Sigma Lithium Corporation (NASDAQ:SGML) faces growing liquidity and operational headwinds. Funding delays and a recent supplier change have heightened uncertainty around its near-term production and expansion plans.
Analyst Downgrade Cites Rising Risks
Bank of America analyst Rock Hoffman downgraded Sigma Lithium to Neutral from Buy, citing rising liquidity pressures and operational uncertainty following the company’s decision to switch mining contractors.
The bank cut its price forecast to $7 from $10, reflecting lower earnings estimates and delayed expansion timelines.
Bank of America said the supplier change has introduced near-term production and financing risk, even though Sigma’s fundamentals, such as low capex/opex, and stable volumes, remain attractive.
The bank noted that the company’s liquidity position has weakened after a cash drawdown and high days payable outstanding (DPO), and warned that deferred payments could strain future financing.
Delayed Customer Prepayments and BNDES Funding Uncertainty
The report highlighted that customer prepayment discussions have dragged on, with a previously expected $300 million prepayment pipeline yet to materialize.
Meanwhile, funding from Brazil’s BNDES bank appears less likely; the bank removed the BNDES loan from its model and expects only a $100 million prepayment in the fourth quarter, insufficient to cover near-term obligations, including a $100 million debt maturing in late 2026.
Bank of America reduced its 2026 and 2027 EBITDA forecasts to $16 million and $36 million, respectively, from $29 million and $122 million, citing capital constraints delaying expansion of Phase 2 and Phase 3 projects to 2028-2029.
The firm estimates Sigma will need an additional $150 million to refinance debt and fund growth capex. Despite these cuts, the bank slightly raised its valuation multiple to 8.5x from 8x to reflect Sigma’s early-stage production profile.
Cash Shortfall Intensifies Liquidity Concerns
Liquidity concerns intensified after Sigma ended the second quarter with $15 million in cash, against $44 million in payables and $54 million in short-term borrowings.
The analyst said the company’s cash balance remains far below the estimated $50 million minimum needed to cover two quarters of operating costs, raising concerns.
The bank said $7 price forecast is based on a net asset value (NAV) model averaged with 8.5x multiple applied to the company’s expected 2027 EBITDA.
Price Action: SGML shares were trading lower by 0.90% to $6.055 at last check Friday.
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