpretation and Conclusions      56
Risk Assessment      56
Opportunities      56
Recommendations      57
Geology and Resources      57
First Mine Recommendations      57
Second Mine Project Recommendations      57
Competitive Conditions and Anticipated Trends      58
Emerging Market Disclosure      61
RISK FACTORS      63
Risk Factors      63
Risks Related to Resource Development      64
DESCRIPTION OF CAPITAL STRUCTURE      78
Common Shares      78
DIVIDENDS AND DISTRIBUTIONS      78
MARKET FOR SECURITIES      79
Market      79
Trading Price and Volume      79
PRIOR SALES      80
DIRECTORS AND OFFICERS      80
Name and Occupation      80
Shareholdings of Directors and Officers      82

 

 

 

 

 

 

Cease Trade Orders, Bankruptcies, Penalties or Sanctions      82
Committees of the Board      83
Conflicts of Interest      83
AUDIT COMMITTEE INFORMATION      84
Audit Committee Charter      84
Composition of the Audit Committee      84
Relevant Education and Experience      84
Audit Committee Oversight      85 
Reliance on Certain Exemptions      85
Pre-Approval Policies and Procedures      85
Audit Fees      86
LEGAL PROCEEDINGS AND REGULATORY ACTIONS      85
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS      85
TRANSFER AGENT AND REGISTRAR      85
MATERIAL CONTRACTS      85
INTERESTS OF EXPERTS      86
ADDITIONAL INFORMATION      86
SCHEDULE “A” Audit Committee Charter      87
EXHIBIT “A” TO THE AUDIT COMMITTEE CHARTER      92
SCHEDULE “B” DEFINITIONS      94

 

 

 

 

 

 

INTERPRETATION

 

Definitions

 

For a description of defined terms and other reference information used in this Annual Information Form (this “AIF”), please refer to Schedule “B”.

 

CIM Definition Standards

 

The disclosure included in this AIF uses mineral resources and mineral reserves classification terms that comply with reporting standards in Canada. All mineral resource and mineral reserve estimates are made in accordance with the CIM Definition Standards and NI 43-101, which is a set of rules developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects and operations. The following definitions are reproduced from the CIM Definition Standards:

 

A mineral resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral resources are sub-divided, in order of increasing geological confidence, into inferred, indicated and measured categories, which are defined as follows:

 

·An inferred mineral resource is that part of a mineral resource for which quantity, grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An inferred mineral resource has a lower level of confidence than that applying to an indicated mineral resource and must not be converted to a mineral reserve. It is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.

 

·An indicated mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of modifying factors (as defined below) in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An indicated mineral resource has a lower level of confidence than that applying to a measured mineral resource and may only be converted to a probable mineral reserve.

 

·A measured mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of modifying factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A measured mineral resource has a higher level of confidence than that applying to either an indicated mineral resource or an inferred mineral resource. It may be converted to a proven mineral reserve or to a probable mineral reserve.

 

“Modifying factors” are considerations used to convert mineral resources to mineral reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

 

2020 ANNUAL INFORMATION FORM

 6

 

 

 

 

A mineral reserve is the economically mineable part of a measured and/or indicated mineral resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that include application of modifying factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. Mineral reserves are sub-divided, in order of increasing geological confidence, into probable and proven categories, which are defined as follows:

 

·A probable mineral reserve is the economically mineable part of an indicated, and in some circumstances, a measured mineral resource. The confidence in the modifying factors applying to a probable mineral reserve is lower than that applying to a proven mineral reserve.

 

·A proven mineral reserve is the economically mineable part of a measured mineral resource. A proven mineral reserve implies a high degree of confidence in the modifying factors.

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION

 

Certain information and statements in this AIF may constitute “forward looking information” within the meaning of Canadian securities legislation and “forward looking statements” within the meaning of U.S. securities legislation (collectively, “Forward Looking Information”), which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such Forward Looking Information. All statements, other than statements of historical fact, may be Forward Looking Information, including, but not limited to, mineral resource or mineral reserve estimates (which reflect a prediction of mineralization that would be realized by development). When used in this AIF, such statements generally use words such as “may”, “would”, “could”, “will”, “intend”, “expect”, “believe”, “plan”, “anticipate”, “estimate” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this AIF. Forward Looking Information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and does not necessarily provide accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the Forward Looking Information, which is based upon what management believes are reasonable assumptions, and there can be no assurance that actual results will be consistent with the Forward Looking Information.

 

In particular (but without limitation), this AIF contains Forward Looking Information with respect to the following matters: statements regarding anticipated decision making with respect to the Project; capital expenditure programs; estimates of mineral resources and mineral reserves; development of mineral resources and mineral reserves; government regulation of mining operations and treatment under governmental and taxation regimes; the future price of commodities, including lithium; the realization of mineral resource and mineral reserve estimates, including whether mineral resources will ever be developed into mineral reserves; the timing and amount of future production; currency exchange and interest rates; expected outcome and timing of environmental surveys and permit applications and other environmental matters; the Company’s ability to raise capital and obtain project financing; expected expenditures to be made by the Company on its properties; successful operations and the timing, cost, quantity, capacity and quality of production; capital costs, operating costs and sustaining capital requirements, including the cost of construction of the processing plant for the Project; and competitive conditions and anticipated trends post-COVID-19 pandemic and the ongoing uncertainties and effects in respect of the COVID-19 pandemic.

 

2020 ANNUAL INFORMATION FORM

 7

 

 

 

 

Forward Looking Information does not take into account the effect of transactions or other items announced or occurring after the statements are made. Forward Looking Information is based upon a number of expectations and assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results to differ materially from those disclosed in or implied by such Forward Looking Information. With respect to the Forward Looking Information, the Company has made assumptions regarding, among other things:

 

·General economic and political conditions

·Stable and supportive legislative, regulatory and community environment in the jurisdictions where the Company operates

·Stability and inflation of the Brazilian Real, including any foreign exchange or capital controls which may be enacted in respect thereof, and the effect of current or any additional regulations on the Company’s operations

·Anticipated trends and effects in respect of the COVID-19 pandemic and post-pandemic

·Demand for lithium, including that such demand is supported by growth in the electric vehicle (“EV”) market

·Estimates of, and changes to, the market prices for lithium

·The impact of increasing competition in the lithium business and the Company’s competitive position in the industry

·The Company’s market position and future financial and operating performance

·The Company’s estimates of mineral resources and mineral reserves, including whether mineral resources will ever be developed into mineral reserves

·Anticipated timing and results of exploration, development and construction activities

·Reliability of technical data

·The Company’s ability to develop and achieve production at the Project

·The Company’s ability to obtain financing on satisfactory terms to develop the Project

·The Company’s ability to obtain and maintain mining, exploration, environmental and other permits, authorizations and approvals for the Project

·The timing and possible outcome of regulatory and permitting matters for the Project

·The exploration, development, construction and operational costs for the Project

·The accuracy of budget, construction and operations estimates for the Project

·Successful negotiation of definitive commercial agreements, including off-take agreements for the Project

·The Company’s ability to operate in a safe and effective manner.

 

Although management believes that the assumptions and expectations reflected in such Forward Looking Information are reasonable, there can be no assurance that these assumptions and expectations will prove to be correct. Since Forward Looking Information inherently involves risks and uncertainties, undue reliance should not be placed on such information.

 

The Company’s actual results could differ materially from those anticipated in any Forward Looking Information as a result of various known and unknown risk factors, including (but not limited to) the risk factors referred to under the heading “Risk Factors” in this AIF. Such risks relate to, but are not limited to, the following:

 

·The Company may not develop the Project into a commercial mining operation

·There can be no assurance that market prices for lithium will remain at current levels or that such prices will improve

·The market for electric vehicles (“EVs”) and other large format batteries currently has limited market share and no assurances can be given for the rate at which this market will develop, if at all, which could affect the success of the Company and its ability to develop lithium operations

·Changes in technology or other developments could result in preferences for substitute products

·New production of lithium hydroxide or lithium carbonate from current or new competitors in the lithium markets could adversely affect prices

·The Project is at development stage and the Company’s ability to succeed in progressing through development to commercial operations will depend on a number of factors, some of which may be outside its control

·The Company’s financial condition, operations and results of any future operations are subject to political, economic, social, regulatory and geographic risks of doing business in Brazil

 

2020 ANNUAL INFORMATION FORM

 8

 

 

 

 

·Violations of anti-corruption, anti-bribery, anti-money laundering and economic sanctions laws and regulations could materially adversely affect the Company’s business, reputation, results of any future operations and financial condition

·The Company is subject to regulatory frameworks applicable to the Brazilian mining industry which could be subject to further change, as well as government approval and permitting requirements, which may result in limitations on the Company’s business and activities

·The Company’s operations are subject to numerous environmental laws and regulations and expose the Company to environmental compliance risks, which may result in significant costs and have the potential to reduce the profitability of operations

·Physical climate change events and the trend toward more stringent regulations aimed at reducing the effects of climate change could have an adverse effect on the Company’s business and future operations

·As the Company does not have any experience in the construction and operation of a mine, processing plants and related infrastructure, it is more difficult to evaluate the Company’s prospects, and the Company’s future success is more uncertain than if it had a more proven history of developing a mine

·The Company’s future production estimates are based on existing mine plans and other assumptions which change from time to time. No assurance can be given that such estimates will be achieved

·The Company may experience unexpected costs and cost overruns, problems and delays during construction, development, mine start-up and operations for reasons outside of the Company’s control, which have the potential to materially affect its ability to fully fund required expenditures and/or production or, alternatively, may require the Company to consider less attractive financing solutions

·The Company’s capital and operating cost estimates may vary from actual costs and revenues for reasons outside of the Company’s control

·The Company’s operations are subject to the high degree of risk normally incidental to the exploration for, and the development and operation of, mineral properties

·Insurance may not be available to insure against all such risks, or the costs of such insurance may be uneconomic. Losses from uninsured and underinsured losses have the potential to materially affect the Company’s financial position and prospects

·The Company is subject to risks associated with securing title and property interests

·The Company is subject to strong competition in Brazil and in the global mining industry

·The Company may become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health and safety matters, which could result in consequences material to its business and operations

·The Company’s mineral resource and mineral reserve estimates are estimates only and no assurance can be given that any particular level of recovery of minerals will in fact be realized or that identified mineral resources or mineral reserves will ever qualify as a commercially mineable (or viable) deposit

·The Company’s operations and the development of its projects may be adversely affected if it is unable to maintain positive community relations

·The Company is exposed to risks associated with doing business with counterparties, which may impact the Company’s operations and financial condition

·Any limitation on the transfer of cash or other assets between the Company and the Company’s subsidiaries, or among such entities, could restrict the Company’s ability to fund its operations efficiently

·The Company is subject to risks associated with its reliance on consultants and others for mineral exploration and exploitation expertise

·The current COVID-19 pandemic could have a material adverse effect on the Company’s business, operations, financial condition and stock price

·If the Company is unable to ultimately generate sufficient revenues to become profitable and have positive cash flows, it could have a material adverse effect on its prospects, business, financial condition, results of operations or overall viability as an operating business

·The Company is subject to liquidity risk and therefore may have to include a “going concern” note in its financial statements

·The Company may not be able to obtain sufficient financing in the future on acceptable terms, which could have a material adverse effect on the Company’s business, results of operations and financial condition. In order to obtain additional financing, the Company may conduct additional (and possibly dilutive) equity offerings or debt issuances in the future

 

2020 ANNUAL INFORMATION FORM

 9

 

 

 

 

·The Company may be unable to achieve cash flow from operating activities sufficient to permit it to pay the principal, premium, if any, and interest on the Company’s indebtedness, or maintain its debt covenants

·The Company has not declared or paid dividends in the past and may not declare or pay dividends in the future

·The Company will incur increased costs as a result of being a public company both in Canada listed on the TSXV and in the United States listed on the Nasdaq Capital Market (“Nasdaq”), and its management will be required to devote further substantial time to United States public company compliance efforts

·If the Company does not maintain adequate and appropriate internal controls over financial reporting as outlined in accordance with NI 52-109 or the Rules and Regulations of the SEC, the Company will have to report a material weakness and disclose that the Company has not maintained appropriate internal controls over financial reporting

·As a foreign private issuer, the Company is subject to different U.S. securities laws and rules than a domestic U.S. issuer, which may limit the information publicly available to its shareholders

·Failure to retain key officers, consultants and employees or to attract and, if attracted, retain additional key individuals with necessary skills could have a materially adverse impact upon the Company’s success

·The Company is subject to currency fluctuation risks

·From time to time, the Company may become involved in litigation, which may have a material adverse effect on its business financial condition and prospects

·Certain directors and officers of the Company are, or may become, associated with other natural resource companies which may give rise to conflicts of interest

·The market price for the Company’s shares may be volatile and subject to wide fluctuations in response to numerous factors beyond its control, and the Company may be subject to securities litigation as a result

·If securities or industry analysts do not publish research or reports about the Company’s business, or if they downgrade the Common Shares, the price of the Common Shares could decline

·The Company will have broad discretion over the use of the net proceeds from offerings of its securities

·There is no guarantee that the Common Shares will earn any positive return in the short term or long term

·The Company has a major shareholder which owns 55.5% of the outstanding Common Shares and, as such, for as long as such shareholder directly or indirectly maintains a significant interest in the Company, it may be in a position to affect the Company’s governance, operations and the market price of the Common Shares

·As the Company is a Canadian corporation but most of its directors and officers are not citizens or residents of Canada or the U.S., it may be difficult or impossible for an investor to enforce judgements against the Company and its directors and officers outside of Canada and the U.S. which may have been obtained in Canadian or U.S. courts or initiate court action outside Canada or the U.S. against the Company and its directors and officers in respect of an alleged breach of securities laws or otherwise. Similarly, it may be difficult for U.S. shareholders to effect service on the Company to realize on judgments obtained in the United States

·The Company is governed by the corporate and securities laws of the Province of British Columbia and of Canada, which in some cases have a different effect on shareholders than U.S. corporate laws and U.S. securities laws

·The Company is subject to risks associated with its information technology systems and cyber-security

·The Company may be a Passive Foreign Investment Company, which may result in adverse U.S. federal income tax consequences for U.S. holders of Common Shares

 

Readers are cautioned that the foregoing lists of assumptions and risks is not exhaustive. The Forward Looking Information contained in this AIF is expressly qualified by these cautionary statements. All Forward Looking Information in this AIF speaks as of the date of this AIF. The Company does not undertake any obligation to update or revise any Forward Looking Information, whether as a result of new information, future events or otherwise, except as required by applicable securities law. Additional information about these assumptions, risks and uncertainties is contained in the Company’s filings with securities regulators, including the Company’s most recent annual and interim MD&A, which are available on SEDAR at www.sedar.com.

 

2020 ANNUAL INFORMATION FORM

 10

 

 

 

 

CAUTIONARY NOTE REGARDING MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

 

Technical disclosure regarding the Company’s properties included in this AIF, and in the documents incorporated herein by reference has not been prepared in accordance with the requirements of U.S. securities laws. Without limiting the foregoing, such technical disclosure uses terms that comply with reporting standards in Canada and estimates are made in accordance with NI 43-101. Unless otherwise indicated, all mineral reserve and mineral resource estimates contained in the technical disclosure have been prepared in accordance with NI 43-101 and the CIM Definition Standards.

 

Under the SEC rules regarding disclosure of technical information, the definitions of “proven mineral reserves” and “probable mineral reserves” are substantially similar to the corresponding CIM Definition Standards, and the SEC recognizes “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” which are also substantially similar to the corresponding CIM Definition Standards. However, there are still differences in the definitions and standards under the SEC rules and the CIM Definition Standards. Therefore, the Company’s mineral resources and reserves as determined in accordance with NI 43-101 may be significantly different than if they had been determined in accordance with the SEC rules.

 

OTHER INFORMATION

 

Currency

 

This AIF contains references to United States dollars, Canadian dollars and Brazilian Reais. All dollar amounts referenced, unless otherwise indicated, are expressed in Canadian dollars “Cdn$”. United States dollars are referred to as “US$”. Brazilian Reais are referred to as “R$”.

 

The following table sets forth the high and low, average and period-end exchange rates for one US dollar expressed in Canadian dollars and Brazilian Reais for each period indicated, based upon the daily exchange rates provided by the Bank of Canada and FactSet:

 

United States Dollars into Canadian Dollars and Brazilian Reais
    2020    2019 
High   Cdn$1.45/R$5.93    Cdn$1.36/R$4.27 
Low   Cdn$1.27/R$4.02    Cdn$1.30/R$3.64 
Rate at end of period   Cdn$1.27/R$5.19    Cdn$1.30/R$4.02 
Average rate for period   Cdn$1.34/R$5.15    Cdn$1.33/R$3.94 

 

On November 30, 2021, the rate for Canadian dollars (as quoted by the Bank of Canada) and Brazilian Reais (as quoted by FactSet) in terms of the United States dollar was US$1.00 = Cdn$1.2828/R$5.6486.

 

Third Party Information

 

This AIF includes market, industry and economic data and projections obtained from various publicly available sources and other sources believed by the Company to be true. Although the Company believes these to be reliable, it has not independently verified the information from third party sources, or analyzed or verified the underlying reports relied upon or referred to by the third parties, or ascertained the underlying economic and other assumptions relied upon by the third parties. The Company believes that the market, industry and economic data and projections are accurate and that the estimates and assumptions are reasonable, but there can be no assurance as to their accuracy or completeness. The accuracy and completeness of the market, industry and economic data and projections in this AIF are not guaranteed and the Company does not make any representation as to the accuracy or completeness of such information.

 

2020 ANNUAL INFORMATION FORM

11

 

 

 

Non-GAAP Measures

 

This AIF and the Updated Feasibility Study Report incorporated by reference herein contains certain non-GAAP measures. The non-GAAP measures do not have any standardized meaning within IFRS and therefore may not be comparable to similar measures presented by other companies. These measures provide information that is customary in the mining industry and that is useful in evaluating the Project. This data should not be considered as a substitute for measures of performance prepared in accordance with IFRS.

 

Qualified Person

 

Mr. Wes Roberts, P.Eng., a member of the technical committee of the Company, is the “qualified person” under NI 43-101 who reviewed and approved the technical information disclosed in this AIF and the documents incorporated by reference herein.

