Sigma Lithium shares up after news its review process will run into 2024

Sigma Lithium (TSXV: SGML; NASDAQ: SGML) shares rose 10% on Tuesday morning after the company announced it will continue its strategic review process into 2024. The company has entered into contractual and detailed structural negotiations with finalists who might acquire Sigma, though it hasn’t disclosed the names of finalists.

The company has been evaluating strategic alternatives, with parties expressing interest in acquiring the company, its subsidiary Sigma Brazil, and its Grota do Cirilo project in Brazil.

In addition, Sigma Brazil is initiating the procedures for a primary listing of its shares on both Nasdaq and the Singapore Stock Exchange.

“Such listings can help maximize shareholder value, should the selected alternative in its strategic review process involve only Sigma Brazil,” the company said in a news release on Monday.

Sigma has held talks with Tesla and other automakers about supplying the key battery ingredient in the coming years.

“We are delighted with the overwhelming interest in our business from some of the most admired companies in the battery materials and electric vehicles industries globally, including automakers and battery manufacturers,” Sigma CEO Ana Cabral said.

“We are also honoured with the direct engagement of C-level executives and board members from the consortiums with our leadership during this strategic process, significantly strengthening our relationships with global leaders and key decision makers of our industry.”

In a research note on Monday, Canaccord Genuity analyst Katie Lachapelle said that Sigma’s intention to list its shares on Nasdaq and the Singapore Stock Exchange could level the playing field and provide certainty for a deal. 

The move also signifies that a Chinese consortium is likely at the table, she said. 

By listing Sigma’s wholly owned subsidiary Sigma Brazil on exchanges outside of Canada, the consortium could acquire Sigma Brazil instead of the TSXV-listed Sigma Lithium, potentially reducing the chance that the Canadian government would review the deal. Lachapelle pointed to the new stricter measures on foreign investment in critical minerals introduced by the federal government in October 2022. 

The miner is currently producing lithium from its Grota do Cirilo Project in Brazil. The first phase of the project is expected to produce 270,000 tonnes of lithium annually, which amounts to 36,700 tonnes of lithium carbonate equivalent (LCE).

If it is determined to proceed after completion of an ongoing feasibility study, the second and third phases of the project are expected to increase production to 766,000 tonnes annually (or 104,200 LCE).

According to the company, Grota do Cirilo uses 100% renewable energy, 100% recycled water and 100% dry-stacked tailings.

Shares of Sigma Lithium traded at $41.38 apiece in Toronto on Tuesday morning, valuing the company at $4.5 billion. Its shares traded in a 52-week range of $29.56 and $57.57.