Sigma Lithium surges as output climbs, costs fall

Sigma Lithium (TSXV, NASDAQ: SGML) surged to a one-month high on Friday as investors welcomed the company’s second-quarter production increase and cost cuts despite weaker-than-expected earnings.

Lithium oxide concentrate output rose 38% to 68,368 tonnes in the April-June quarter, Sao Paulo-based Sigma said Friday in a statement. That exceeded the company’s 67,500-tonne target for the period.

The Brazil-focused lithium miner also kept costs down. All-in sustaining cash costs (AISC) came in at $594 per tonne, below the company’s $660 per-tonne target. Costs in the same period a year ago were $779 per tonne.

Despite the higher production, sales volumes dropped 23% to 40,350 tonnes, sending revenue down by 60% to $21.1 million. Sigma blamed the decline on a strategy to withhold products during intense volatility in the global lithium market.

At a result, Sigma’s net loss widened to $18.8 million from $10.8 million. At 17¢ a share, the loss fell short of the 4¢ a share average of analyst estimates.

Shareholders nevertheless responded positively, sending Sigma shares up 15% to $8.85, their highest level since July 25. The company has a market capitalization of about $985 million.

Sigma’s results come days after China’s CATL, the world’s largest maker of electric-vehicle batteries, halted production at its Jianxiawo mine, which accounts for about 6% of global lithium output. The closure has pushed international lithium prices higher, easing fears of a supply glut.

“The company had a messy second quarter commercially as expected, but it seems like the dynamic is quickly improving in the third quarter with tailwinds for both the commodity and the company,” BMO Capital Markets mining analyst Joel Jackson said Friday in a note.

Sigma’s second-quarter performance highlights the strength of the company’s “low-cost, large-scale operations and disciplined commercial strategym” Sigma CEO Ana Cabral said.

“We maintained production cadence at 68,000 tonnes and are comfortably on track to deliver on our annual production target of 270,000 tonnes while preserving pricing power in a volatile market,” she added.

During the latest period, Sigma also said it advanced the planned expansion of its Grota do Cirilo operations in Minas Gerais State. Adding a second plant would double the company’s production capacity to 520,000 tonnes per year.