[SMM Analysis] Two Suspensions in Two Months: Sigma Lithium Permits Suspended Again, Expansion Affected

On September 24, FEAM, the environmental oversight agency of Brazil’s Minas Gerais state (the State Environmental Foundation), published a notice in the state official gazette formally suspending five operating licenses held by Sigma Lithium’s Grota do Cirilo lithium mine. The suspension covers mining, waste storage and mineral processing operations, and explicitly includes the planned expansion project in the ban. Illegal resumption of production would be subject to fines.

This is the second time in two months that this batch of licenses has been suspended. In late July, FEAM had imposed a ban on the same licenses due to environmental violations, and Sigma was only able to resume production after signing a Conduct Adjustment Agreement (TAC) with the state government on August 21. This latest ban stems from a higher-level judicial ruling—on September 4, a federal court issued an emergency injunction in a civil lawsuit, suspending all environmental licenses of Sigma’s mining subsidiary and requiring a full halt to mining and processing operations. The federal-level ruling directly overturned the earlier TAC. As of press time, the conditions for resuming production at this mine—nominally 270,000 tonnes per year and Brazil’s largest spodumene mine—remain unclear.

Reason for Suspension: Missing Community Consultation Process and Dispute Over the 8-Km Red Line

The judicial injunction was initiated by a federation of Quilombola communities in Minas Gerais. Quilombola are Afro-Brazilian traditional communities. The plaintiffs allege that Sigma deliberately exaggerated the distance between the mine and the traditional territory of the Baú community in its environmental impact filings—third-party research shows the territory is only about 2.7 km from the project’s direct impact area, within Brazil’s 8-km mandatory consultation threshold, and the project did not complete the legally required Free, Prior and Informed Consent (FPIC) process before starting production.

The presiding judge found that continued blasting and earthworks by the mine several kilometers from the traditional territory posed a potential risk of harm to the community. The judge therefore ordered a full production halt, barred the state government from issuing new licenses, and directed a third-party institution to conduct on-site mapping to verify the true distance between the mine and the territory. Sigma has consistently maintained that the project lies outside the impact zone.

In fact, similar community consultation disputes are not unprecedented: in 2023, local communities filed a lawsuit and secured a temporary suspension, with Sigma resuming production only after supplementing its filing materials. The two suspensions this year have different causes. In January, Brazil’s Ministry of Labour confirmed closure orders for three of the mine’s five waste rock dumps because their safety factors were below the legal minimum of 1.3. The July administrative ban targeted illegal surface clearing, watercourse impacts and irregular groundwater extraction. Sigma paid cumulative fines of about US$540,000 and invested about US$1 million to complete rectification.

Year-to-Date Developments: Tug-of-War Between Fundamental Recovery and Regulatory Reversals

Operationally, 2026 was supposed to be Sigma’s year of recovery. After a voluntary production halt for upgrades in the fourth quarter of 2025, the mine resumed ramp-up from January. In the first quarter, it produced and sold 23,600 tonnes of spodumene concentrate (SC5), generating revenue of US$42 million, up 150% quarter-on-quarter. Second-quarter output rose further to 35,400 tonnes, with EBITDA margin hitting a record 47%, while ex-works cost fell 36% quarter-on-quarter to US$401 per tonne.

Production recovery and regulatory reversals unfolded almost in parallel: on July 17, environmental violations triggered a phased production suspension for rectification; on August 21, the TAC took effect and production resumed; on September 4, the federal injunction arrived suddenly. According to the company’s interim report, Sigma plans to build two additional concentrators, raising capacity to 580,000 tonnes per year by the end of 2027 and further to 830,000 tonnes per year by the end of 2028. It also maintains production guidance of 240,000 tonnes delivered over the next 12 months and 330,000 tonnes for fiscal 2027. Now the injunction freezes both expansion approvals and the restart path, and this timetable faces a material threat.

Company Response: Insists No Notice Received, Targets Unchanged

In response to the early September judicial ruling, Sigma issued a formal statement on September 7 with a four-point response. First, the company has not received any legal notice related to the ruling. Second, the ruling was made during a three-day court recess by a court more than 300 km from the mine, “without due process,” and is inconsistent with the spirit of Brazil’s rule of law. Third, it categorically denies that the federal ruling overturned the TAC signed with the state government on August 21. Fourth, mining and industrial activities continue to operate, and the production targets of 240,000 and 330,000 tonnes remain unchanged. The company also stressed that its operations support 19,000 local jobs and said it launched a legal defense after the courts resumed operations.

After FEAM issued the suspension order, the company’s line remained unchanged, continuing to refute media reports that its licenses had been suspended. But opposition voices are also escalating. Federal Congresswoman Célia Xakriabá publicly welcomed the suspension decision, saying pointedly that “a mining company packages itself as a pillar of the global sustainable economy, while Brazilian local communities report serious human rights abuses and blatant defiance of judicial orders.” She had previously filed criminal complaints with the Federal Public Ministry and the Federal Police over Sigma allegedly ignoring the injunction and continuing operations.

Currently, the direction of the case hinges on two things: the results of the independent mapping review of the true distance between the mine and the Baú community, and the progress of Sigma’s legal defense. Given the typical adjudication timelines for cases involving traditional community rights in Brazil, there is no short-term path to restart production by paying fines. For global hard-rock lithium supply, when this 270,000-tonne-per-year mine restarts and expands will remain one of the most important variables to watch on the supply side in the fourth quarter and in 2027.