Sigma Lithium's Grota do Cirilo project in Brazil
Credit: Sigma Lithium Corp.

Sigma Lithium's Grota do Cirilo project in Brazil will start operations in the new year

A new study triples the company’s projected lithium output in 2024

The stock: You wouldn’t know what a miserable year on the markets 2022 has been from the looks of Sigma Lithium Corp. (TSXV, NASDAQ:SGML). The Vancouver-based junior miner’s stock is up more than 250 percent year to date, based on Tuesday’s close of $43.12. A production expansion study turned up like a Secret Santa for investors on December 4, nearly tripling the company’s year two (2024-25) output estimate to 768,000 tonnes of battery-grade lithium.

The drivers: You probably know by now that lithium is one of the critical minerals, hitherto produced only in small quantities, that goes into today's dominant lithium-ion battery chemistry and will need to see a five-fold supply increase to meet the demands of electrified transportation through 2030.

For a decade now, Sigma Lithium has been developing a cluster of hardrock exploration properties in Brazil. Operating on a pilot basis since 2018, the project is expected to commence commercial-scale production this coming April. Should it meet its targets, Sigma would leap to the front rank of global lithium producers by 2024.

The company is backed by Synergy Capital, a Dubai-based private equity fund focused on minerals and infrastructure for the energy transition. Though all the pieces—financing, permitting, mining and processing facilities nearing completion—appear to be in place, there remains plenty of execution risk around a venture with a $4.5-billion market capitalization and no revenues to date.

Word on the street: “The inclusion of a combined Phase 2 and Phase 3 production expansion results in a 45-percent increase in our Net Asset Value and materially higher near-term free cash flow projections,” said Canaccord Genuity analyst Katie Lachapelle as she raised her price target on Sigma stock to $65 from $45, with a “speculative buy” rating. With much of its output not yet spoken for, she thinks Sigma could become a takeover target.

Coming and going: S&P Global has once again shuffled the membership of the S&P/TSX Composite, Canada's most-watched stock market index. Vancouver-based Africa Oil Corp. (TSX:AOI) will be joining the index as of December 19, while another firm based in the city, Canaccord Genuity Group (TSX:CF), is to be dropped.