 

Date of Information

 

Except as otherwise indicated, all information disclosed in this AIF is as of December 1, 2021.

 

2020 ANNUAL INFORMATION FORM

12

 

 

 

STRUCTURE OF THE COMPANY

 

Name, Address and Incorporation

 

Sigma Lithium Corporation (the “Company” or “Sigma”) is domiciled in Canada and was incorporated under the Canada Business Corporations Act on June 8, 2011 originally under the name Margaux Red Capital Inc. The current business of Sigma was acquired through a reverse take-over transaction on April 30, 2018 pursuant to which the Company acquired Sigma Lithium Resources Inc (“Sigma Holdings”) which held (and continues to hold) the Grota do Cirilo Project, located in the state of Minas Gerais in Brazil (the ”Project”) through a Brazilian wholly-owned subsidiary, Sigma Mineração S.A. (“Sigma Brazil”). On completion of the reverse take-over transaction, the Company implemented a share consolidation. On July 5, 2021, the Company changed its name from “Sigma Lithium Resources Corporation” to “Sigma Lithium Corporation”.

 

The head office of the Company is at Suite 2200, HSBC Building, 885 West Georgia St. Vancouver, BC V6C 3E8 Canada and its web site is www.sigmalithium.ca.

 

Intercorporate Relationships

 

The corporate structure of the Company, its subsidiaries, the jurisdiction of incorporation of such corporations and the percentage of equity ownership are set out in the following chart:

 

 

 

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GENERAL DEVELOPMENT OF THE BUSINESS

 

Overview

 

Sigma is a Canadian-based mineral processing and development company, focused on advancing, with an environmental sustainability directed strategy, one of the largest hardrock lithium projects in the Americas - its wholly-owned Grota do Cirilo Project in Brazil, with the goal of participating in the rapidly expanding lithium-ion battery supply chain for EVs. For further information on the business of the Company, please refer to “Description of the Business”.

 

Three Year History

 

The following is a summary of the key developments that have generally influenced the development of the Company’s business and projects over the last three years.

 

Operations

 

The Company continues to advance toward initiating commercial production in 2022. On November 9, 2021, the Company announced that it is mobilizing its workforce and equipment on site for construction of the Production Plant. This stage comprises the earthworks necessary for installation of the Production Plant and infrastructure foundations. It is expected that approximately one million cubic meters of soil/subsoils will be moved, employing a workforce of approximately 180 personnel. Completion of this stage is expected within three months.

 

The Company successfully completed several workstreams involved in the pre-construction of the Project within its schedule and budget parameters. In 2021, the Company reached major milestones towards engineering and construction, despite challenging circumstances created by the COVID-19 pandemic.

 

The Company is managing three interconnected workstreams aimed to develop the Project as a whole:

 

·The completion of detailed engineering and execution and management of construction activities for Production Phase 1 and the Production Plant

 

·The completion of the pre-feasibility study of Production Phase 2, aimed at a potential production expansion

 

·The continued exploration and expansion of the Project’s estimated mineral resources, with the objective of increasing the Project’s mine life and/or a potential Production Phase 3 expansion scenario

 

For further information on Production Phase 1, Production Phase 2 and Production Phase 3, please refer to “Description of the Business – Current Status of the Project”.

 

In relation to the Production Phase 1 workstream, the Company expects Front-End Engineering and Design (“FEED”) to be finalized in the fourth quarter of 2021. The revised capital expenditure (“CAPEX”) estimation is ongoing and final CAPEX with a Project Execution Plan (“PEP”) is also expected to be complete in the fourth quarter of 2021. Subsequently, Board approval for the Production Phase 1 construction plan could be made formalizing a final investment decision. Immediately thereafter, the Company would place orders for long lead items and reserve manufacturing slots with the key vendors whose equipment is part of the construction critical path. Contracts for earthmoving, civil construction, and the orders for long lead items, will be paid for with funds already in the Company treasury and currently earmarked for construction.

 

Following the successful conclusion of the first phase of FEED, Promon Engenharia Ltda. (“Promon”) and Primero Group Ltd (“Primero”) will remain engaged by the Company and continue to focus on negotiating and securing long lead items for the construction of the Production Plant. The Company is currently negotiating an agreement for the engineering, procurement, and construction management (“EPCM”) of the Production Plant and associated infrastructure with both engineering firms. The Company is also in negotiations with two finalist mining contractors to build and operate the First Mine at the Project.

 

The Company continued to demonstrate the unique extent and high-purity quality of its hard rock lithium mineralization at the Project and its commercial and market relevance by having significantly advanced its strategic goals on three fronts: short term production scheduled for 2022, the viability of a near-term production expansion contemplated for 2023, and the determination of the ultimate extent of mineral resources at the Project, all while maintaining its strategic leadership in ESG in the lithium supply chain.

 

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For further information on the Project, please refer to “Description of the Business – Current Status of the Project”.

 

On December 1, 2021, the Company filed on SEDAR the Updated Feasibility Study Report in respect of its preliminary economic assessment on Production Phase 2 of the Project. The Updated Feasibility Study Report was prepared by leading mining consultancies and the professional services firms Primero, SGS Canada Lakefield (“SGS”), and GE21 Consultoria Mineral (“GE21”). Please refer to “Description of the Business – Current Status of the Project” and “Summary of Updated Feasibility Study Report”. This approach was the result of a thorough review of the Company´s strategic priorities, with the objective of potentially responding to a significant increase in demand from its customers and solidifying its unique market position as a future supplier of high purity 6% battery grade lithium concentrate (“Battery Grade Green and Sustainable Lithium”). It also aims to significantly increase both the scale of the Project and its commercial and market importance on three fronts: (i) future production, (ii) scale of mineral reserves and (iii) scale of mineral resources, all while maintaining its battery grade green lithium products and the Company’s strategic leadership in ESG in the lithium supply chain.

 

The Company (prior to the severe second wave of COVID-19) revised its strategy regarding certain international third-party engineering service providers and replaced them with Brazil-based specialists, anticipating the severely restrictive global travel bans that followed in the fourth quarter of 2020 as a result of the second wave. This pre-emptive change enabled the Company to successfully complete all field activities on time and on budget, and to continue to execute engineering activities during the rest of 2021.

 

In that regard, the Company has also made significant progress in further strengthening its project team, aligning and defining scope requirements as well as advancing the Project’s execution strategy. The Company has added several senior professionals as part of its project implementation team. Key Project consultants include a mix of experienced Brazilian and international engineers actively engaged on or off site, and currently includes GE21, MDGeo Hidrogeologia e Meio Ambiente (“MDGEO”), APL Engenharia (“APL”), Primero, SGS, Metso-Outotec (“Metso”) and SRK Consulting Inc (“SRK”).

 

The Company added two senior project management professionals to lead the Project Management Office (“PMO”): a senior mineral processing engineer and a senior geotechnical geologist. They report to Calvyn Gardner, one of the Company’s co-CEOs, who has primary responsibility for all technical workstreams and has been based full time at the Project since August 2020. This core team has been providing valuable oversight on project delivery, while interfacing with the detailed engineering team, construction contractors, equipment vendors and other stakeholders, aligning them to the Project objectives. The PMO has established standard management processes and strategies regarding project execution, contract management, project delivery and document controls.

 

In addition, following the listing on the Nasdaq, the corporate finance and business development teams were also strengthened with the addition of two senior professionals: the company appointed a new CFO and a Director of Business Development and Investor Relations.

 

Overall, although working under a strict COVID-19 Protocol (the “Protocol”), the Company made significant progress in 2021 to date, despite the circumstances created by the COVID-19 pandemic. The Protocol was developed in conjunction with Brazilian health advisors, who are consulted on a regular basis to refine and adapt the Protocol to respond to the evolving COVID-19 situation in Brazil. An average of 86 people worked at the Project site, of which only two tested positive for COVID-19. They received prompt medical assistance and have fully recovered. Since the implementation of the Protocol, the Company has not reported any new cases on site. Nevertheless, the COVID-19 situation in Brazil remains challenging. The Company has been actively monitoring any additional impacts on pre-construction activities and the pre-construction schedule. Mandatory mask wearing on site and premises, physical distancing requirements and additional sanitary measures, along with testing measures for workers accessing the site, have brought delays to the expected date to commence production in the fourth quarter of 2022. In addition, the Company continues to support the municipalities of Itinga and Araçuaí in their ongoing response to the pandemic (please refer to “Environmental Social and Governance”).

 

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Further to the information referenced above regarding Production Phase 1, based on the design considered by the Updated Feasibility Study Report, the Production Plant will have the capacity to process 1.5 million metric tonnes of mineralized spodumene material per year from the Project. The Production Plant design is projected to produce 220,000 tonnes of Battery Grade Green and Sustainable Lithium per annum, with one of the lowest reported levels of impurities in the world. The Updated Feasibility Study Report assumes: (i) conventional open-pit mining operation; (ii) a low risk approach, building a commercial production plant utilizing conventional lithium Dense Media Separation (“DMS”) and attributing a conservative recovery rate of 60%, (iii) average annual production of 220,000 tonnes of 6% battery grade lithium concentrate, (iv) a mine life of 9.2 years, (v) projected cash operating costs of US$238 per tonne of lithium concentrate (cash cost CIF China of US$ 342 per tonne of lithium concentrate), among the lowest reported costs globally. The Updated Feasibility Study Report estimates were prepared using a cut-off grade of 0.5% Li2O and include: (i) a Mineral Reserves estimate of 10.27 million tonnes of proven reserves with average 1.45% Li2O content and 3.52 million tonnes of probable reserves with 1.47% Li2O content, and (ii) a Mineral Resources estimate of 26.34 million tonnes of measured resources with average 1.39% Li2O content, 19.44 million tonnes of indicated resources with average 1.37% Li2O content and 6.6 million tonnes of inferred resources (representing approximately 1,560,919 tonnes of LCE in the measured and indicated categories, with a further 220,070 tonnes LCE in the inferred category).

 

The positive economics reflected in the Updated Feasibility Study Report provides a strong platform to continue developing the Company’s extensive mineral properties at the Project, which includes nine past-producing lithium mines.

 

On November 6, 2019, the Company filed the Feasibility Study Report on Production Phase 1 and the Production Plant.

 

Since the fourth quarter of 2018, the Company has been producing low carbon high purity lithium concentrate at an on-site demonstration pilot plant and has shipped samples to potential customers for product certification and testing (the “Demonstration Plant”). The production from the Demonstration Plant has been an important part of the Company’s successful commercial strategy for its Battery Grade Green and Sustainable Lithium.

 

On March 23, 2018, Sigma Holdings published a technical report relating to the Project titled “Technical Report, Northern and Southern Complexes Project, Araçuaí and Itinga, Brazil” with an effective date of January 29, 2018 and prepared by Marc-Antoine Laporte, P. Geo, of SGS.

 

Environmental Social and Governance

 

In November 2021, Ana Cabral-Gardner, the other co-CEO of the Company, was nominated by a national focal point (“NFP”) as a representative to the United Nations Convention on Climate Change. She actively participated in the event as a speaker, including a panel on the theme “Circular Economy and the 21st Century City: Unlocking the Social & Environmental Benefits of the Sustainable City,” presenting the Company’s project to recycle tailings from its greentech plant and the ensuing economic development impact for the region. Ana also spoke at the main event/Blue Zone regarding “The Future of ESG Investing: Enabling the Energy Transition to a Net Zero World.”

 

In September 2021, the Company announced the constitution of an environmental sustainability and social impact committee (the “ESG Committee”), created to assist the Board with its ESG centric strategy. Ana Cabral-Gardner and Marcelo Paiva were appointed as co-Chairs of the ESG Committee. Maria Salum, Chief Sustainability Officer will act as senior advisor to the ESG Committee. The purpose of the committee is to advise and support co-CEOs Ana Cabral-Gardner and Calvyn Gardner in determining and implementing the Company’s wide range environmental and social sustainability initiatives, based on the selected sustainable development goals (the “Mission Critical SDGs”) for each of the two aspects of ESG: “E” environmental and “S” social. There are two key initiatives that will be the focus of the Committee: (i) establishing the Investment Agency which encompasses the coordination of the social programs of the Company; and (ii) overseeing strategy and coordinating with Board’s Technical Committee to drive the Company to its ambitious net zero 2024 targets (measured as emissions minus carbon credits), within this Decade of Action and 26 years ahead of United Nations’ 2050 targets.

 

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In September 2021, Ana Cabral-Gardner, co-CEO, was invited to the United Nations (“UN”) High-Level Dialogue on Energy Transition that took place in tandem with the UN General Assembly in New York. The Company demonstrated its alignment with the Paris Climate Accord and submitted an Energy Compact proposal committing to supply the production levels of lithium materials to enable energy transition. The Company targeted to reach net zero carbon emissions after its second year of production in 2024 (26 years ahead of UN targets for net zero emissions in 2050 and six years ahead of UN Decade of Action targets outlined at 2030 Agenda for Sustainable Development and the Paris Agreement on climate change).

 

Earlier in 2021, the Company commissioned two assessments of its net carbon footprint. It conducted an independent ISO 14000 compliant audit of its life cycle analysis, and is in process to complete an independent expert validation of its carbon credits generated by its internal preservation, reforestation, and compensation forestry programs.

 

Following the principles of the United Nations Sustainable Development Goals (“UN-SDGs”), in particular UN-SDG #11 (sustainable cities) and UN-SDG #8 (decent work and economic growth), the Company is leading the creation, structuring and operations of an independent agency to promote private investment and economic diversification of the Vale do Jequitinhonha region, where the Project is located (the “Investment Agency”). The Investment Agency aims to transform the region with organized activities to stimulate development, contributing to the diversification of the business environment through the attraction of investments to the two municipalities of Araçuaí and Itinga in Brazil.

 

The Company has successfully obtained institutional support for the Investment Agency from the government of Minas Gerais and the Secretary of Special Development Projects (“INDI”) and from the mayors of Araçuaí and Itinga, following the principles of UN-SDG #17 (partnership for the goals). The Company engaged TSX Advisors Ltda (“TSX Advisors”), a specialist consulting firm, to lead the project to structure and implement the Investment Agency. TSX Advisors has a successful track record of executing similar projects for Brazil´s largest mining companies. At a ceremony presided over by the Vice Governor of Minas Gerais, the Investment Agency was launched in September 2021, during the week celebrating the 150 years of establishment of the town of Araçuai.

 

In 2021, the Company revived and expanded its COVID-19 prevention initiative, distributing an additional 12,000 units of hospital disinfectant (totaling 12 tonnes) as well as 2,400 “family size” hand sanitizers (totaling 840 kg of the product). The Company was able to access the procurement of most of these items at cost as a result of the support of certain of its shareholders. All these actions to combat and prevent COVID-19 were in partnership with the municipalities of Araçuaí and Itinga, that led the logistics of distributing the materials to the end users.

 

On April 29, 2021, in line with UN-SDGs #17 (partnership for the goals), UN-SDG #1 (no poverty) and UN-SDG #2 (zero hunger), the Company launched “Sigma contra a fome” (Sigma against hunger) - an initiative to provide humanitarian relief during the next 10 months of the pandemic for the population living in poverty. The initiative has been distributing 600 basic food baskets per month to 600 families, totaling 6,000 food baskets (with an average of four people), feeding approximately 2,400 people per month. Additionally, the Company´s initiative fostered the social entrepreneurship of the community, where local businesses, by means of the Rotary Club, matched the initiative and committed to donate 5,000 food baskets. The Company was also an anchor donor to the Rotary Club initiative, donating an additional 1,000 food baskets.

 

On May 4, 2020, in line with UN-SDG #3 (Good Health and Well Being), the Company announced, as part of its active engagement in the fight against the spread of COVID-19, that it donated 12 tonnes of sodium hypochlorite (hospital sanitizer liquid bleach) in 12,000 bottles to 16 entities in the Vale do Jequitinhonha region, including hospitals, medical clinics, prisons, nursing homes, care centers for people with disabilities and religious entities. This amount was sufficient to supply these entities until December 2020.

 

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In addition to the initiatives described above, the Company has ongoing comprehensive environmental and social programs in process, consistent with its leadership role in ESG in the lithium mining sector and its commitment to sustainable mining.

 

The mitigating social and environmental programs already initiated or to commence during the construction phase aim to establish actions to proactively mitigate, prevent, control and compensate for the environmental impacts that could be caused by mining and processing activities to be carried out by the Company once it commences production. These programs and actions, which are described below, are also based on the UN-SDGs:

 

·Programs and actions to commence in the fourth quarter of 2021: the Company expects to complete a program for the implementation and maintenance of rain drainage systems and containment of erosion processes; noise and vibration levels control and monitoring program; and a monitoring program for domestic and industrial effluents.

 

·Programs and actions initiated in the second half of 2021: air emissions control and air quality monitoring programs and surface water quality monitoring program.

 

·Programs and actions initiated in the first half of 2021: program to rescue and drive away the local fauna from industrial site; program to rescue threatened and endemic flora; and a fauna monitoring program.

 

·Programs and Actions initiated in 2020: solid waste management program; waste reuse plan; environmental education program; program for the prioritization and professional training of local suppliers; accident prevention and public health program; social communication program; maintenance and conservation program for permanent preservation areas and legal reserves; environmental management and supervision plan; monitoring program for vegetation planted; program for visual monitoring of environmental impacts and mitigating measures; and specific conservation and monitoring programs for endangered species.

 

On November 8, 2019, Ana Cabral-Gardner addressed the World Climate Summit during the UN Climate Change Conference COP-25 in Madrid and presented a case study for the Company as an ESG “green mining” company and the role played by its investors in providing the capital and leadership to drive the implementation of environmental and social best practices in developing the Project.

