Sigma Lithium chair says cash flow will cover key debt maturity

Sigma Lithium (CVE: SGML) is generating enough cash to fully repay a key loan by year-end, the Brazilian company’s co-chair said in comments that may further ease concerns over liquidity.

The $100 million debt facility matures around December, four years after it was signed with Sigma’s UAE-based shareholder Synergy Capital. The loan, which has helped fund expansions, accounts for the bulk of the miner’s $134 million in debt as of March 31, according to a June company presentation. 

“The company is producing and generating cash,” Marcelo Paiva said in an interview. “This loan carries a high borrowing cost, so we have no interest in renewing,” he said, adding that Synergy is an “important shareholder” and “excellent counterpart.”

Sigma has faced mounting scrutiny from analysts and investors since October, when the Brazilian miner said it would temporarily shut its sole operating mine to upgrade equipment and switch contractors. It’s also been the target of lawsuits brought by Brazilian prosecutors over the mine’s alleged impact on nearby communities. The shares are down more than 20% this year.

The company’s Grota do Cirilo complex, located in Brazil’s Lithium Valley, is one of the world’s largest hard-rock lithium deposits and includes an adjacent processing plant. While down from previous quarters due to the upgrade, output in the second quarter exceeded guidance by 6%, Sigma said in a statement last week. 

The company reported negative free cash flow in the first quarter but has since benefited from advance payments under lithium concentrate sales agreements. As of May 15, Sigma had $28 million cash, its highest level since the end of 2024.

The Synergy debt facility is secured by Sigma Brazil’s assets, including a pledge of all its shares, and a corporate guarantee that remains in place until certain release conditions are met.

A finance veteran, Paiva is the managing partner of A10 Investimentos, which he co-founded with Sigma Chief Executive Officer Ana Cabral in 2013.

Sigma’s largest shareholder through one of its funds, A10 recently increased its stake through open-market purchases, while keeping its holdings below 5% of shares. The fund views Sigma as undervalued relative to peers, citing its operational performance and growth prospects.

The company received state backing in 2024 through a 16-year, 487 million-real ($96 million) climate financing loan from Brazil’s BNDES development bank to expand its plant. The project would nearly double production capacity to 520,000 metric tons of concentrate a year. 

In April, Sigma said it had secured a bank guarantee enabling it to draw on the financing. But no funds have been disbursed because the company has yet to meet all conditions, the BNDES said in an e-mailed response to Bloomberg. 

“The bank is reviewing new information submitted by the company before deciding whether to move forward with the financing agreement,” it said. 

(By Mariana Durao)