Sigma Lithium Corporation, a leading global lithium producer dedicated to powering the next generation of electric vehicles with carbon neutral, socially and environmentally sustainable Quintuple Zero Green Lithium Concentrate, received a binding commitment letter dated August 27, 2024 (“Award Letter – Carta 64/2024 – BNDES GP/SG/ROD”) from BNDES (“National Brazilian Bank for Economic and Social Development”) with the final approval for a BRL 486.8 million development loan to fund the construction of a Second Greentech Carbon Neutral industrial production plant for lithium concentrate at Vale do Jequitinhonha in Brazil (“Second Greentech Carbon Neutral Plant”).
The Award Letter by BNDES outlines its binding commitment to extend the Company a development loan as decided by its Credit Committee to be funded from the National Climate Change Fund (“Fundo Nacional de Mudanca Climatica – FNMC, Climate Fund Program“) in accordance with the terms and conditions outlined in the supporting documents (specifically “Decisao DIR 222/2024-BNDES“) and in the Development Loan agreement.
The approved funding of BRL 487 million represents almost 99% of the BRL 492 million capex budget submitted to BNDES for the construction of the Second Greentech Carbon Neutral Plant, as per the Letter of Intent and the news release issued by the Company on 12 February 2024. Sigma’s capital budget for the construction of the Second Greentech Carbon Neutral Plant has benefitted from fluctuations in local currency values, as most of the equipment is produced and assembled in Brazil and/or quoted in BRL.
The Development Loan provides the Company with a 16-year repayment period at the low interest rate of 7.45% per year (below the current Brazilian sovereign interest rate of 10.5%), a hallmark of development debt financing. As a result of the significant duration of this new loan to finance construction, during the third quarter of 2024 the Company has decided to retire most of its unused existing short term trade finance lines. Sigma is repaying these lines using its current cash position.
The closing of the Development Loan remains subject to the Company’s submission of satisfactory letters of credit (“Cartas de Fianca Bancaria”) issued by Brazilian banking institutions accredited by BNDES, as well as the customary closing conditions for a Development Loan of this nature, including the Company’s constant adherence to the operating policies of BNDES.
Closing conditions for the Development Loan do not include lithium market-related conditions and cyclical lithium market and pricing elements that fall outside of the control of the Company, as the Development Loan is a long-term development industrial & climate policy instrument by BNDES.
With the Second Greentech Carbon Neutral Plant, Sigma plans to double its production capacity of its Quintuple Zero Green Lithium from the current 270,000 tonnes to approximately 520,000 tonnes. The Second Greentech Carbon Neutral Plant will introduce innovations that will further increase the efficiency of its industrial process to beneficiate mineral spodumene ore into Quintuple Zero Green Lithium pre chemical high purity concentrate.
Sigma initiated construction activities on site following the Final Investment Decision made by its Board of Directors. Based on the current construction timetable, the Company expects to conclude construction and commissioning in the summer of 2025.
The Development Loan is part of a broader strategic plan by BNDES to foster in Brazil the development of a competitive and scalable industrial supply chain to globally supply environmentally and socially sustainable industrialized lithium materials. BNDES stated in the letter that the Development Loan for Sigma Lithium to expand carbon neutral lithium industrial production capacity is part of BNDES’ long-term strategy to support the development of a scalable, green and socially inclusive industrial base in Brazil.
Ana Cabral, CEO and Co-Chairman said: “We were honored with the award by BNDES’s Directors of the binding commitment letter for our development loan to finance the construction of our second Greentech lithium plant, which will double the production scale of our industrial facilities. The award of this development loan by BNDES crowns over 10 years of relentless execution by our team at Sigma Lithium to build our global leadership in the industrial production of carbon neutral, environmentally sustainable and socially traceable lithium materials. Our unparalleled operational success has significantly contributed to attracting investment in Brazil from other global lithium companies, creating one of the world’s fastest growing producing territories. Having BNDES as a creditor represents the support of the government of Brazil for Sigma Lithium’s industrial expansion plans at Vale do Jequitinhonha’.
“In the last decade, we have pioneered and consistently championed the socially inclusive and environmentally sustainable industrialization of battery materials. As a result, our region, once one of the most impoverished in Brazil, now prospers and is known the world over as “Lithium Valley”. BNDES support allows Sigma to further amplify its socially transformational impact in Lithium Valley: illustrating the effects of how a just and inclusive energy transition has the potential to lift an entire region.”
She added “we believe that with the optimum long-term capital structure enabled by this development loan by BNDES, Sigma Lithium has a unique opportunity to solidify its global industrial competitive leadership in producing low cost, environmentally and socially sustainable Quintuple Zero lithium materials to supply the next generation of electric vehicles, which are fully aligned with the ethos of their traceability conscious consumers. BNDES has demonstrated a visionary long-term counter-cyclical approach to industrial policy financing, in line with its peers in large industrial countries, by fostering the base industry of lithium materials beneficiation, despite the deterioration in the short-term market outlook this year”.