 

Corporate

 

On October 5, 2021, the Company announced the signing of a binding term sheet for an offtake agreement on a “take or pay” basis (the “Offtake”) for the sale of Battery Grade Green and Sustainable Lithium to LG Energy Solution, Ltd (“LGES”), one of the world’s largest manufacturers of advanced lithium-ion batteries for electric vehicles. The six-year Offtake for Battery Grade Green and Sustainable Lithium scales from 60,000 tonnes per year in 2023 to 100,000 tonnes per year from 2024 to 2027 subject to the Company and LGES executing a mutually acceptable definitive documentation to implement the Offtake. The Company and LGES also agreed to negotiate each year, starting in 2022, an additional optional supply of Battery Grade Green and Sustainable Lithium, not otherwise committed in other Sigma Lithium offtake arrangements. The purchase price for the Battery Grade Green and Sustainable Lithium under the Offtake will be linked to market prices for the high purity lithium hydroxide during the term of the Offtake. The Offtake is intended to be legally binding on both the Company and LGES, and is subject to, among other things, completion of the negotiation of definitive written agreement(s), which are to be consistent with the agreed terms contained in the binding term sheet.

 

On September 13, 2021, the Company completed its dual-listing process and the Common Shares began trading in the U.S. on the Nasdaq. The Company is pleased to report that its corporate governance policies and the make up of the Board are compliant with required Nasdaq and SEC governance standards, including Nasdaq’s diversity requirement for a company’s board to have at least one female director and at least one additional diverse director.

 

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On September 8, 2021, the Company announced the appointment of Ana Cabral-Gardner as Co-CEO, joining Calvyn Gardner, who was previously CEO and also became Co-CEO as well as the new management appointment of Felipe Peres as Chief Financial Officer. The Company also announced the constitution of an ESG Board Committee resulting from the program intended to achieve Net Zero emissions by 2024 and the issuance of performance-based RSUs to the Co-CEOs.

 

On June 29, 2021, the Company held the annual and special meeting of the Company’s shareholders. At such meeting, the Company’s shareholders approved: (i) the election of Gary Litwack (independent), Frederico Marques (independent), Calvyn Gardner, Marcelo Paiva, and Ana Cabral-Gardner as the directors of the Company; (ii) the re-appointment of KPMG LLP as the auditors of the Company for the financial year ended December 31, 2021; (iii) a special resolution authorizing and approving the amendment to the Company’s articles to effect the change of the Company’s name from “Sigma Lithium Resources Corporation” to “Sigma Lithium Corporation”; (iv) an ordinary resolution approving the repeal and replacement of the existing by-laws of the Company with a new By-Law No. 1; and (v) a special resolution approving the amendment to the articles of the Company to effect a consolidation of the Common Shares on the basis of one (1) post-consolidation common share for up to ten (10) pre-consolidation common shares, as determined by the Board at its sole discretion.

 

On February 12, 2021, the Company announced the closing of a non-brokered private placement (the “2021 Offering”) of 9,545,455 Common Shares at a price of Cdn$4.40 per Common Share for aggregate gross proceeds of Cdn$42.0 million. The size of the 2021 Offering reflected a significant upsizing due to strong institutional investor demand.

 

On December 7, 2020, the Company announced that it received a binding commitment for a Cdn$18,750,000 (R$75,000,000) credit line (“Development Credit Line”) from Banco de Desenvolvimento de Minas Gerais. The closing of the Development Credit Line is subject to the negotiation of definitive documentation and other customary closing conditions, followed by final credit approval for draw-downs.

 

On September 25, 2020, the Company announced a management appointment and updates to the Board. The Company appointed Maria Jose Salum as its Chief Sustainability Officer. The Company also announced the constitution of a Technical Board Committee with Wes Roberts and Vicente Lobo as the Co-Chairs. Ana Cabral-Gardner was appointed as Co-Chairman of the Board, joining Calvyn Gardner, who was previously Chairman and also became Co-Chairman of the Board.

 

On August 13, 2020, the Company announced the closing of a non-brokered private placement (the “2020 Offering”) of 8,250,200 Common Shares at a price of Cdn$2.15 per Common Share for aggregate gross proceeds of US$13.3 million (approximately Cdn$17.8 million). The size of the 2020 Offering reflected an upsizing by one-third from the original intended amount announced on July 27, 2020, due to strong institutional investor demand.

 

On June 29, 2020, the Company announced the signing of a term sheet for a US$45 million senior secured project finance facility (the “Bank Project Finance Facility”) to be led by Societe Generale. The consummation of the Bank Project Finance Facility remains subject to completion of due diligence, credit approval, the negotiation of definitive documentation and other customary closing conditions.

 

A10 Group has supported the Company´s liquidity needs without additional equity incentives on two occasions, both in connection with then challenging capital markets conditions:

 

1)On November 29, 2019, in order to fund its working capital, the Company entered into an agreement with the A10 Group providing for a Cdn$6.6 million (US$5.0 million) revolving credit facility (the “Unsecured Credit Facility Agreement”), bearing interest at 11% per annum, calculated from the day funds were drawn. The Unsecured Credit Facility Agreement did not include any warrants or other incentives. It had a one-year term, which was the maturity for all funds drawn, and allowed funding for lender-approved expenses. Its term was extended twice by A10 Group, for both principal and accrued interest, without any penalties or additional charges until September 2021, when it was repaid in full.

 

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2)During March of 2018, A10 Group, provided several bridge loans to the Company in the aggregate amount of R$1,747,600 (US$595,932) with interest calculated pursuant to the CDI (Brazilian Interbank Rate) plus a 4% per year spread, accrued from the date of each disbursement. The bridge loans had due dates on April 30 and May 30, 2018 and were automatically renewable on a rolling basis. On July 18, 2018, the loans were repaid in full.

 

On April 5, 2019, the Company announced the execution of a binding heads of agreement with Mitsui & Co. Ltd. (“Mitsui”) (the “Mitsui HOA”). In accordance with the Mitsui HOA, Mitsui would prepay the Company the amount of US$30,000,000 for battery grade lithium concentrate supply of up to 80,000 tonnes annually over six years, extendable for another five years at the option of Mitsui. The initial tranche payment of US$3,000,000 was received by the Company on April 4, 2019 and recorded as deferred revenue, while disbursement of the remaining tranches is to occur subject to certain conditions, including obtaining senior debt commitments for the remaining amount of the estimated Capex for the construction of the Production Plant. The consummation of the transactions contemplated by the Mitsui HOA remain subject to the negotiation of definitive documentation and other customary conditions.

 

On January 9, 2019, the Company announced an increase in mineral resource at the Project, and certain other updates to the Board and management of the Company.

 

On April 30, 2018, the Sigma Merger Transaction was completed. In connection with the Sigma Merger Transaction, Sigma Holdings completed a $20,040,000 private placement offering of subscription receipts, which were exchanged for pre-consolidation Common Shares upon the implementation of the Sigma Merger Transaction.

 

DESCRIPTION OF THE BUSINESS

 

Overview

 

Sigma is a Canadian mineral processing and development company, focused on advancing, with an environmental sustainability directed strategy, one of the largest hardrock lithium projects in the Americas - its wholly-owned Grota do Cirilo Project, located in Minas Gerais in Brazil - with the goal of participating in the rapidly expanding lithium-ion battery supply chain for EVs.

 

In order to secure a leading position supplying environmentally sustainable lithium for the next generation of EV supply chains, the Company has adhered consistently to the highest principles and standards of ESG practices, which were established as part of its core purpose at inception in 2012. As a result, the Company has undertaken an ESG-centric management strategy, whereby its environmental and social sustainability purposes determine its strategic steps.

 

Sigma´s Common Shares are listed and trade on the TSXV and Nasdaq under the symbol SGML.

 

Lithium Properties

 

The Project comprises four properties owned by Sigma Brazil: Grota do Cirilo (the area of the Project where the First Mine and Second Mine are located), and the Sao Jose, Genipapo and Santa Clara properties. The Project consists of 27 mineral rights (which include mining concessions, applications for mining concessions, exploration authorizations and applications for mineral exploration authorizations) spread over 191 km2. Within the Project area there are nine past producing lithium mines and 11 first-priority development targets.

 

The Project is located in the northeastern part of the state of Minas Gerais, in the municipalities of Araçuaí́ and Itinga, approximately 25 km east of the town of Araçuaí́ and 600 km northeast of Belo Horizonte, the state capital. The Project is approximately 500km from the Port of Ilheus, from where samples have been shipped for product certification and testing and from where future production is planned to be shipped.

 

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Current Status of the Project

 

The Project will be vertically integrated, as the Company´s own mining operations will supply mineralized spodumene material with exceptional mineralogy to its lithium production and processing plant (the “Production Plant”). The Production Plant is designed to be environmentally friendly, fully automated and digitally controlled separating, purifying and concentrating the spodumene in an environmentally friendly process to produce Battery Grade Green and Sustainable Lithium, engineered to the specifications of the Company’s customers in the rapidly expanding lithium-ion battery supply chain for EVs.

 

The Production Plant is planned to have two separate production lines with similar processing flowsheets, which are projected to share certain elements of a common plant infrastructure. The first phase of production for the Project (“Production Phase 1”) is the subject of the feasibility study analysis included in the Updated Feasibility Study Report. It will initially utilize as feedstock spodumene from the Project’s Xuxa deposit (the “First Mine”). Its detailed design has been completed and the capital expenditures are being confirmed with firm quotes by suppliers to reach FEL-3 stage of precision. Based on the Updated Feasibility Study Report, the Company plans to produce 220,000 tonnes per year of Battery Grade Green and Sustainable Lithium (33,000 tonnes per year of lithium carbonate equivalent (“LCE”)) in Production Phase 1 and expects to be amongst the world’s lowest cost producers.

 

The next production phase of the Project (“Production Phase 2”) has been the subject of the preliminary economic assessment (the “PEA”) included in the Updated Feasibility Study Report, and could potentially increase production utilizing feedstock from the Project’s Barreiro deposit (the “Second Mine”). GE21, based on the Mineral Resource, prepared the PEA for the Second Mine. The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. It is noted that the Company has not yet made a production decision in respect of the Second Mine. The Company expects that it will assess the results of a pre-feasibility study and a definitive feasibility study before making a production decision in respect of the Second Mine. All statements regarding mine development or production in respect of the Second Mine in this AIF are expressly qualified by this statement.

 

The Company completed the PEA with the objective of potentially responding to a significant increase in demand from its customers and solidifying its unique market position as a future supplier of Battery Grade Green and Sustainable Lithium. As reflected in the Updated Feasibility Study Report, the PEA projects significant economies of scale for Production Phase 2 (if warranted, following completion of the ongoing pre-feasibility study and definitive feasibility study), resulting from the low capital expenditure (“CAPEX”) of adding a second environmentally-friendly lithium processing line and vertically integrating it to the Project, mining an average of 1.68 million tonnes (“Mt”) per year during approximately 12.7 years of projected mine life.

 

The Company also commenced a further pre-feasibility study for Production Phase 2 contemplating the addition of a second processing line with similar capacity of 220,000 tonnes per year of Battery Grade Green and Sustainable Lithium from Production Phase 1 (once onstream in 2022), therefore potentially doubling the Project total capacity to 440,000 tonnes per year (66,000 tonnes per year of LCE) of Battery Grade Green and Sustainable Lithium. Production Phase 2 is expected to benefit from economies of scale by utilizing most of the Production Plant infrastructure established for Production Phase 1.

 

This approach is the result of a thorough review of the Company´s strategic priorities in light of the significant change in lithium market conditions and aims to significantly increase both the scale of the Project and its commercial and market importance on three fronts: future production, scale of mineral resources and of mineral reserves, all the while maintaining its battery grade green lithium products and the Company’s strategic leadership in environmental, social and governance (“ESG”) in the lithium supply chain.

 

The Company is accelerating its site exploration activities for the Project with the goal of increasing the Project mine life or potentially increasing production at expanded production levels in Production Phase 2, if warranted after completing the ongoing pre-feasibility study (and definitive feasibility study) or a third production expansion phase (“Production Phase 3”) if warranted following completion of further feasibility study.

 

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The Production Plant has a lithium processing design that includes dense media separation (“DMS”) technology which does not utilize hazardous chemicals in the separation and purification of the lithium. The Company will apply a customized algorithm developed to contemplate the specificities of the mineralogy in each of the Company’s mines to digitally control the dense media levels in the Production Plant.

 

In addition, the Production Plant will be 100% powered by clean energy and it will use water efficiently, while preserving land ecosystems when production scales. As a result of state-of-the-art recirculation and tailings management circuits:

 

·the tailings will be dry stacked (and therefore will not create a tailings dam). Because the DMS technology of the Production Plant does not utilize hazardous chemicals, the dry-stacked tailings materials could also be entirely recyclable as feed for ancillary industries, such as ceramics

 

·the water utilized in the production process is 100% recirculated into the plant. Approximately 10% of the water is either lost or evaporates, with 90% of water consumed in the production process reutilized back into the Production Plant, achieving a high level of water efficiency

 

Since the fourth quarter of 2018, Sigma Brazil has been producing low carbon high purity lithium concentrate at an on-site Demonstration Plant and has shipped samples to potential customers for product certification and testing. This demonstration production has been an important part of the successful commercial strategy of the Company for its Battery Grade Green and Sustainable Lithium.

 

The Company expects to submit a net zero execution plan to achieve its emission reduction targets after its second year of full operations, expected to be in 2024, partly as a result of its strategic decision to decrease emissions through the introduction of biofuels to fuel the trucks and other heavy equipment of the mining fleet starting in the second year of production. The Company also plans to pursue generation of carbon credits through “in-setting” strategies such as preserving water streams and developing the agroforestry systems within its regional ecosystem. As part of that strategy, the Company is studying future partnerships with generators of renewable power for self-generation of the electricity required to power the Production Plant.

 

Operations Overview

 

Detailed Engineering and Conclusion of Pre-Construction Activities for the Production Plant

 

The FEED work progressed well in the third quarter. Key achievements during this period include:

 

·Material Take-Offs (“MTOs”) and revised equipment lists issued for CAPEX updates

 

·Detail of the MTOs issued and revisions in all lay-out drawings

 

·3D Model 30% progress review completed for the DMS plant and crushing circuit. Modelling effort for the FEED phase is effectively completed

 

·Detail design schedule issued for review

 

·Carried out constructability review of DMS plant and completed tables outlining required construction sequence

 

·Larger crushing equipment (Primary, Secondary and Tertiaries) was defined and incorporated in current design

 

·Adjustment of the associated equipment, platework, steel and concrete

 

Promon continued to organize meetings with vendors for various critical packages as per the Company’s request to optimize the number and ordering of long lead times.

 

The PEP in progress contemplates a procurement strategy formulated to derive maximum CAPEX effectiveness, protecting shareholder returns. This workstream is currently being led by the Company’s Project management team, Promon and TSX Advisors, a consulting company specializing in domestic and global procurement, including equipment and import logistics to Brazil.

 

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Production Plant EPCM

 

The design related activities of the Production Plant have been completed, aiming to ensure a rapid start to the Project following a final investment decision. All designs completed include consideration for a future parallel Production Phase 2 plant.

 

The related infrastructure design is complete. All long lead items have been identified and are currently being negotiated and secured. Discussions are being held with vendors to reduce delivery times and establish requirements to reserve manufacturing slots.

 

The Company is in contract negotiations to engage Promon as the EPCM contractor for Project execution and Primero to provide engineering services for the Production Plant, equipment and field services during construction. For a detailed outline of the work breakdown outlining the division engineering and design between Promon and Primero during the Project execution stage, see the most recent interim MD&A of the Company under the heading “Production Plant EPCM”.

 

Detailed engineering will be developed in a collaborative manner between Promon, Primero and the Company using the FEED documents that will be revised and/or new documents to be developed as applicable, considering the division of responsibilities defined in the document.

 

The responsibility for the development of detailed design of Area 700 - Mining will be divided between the mining engineering subconsultant and mining contractor, who will be also responsible for haul roads design. Promon will only develop the design of the access roads.

 

Procurement services considered under the EPCM contractor’s scope encompass the phases of supplier list definition (together with the Company): request for quotation, tabulation of commercial proposals, commercial negotiations and issuance of purchase recommendation, kick-off meeting with the chosen supplier, expediting of supplier documentation during the project period and management of the company contracted by the Company expediting and inspecting the supplies and receiving on the field, as detailed in the activities below.

 

The following items describe the activities to be developed by the Company, in conjunction with Promon's construction and safety management team, throughout the execution of the construction:

 

·Manage the execution and certify the quality of the execution of the Project

 

·Analyze, criticize and propose containment, prevention and correction measures, continuously and proactively, for the management of the entire implementation of the Project (covering all aspects of Health & Safety, environment, quality, schedule, costs and scope)

 

·Manage the expediting of supply processes, to be executed by a specialized company to be hired by the Company

 

·Manage the quality of the Project implementation

 

·Coordination of commissioning activities, together with assembly contractors and equipment and systems suppliers, testing and delivery of the Project

 

·Manage, supervise and enforce labor, social security and tax standards and the client's specific corporate and specific standards with contractors: occupational safety and health - H&S, environmental, technical, others

 

Commissioning and Startup

 

Promon’s scope includes the Project future commissioning and startup management, with the support of the Company's operational team, equipment suppliers and assembler, including the following activities:

 

·Preparation of commissioning and testing procedures of the implemented facilities and systems

 

·Monitoring of commissioning tests and analysis of the respective issued reports

 

·Identification, registration and communication of non-conformities related to commissioning and tests procedures

 

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·Monitoring and updating the backlog

 

·Control of commissioning tests reports issuance

 

·Expediting, together with the contractors, the sending of the data-books, available for the pre¬operational phase

 

·Coordination of interfaces between contractors.

 

·Primero’s assistance will be secured for commissioning.

 

Capex Estimation (IPA Front End Loading FEL-3)

 

Promon is currently undertaking a series of engineering tasks to prepare a comprehensive CAPEX estimation at FEL-3 level of confidence for the Production Plant (with FEED documentation), including overall planning of the Project, 3D models, the bulk site earthworks and site layouts. Promon will develop the following items: (i) ROM pad, including retaining wall structures, (ii) Settlement ponds, (iii) Site Wide Bulk Earthworks, including the following areas: Greentech process circuits and infrastructure and water capture, (iv) General site drainage.

 

Mining

 

The responsibility for the development of detailed engineering of mining related infrastructure will be divided between the mining engineering subconsultant and mining contractor, that will also be responsible for haul roads design. Promon is to complement this scope, developing the engineering and design of: (i) mining general - access roads, (ii) mining infrastructure and services - fire hydrants, (iii) fuels storage and distribution.

