Bloomberg
Sabrina Valle

Sigma Lithium Resources Inc. is preparing to go public in March as it looks to begin production of the metal used in rechargeable batteries as soon as next year, before new supply from Chile hits the market. The Canada-based company with hard-rock lithium projects in Brazil is planning a reverse takeover, a back-door route to listing shares in which a private company buys a publicly traded shell company, thereby avoiding the fees associated with an initial public offering.

Sigma wants to raise C$25 million ($20 million) to C$30 million initially, and a total of C$85 million this year, as part of a plan to start ramping up production in 2019, Sigma director Ana Cabral said in a telephone interview. It’s looking to tap record prices driven by surging demand for lithium-ion batteries used in electric vehicles. Prices may start coming down in a few years after Soc. Quimica & Minera de Chile SA got the all-clear in January to expand output.

“With high demand from electric cars, there is a scarcity of lithium,” Cabral said from Toronto. “Until Chile raises production in 2023, 2024, that scarcity may continue. Whoever has lithium reserves now has leverage to negotiate.” After the reverse takeover, Sigma plans to have a free float of about 15 percent. The stock is expected to be priced in the second week of March, Cabral said.

Today, the company is 80 percent owned by Brazilian investment firm A-10, with Sigma executives owning the rest. After the reverse takeover, A-10 probably will hold 65 percent, Sigma executives 10 percent and a Canadian group that already bought debentures would have 8 percent, Cabral said.

To contact the reporter on this story:
Sabrina Valle in No Rio de Janeiro at svalle@bloomberg.net
To contact the editors responsible for this story:
Reg Gale at rgale5@bloomberg.net
James Attwood, Steven Frank