Brazil needs swift regulation, says lithium company – 05/08/2023 – Market

Ana Cabral is president of Sigma Lithium, the mining company that most extracts lithium today in Brazil, raw material for the production of batteries for electric vehicles. She says she’s been working 16-hour days since 2018, when she took over the company.

Cabral claims to be an environmental activist and at the age of 16 joined the Green Party. “I am a development economist and I know that to develop Brazil it is necessary to have natural resources because it is through them that it is possible to bring investments to the country. But, if we do not do this in harmony with nature, the model is bankrupt”, he says. .

In recent months, the executive has been meeting frequently with politicians. On Wednesday (2), for example, she met for the first time with the Minister of Mines and Energy, Alexandre Silveira.

Days earlier, he had managed to bring together vice-president Geraldo Alckmin (PSB) and the governor of Minas Gerais, Romeu Zema (Novo), at the ceremony for the first shipment of lithium to China.

A large part of this agenda, according to her, is to convince the authorities that Brazil needs to accelerate its regulatory policies to compete with neighboring countries, especially Argentina. Brazil is now the fifth largest producer of lithium in the world; Argentina is fourth.

Until last year, the neighboring country had 36 projects in progress. And that, according to analysts, is thanks to incentives that include a 30-year guarantee of tax stability, a fixed royalty rate of 3% and concessions granted for an indefinite period. Liberal policies persist even in the government of leftist Alberto Fernández.

“Argentina has been in this business since 2015 with incredible market policies. They came aware that they don’t have money and that what they have is for health, education and sanitation. And, therefore, they needed to bring market-friendly policies and thus attract investment “, says Cabral.

Sigma’s current project should last 13 years, but the Zema government says that the Jequitinhonha Valley has enough reserves to be extracted by a hundred. The market forecast, however, is that the price of lithium will drop considerably in a few years. How long does Sigma predict lithium extraction will be viable economically?
In our sector, it is necessary to have long-term plans so that we can overcome changes in commodity prices. From 2018 to 2020, there was an oversupply of lithium, and four companies went bankrupt.

We managed to cross because we showed that it is possible to develop natural resources, benefit, create value and generate social development.

The window is related to the adoption of the electric car in the northern hemisphere. We know that the increase in demand for lithium will last until 2030, but at the same time the price of the mineral has already dropped 50% this year because lithium is not rare. Even so, Brazil manages to get ahead of the entire offer because our lithium is green and the price is the same.

What makes the lithium mined by Sigma green?
Our process is zero carbon, zero dam, zero harmful chemicals and virtually all water is reused. In other countries, there are tailings dams, chemicals and problems with water.

What makes our lithium green is the industrial process. There are no harmful chemicals; we do not use acids to separate, purify and granulate lithium.

In addition, we have to treat the water we use, since the Jequitinhonha River, from which we collect, is practically sewage. Finally, all of our tailings are dry-piled and, therefore, there is no dam. [como havia em Brumadinho e Mariana, na extração de minério de ferro].

I am a development economist and I know that to develop Brazil it is necessary to have natural resources because it is through them that it is possible to bring investments to the country. But if we don’t do this in harmony with nature, the model is bankrupt.

Is zero carbon due to the purchase of credits?
We only buy the leftovers. The market, which is critical of buying credit, is in love with us because we’ve done our homework.

The sector generates 13 tons of carbon for every ton of lithium; in brine [onde está o lítio do Chile, Bolívia e Argentina] are 3 to 5 tons. We managed to spend 0.25 ton of carbon per ton of lithium, which is why we spent only US$ 700,000 [R$ 3,4 milhões] with a carbon credit per year, which represents 1% of our operating costs.

Where is Brazil in the lithium race?
The lithium race is very interesting because today there is a drop in consumer resistance to electric cars. Added to this is the US government incentive to give consumers US$ 7,500 [R$ 36,5 mil] per car purchased. With this, a market is created beyond China and Europe.

We managed to insert Brazil in a chain where it was not. And this chain exists all over the world, because lithium is not rare.

In our region, there is lithium in Bolivia, Chile, Argentina and Canada, and everyone wants to export to the United States and Europe. We managed to insert Brazil into the chain through the front door, saying that Brazilian lithium is green and that it is not possible to compete with it.

But what is the country missing?
Brazil is competing hard to establish the national territory as a producing territory. That is why the concept of the Lithium Valley is important [programa do governo Zema pretende atrair mais mineradoras para o Vale do Jequitinhonha]; nobody will invest in the chain if there is only one producer, nobody wants to deal with a monopoly.

The issue here is who will come first to deliver the clean mineral, be it lithium, cobalt, copper or nickel. [minerais utilizados na fabricação de veículos elétricos]. It turns out that all of the latter are problematic in the world in terms of processing.

They are minerals that have a lot of carbon in their chain, and then you change the diesel of a car for a technology that generated a lot of carbon. That’s the problem with the industry today.

The agenda that we have today with the federal government is about having a faster and more modern regulatory environment, because our competitor is Argentina, which is already booming in this market.

Is Argentina more developed than Brazil in this sector?
A lot more. Argentina has been in this business since 2015 with incredible market policies. They came aware that they don’t have money and that what they have is for health, education and sanitation. And, therefore, they needed to bring market-friendly policies and thus attract investments.

Before our decree [que liberou a exportação de lítio] to be published, Argentina had received BRL 78 billion, and Brazil, BRL 2 billion.

the city of Salta [onde o lítio é extraído na Argentina] there was nothing and today there is even a building. People say that Araçuaí is Salta in five years. I’m going to Argentina this week to participate in a seminar on the subject.

If Bolivia accelerates lithium extraction, won’t the mineral’s prices drop dramatically?
There is a lack of legal security in Bolivia. That’s because they require companies to partner with the government.

The market gravitates towards places where there is legal certainty, such as Canada, Argentina and Brazil. Chile [segundo maior produtor de lítio do mundo] recently did like Bolivia, and the investments came out of there. Part went to Australia [maior produtora] and the other we are trying to capture.

Why Sigma Chose Not to Transform Concentrated Spodumene [produto final da Sigma, com 5% de óxido de lítio] in lithium carbonate or lithium hydroxide, chemical compounds used in the manufacture of batteries, with greater added value and exported by Argentina and Chile?
We entered the market to do something socially and environmentally sustainable; the objective was to add value and develop the region, delivering royalties. Today, we employ 1,000 people, 400 in the expansion work and 500 in the mine.

If we had a hydroxide production plant, it would only be 25 more jobs. Also, the dust that is generated during lithium hydroxide production corrodes your skin if you are sweaty. It’s not trivial.

Information has circulated that Sigma could be sold to billionaire Elon Musk, a Chinese mining company or Saudi Arabia’s sovereign wealth fund. Were there, in fact, these conversations?
We’re the most rumored company around, and I can’t speak to them.

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X-RAY | ANA CABRAL

She is a partner and co-founder of A10 Investimentos, the controlling shareholder of Sigma Lithium, one of the largest lithium companies in the world. She has over 25 years of experience in global investment banking in New York, London and São Paulo and over 15 as an investor. She has worked at Pactual and Credit Suisse banks and at the Goldman Sachs group.