 

Pre-Construction Outlook for the First Mine (Production Phase 1)

 

The First Mine will supply 100% of the feedstock for the Production Plant during Production Phase 1, creating a fully integrated and low-cost operation. The Company and GE21 are in the process of completing a final scenario for an optimized mine design for the First Mine to supply the Production Plant for eight years, potentially integrating with an eventual Second Mine (should its feasibility study so warrant) as the feedstock for the production of Battery Grade Green and Sustainable Lithium.

 

The Company has successfully completed several critical workstreams involved in the pre-construction of the First Mine within the scheduled and budgeted parameters. This includes all activities required for the geotechnical validation at detailed engineering level, as well as critical hydrogeological analysis and validation (including the installation of 12 piezometers for ongoing monitoring).

 

The Company is currently optimizing the mining plan with two pit layouts under consideration, including preparation of detailed mine production sequencing.

 

These validations at detailed engineering confidence levels were initiated as a result of the Company’s ESG-centered strategy. A key element of the environmental strategy for Production Phase 1, as detailed in the Updated Feasibility Study Report, was the decision to open the First Mine as two separate pits to preserve the Piauí river’s seasonal “stream” and its surrounding ecosystems (collectively, the “Piaui”). This decision was a result of the Piaui´s pivotal role in providing the only source of freshwater for the surrounding communities for four to five months of the year during the rainy season (the Project is located within a semi-arid region with extended dry season). The following workstreams of the pre-construction for the First Mine have been completed:

 

·Completed 100% of geotechnical workstreams and refined North and South pit designs and pit wall slopes of the First Mine. Completed 100% of geotechnical modeling and analysis. All planned additional geotechnical holes were successfully drilled with core orientations targeting all wall orientations (i.e. hanging wall, end walls, and footwall).

 

·The Company, GE21 and MDGEO completed 100% of hydrogeological workstreams. The Company decided to conduct a hydrogeology detailed assessment and complete a model of groundwater pathways to increase confidence that, in the scenario of climate change substantially altering rainfall patterns in the region (increasing seasonal water flows at the Piaui), the Company would be equipped with information to determine the most suitable pit dewatering methodology. Piezometers were installed for ongoing analysis of data for subsequent geo-hydrogeological modelling during the first year

 

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·The Company and GE21 are in the process of completing a final scenario for an optimized mine design for the First Mine. It has the benefit of enhancing the life cycle analysis of the Project by substantially decreasing its carbon footprint by: (i) decreasing the vegetation suppression of trees in the construction of the pit to less than 50 hectares and (ii) segregation of mine waste piles and processed tailings with the goal of future recycling as feed for ancillary industries, promoting a circular economy

 

The following pre-construction activities have been concluded for the First Mine:

 

·Completed the strategic monthly mining sequencing plan for the first three years of the life of mine, then quarterly for year four and annually for the remaining years

 

·Completed the design of final pit (with final operating parameters: berm, ramp, ultimate wall slope angles)

 

·Developed a comprehensive grade control program utilizing geostatistical methods to ensure feed grades are maintained within the expected range. The proposed grade control system will be designed to minimize schist waste rock dilution with the pegmatite ore recovery in pit

 

·Finalization of the waste piles design

 

·Designing the ROM pad for Production Phase 1 together with Promon

 

Preliminary Economic Assessment, Pre-Feasibility and Feasibility Studies for Increased Scale in Production Phase 2

 

The Company continues to advance multiple Project workstreams in geology, geotechnical, metallurgical, environmental and regulatory permitting with the objective of preparing for Production Phase 2 after 2023. The Company completed the PEA for the Second Mine and Production Phase 2, filing the Updated Feasibility Study Report on July 15, 2021. The PEA contemplated utilizing as feedstock the mineralized spodumene material from the Second Mine (Barreiro Mine) with the objective of significantly increasing production.

 

The Company has engaged SGS, Primero and GE21 to build on the results of the PEA and prepare pre-feasibility and feasibility studies for Production Phase 2, adding to the Production Plant a second similar DMS processing line with capacity of 220,000 tonnes per year (33,000 LCE) of battery grade high purity lithium concentrate. The results of the various workstreams are planned to be completed in stages. Following the PEA, the pre-feasibility study is to be completed during December 2021.

 

The PEA demonstrated the significant cost benefit of vertically integrating a second production line and utilizing as feedstock the mineralized spodumene material from the Second Mine, potentially mining an average of 1.68Mt per year during 12.7years of mine life.

 

The Second Mine is the Project’s largest deposit. It is a high-purity, high-grade lithium deposit, with 19.58Mt of measured and indicated mineral resources at 1.43% Li2O and 1.76Mt of inferred mineral resources at 1.45% Li2O suitable for open pit mining.

 

Additional drilling continues seeking to both increase the mineral resource and to strengthen the geological data for the mineral resource model.

 

GE21, based on the Mineral Resource, prepared the PEA for the Second Mine. The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. It is noted that the Company has not yet made a production decision in respect of the Second Mine. The Company expects that it will assess the results of a pre-feasibility study and a definitive feasibility study before making a production decision in respect of the Second Mine. All statements regarding mine development or production in respect of the Second Mine in this AIF are expressly qualified by this statement.

 

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The Company and Primero completed all the metallurgical and variability pre-feasibility test work at SGS laboratories with the aim of customizing a flowsheet for the processing line of Production Phase 2 with the Barreiro deposit.

 

·The heavy liquid separation testing results achieved 66% Li2O recovery

 

·This was followed by pilot plant scale DMS metallurgical testing, which achieved 60.7% Li2O recovery producing a battery grade concentrate of 6.11% Li2O

 

·The processing and metallurgy tests achieved good lithium recoveries in an environmentally friendly DMS plant, with similar flowsheet (and capital costs) to the first production line, without requiring a more capital-intensive and less environmentally friendly flotation process.

 

·These DMS recoveries are a result of the Second Mine having a similar exceptional mineralization to the First Mine

 

The Company completed all field work for the preparation of a Phase 2 pre-feasibility study, including geotechnical drilling and hydrogeology test work. Following the completion of the additional drilling program, GE21 will complete the mining plan, geotechnical program and modelling of the Barreiro deposit. The field work required for the hydrogeological section of the pre-feasibility study has been completed, as all groundwater level measurements have been completed.

 

Environmental Impact Study for Phase 2 Production

 

The Company conducted detailed environmental impact studies for the fauna and the flora in the area of the Barreiro deposit where the pit and waste piles will be located. These studies started in the dry season of the second quarter of 2020 and continued throughout the wet season during the third and fourth quarters of 2020. The environmental impact studies as well as a comprehensive environmental and social impact assessment report (“EIA/RIMA”) are ongoing by the Company.

 

The design proposed by the Company in the EIA/RIMA for the area directly impacted by the Project (the “Project Impacted Area”) has followed the Company´s ESG-centric approach to minimize distances by combining the minimization of greenhouse gas emissions of diesel in mining trucks with a minimization of semi-arid bush and vegetation suppression. Therefore, the Company contemplated the location of its processing tailings dry stacking piles in the vicinity of the Production Plant. As a result, the life cycle analysis of the Company is substantially enhanced, decreasing environmental and carbon footprints.

 

Once the EIA/RIMA is approved by regulators, a permit for the construction and installation of the Second Mine (LP/LI) as well as operation permits from environmental authorities will be required.

 

Exploration & Development of Other Deposits in the Project Area

 

The Company is accelerating its site exploration activities for the Project with the goal of potentially increasing the Project mine life at the expanded production levels of 440,000 tonnes per year of Production Phase 2 or potentially increasing production output after 2024 in a third production phase should EV penetration growth continue to accelerate, and lithium demand forecasts continue to demonstrate strength. The objective of the exploration program is to substantially increase estimated mineral resources during the first quarter of 2022.

 

The Company’s dedicated geological teams and SGS Canada are carrying out an exploration program to determine the ultimate extent of the property mineralization and more rapidly increase the scale of estimated mineral resources, while demonstrating the uniqueness of the high-purity quality of its hard rock lithium mineralization.

 

·The Company has continued to conduct a campaign to diamond drill the remaining 10,000 meters (in a campaign targeting 20,000 meters) to further define current mineralized structures validated in the Updated Feasibility Study Report, increasing the scale of known deposits

 

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·In addition, it has focused on five other targets, previously identified by historical mining and surface trenching

 

This geology workstream did not impact the Phase 1 Production pre-construction workstreams as it is managed by a separate geological team. This geological team is currently operating with five drill rigs on two shifts and adding a sixth rig in Q4 2021.

 

·Additionally, the Company´s geological teams continued to evaluate the potential of known deposits that were not included in the mineral resource estimate in the Updated Feasibility Study Report. Two deposits with significant potential were targeted with diamond drilling campaigns

 

·The Company focused the 2021 drilling campaign in an area with pegmatite surface exposure that returned promising results in the 2018-2019 drilling program. This regional exploration program, of drilling designed to test the target object was very positive, totaling 6538m in 47 positive holes. An additional 5,000m of drilling will be made, totaling 11,537m by the end of 2021. The drilling will be completed on 100m x 50m spacing along a 500m open strike

 

Additional operational and business updates in respect of the Company and the Project are provided in the Company’s most recently filed MD&A.

 

Royalties

 

The Brazilian government levies a royalty on mineral production: Compensação Financeira pela Exploração de Recursos Minerais (“CFEM”). Lithium production is subject to a 2% CFEM royalty, payable on the gross income from sales. The Project is also subject to two third-party royalties:

 

(i)an NSR royalty (“NSR Royalty”) of 1% over the gross revenues of the Company from sales of minerals extracted from the Project less all taxes and costs incurred in the process of extraction, production, processing, treatment, transportation and commercialization of the products sold. The NSR Royalty can be “put by the owner” and “called by the Company” for US$ 3.8 million, once the Company reaches commercial production of 40,000 tonnes of lithium concentrate

 

(ii)another one that provides to the holder (currently LRC LP I) a royalty of 1% over the gross revenues of the Company from sales of minerals extracted from the Project, less taxes, returns and sale commissions (“Net Revenue Royalty”)

 

Life Cycle Analysis and Net Zero Strategy

 

The Company has engaged Minviro Ltd. for the preparation of an independent ISO 14000 compliant life cycle assessment (“LCA”). The Company has engaged BeZero Carbon Ltd for the assessment of the Company´s internal carbon offsetting projects (“in-setting projects”) and advisory on a portfolio of carbon additional in-setting projects and initiatives which the company may undertake in order to deliver its plans to make a robust net zero declaration by 2024.

 

The objectives of both workstreams are to understand the greenhouse gas emissions associated with the positive activities of carbon sequestering undertaken by the Company, link the results to the overall carbon footprint of existing and planned operations, create an in-setting and offsetting plan for residual emissions and provide an evidence-based assessment for the Company´s net zero targets. The Company will take responsibility for all of its expected scope 1, 2, and 3 emissions, as is the expectation in today’s international carbon accounting environment for maximizing the robustness and defensibility of the Company’s strategy. Net zero targets will be undertaken in two phases: (i) Net zero by 2023: incorporating scope 3 emissions from mine to port of shipment in Brazil; (ii) deliver its plans to make a robust Net zero declaration by 2024: incorporating scope 3 emissions at port of delivery.

 

The study and the audit are contemplating its production route of Battery Grade Green and Sustainable Lithium with spodumene mining and lithium purification and concentration production in Brazil. The final ISO 14000 audit report is ongoing and will include: (i) a cradle to grave life cycle inventory and impact assessment to generate impact data for climate change, water consumption, land use and certain impact categories selected by the Company, and (ii) a complete contribution analysis outlining the major inputs contributing to the impact categories.

 

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The Company expects to publish results from the LCA in the first quarter of 2022, including its carbon insetting and off-setting strategies. The Company plans to adapt to the most up to date norms in the industry, as this is an important pillar of the Company’s plans to develop and maintain a net zero strategy, while the expectations and norms for offsetting and emissions reporting continue to evolve.

 

Environmental Licensing and Permitting

 

In August 2020, the Company filed at SUPPRI (the “Priority Projects Superintendence of Minas Gerais”) a complementary environmental impact study and environmental mitigation plan (the “Complementary EIA/RIMA”) to the Company´s current environmental license for construction of Production Phase 1. The objective was to increase the scope area (Area Diretamente Afetada) of its current construction and installation license to include the south pit of the First Mine.

 

The Complementary EIA/RIMA contemplates the simultaneous mining of both north and south pits of the First Mine, potentially also supplying the mineralized spodumene material for the first few years of Production Phase 2. The Complementary EIA/RIMA also includes a dry stacking tailings plan that separates rock waste and tailings piles in order to allow for the potential recycling of 100% of the tailings to ancillary industries, such as ceramics.

 

The south pit of the First Mine is being designed to have the lowest possible environmental impact and greatest socioeconomic return. The simultaneous mining of the north pit and the south pit by the Company to feed the Production Plant will allow the municipality of Araçuaí (where the south pit is located) to receive royalties from mining (“CFEM”), previously restricted to the municipality of Itinga, where the north pit is located, spreading financial prosperity to both municipalities, meeting SDG # 16 (Peace, Justice and Strong Institutions).

 

Concurrent environmental licensing is required for construction and installation (which comprises pre-operation and commissioning of the production plant, including pre-stripping and all mining required for commissioning). An operating license (“LO”) is required for the commercial operations, when external sales of the products are conducted.

 

The Company obtained the required environmental licenses for both construction (“LP”) and installation and commissioning (“LI”) of the Production Plant from the environmental authority of the State of Minas Gerais (the “LP/LI Environmental License”), the Council of Environmental Policy (Conselho Estadual de Politica Ambiental or “COPAM”) in Brazil. COPAM issued a dual LP and LI Certificate in June 2019 for a period of six years expiring on May 31, 2025. The LP/LI Environmental License permits the Company to build the First Mine and Production Plant and to install the plant, conduct trial mining, and testing of the DMS beneficiation process of mineralized spodumene material into battery grade lithium concentrate building a reserve stockpile for future sale.

 

The Company's mining easement request (“Servidão Mineral”) was published in the Official Gazette of the Federal Government on July 29, 2020. This is an important step towards obtaining the operational license (licença operacional, LO) required after commissioning and ramp-up in order for the Project to enter full scale Production Phase 1. It contemplates the mining and processing activities of the First Mine.

 

The Company has a definitive water usage license for the construction of the Production Plant, which was granted by ANA (Agência Nacional de Águas), the Federal Government’s water agency, in February 2019. The water usage license is valid for 10 years, which is expected to be sufficient for the life-of mine (LOM) requirements for mining and product processing from Production Phase 1, as currently planned by the Company. The water usage license received should also be sufficient to process lithium mineralized material at the planned rate of production of an expected 440,000 tonnes of lithium concentrate as well as additional production phases contemplated, subject to confirmation by feasibility studies.

 

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Surface Rights and Other Permitting

 

Certain surface rights in the Production Phase 1 area, the current primary focus of the Company’s activity, are held by two companies owned by the co-CEOs of the Company, Arqueana Empreendimentos e Participações S.A. (“Arqueana”) and Miazga Participações S.A. (“Miazga”). The Company has entered into two right-of-way agreements with these companies to support its exploration and development activities within the Grota do Cirilo property, as well as with third-party surface owners in the Project area.

 

The Company has a mining easement (Servidão Mineral) with a total of 413.3 hectares and aims to cover the areas of waste and tailings piles, Production Plant, all access roads (internal), electrical substation, installation of fueling station and support structures. The Servidão Mineral was published in the Official Gazette of the Federal Government. It contemplates the mining and processing activities of the First Mine (ANM Process No. 824.692/1971).

 

The Company also obtained a key approval for Production Phase 2 plan with the Agência Nacional de Mineração (the “ANM”) approving its economic feasibility study (“Plano Econômico de Avaliação” - PAE). This approval advanced the Production Phase 2 permitting process to the mining concession request stage (“Requerimento de Concessão de Lavra”).

 

The Company holds approved economic mining plans (Plano de Aproveitamento Econômico or PAE) over the Xuxa, Barreiro, Lavra do Meio, Murial, and Maxixe deposits within the Grota do Cirilo property. The Brazilian government levies a royalty on mineral production: Compensação Financeira pela Exploração de Recursos Minerais (CFEM). Lithium production is subject to a 2.0% CFEM royalty, payable on the gross income from sales. The Xuxa Project is also subject to two third-party royalties, one on the net income from sales and the other on a net smelter return (NSR), of 1% each.

 

Specialized Skills and Knowledge

 

All aspects of the Company’s business require specialized skills and knowledge. Such skills and knowledge include the areas of geology, drilling, logistics planning and implementation of exploration programs as well as regulatory, finance and accounting. To date, the Company has been able to locate and retain such professionals from Australia, Brazil, Canada, Russia, South Africa and the UK, and believes it will be able to continue to do so. The Company relies upon its management, employees and various consultants for such expertise.

 

Mineral Price and Economic Cycles

 

The mining business is subject to mineral price cycles. The marketability of minerals and mineral concentrates is also affected by worldwide economic cycles. Lithium markets are affected by demands for lithium batteries and global economic conditions. Fluctuations in supply and demand in various regions throughout the world are common.

 

Economic Dependence

 

The Company’s business is dependent on the exploration, development and operation of lithium properties and the EV market. The Company does not expect to be dependent on any sole contract to sell the major part of the Company’s products or services or to purchase the major part of the Company’s requirements for goods, services or raw materials.

 

Bankruptcy and Similar Procedures

 

There are no bankruptcies, receivership or similar proceedings against the Company, nor is the Company aware of any such pending or threatened proceedings. The Company has not commenced any bankruptcy, receivership or similar proceedings during the Company’s history.

 

Reorganizations

 

There have been no corporate reorganizations of the Company within the three most recently completed financial years.

 

Foreign Operations

 

The Project exposes the Company to various degrees of political, economic and other risks and uncertainties. See “Emerging Market Disclosure” and “Risk Factors” below.

 

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Employees

 

As at December 31, 2020, the Company had eight employees and sixteen part time and/or consultants working at various locations.

