Sigma Lithium Temporarily Halts Operations in Brazil

Sigma Lithium (TSXV:SGML,NASDAQ:SGML) announced a temporary suspension of all mining and industrial production at its operations in Brazil, citing an "atypical 15-day delay" by the Federal Court of Appeals in reviewing the company’s emergency legal defense against an environmental injunction.

The suspension forces the producer of lithium oxide concentrate to delay its 12-month production guidance of 240,000 tons by three months. The company nevertheless maintained its fiscal 2027 production target of 330,000 tons.

Sigma Lithium will maintain its commercial recycling operations and generate cash flow by selling high-purity lithium fines derived from dry stacked tailings as a means of self-funding during the operational halt.

The pause stems from a preliminary emergency injunction issued by a local federal judge in Teofilo Otoni during a holiday weekend, which in turn resulted from a lawsuit filed by the NGO Ngolo that requested Minas Gerais state authorities to suspend Sigma Lithium's environmental licenses.

The NGO alleged the Grota do Cirilo complex negatively impacts a nearby Quilombola community, a rural heritage settlement established by descendants of enslaved Afro-Brazilians.

The lawsuit also named the State Government of Minas Gerais, the state environmental authority (FEAM), and the federal traditional communities body (INCRA) as defendants for evaluating and granting the licenses since 2019.

Sigma Lithium challenged the injunction, arguing its constitutional right to present a legal defense was violated when the local court failed to serve legal communication until nearly a week after the ruling was issued.

The company stated the court also denied previous requests for independent expert technical evidence to evaluate atmospheric, water, acoustic, and structural impacts on the community.

According to the company, the Grota do Cirilo complex operates outside the legally mandated environmental impact perimeter. Sigma Lithium stated the settlement's houses are situated on the opposite bank of the Jequitinhonha River, approximately 8 to 11 kilometers from the active mining pits.

The company alleges the lawsuit’s claim of a 2.7-kilometer proximity relies on an "anomalous measurement 30x larger than the original baseline," derived from a self-proclaimed technical report that allocated 1.5 square kilometers for each alleged Quilombola family.

Sigma Lithium warned that the upcoming second round of Brazil’s general elections on October 25 introduces the risk of a delayed or negatively biased appellate ruling against the mining industry. Should the Federal Court of Appeals uphold the injunction, the company stated it would seek a secondary appeal in the superior federal courts.

In August, Sigma Lithium fully resumed its mining and industrial operations after signing a Terms for Adjustment of Procedures (TAC) agreement with the State of Minas Gerais.

As part of the settlement, the company committed approximately US$1 million in capital expenditures of environmental adjustments and agreed to pay US$540,000 for environmental fines.

Shares of Sigma Lithium slipped to C$11.16 following the Thursday (October 1) curtailment announcement. Currently shares are trading at C$12.24, as of 12:57 p.m. ET.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.