 

Environmental Protection

 

The current and future operations of the Company, including exploration and development activities, are subject to extensive laws and regulations governing environmental protection, employee health and safety, exploration, development, tenure, production, taxes, labour standards, occupational health, waste disposal, protection and remediation of environment, reclamation, mine safety, toxic substances and other matters. Compliance with such laws and regulations can increase the costs of, and potentially delay planning, designing, drilling and developing the Company’s mineral properties, including the Project.

 

Social and Environmental Policies

 

The Company aims to minimize the impact of its operations on both local communities and the environment. The Company is committed to developing the Project in a responsible and sustainable manner. The Company takes its responsibilities seriously to protect the environment, to conduct business based on high ethical standards and to make a positive difference in the communities in which it operates.

 

SUMMARY OF UPDATED FEASIBILITY STUDY REPORT

 

Set out below is an extract from the Updated Feasibility Study Report dated November 22, 2021, with an effective date of June 2, 2021, prepared by by Homero Delboni Jr, B.E., M.Eng.Sc., Ph.D., Guilherme Gomides Ferreira (MEng) MAIG, Marc-Antoine Laporte, P. Geo, Stephane Normandin, P. Eng., Jacques Parent, P.Eng., Jarrett Quinn, P.Eng., Porifrio Cabaleiro Rodriguez, MEng., and Jacqueline Wang, P.Eng. (the “FS Qualified Persons”). Reference should be made to the full text of the Updated Feasibility Study Report, which is the current technical report on the Project, is available on the Company’s website at www.sigmalithium.ca or at www.sedar.com and is incorporated by reference into this AIF, for the detailed disclosure in respect of the Project. All statements in the summary below are as of the effective date of the Updated Feasibility Study Report.

 

Property Description and Location

 

The Project is located in Northeastern Minas Gerais State, in the municipalities of Araçuaí and Itinga, approximately 25 km east of the town of Araçuaí and 450 km northeast of Belo Horizonte.

 

The Project comprises four properties owned by Sigma Brazil and is divided into the Northern Complex (the Grota do Cirilo, Genipapo and Santa Clara properties) and the Southern Complex (the São José property).

 

The Project consists of 27 mineral rights, which include mining concessions, applications for mining concessions and exploration permits, spread over 191 km2, which include nine past producing lithium mines and 11 first-priority exploration targets. Granted mining concessions are in good standing with the Brazilian authorities.

 

The surface rights in the Grota do Cirilo area, the current primary focus of activity, are held by two companies, Arqueana Minérios e Metais (Arqueana) and Miazga Participações S.A. (Miazga). Sigma Brazil has entered into two right-of-way agreements with these companies to support the Company’s exploration and development activities within the Grota do Cirilo property, as well as third-party surface owners.

 

The Company has been granted a flow of 150 m3/h from the Jequitinhonha River for all months of the year for a period of 10 years, which is sufficient for life-of mine (LOM) requirements.

 

The Brazilian Government levies a Compensação Financeira pela Exploração de Recursos Minerais (CFEM) royalty on mineral production. Lithium production is subject to a 2.0% CFEM royalty, payable on the gross income from sales. The Project is subject to two third-party net smelter return (NSR) royalties of 1% each.

 

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To the extent known to the FS Qualified Persons, there are no other significant factors and risks that may affect access, title, or the right or ability to perform work on the Project that have not been discussed in the Updated Feasibility Study Report.

 

Accessibility, Climate, Local Resources, Infrastructure and Physiography

 

The Project is easily accessible from regional paved road BR-367, which runs through the northern part of the Project. Within the Project area, accessibility is provided by a network of maintained arterial and back country service roads. A municipal airport services the town of Araçuaí. The closest major domestic airport is located at Montes Claros, 327 km west of Araçuaí.

 

The Eastern Brazil region is characterized by a dry, semi-arid and hot climate. It is expected that future mining operations could be conducted year-round. Exploration activities are year-round but can be interrupted by short-term rainfall events.

 

Mining operations have been previously conducted in the Project area. Existing infrastructure includes power supply and substation, an extensive office block equipped with internet and telephones, accommodation for 40 persons on site, dining hall and kitchen, workshop, on-site laboratory and sample storage building, warehouse and a large store, a fuel storage facility with pumping equipment, and a water pumping facility from the Jequitinhonha river with its reservoir. The main 138 kV transmission line from the Irape hydro power station runs through the northern part of the Project area. The town of Araçuaí can supply basic services. Other services must be sourced from Belo Horizonte or São Paulo.

 

The topography consists of gently rolling hills with less than 100 m difference in elevation. The Project area typically hosts thorn scrub and savannah. Much of the area has been cleared for agriculture. The primary source of water for this project is the Jequitinhonha River.

 

History

 

Exploration and mining activities prior to the Company’s project interest were conducted by Companhia Estanìfera do Brazil (CEBRAS), Arqueana Minérios e Metais (Arqueana), Tanex Resources plc (Tanex; a subsidiary of Sons of Gwalia Ltd (Sons of Gwalia)), and RI-X Mineração S.A. (RI-X). CEBRAS produced a tin/tantalite concentrate from open pit mines from 1957 to the 1980s. Arqueana operated small open pit mines from the 1980s to the 2000s, exploiting pegmatite and alluvial gravel material for tin and tantalite. Tanex Resources obtained a project interest from Arqueana, and undertook channel sampling, air-track, and reverse circulation (RC) drilling. The Project was subsequently returned to Arqueana. In 2012, RI-X obtained a controlling interest in Arqueana, and formed a new subsidiary company to Arqueana called Araçuaí Mineração whose name was later changed to Sigma Brazil. Sigma Brazil completed mapping, data compilation, a ground magnetic survey, channel sampling, and HQ core drilling. A heavy mineral separation (HMS) pilot plant was built during 2014–2015. Lithium-specific mining activities were conducted over at least five deposits in the Northern Complex, and four deposits in the Southern Complex.

 

In 2017, the Company purchased a DMS unit to produce a 6% Li2O spodumene concentrate. The Company has completed ground reconnaissance, satellite image interpretation, geological mapping, channel and chip sampling, trenching, core drilling, Mineral Resource and Mineral Reserve estimation, and a feasibility study. The Company initially focused on a geological assessment of available field data to prioritize the 200 known pegmatites that occur on the various properties for future evaluation. A ranking table that highlighted pegmatite volume, mineralogy and Li2O and Ta2O5 grade was established. Within the more prospective areas, the Company concentrated its activities on detailed geological and mineralogical mapping of historically mined pegmatites, in particular, on the larger pegmatites.

 

Geological Setting and Mineralization

 

The pegmatites in the Project area are classified as lithium–cesium–tantalum or LCT types. The Project area lies in the Eastern Brazilian Pegmatite Province that encompasses a very large region of about 150,000 km2, stretching from the state of Bahia to the state of Rio de Janeiro.

 

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The pegmatite swarm is associated with the Neoproterozoic Araçuaí orogeny and has been divided into two main types: anatectic (directly formed from the partial melting of the country rock) or residual pegmatite (fluid rich silicate melts resulting from the fractional crystallization of a parent magma). The pegmatites in the Project area are interpreted to be residual pegmatites and are further classified as LCT types.

 

Pegmatite bodies are typically hosted in a grey biotite–quartz schist and form bodies that are generally concordant with the schist foliation but can also cross-cut foliation. The dikes are sub-horizontal to shallow-dipping sheeted tabular bodies, typically ranging in thickness from a few metres up to 40 m or more, and display a discontinuous, thin, fine-grained chilled margin. Typical pegmatite mineralogy consists of microcline, quartz, spodumene, albite and muscovite. Spodumene typically comprises about 28–30% of the dike, microcline and albite around 30–35%, and white micas about 5–7%. Locally, feldspar and spodumenes crystals can reach as much as 10–20 cm in length. Tantalite, columbite and cassiterite can occur in association with albite and quartz. The primary lithium-bearing minerals are spodumene and petalite. Spodumene can theoretically contain as much as 3.73% Li, equivalent to 8.03% Li2O, whereas petalite, can contain as much as 2.09% lithium, equivalent to 4.50% Li2O.

 

Features of the pegmatites where mineral resources have been estimated include:

 

First Mine: foliation concordant, strikes northwest–southeast, dips to the southeast at 40º to 45º, and is not zoned. The strike length is 1,700 m, averages 12–13 m in thickness and has been drill tested to 259 m in depth. First Mine remains open to the west, east, and at depth

 

Second Mine: foliation discordant, strikes northeast–southwest, dips to the southeast at 30º to 35º, and is slightly zoned with a distinct spodumene zone as well as an albite zone. The pegmatite is about 600 m long (strike), 30–35 m wide, and 800 m along the dip direction. Second Mine remains open to the northeast and at depth

 

Murial: foliation discordant, strikes north–south, and has a variable westerly dip, ranging from 25º to 75º. The strike length is about 750 m, with a thickness of 15–20 m, and the down-dip dimension is 200 m. The pegmatite is zoned with a spodumene-rich intermediate zone and a central zone that contains both spodumene and petalite. The southern section of the pegmatite has lower lithium tenors than the norther portion of the dike. Murial remains open to the north, south, and at depth

 

Lavra do Meio: foliation concordant, strikes north–south, dips 75º–80º to the east. The strike length is 300 m with an average thickness of 12–15 m and a down-dip distance of 250 m. The pegmatite is zoned and contains both spodumene and petalite and remains open at depth.

 

Exploration

 

The Company began working on the Project in June 2012, focusing on a geological assessment of available field data to prioritize the 200 known pegmatites that occur on the various properties for future evaluation. A ranking table that highlighted pegmatite volume, mineralogy and Li2O and Ta2O5 grade was established.

 

Within the more prospective areas, the Company concentrated its activities on detailed geological and mineralogical mapping of historically mined pegmatites, in particular, on the larger pegmatites, First Mine and Second Mine. These dikes were channel sampled and subsequently assessed for their lithium, tantalum and cassiterite potential. This work was followed by bulk sampling and drilling. In the southern complex area, the Company’s geologists have visited sites of historical workings, and undertaken reconnaissance mapping and sampling activities. The Lavra Grande, Samambaia, Ananias, Lavra do Ramom and Lavra Antiga pegmatites were mined for spodumene and heavy minerals, and in some cases gem-quality crystals were targeted. These pegmatites are considered to warrant additional work.

 

Drilling

 

Drilling completed by the Company across the Project area consists of 255 core holes totalling 42,959.76 m. As at the date of the Updated Feasibility Study Report, this drilling has concentrated on the Grota do Cirilo pegmatites. Drilling was at HQ core size (63.5 mm core diameter) in order to recover enough material for metallurgical testing. Drill spacing is variable by pegmatite, but typically was at 50 m with wider spacing at the edges of the drill pattern. Drill orientations were tailored as practicable to the strike and dip of the individual pegmatites. The drill hole intercepts range in thickness from approximately 85–95% of true width to near true width of the mineralization.

 

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All core was photographed. Drill hole collars were picked up in the field using a Real Time Kinematic (RTK) global positioning system (GPS) instrument with an average accuracy of 0.01 cm. All drill holes were down-hole surveyed by the Company’s personnel using the Reflex EZ-Track and Reflex Gyro instruments. Calibrations of tools were completed in 2017 and 2018.

 

Sampling intervals were determined by the geologist, marked and tagged based on lithology and mineralization observations. The typical sampling length was 1 m but varied according to lithological contacts between the mineralized pegmatite and the host rock. In general, 1-2 m host rock samples were collected from each side that contacts the pegmatite.

 

The Company conducted HQ drilling programs in 2014, 2017, and 2018 on selected pegmatite targets. The drill programs have used industry-standard protocols that include core logging, core photography, core recovery measurements, and collar and downhole survey measurements. There are no drilling, sampling or recovery factors that could materially impact the accuracy and reliability of the results in any of the drill campaigns. Drill results from Grota do Cirilo property support the Mineral Resource estimates and the feasibility study.

 

Sample Preparation, Analyses and Security

 

Sampling intervals were determined by the geologist, marked and tagged based on lithology and mineralization observations. The typical sampling length was 1 m but varied according to lithological contacts between the mineralized pegmatite and the host rock. In general, 1 m host rock samples were collected from each side that contacts the pegmatite.

 

All samples collected by Sigma Brazil during the course of the 2012–2018 exploration programs were sent to the SGS Geosol laboratory (SGS Geosol) located in the city of Belo Horizonte, Brazil. A portion of the 2017–2018 sample pulps were prepared by ALS Brazil Ltda. in Vespasiano, Brazil (ALS Vespasiano) and shipped to ALS Canada Inc. Chemex Laboratory (ALS Chemex) in North Vancouver, BC, Canada for cross check validation. A portion of the 2014 samples were resampled by the QP and sent for validation to the SGS Lakefield Laboratory (SGS Lakefield) in Lakefield Canada. All laboratories, including ALS Chemex, ALS Vespasiano, SGS Lakefield and SGS Geosol are ISO/IEC 17025 accredited. The SGS Geosol laboratory is ISO 14001 and 17025 accredited by the Standards Council. All laboratories used for the technical report are independent from Sigma Brazil and the Company and provide services to Sigma Brazil pursuant to arm’s length service contracts.

 

Sample preparation conducted at SGS Geosol consisted of drying, crushing to 75% passing 3 mm using jaw crushers, and pulverizing to 95% passing 150 mesh (106 µm) using a ring and puck mill or a single component ring mill. In 2017, SGS Geosol performed 55-element analysis using sodium peroxide fusion followed by both inductively coupled plasma optical emission spectrometry (ICP-OES) and inductively coupled plasma mass spectrometry (ICP-MS) finish (SGS code ICM90A). This method uses 10 g of the pulp material and returns different detection limits for each element and includes a 10 ppm lower limit detection for Li and a 10,000 ppm upper limit detection for Li. In 2018, SGS Geosol used a 31-element analytical package using sodium peroxide fusion followed by both Inductively Coupled Plasma Atomic Emission Spectrometry (ICP-AES) and ICP-MS finish (SGS code ICP90A).

 

Sample preparation at ALS Vespasiano comprised drying, crushing to 70% passing 2 mm using jaw crushers, and pulverizing to 85% passing 200 mesh (75 µm) using a ring and puck mill or a single component ring mill. Lithium and boron were determined by sodium peroxide fusion followed by ICP-AES analysis (ALS Chemex method ME-ICP82b).

 

The 2017 witness samples collected on the 2014 drill core were analyzed at SGS Lakefield using sodium peroxide fusion followed by both ICP-OES and ICP-MS finish (SGS code ICM90A).

 

In addition to the laboratory quality assurance quality control (QA/QC) routinely implemented by SGS Geosol and ALS Chemex using pulp duplicate analysis, Sigma Brazil developed an internal QA/QC protocol for the First Mine drilling, which consisted of the insertion of analytical standard reference materials (standards), blanks and core duplicates on a systematic basis with the samples shipped to the analytical laboratories. In 2017, the Company also sent pulps from selected mineralized intersections to ALS Chemex for reanalysis. No pulp reanalysis was performed by the Company in 2013 and 2014. A total of 664 pulp samples from the 2017 First Mine drilling program were sent to ALS Vespasiano for third-party verification.

 

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Sigma Brazil inserted standards in sample batches during the 2014 and 2017–2018 sampling programs. During the 2014 campaign, the standard used was made of locally sourced and prepared pegmatite and was not certified. Sigma Brazil inserted an uncertified standard into the sample stream for every 25 samples for a total of five uncertified standards inserted. The 2017–2018 campaign used seven certified standards from African Mineral Standards (AMIS), an international supplier of certified reference materials. A total of 88 standards were inserted during the 2017 campaign and 315 were inserted during the 2018 campaign. Results were considered acceptable and no material accuracy issues were noted.

 

During the 2017–2018 campaign Sigma Brazil included insertion of analytical blanks in the sample series as part of their internal QA/QC protocol. The blank samples, which are made of fine silica powder provided by AMIS, are inserted an average of one for every 20 samples by the Sigma Brazil geologist and subsequently sent to SGS Geosol. The same procedure was used by Sigma Brazil for the 2014 drilling campaign. A total of 647 analytical blanks were analysed during the 2014 and 2017–2018 exploration programs. Results were considered acceptable and no material contamination issues were noted.

 

Sigma Brazil inserted core duplicates every 20th sample in the sample series as part of their internal QA/QC protocol. The sample duplicates correspond to a quarter HQ core from the sample left behind for reference, or a representative channel sample from the secondary channel cut parallel to the main channel. Assay results were considered acceptable between the two sample sets.

 

Bulk densities of the lithologies were measured by SGS Geosol by pycnometer measurement. Measurements were by lithology with special attention to the lithium bearing pegmatite. Separate measurements were made for the First Mine and Second Mine.

 

A total of 188 measurements were made on Xuxa core from 2017–2018. Of the 188 measurements, 24 were made on albite-altered pegmatite, 54 on schist, and 110 on lithium-bearing pegmatite. For Second Mine, a total of 401 measurements were made on core from the 2018 drill program. Of the 401 measurements, 82 were made on albite-altered pegmatite, 177 on schist, and 142 on lithium-bearing pegmatite. For Murial, a total of 134 measurements were made by the same method on core from the 2018 drill program. Of the 134 measurements, 32 were made on the albite-altered pegmatite, 58 on the schist and 44 on the lithium bearing pegmatite. For Lavra do Meio, a total of 51 measurement were made by the same method on core from the 2018 drill program. Of the 51 measurements, nine were made on the albite altered pegmatite, 22 on the schist and 20 on the lithium bearing pegmatite.

 

In 2017, SGS validated the exploration processes and core sampling procedures used by Sigma Brazil as part of an independent verification program. The QP concluded that the drill core handling, logging and sampling protocols are at conventional industry standard and conform to generally accept best practices. The chain of custody was followed by Sigma Brazil employees and the sample security procedure showed no flaws. The QP considers that the sample quality is good and that the samples are generally representative.

 

As additional QAQC, SMSA sent 664 samples from the 2017-2018 Grota do Cirillo drilling campaign to ALS Chemex for analysis using the protocol ME-ICP82b with sodium peroxide fusion. Preparation was done by ALS Vespasiano and the samples were subsequently shipped to Vancouver. The average Li concentration for the original was 6,411.4 ppm Li while the duplicate average was 6,475.9 ppm Li. This indicates a slight bias of the ALS Chemex duplicates which is well within the accepted margin of error.

 

Overall, the QP is confident that the system is appropriate for the collection of data suitable for a Mineral Resource estimate and can support Mineral Reserve estimates and mine planning.

 

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Data Verification

 

Visits to the Project site were conducted by Marc-Antoine Laporte, P.Geo., M.Sc. from September 11 to September 15, 2017, from July 11 to July 17, 2018 and from September 18 to 23, 2018. These visits enabled the QP to become familiar with the exploration methods used by Sigma Brazil, the field conditions, the position of the drill hole collars, the core storage and logging facilities and the different exploration targets.

 

The database for the Project was first transmitted to SGS by the Company on September 15, 2017 and was regularly updated by the Company’s geologists. The database contains data for: collar locations; downhole surveys; lithologies and lithium assays. Upon importation of the data into the modelling and mineral resources estimation software (Genesis©), SGS conducted a second phase of data validation where all the major discrepancies were removed from the database. Finally, SGS conducted random checks on approximately 5% of the assay certificates, to validate the assay values entered in the database.

 

Witness samples were taken from previously sampled intervals and the half cores were cut to quarter cores. A total of nine mineralized intervals were sampled to compare the average grade for the two different laboratories. The average for the original samples is 1.61 % Li2O while the average for the control samples is 1.59 % Li2O. The average grade difference is 0.02% which makes a relative difference of 1.28% between the original and the control samples.

 

Following the data verification process and QA/QC review, the QP is of the opinion that the sample preparation, analysis and QA/QC protocol used by Sigma Brazil for the Project follow generally accepted industry standards and that the Project data is of a sufficient quality. However, more attention should be put into the blank material selection in the future in order improve the similarity between the batches.

 

Mineral processing and Metallurgical Testing

 

Drill core samples from the First Mine were processed at the SGS Lakefield facility in October 2018, while samples from Barreiro were tested between November 2020 and May 2021. Work conducted on the Xuxa samples included comminution, heavy liquid separation (HLS), REFLUX™ classifier, DMS and magnetic separation, while the Barreiro test work program included sample characterization, grindability testing and heavy liquid separation (HLS).

 

First Mine

 

Drill core samples were selected and combined into six variability (Var) samples for a test work program comprising of mineralogical analyses, grindability, HLS, REFLUX™ classifier, DMS, and magnetic separation testing. Flowsheets for lithium beneficiation were developed in conjunction with the testwork. The goal was to produce spodumene concentrate grading a minimum 6% Li2O and maximum 1% Fe2O3 while maximizing lithium recovery.

 

Four HLS tests, at four crush sizes (15.9 mm, 12.5 mm, 9.5 mm, and 6.3 mm) were carried out on each of the six variability samples to evaluate the recovery. The 9.5 mm crush size was selected as the optimum crush size for DMS test work, as it results in the highest lithium recovery with minimal fines generation.

 

The DMS variability samples were each crushed to -9.5 mm and screened into four size fractions: coarse (-9.5/+6.3 mm), fines (-6.3/+1.7 mm), ultrafines (-1.7/+0.5 mm) and hypofines (-0.5 mm). The coarse, fines and ultrafines fractions of each variability sample were then processed separately for lithium beneficiation. The REFLUX™ classifier test work was carried out with a RC-100 unit for mica rejection from the fines and ultrafines fractions only. This test work was conducted at FLSmidth’s Minerals Testing and Research Center in Utah, USA.

 

The coarse and fines REFLUX™ classifier underflow and ultrafines RC underflow of each variability sample were processed separately through DMS. The DMS concentrate from each of these fractions underwent a magnetic separation step at 10,000 Gauss.

 

The DMS test work flowsheet for the coarse and fines fractions included two passes through the DMS; the first at a lower specific gravity (SG) cut-point (~2.65) to reject silicate gangue and the second at a higher specific gravity (SG) cut-point (~2.90) to generate spodumene concentrate. The coarse DMS middlings were re-crushed to -3.3 mm and a two stage HLS test conducted. The ultrafines DMS test work flowsheet included only a single pass through the DMS circuit at a high SG cut-point (~2.90) to generate spodumene concentrate.

 

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The DMS test results demonstrated that DMS was able to produce spodumene concentrate with >6% Li2O in most of the tests, for an average recovery of 60.4%.

 

The Var 3 and Var 4 samples were determined to best represent the deposit.

 

Second Mine

 

Four variability and one composite sample were tested for Second Mine, with the goals of the program to provide preliminary process information on the metallurgical performance of mineralized material samples from the Second Mine. The test work program was developed based on previous test work and flowsheet developed for the First Mine. The aim of the test work program was to produce chemical grade spodumene concentrate (>6% Li2O) with low iron content (<1% Fe2O3), while maximizing lithium recovery.

 

Two sets of HLS tests were undertaken. The first set was conducted using the Composite to test optimal crush size (i.e., top size of 15.9 mm, 12.5 mm, 10.0 mm, and 6.3 mm). HLS tests were then performed on each variability sample at the optimum crush size. The fine fraction (i.e., -0.5 mm) was screened out from each sub-sample and the oversize fraction was submitted for HLS testing. A crush size of -10 mm was determined to be optimal and variability HLS testing was undertaken at this crush size. Interpolated stage recoveries (6% Li2O concentrate) for the four variability samples ranged from 56.0% to 77.3%.

 

In all four variability samples, HLS tests produced >6% Li2O spodumene concentrate with low iron content (<1.0% Fe2O3).

 

Mineral resource estimates

 

Mineral Resources for the Grota do Cirilo pegmatite were estimated using a computerised resource block model. Three-dimensional wireframe solids of the mineralisation were defined using drill hole Li2O analytical data.

 

Data were composited to 1 m composite lengths, based on the north–south width of the block size defined for the resource block model. Compositing starts at the schist-pegmatite contact. No capping was applied on the analytical composite data. The First Mine models used a 6 m x 3 m x 5 m block size. Murial and Lavra do Meio models used a 5 m x 3 m x 5 m block size and the Second Mine model used a 5 m x 5 m x 5 m block. Average densities were applied to blocks, which varied by pegmatite, from 2.65 t/m3 at Lavra do Meio to 2.71 t/m3 at the Second Mine.

 

Variography was undertaken for First Mine, Second Mine and Lavra do Meio and the projection and Z-axis rescaling were done according to the mineralization orientation.

 

The grade interpolation for the First Mine, Second Mine and Lavra do Meio resource block models were completed using ordinary kriging (OK). The Murial model was estimated using an inverse distance weighting to the second power (ID2) methodology. The interpolation process was conducted using three successive passes with more inclusive search conditions from the first pass to the next until most blocks were interpolated, as follows:

 

Pass 1:

 

First Mine: search ellipsoid distance of 75 m (long axis) by 75 m (intermediate axis) and 25 m (short axis) with an orientation of 130° azimuth and -50° dip to the southeast; minimum of seven composites, a maximum of 15 composites and a minimum of three drill holes

 

Second Mine: search ellipsoid distance of 55 m (long axis) by 55 m (intermediate axis) and 25 m (short axis) with an orientation of 155° azimuth and -35° dip to the southeast; a minimum of seven composites, a maximum of 15 composites and a minimum of three drill holes

 

Murial: 75 m (long axis) by 75 m (intermediate axis) and 35 m (short axis) with an orientation of 95° azimuth and -80° dip to the west; minimum of seven composites, a maximum of 15 composites and a minimum of three drill holes

 

Lavra do Meio: 50 m (long axis) by 50 m (intermediate axis) and 25 m (short axis) with an orientation of 280° azimuth and -75° dip to the east; minimum of five composites, a maximum of 15 composites and a minimum of three drill holes

 

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Pass 2:

 

First Mine: twice the search distance of the first pass; minimum of seven composites, a maximum of 15 composites and a minimum of three drill holes

 

Second Mine: twice the search distance of the first pass; a minimum of seven composites, a maximum of 15 composites and a minimum of three drill holes

 

Murial: twice the search distance of the first pass; minimum of seven composites, a maximum of 15 composites and a minimum of three drill holes

 

Lavra do Meio: twice the search distance of the first pass; minimum of five composites, a maximum of 15 composites and a minimum of three drill holes

 

Pass 3:

 

First Mine: 300 m (long axis) by 300 m (intermediate axis) by 100 m (short axis) with a minimum of seven composites, a maximum of 25 composites and a minimum of three drill holes

 

Second Mine: 250 m (long axis) by 250 m (intermediate axis) by 100 m (short axis) with a minimum of seven composites, a maximum of 25 composites and no minimum number of drill holes

 

Murial: 200 m (long axis) by 200 m (intermediate axis) by 100 m (short axis) with a minimum of seven composites, a maximum of 20 composites and no minimum number of drill holes

 

Lavra do Meio: 125 m (long axis) by 125 m (intermediate axis) by 75 m (short axis) with a minimum of five composites, a maximum of 15 composites and no minimum composites required per drill hole.

 

The estimates and models were validated by statistically comparing block model grades to the assay and composite grades, and by comparing block values to the composite values located inside the interpolated blocks. The estimates were considered reasonable.

 

Mineral Resources are classified into Measured, Indicated and Inferred categories. The Mineral Resource classification is based on the density of analytical information, the grade variability and spatial continuity of mineralization. The Mineral Resources were classified in two successive stages: automated classification, followed by manual editing of final classification results. Classifications were based on the following:

 

Measured Mineral Resources

 

First Mine: the search ellipsoid used was 50 m (strike) by 50 m (dip) by 25 m with a minimum of seven composites in at least three different drill holes

 

Second Mine, Murial, and Lavra do Meio: the search ellipsoid was 55 m (strike) by 55 m (dip) by 35 m with a minimum of five composites in at least three different drill holes

 

Indicated Mineral Resources

 

In all deposits, the search ellipsoid was twice the size of the Measured category ellipsoid using the same composites selection criteria

 

Inferred Mineral Resources

 

In all deposits, all remaining blocks.

 

The conceptual economic parameters were used to assess reasonable prospects of eventual economic extraction. A series of economic parameters were estimated to represent the production cost and economic prospectivity of an open pit mining operation in Brazil and came either from SGS Canada or Sigma Brazil. These parameters are believed to be sufficient to include all block models in future open pit mine planning, due mostly to the relatively low mining costs in Brazil.

 

The Mineral Resource estimates for Grota do Cirilo are reported in Table 0-1 to Table 0-4 using a 0.5% Li2O cut-off. The Mineral Resource estimates are constrained by the topography and are based on the conceptual economic parameters. The estimate has an effective date of January 10, 2019. The QP for the estimate is Mr. Marc-Antoine Laporte, P.Geo., an SGS employee.

 

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Table 0-1 – First Mine Deposit Mineral Resource Estimate

 

Cut-off Grade
Li2O (%)		 Category Tonnage
(t)		 Average Grade
Li2O (%)
0.5 Measured 10,193,000 1.59
0.5 Indicated 7,221,000 1.49
0.5 Measured + Indicated 17,414,000 1.55
0.5 Inferred 3,802,000 1.58

 

Notes to accompany Table 0-1 First Mine Deposit Mineral Resource Estimate:

 

1.Mineral Resources have an effective date of January 10, 2019 and have been classified using the 2014 CIM Definition Standards. The Qualified Person for the estimate is Mr. Marc-Antoine Laporte, P.Geo., an SGS employee.

 

2.Mineral Resources are reported assuming open pit mining methods, and the following assumptions: lithium concentrate (6% Li2O) price of US$1,000/t, mining costs of US$2/t for mineralization and waste, US$1.2/t for overburden, crushing and processing costs of US$12/t, general and administrative (G&A) costs of US$4/t, concentrate recovery of 85%, 2% royalty payment, pit slope angles of 55º, and an overall cut-off grade of 0.5% Li2O.

 

3.Tonnages and grades have been rounded in accordance with reporting guidelines. Totals may not sum due to rounding.

 

4.Mineral Resources are reported inclusive of those Mineral Resources converted to Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

 

5.Long-term lithium concentrate price of $1,000/t assumes processing cost of US$12/t and metallurgical recovery of 85%.

 

Table 0-2 – Second Mine Deposit Mineral Resource Estimate

 

Cut-off Grade
Li2O (%)		 Category Tonnage
(t)		 Average Grade
Li2O (%)
0.5 Measured 10,313,000 1.4
0.5 Indicated 10,172,000 1.46
0.5 Measured + Indicated 20,485,000 1.43
0.5 Inferred 1,909,000 1.44

 

Notes to accompany Table 0-2 Second Mine Deposit Mineral Resource Estimate

 

1.Mineral Resources have an effective date of January 10, 2019 and have been classified using the 2014 CIM Definition Standards. The Qualified Person for the estimate is Mr. Marc-Antoine Laporte, P.Geo., an SGS employee.

 

2.Mineral Resources are reported assuming open pit mining methods, and the following assumptions: lithium concentrate (6% Li2O) price of US$1,000/t, mining costs of US$2/t for mineralization and waste, US$1.2/t for overburden, crushing and processing costs of US$12/t, general and administrative (G&A) costs of US$4/t, concentrate recovery of 85%, 2% royalty payment, pit slope angles of 55º, and an overall cut-off grade of 0.5% Li2O.

 

3.Tonnages and grades have been rounded in accordance with reporting guidelines. Totals may not sum due to rounding.

 

4.Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

 

5.Long-term lithium concentrate price of $1,000/t assumes processing cost of US$12/t and metallurgical recovery of 85%.

 

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Table 0-3 – Murial Deposit Mineral Resource Estimate

 

Cut-off Grade
Li2O (%)		 Category Tonnage
(t)		 Average Grade
Li2O (%)
0.5 Measured 4,175,000 1.17
0.5 Indicated 1,389,000 1.04
0.5 Measured + Indicated 5,564,000 1.14
0.5 Inferred 669,000 1.06

 

Notes to accompany Table 0-3 Murial Deposit Mineral Resource Estimate

 

1.Mineral Resources have an effective date of January 10, 2019 and have been classified using the 2014 CIM Definition Standards. The Qualified Person for the estimate is Mr. Marc-Antoine Laporte, P.Geo., an SGS employee.

 

2.Mineral Resources are reported assuming open pit mining methods, and the following assumptions: lithium concentrate (6% Li2O) price of US$1,000/t, mining costs of US$2/t for mineralization and waste, US$1.2/t for overburden, crushing and processing costs of US$12/t, general and administrative (G&A) costs of US$4/t, concentrate recovery of 85%, 2% royalty payment, pit slope angles of 55º, and an overall cut-off grade of 0.5% Li2O.

 

3.Tonnages and grades have been rounded in accordance with reporting guidelines. Totals may not sum due to rounding.

 

4.Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability

 

5.Long-term lithium concentrate price of $1,000/t assumes processing cost of US$12/t and metallurgical recovery of 85%.

 

Table 0-4 – Lavra do Meio Deposit Mineral Resource Estimate

 

Cut-off Grade
Li2O (%)		 Category Tonnage
(t)		 Average
Grade Li2O
(%)
0.5 Measured 1,626,000 1.16
0.5 Indicated 649,000 0.93
0.5 Measured + Indicated 2,275,000 1.09
0.5 Inferred 261,000 0.87

 

Notes to accompany Table 0-4 Lavra do Meio Deposit Mineral Resource Estimate

 

1.Mineral Resources have an effective date of January 10, 2019 and have been classified using the 2014 CIM Definition Standards. The Qualified Person for the estimate is Mr. Marc-Antoine Laporte, P.Geo., an SGS employee.

 

2.Mineral Resources are reported assuming open pit mining methods, and the following assumptions: lithium concentrate (6% Li2O) price of US$1,000/t, mining costs of US$2/t for mineralization and waste, US$1.2/t for overburden, crushing and processing costs of US$12/t, general and administrative (G&A) costs of US$4/t, concentrate recovery of 85%, 2% royalty payment, pit slope angles of 55º, and an overall cut-off grade of 0.5% Li2O.

 

3.Tonnages and grades have been rounded in accordance with reporting guidelines. Totals may not sum due to rounding.

 

4.Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

 

5.Long-term lithium concentrate price of $1,000/t assumes processing cost of US$12/t and metallurgical recovery of 85%.

 

Factors that can affect Grota do Cirilo Mineral Resource estimates include but are not limited to:

 

·Changes to the modelling method or approach

 

·Changes to geotechnical assumptions, in particular, the pit slope angles

 

·Metallurgical recovery assumption that are based on preliminary test results

 

·Changes to any of the social, political, economic, permitting, and environmental assumptions considered when evaluating reasonable prospects for eventual economic extraction.

 

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Mineral Resource estimates can also be affected by the market value of lithium and lithium compounds.

 

Mineral Reserve Estimates

 

First Mine Mineral Reserve estimates have an effective date of 5 June 2019 and have been converted from Measured and Indicated Mineral Resources. The key parameters upon which the 5 June 2019 Mineral Reserve estimates were defined are summarized in Table 0-5.

 

Table 0-5 – Parameters Used in First Mine Pit Optimization

 

Parameter Value
Lithium concentrate price US$700/t concentrate
Royalties (CFEM) 2% of revenue
Exchange rate 3.7 BRL/ US$
Costs  
Mining US$2.15/t mined
Processing US$10.51 /t ore
G&A US$3,809,106/ year
Logistics US$82/t concentrate wet
Plant recovery 60.4%
Concentrate grade 6%
Mining recovery 100%
Dilution 9.3%
Overall Pit slopes 33.6° – 53°

 

Note: CFEM is the Brazilian government royalty

 

The total Proven and Probable Mineral Reserves are as presented in Table 0-6.

 

Table 0-6 – First Mine Mineral Reserves

 

Reserve Tonnage (t) Li₂O (%)
Proven 10,270,000 1.45
Probable 3,520,000 1.47
TOTAL 13,790,000 1.46

 

Note to accompany Mineral Reserves table:

 

1.Mineral Reserves have an effective date of 5 June 2019. The Qualified Person for the estimate is Porfirio Cabaleiro Rodriguez, FAIG, an employee of GE21.

 

2.Mineral Reserves are confined within an optimized pit shell that uses the following parameters: lithium concentrate price: US$700/t concentrate; mining costs: US$2.15/t mined; processing costs: US$10.51/t processed; general and administrative costs: US$3.8 M/a; logistics costs: US$82/t wet concentrate; process recovery of 60.4%; mining dilution of 9%; pit inter-ramp angles that range from 40.5 – 74.8º.

 

3.Tonnages and grades have been rounded in accordance with reporting guidelines. Totals may not sum due to rounding.

 

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The existing high voltage transmission line at Pit 1 will need to be relocated in Year 2 so as not to interfere with the mining of the pit’s northern part. The Company has been given the legal authority to relocate the line by 150 m.

 

The Company has not purchased the surface rights for Pit 2 but has applied to the ANM (Brazilian mining regulatory agency) for the granting of authority to mine the area. Pit 2 will come into operation 1.5 years after plant start-up.

 

Mining methods

 

First Mine

 

The Company has undertaken a program of resource drilling for the First Mine deposit. Most of these drill holes have been geotechnically logged for structural data. The geotechnical data logged from these holes has been analyzed to provide estimates of slope stability, using industry standard empirical techniques.

 

The mine layout and operation are based on the following criteria:

 

Two independent open pits areas: Pit 1 in the north and Pit 2 in the south 

Single access from both pits to the mine infrastructure pad and the processing plant  

Low height ore benches to reduce mine dilution and maximize mine recovery 

Pre-splitting of the ore zone to reduce mine dilution 

Elevated inter-ramp angles for the waste to reduce strip ratio.

 

The basis for the scheduling includes:

 

Six months of pre-stripping to liberate the ore 

Mining of Pit 1 first as this is closer to the processing plant and is also included in the current environmental license process 

Disposal of the waste rock at the start of operation at pile 1 (close to processing plant) and pile 2 

Commence disposal of waste rock at pile 3 after one year and three months from the start of the operation 

Commence mining of Pit 2 from Year 3 onwards 

Mine both pits in conjunction from Year 3 to Year 6 to reduce the drop-down rate and to facilitate the 1.5 Mtpa production rate  

The planned open pit mine life is nine years and three months 

The mining fleet is based on off-highway trucks for the waste movement and road trucks for the ore to be operated by a mining contractor.

 

Second Mine

 

GE21, based on the Mineral Resource, prepared the PEA for the Second Mine.

 

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

 

It is noted that the Company has not yet made a production decision in respect of the Second Mine. The Company expects that it will assess the results of a pre-feasibility study and a definitive feasibility study before making a production decision in respect of the Second Mine. All statements regarding mine development or production in respect of the Second Mine in this AIF are expressly qualified by this statement.

 

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The mine layout and operation are based on the following criteria:

 

·A single open pit on the Second Mine pegmatite

·Low height mineralized material benches to reduce mine dilution and maximize mine recovery

·Pre-splitting of the mineralized material to reduce mine dilution

·Elevated inter-ramp angles for the waste to reduce strip ratio

 

The basis for the scheduling includes:

 

·Pre-stripping the pit to liberate mineralized material

·Pit cut-backs in years 5 and 6 to expand and deepen pit

·Mining at a rate of 1.68 Mtpa

·The planned open pit mine life is 12 years and eight months

·The mining fleet is based on off-highway trucks for the waste movement and road trucks for the mineralized material to be operated by a mining contractor

 

Recovery methods

 

The First Mine concentrator plant is designed to produce a minimum 6.0% Li2O spodumene concentrate from an ore grade of 1.46% Li2O (diluted) with an average iron content of 0.97%, using DMS.

 

If a positive production decision is made for the Second Mine, a second DMS concentrator plant would be constructed to process the Second Mine mineralized material. This plant would produce a minimum 6.0% Li2O spodumene concentrate from a mineralized material grade of 1.44% Li2O (diluted) with an average iron content of 0.97%.

 

Processing Plant Description

 

The First Mine plant throughput capacity is based on 1.5 Mtpa (dry) of ore fed to the crushing circuit. The in-house crushing circuit is sized for 3.0 Mtpa, which will accommodate the additional mineralized material from Second Mine, if developed. The First Mine wet plant (DMS) is sized for 1.5 Mtpa throughput capacity, while the possible Second Mine DMS is based on a 1.68 Mtpa throughput capacity.

 

The concentrator plants are designed based on a proven DMS circuit and include three-stage conventional crushing and screen circuit, up-flow classification for mica removal, two-stage coarse DMS circuit, two-stage fines DMS circuit, single-stage ultrafines circuit, as well as magnetic separation and optical sorting on the final product stream.

 

Design Criteria and Utilities Requirements

 

The data for the feasibility study engineering and design were sourced from metallurgical test-work conducted at SGS Lakefield. Recovery data are based on results from variability samples #3 and #4. The mass balance, process design criteria and process flow diagrams were developed based on these test work data.

 

The utilities consumption requirements are approximately 6.7 MW for the process plant and 1.5 MW for non-process infrastructure at the process plant.

  

The raw water consumption for process water is nominal at 23 m3/hr (make-up raw water requirement).

 

The process water will be recycled within the plant using a thickener, where all fines slurry streams will be directed and recovered. This water will be pumped to the process water tank and recycled to the circuits.

 

Consumables will include reagents and operational consumables for the crushing circuit and the DMS plant.

 

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Project Infrastructure

 

The First Mine project infrastructure will be constructed on earthworks pads for the mineral processing plant, the mine operation support units, the open pits of the mines and the areas of waste rock and tailings disposal.

 

If developed, the Second Mine will utilize the infrastructure developed for the First Mine.

 

Buildings, Roads, Fuel Storage, Power Supply and Water Supply

  

Access to the processing plant will be by municipal road linking BR367 within the communities of Poço D’antas and Taquaril Seco. The current road will be suitable for truck traffic; however, construction of a new section of the road will be necessary to bypass the plant.

 

The plant and mine services areas will have administrative buildings such as offices, changeroom, cafeteria, concierge, clinic, fire emergency services and operation support facilities such as workshops and warehouses.

 

Fuel will be stored and dispensed from a fuel facility located at the mine services area.

 

Power will be supplied from the existing power grid line. Two main sub-stations (CEMIG and plant) will be installed to supply power to the plant, the mine services area and associated infrastructure.

 

Raw water will be supplied from the Jequitinhonha River, treated as necessary and reticulated within the plant for process, potable and firewater needs.

  

Waste Rock and Tailings Disposal and Stockpiles

 

At the First Mine, waste rock and tailings will be stored in two piles in the initial years of operation. Waste pile 1 will be located near the process area (both in the Olimpio area) and will be used for co-disposal of waste rock and tailings generated from the plant.

 

Waste pile 2 will be located to the south, in the Gilson area.

 

Both piles will have 25m wide access ramps with maximum gradients of 10%.

 

Waste piles 3 and 4 will be located adjacent to the north and south pits respectively. Table 0-7 provides the projected storage requirements.

 

Table 0-7 – Waste Pile Storage

 

  

Waste Rock 

m3 

  

Tailings 

m3 

   Waste &
Tailings Total 
MT		   Years -
Storage		 
Waste pile #1  7,845,000    567,400   17 (Note 1)    1.3 
Waste pile #2  456,731 (Note 2)    39,879   1.0    1.3 
Waste pile #3  17,399,267    8,582,001   88.26    4.5 
Waste pile #4  26,776,556    -   101.14    5.2 

 

Note 1: approximately 6.0 Mt of mine pre-stripping (first 2 quarters of mine production) will be disposed of at waste pile 1

 

Note 2: 314,072 m3 will be clear and grub from the process area and mine services area and 142,659 m3 from the earthworks cut material.

 

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Control Systems and Communication

 

A process control system (PCS) including a main plant SCADA system will be installed for monitoring and control purposes.

 

The telecommunications network will consist of the telecommunications network, access control system and RFID.

 

Market Studies and Contracts

 

The key information contained in the market study was prepared by Roskill Consulting Group Ltd (Roskill).

 

Demand and Consumption

 

The short-, medium- and long-term outlook for lithium consumption appears strong, with overall consumption growth forecast at 15.2% per annum, and demand growth 14.5% per annum, to 2033 in the base-case scenario. Growth will be higher in the shorter-term, at 22.7% per annum to 2023, and then slow to 14.0% per annum from 2023 to 2028, and 9% per annum from 2028 to 2033, as the market matures.

 

There are, however, considerable upside and downside risks to the outlook for growth in consumption of lithium to 2028, dependant on the global economic growth and the demand of Li-ion battery-powered hybrid and electric vehicles (xEVs).

 

Supply

 

At end-2018, global nameplate production capacity for mining lithium totalled 588,540 tpa lithium carbonate equivalent (LCE). Based on announced capacity expansions and new project schedules, lithium mine production capacity is forecast to increase to almost 1.0 Mtpa LCE by 2022. The largest additions to mine capacity are in Australia for mineral-based production and Chile for brine-based production. Additional mine capacity will be required from the mid/late-2020s.

 

Contracts

 

The Company has entered into the Mitsui HOA for a strategic offtake and funding partnership with Mitsui for a significant portion of the funding required for the capital expenditures and project construction.

 

Pursuant to Mitsui HOA, Mitsui and the Company have agreed terms on:

 

·Production pre-payment to the Company of US$30,000,000 for battery-grade lithium concentrate supply of up to 55,000 t annually over six years, extendable for five years plus an off-take agreement supplementary 25,000 t of product annually

·Advancement of deposit for long-lead items for the project

·Strategic collaboration to leverage Mitsui’s considerable global logistics and battery materials marketing expertise as well as an agreement to continue discussions regarding additional funding for further exploration and development of the Company’s mineral properties

·Mitsui’s right to participate in the Company’s future capital for production expansion with other deposits conditional to concluding a feasibility study and Mineral Reserves estimates

·Sales prices are set quarterly based on the published price of nominal arms-length chemical-spodumene concentrate above 6% Li2O (SC6).

 

For more information in respect of additional contracts entered into after the date of the Updated Feasibility Study Report, see “General Development of the Business – Three Year History - Corporate”.

 

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The Company has no contracts in place in support of operations. Any future contracts are likely to be negotiated and renewed on an annual or biannual basis. Contract terms are expected to be typical of similar contracts in Minas Gerais State.

  

Price Forecast

 

The Company is using the 10-year Roskill forecast for the average spodumene concentrate nominal arms-length sales price of US$750 US (cost, insurance and freight (CIF) delivered to Port of Shanghai, China) in the economic assessment.

 

Environmental Studies, Permitting and Social or Community Impact

 

Conselho Estadual de Politica Ambiental (COPAM) granted an Operation License in support of certain Sigma Brazil mining concessions on the Grota do Cirilo property on August 25, 1994. The licence was renewed on August 14, 2008 but has subsequently been allowed to lapse as it was not suitable for the new level of mining contemplated by the Company. The Company applied and was issued the first phase of the Preliminary License (Licença Previa or LP) and an Installation License (Licença de Instalação or LI) to commence construction at the First Mine. Mining licenses are for life of mine and environmental licences are timely renewed when due.

 

The Company holds approved economic mining plans (Plano de Aproveitamento Econômico or PAE) over the Xuxa, Barreiro, Lavra do Meio, Murial, and Maxixe deposits within the Grota do Cirilo property. The PAE for the First Mine was updated and approved in August 2018.

 

Reclamation plans (referred to as degraded area plans or PRADs) have been developed and implemented for certain past-producing areas within the Grota do Cirilo property. The successful recovery of these areas is managed by Sigma Brazil personnel and external consultants in conjunction with the governing regulatory agencies.

 

The Company has held regular meetings and consultation sessions with local stakeholders regularly over the last five years. The further development of Sigma Brazil mining activities in the Jequitinhonha Valley is viewed by both communities as an important regional economic driver.

 

Applicable Legal Requirements for Project Environmental Permitting

 

CONAMA Resolution N° 237 (1997) defines environmental licensing as an administrative procedure by which the competent environmental agency permits the locating, installation, expansion and operation of enterprises and activities that use environmental resources in a manner considered to be effectively or potentially polluting.

 

The licensing process in Minas Gerais has been developed in accordance with COPAM Regulatory Deliberation N° 217, dated December 6, 2017 and establishes classification criteria based on scale and polluting potential, as well as the locational criteria used to define the modalities of environmental licensing of ventures and activities that use environmental resources in the state of Minas Gerais.

 

In compliance with CONAMA Resolution 09/90, the environmental licensing of mining projects is always subject to an Environmental Impact Assessment (”EIA”), followed by an Environmental Impact Report (”RIMA”), which supports the technical and environmental feasibility stage of the project and the granting of a LP and/or a concurrent LP + LI.

 

Current Project Environmental Permitting Status

 

A Concurrent Environmental Licensing Type CEL 2 (LP + LI) will be required in support of operations.

 

The water license for the uptake of 150 m³/h of water from the Jequitinhonha River was approved by the Agencia Nacional das Águas (ANA) in February 2019.

 

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The CEL 2 (LP + LI) for the initial project phase, consisting of the north pit (Pit #1), waste piles 1 and 2 and the plant area was submitted on December 20, 2018 and was followed by the complete presentation of the EIS, the EIR and the Environmental Control Plan (ECP) as well the other documents listed in Basic Guidance Form (BGF). The EIS (Estudo e Relatorio de Impacto Ambiental – EIA-RIMA dated 30 October 2018) and Plano de Controle Ambiental – PCA dated December 2018 were prepared and issued for submittal to the authorities by NEO Soluções Ambientais and ATTO GEO Geologia e Engenharia. Approval was obtained on June 3, 2019.

 

A second EIS covering Pit #2 and waste piles #3 and #4 was formally submitted for approval in March 2020 in line with the prescribed permitting timing requirements. for the process plant coming online with Pit #1.

 

Authorizations

 

Sigma Brazil is the owner of the mining rights registered under DNPM Nº 824.692/1971, and the holder of Mining Concession Ordinance Nº 1.366, published on October 19, 1984. In 2018 a new Economic Development Plan (EDP) was registered with the National Mining Agency (ANM), which was approved on November 16, 2018.

 

The approval of the EDP and environmental study involves the technical and legal analysis and formal approval of the proposed project. With the granted LP + LI, the company must now install the project within 5 years, comply with the environmental conditions established in the LP + LI certificate and finally, apply for the Operation License after installation in order to begin operational activities.

 

The formalization of the environmental licensing process also included requesting and granting of the EIA. This allows for environmental intervention in an approximately 64 ha area.

 

Land Access

 

The Company has a lease agreement with Miazga Participações S.A., owner of the Poço Danta-Paiuí, Poço Danta and Poço Dantas Farms, to carry out mining activities on its properties. These farms include Legal Reserves (LR) which are preserved and registered in the National Rural Environmental Registration System (NRERS), in accordance with Law Nº 12.651, dated May 25, 2012.

  

Social License Considerations

 

The Company understands and accepts the importance of proactive community relations as an overriding principle in its day-to-day operations as well as future development planning. The company therefore structures its community relations activities to consider the concerns of the local people and endeavors to communicate and demonstrate its commitment in terms that can be best appreciated and understood to maintain the social license to operate.

 

The Jequitinhonha Valley is the poorest region in Minas Gerais which is plighted by poverty and is in the lowest quartile of the Human Development Index (HDI). The Company is the largest investment and operation in the area by a factor of ten and the project will be transformational to the local communities. The largest direct economic benefit is that the Company is subject to a 2% royalty on revenue which is divided between the Federal Government, State Government and Local Government. Secondly a portion of the taxes on local procurement of goods and services is shared with the Local Government. These incomes from the royalty and tax are a most important source of funding for local Government and the Company is the largest direct contributor in the region. The Company will be by far the largest employer in the region with an estimated 500 direct jobs being created with 3 to 4 times this number being indirect.

 

Farming in the area is small-scale subsistence type as the area is semi-arid. There is minimal impact on the neighbouring farms of Grota do Cirilo properties. The Company and contractor workforce will live in the cities of Araçuaí and Itinga and strict environmental management plans are in place to minimize the environmental footprint of the project. An example is 90% of the process water is re-circulated and there is zero run-off water from the site except during the wet season, when excess water from the pond will be discharged in an overflow channel. The process uses dry stacking technology and no slimes dam will be built. Regular environmental monitoring will be conducted, and results will be shared with the local communities.

 

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The Company has targeted and continues with consultations/engagements with numerous stakeholders in support of project development of the Project and has hosted visits from representatives of government departments and local academic institutions.

 

Rehabilitation, Closure Planning and Post-Closure Monitoring

 

The closure plan for the Grota do Cirilo property encompasses the following: dismantling of building and infrastructure, removal of heavy mobile and surface equipment, restoration by reconstituting vegetal cover of the soil and the establishment of the native vegetation, grading and capping with vegetation suppression layer and revegetation of the waste rock and overburden stockpiles, removal of suppressed vegetation along with slope cover and surface drainage for water management, fencing of site, environmental liability assessment studies where there may have been spillages and soil and water contamination and safe disposal, revegetation of the open pit berm areas and fencing around the open pits.

 

In the post-closure phase, a socioenvironmental and geotechnical monitoring program will be carried out, to support ecosystem restoration or preparation for the proposed future use.

 

The monitoring program will collect soil and diversity of species on an annual basis, continuing for a five-year period after mine closure.

 

Second Mine Environmental Work to Date

 

The Environmental Impact Study - EIA and its respective Environmental Impact Report - RIMA will be submitted to the regulatory agency, Bureau of Priority Projects - SUPPRI, as a supporting document to obtain a Preliminary License - LP and an Installation License - LI for Grota do Cirilo Project - Second Mine Pegmatite.

 

Considering the parameters defined by the current laws and regulations, CONAMA Resolution 09/90, the environmental licensing of mining projects is conditioned to EIA/RIMA submission, and these studies are the main technical resources to assess project feasibility.

 

The environmental licensing process started in October 2020 and will be formalized with the submission of the technical studies requested through the Environmental Licensing System - SLA, request No.: 2020.10.01.003.0003780 for the production of: 1,500,000 t/year for open pit mining and 251.89 ha for waste heaps.

 

Capital and Operating Costs

 

Capital Costs First Mine

 

The Production Phase 1 capital cost (CAPEX) estimate includes the process plant, site infrastructure, mining and Owner’s costs. Pre-production, working capital, sustaining and deferred capital costs were also included.

 

Equipment costs were obtained with firm price quotations for six long lead mechanical equipment and with budgetary quotations for the remaining equipment packages. In-country (Brazil) quotations were obtained for the installation unit rates and to the extent feasible for equipment supply. Brazilian fabricators were selected for structural steel and platework supply and fabrication.

 

Material take-offs (MTOs) were generated from the feasibility study designs with the unit rate costs applied per commodity. The CAPEX estimate has an accuracy of ±15% and is summarized in Table 0-8.

 

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Table 0-8 – Capital Cost Estimate Summary First Mine

 

Description  Capital
Cost 
US$ (Million)		 
Processing plant   32.8 
Site infrastructure   32.2 
Owner’s cost   4.6 
Contingency   7.5 
Recoverable taxes   -6.0 
SUBTOTAL CAPITAL COST   71.1 
Pre-production and working capital   27.3 
Sustaining and deferred capital   15.2 

 

Operating Costs First Mine

  

The Production Phase 1 operating cost (OPEX) estimate is based on contract mining, build-own-operate (BOO) high-voltage electrical sub-stations and non-process infrastructure substations and contract crushing, as per the Company’s preferred commercial strategy.

 

The concentrate transport cost has been estimated to be US$22.90M per annum or US$15.30/t of ore per the Company input based on preliminary quotations. This includes all the transport costs from the site to the Port of Ilhéus, Brazil, port storage and handling fees and CIF shipment to the port of Shanghai, China.

 

General and administration costs have been estimated to be US$2.64M per annum or US$1.76/t of ore.

 

Operating cost estimates are summarized in Table 0-9.

 

Table 0-9 – Operating Cost Estimate Summary First Mine

 

Description  OPEX
US$/t		 
Mining cost per tonne of ore mined   21.91 
Process cost per tonne of ROM   10.69 
G&A cost per tonne of ROM   1.76 
Shipping per tonne of ROM   15.30 
NPI (included in Process and G&A)   - 
TOTAL   49.66 

 

The OPEX costs are inclusive of taxes. The OPEX accuracy is ± 15%.

 

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Plant CAPEX and OPEX Second Mine

 

GE21, based on the Mineral Resource, prepared the PEA for the Second Mine.

 

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

 

The Production Phase 2 plant and infrastructure CAPEX is estimated at US$38.0 million.

 

The Production Phase 2 plant and infrastructure OPEX is as per operating costs estimated for the First Mine.

 

Mining Capital Costs Second Mine

  

GE21, based on the Mineral Resource, prepared the PEA for the Second Mine.

 

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

  

Total Production Phase 2 pre-production capex were estimated at about US$1.62 million.

 

Table 0-10 – CAPEX Summary Second Mine

 

Description  Investment (USDx1.000) 
Mining Equipment     NA (contractor fleet) 
Owner’s Cost     1,252.9 
Sub-total 1     1,252.9 
Contingency 30%      375.9 
TOTAL CAPEX     1,623.6 

 

Mining Operating Costs Second Mine

 

GE21, based on the Mineral Resource, prepared the PEA for the Second Mine.

 

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

 

The Production Phase 2 mining operating costs were based on the estimated operating costs for the neighbouring First Mine which is currently in a detailed engineering stage of development and construction. Table 0-11 shows the summary OPEX costs and assumptions.

 

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Table 0-11: OPEX Summary Second Mine

 

description  total 
Total Operating Cost LOM $US M   605.82 
Total Mined Mt   263.04 
Operating Cost $US/t   2.30 

 

Economic Analysis

 

Production Phase 1

 

The Production Phase 1 economic analysis was developed using the discounted cash flow method and based on the data and assumptions for capital and operating costs detailed in this report for the First Mine project mining, processing and associated infrastructure. An exchange rate of 3.85 BRL per US$ was used to convert particular components of the cost estimates into US$. No provision was made for the effects of inflation and the base currency was considered on a constant 2019 US$ basis. The evaluation was undertaken on a 100% equity basis. Exploration costs are deemed outside of the project and any additional project study costs have not been included in the analysis.

 

Production Phase 1 base case scenario results are presented in Table 0-12.

 

Table 0-12 – Base Case Economic Analysis Results First Mine

 

Item  Unit  Value 
Pre-tax NPV @ 8%  US$   299,074,000 
After-tax NPV @ 8%  US$   248,507,000 
Pre-tax IRR  %   47.6 
After-tax IRR  %   43.2 
Pre-tax payback period  Years   2.9 
After-tax payback period  Years   3.1 

 

Note: NPV = net present value, IRR = internal rate of return.

 

The main economic assumptions/input parameters used for the base case are shown in Table 0-13.

 

Table 0-13 – Main Macroeconomic Assumptions First Mine

 

Item  Unit  Value 
Spodumene price @ 6.00% Li2O (CIF China) (Note 1)  US$/t   733 
Spodumene price @ 6.00% Li2O (FOB Ilhéus Port) (Note 2)  US$/t   629 
Exchange rate (Note 3)  BRL/US$   3.85 
Discount rate  %   8.0 

 

Note 1: Roskill forecast of average nominal arms-length selling price

Note 2: China spodumene price minus budgetary estimate shipping cost.

Note 3: An exchange rate of 4.10 BRL/US$ was used for update of the CAPEX. OPEX was based on 3.85 BRL/US$.

 

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The main technical assumptions for the base case are shown in Table 0-14.

 

Table 0-14 – Technical Assumptions (base case) First Mine

 

Item  Unit  Value 
Total Mineral Reserves (P&P)  t   13,784,000 
Annual ROM ore processed  t   1,496,000 
Annual Spodumene Concentrate Production  t   220,000 
Lithium carbonate equivalent (LCE) production (Note 1)  t   33,000 
Strip ratio  ratio   9.6: 1 
Average Li2O grade of the Mineral Reserve  %   1.46 
Spodumene recovery rate  %   60.4 
Concentrate grade  % Li2O   6.00 
Mine life  years   9.25 
Cost of spodumene concentrate ex-works  US$/t   238 
Transportation costs (CIF China)  US$/t   104 
Total cash cost (CIF China)  US$/t   342 
Processing costs per tonne ROM  US$/t   11.03 
Mining costs per waste + ore mined  US$/t mined   2.07 

 

Note 1: tonnage based on direct conversion to LCE excluding conversion rate

 

In the analysis, a 10-year average Roskill forecast of an average nominal arms-length selling price of US$733 (CIF Shanghai) for the spodumene concentrate has been assumed.

 

Figure 0-1 illustrates the after-tax cash flow and cumulative cash flow profiles of the project under the base case scenario.

 

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Figure 0-1 – After-Tax Cash Flow and Cumulative Cash Flow First Mine

 

The First Mine project has been evaluated on pre- and after-tax basis.

 

Sudene is a government agency tasked with simulating economic development in specific geographies of Brazil. The project will be installed in a Sudene-covered area, where a tax incentive granted to the project indicates a 75% reduction of income tax for 10 years, after achieving at least 20% of its production capacity. The considered Brazilian income tax rate is assumed to be 15.25%, which represents the Sudene tax benefit applied to the Brazilian maximum corporate tax of 34% on taxable income (25% income tax plus 9% social contribution).

 

The project is expected to benefit from RECAP (IN SRF 605/2006 – a special tax regime for fixed assets acquisition for exporting companies) which grants PIS (Social Integration Program) and COFINS (Social Security Contribution) exemptions on federal sales taxes charged on gross revenues. The economic analysis assumes that the project is granted this exemption.

 

The project is expected to be exempt from all importation taxes for products for which there is no similar item produced in Brazil (Ex-Tarifário). Assembled equipment where some but not all individual components are produced in Brazil can be considered exempt from import taxes under these terms. The Project royalties include:

 

·A 2.0% CFEM royalty on gross spodumene revenue, paid to the Brazilian Government. The CFEM royalty amount is split between: the Federal Government Entities (10%), State Government of Minas Gerais (15%), and Municipal Government of Araçuaí (60%), for the Federal District and Municipalities, when affected by mining activity and production does not occur in their territories (15%)

·Two 1% NSR royalties

 

A sensitivity analysis was carried out with the base case (including closure costs) as described above as the midpoint. An interval of ±20% versus base case values was considered using 10% increments. Results are shown in

 

Figure 0-2 to Figure 0-3 for commodity price, exchange rate, initial CAPEX, OPEX, discount rate, and lithium grade. A further sensitivity analysis was conducted on a case excluding closure costs.

 

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The Project’s NPV (and IRR) are not significantly vulnerable to changes in the pre-production initial capital expenditure nor discount rate considered, as shown by the smoother curves associated with these variables. Note that the Project IRR is independent of the discount rate considered.

 

The Project’s NPV (and IRR) are most sensitive to variation in CIF spodumene price, lithium grade and BRL per US$ exchange rate as shown by the steeper curves associated with these variables. The Project’s NPV is significantly positive at the lower limit of the price interval and the examined exchange rate interval. The NPV is also significantly positive at the upper limit of the operating expenses interval.

 

 

 

Figure 0-2 – Pre-tax NPV (US$ million) First Mine

 

 

Figure 0-3 – After-tax NPV (US$ million) First Mine

 

Production Phase 2

 

GE21, based on the Mineral Resource, prepared the PEA for the Second Mine.

 

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The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

 

It is noted that the Company has not yet made a production decision in respect of the Second Mine. The Company expects that it will assess the results of a pre-feasibility study and a definitive feasibility study before making a production decision in respect of the Second Mine. All statements regarding mine development or production in respect of the Second Mine in this AIF are expressly qualified by this statement.

 

The Production Phase 2 base case scenario results are presented in Table 0-15.

 

Table 0-15 – Base Case Economic Analysis Results Second Mine

 

Item  Unit  Value 
Pre-tax NPV @ 8%  US$ M   449 
After-tax IRR  %   208 
After-tax payback period  Years   0.4 

 

The main economic assumptions/input parameters used for the Production Phase 2 base case are shown in Table 0-16.

 

Table 0-16 – Main Macroeconomic Assumptions Second Mine

 

Item  Unit  Value 
Spodumene price @ 6.00% Li2O (CIF China) (Note 1)  US$/t   750 
Spodumene price @ 6.00% Li2O (FOB Ilhéus Port) (Note 2)  US$/t   646 
Exchange rate  BRL/US$   5.20 
Discount rate  %   8.0 

 

Note 1: Roskill forecast of average nominal arms-length selling price

Note 2: China spodumene price minus budgetary estimate shipping cost.

 

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The main technical assumptions for the Production Phase 2 base case are shown in Table 0-17.

 

Table 0-17 – Technical Assumptions (base case) Second Mine

 

Item  Unit  Value 
Total Quantity Milled (LOM)  Mt   21.3 
Annual ROM feed processed  Mt   1.68 
Annual Spodumene Concentrate Production  t   220,000 
Lithium carbonate equivalent (LCE) production (Note 1)  t   33,000 
Strip ratio  ratio   11.6:1 
Average Li2O grade of the Mineral Resource  %   1.44 
Spodumene recovery rate  %   66 
Concentrate grade  % Li2O   6.00 
Mine life  years   12.7 
Cost of spodumene concentrate ex-works  US$/t   256 
Transportation costs (CIF China)  US$/t   104 
Total cash cost (CIF China)  US$/t   360 
Processing costs per tonne ROM  US$/t   8.6 
Mining costs per waste + mineralized material mined  US$/t mined   2.3 

 

Note 1: Tonnage based on direct conversion to LCE excluding conversion rate

Note 2: Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

 

In the analysis, a 10-year average Roskill forecast of an average nominal arms-length selling price of US$750.00 (CIF Shanghai) for the spodumene concentrate has been assumed.

 

The Second Mine project is subject to the same royalties as Production Phase 1.

 

Table 0-18 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 0-18: Sensitivity Analysis on NPV with Different Recovery and Pricing Second Mine

 

    After-Tax 
Sensitivity Matrix   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 

 

 

 

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Interpretation and Conclusions

 

Mineral Resources are reported for four pegmatite bodies, Xuxa, Barreiro, Murial and Lavra do Meio. Mineral Reserves are reported for the First Mine.

 

A PEA which is the subject of the Updated Feasibility Study Report, has been conducted on the Second Mine.

 

The extraction plan in the PEA assumes development of one open pit and construction of a process plant to process 1,680,000 dry tonnes of feed per year for a mine life of 12 years and eight months.

 

Under the assumptions presented in the PEA, the mine and process plans are feasible, and the project shows positive economics.

 

It is noted that the Company has not yet made a production decision in respect of the Second Mine. The Company expects that it will assess the results of a pre-feasibility study and a definitive feasibility study before making a production decision in respect of the Second Mine. All statements regarding mine development or production in respect of the Second Mine in this AIF are expressly qualified by this statement.

 

Risk Assessment

 

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

 

Risk assessment sessions were conducted individually and collectively by all parties. These are summarized in the sections below.

 

Most aspects of the Project are well defined. The key residual risks are summarized below. One of the most significant risks identified for the Project are related to lithium markets.

 

The following risks are highlighted for the project:

 

Lithium market sale price and demand (commercial trends)

Fluctuations in the exchange rate and inflation

Delay in obtaining financing: impact to NTP

Delay in obtaining the license for the Second Mine

More fines generated from mining and crushing: potential negative impact on recovery

Ongoing geotechnical monitoring system can change some final pit slope parameters: potential increase in strip ratio.

 

Further details on the risk assessment are provided in Section 25.2 of the Updated Feasibility Study Report.

 

Opportunities

 

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

 

The following opportunities are identified for the Second Mine:

 

·Recovery of Li2O from hypofines with a flotation circuit
·Potential upgrading of some or all of the Inferred Mineral Resources to higher-confidence categories and eventually conversion to Mineral Reserves.
·Recovery of Li2O from petalite
·Potential for future underground mining of the First Mine and Second Mine pegmatites if a trade-off study supports the concept
·Exchange rate may work in the Project’s favour.

 

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Recommendations

 

The following summarizes the recommendations from the First Mine feasibility study and Second Mine PEA in the Updated Feasibility Study Report. A phased work program is planned, which consists of continued exploration over the known pegmatites in the Grota do Cirilo area, together with the implementation of the recommendations of First Mine feasibility study and the Second Mine PEA recommendations.

 

It is important to note that the recommendations for the different projects can be conducted concurrently.

 

Geology and Resources

 

The FS Qualified Persons recommend that additional exploration drilling be conducted across the property to update existing resources and potentially discover new resources. The overall cost for the drill program is estimated at US$6.1M and consists of a 36,000 m drill program to test the Xuxa, Barreiro, Nezinho do Chicao, Murial and Bee areas.

 

First Mine Recommendations

 

The recommendations for the First Mine will be implemented in the project execution phase, prior to commencement of operations, and are estimated to be a total of US$1,275,000, consisting of:

 

·Process plant (testing for wet magnetic separation equipment, a middlings recrushing recovery trade-off study): US$60,000
·Mine design (finalize topographic survey; complete density, moisture and blasted swell effect analyses for ore and waste; implement a reconciliation system and grade control program; evaluate underground mining potential for below the open pit levels of the mine, conduct a reserve study for underground mining; implement geotechnical monitoring system): US$345,000
·Geotechnical (supplementary geotechnical and hydrogeological investigations of planned infrastructure sites including at waste pile areas; supplementary geochemical tests (ARD); large-scale waste rock and tailings co-disposal stockpile field test): US$870,000. (Note: further details of the proposed geotechnical, hydrogeological and geochemical program are provided in Section 26.3 of the Updated Feasibility Study Report)

 

Second Mine Project Recommendations

 

The PEA is preliminary in nature and includes inferred mineral resources that are too speculative geologically to have economic considerations applied them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

 

Based on the results of the Second Mine PEA, the FS Qualified Persons recommend that the Company proceed to completing a pre-feasibility study (PFS), and thereafter (based on the results of the PFS) conduct a definitive feasibility study (FS) in respect of the Second Mine.

 

The 24 m wide accesses significantly affect the overall slope angle of the final pit. If the same access width is maintained in the details of the study, it is recommended to estimate the impact of the ramps in the overall slope angle, so that this value is used in the optimization process. Thus the optimization result will be more adherent with the designed operational pit.

 

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Due to the depth of the pit it is necessary to remove a large amount of waste to maintain the 24 m access roads in the final pit. This impact is even more relevant in the annual pits in which it is sought to minimize the stripping ratio in the first years for a better cash flow. It is recommended to evaluate the feasibility of working only with road trucks, thus maintaining all access roads 10 or 12 m wide.

 

If it is not feasible to operate only with road trucks (due to large amounts of mineralized material/waste), it is recommended to evaluate the use of off-road trucks only in the pre stripping operation. The pre-stripping mining fronts are usually separated from the mining fronts, so that temporary 24-metre accesses would be created only in these regions. In addition, it is possible that the details of the mining plan indicate the option of a new pre stripping around year 9.

 

In detailing the sequential mining plan it is important to assess the amount of mineralization released by the end of each period because it is often necessary to make a large pushback of waste to access the mineralization. Therefore. it is necessary to plan so that there is no shortage of mineralized fronts released during the period in question.

 

It is also recommended to implement the hydrological and hydrogeological studies for the next phases of the Project.

 

Competitive Conditions and Anticipated Trends

 

Lithium Industry Trends and Demand Outlook

 

Lithium’s application within end-use sectors has traditionally been restricted to technical markets (ceramics, greases etc), where demand growth is typically aligned to GDP. Since 2010, however, lithium’s demand growth narrative has dramatically shifted toward rechargeable lithium-ion batteries. This is largely owing to structural changes in the automotive sector as manufacturers transition toward EVs. Unlike technical sectors, demand from batteries will be influenced by a combination of macroeconomics, EV policy targets, emissions mandates, and alignment with international treaties on climate change. Lithium-based batteries are expected to be key in the decarbonization of ground transport, via light and commercial vehicles.

 

 

 

World forecast lithium demand by end-use application, 2019-2031 (kt LCE)

 

Source: Roskill, August 2021

 

Strong battery demand growth allows for an increasing diversification of battery cathode chemistries requiring different lithium compounds. Use of, and substitution between, compounds is not binary, but rather dictated by the cathode composition, primarily the nickel content. Both carbonate and hydroxide demand are expected to be strong, though Roskill expects demand for hydroxide to increase at a faster rate than carbonate over the outlook period (17% vs 26% CAGR between 2021-2031, respectively) owing to an increasing uptake of high nickel chemistries forecast post-2025.

 

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