Sigma Lithium's (SGML) signed $50 million prepayment has increased confidence that the company can manage its near-term liquidity issues and return to normal operations, BofA Securities said in a note Thursday.
The firm said that the payment, expected in Q2, signals strong buyer confidence in Sigma's ability to operate with new subcontractors, likely following a technical and operational review, and could lead to more prepayments. As a result, phase 2 is now expected to start in mid-2027 instead of early 2028, improving the company's valuation, the firm said.
The firm raised its 2026 and 2027 earnings before interest, taxes, depreciation, and amortization estimates to $157 million and $241 million from $137 million and $152 million, driven by stronger tailings sales and an earlier phase 2 start.
Looking ahead, there is potential upside to 2028 and 2029 earnings if phase 3 is developed after phase 2, although a 2029 start is assumed, BofA said, adding that the $50 million prepayment should help fund phase 2 if sales remain steady, but it still expects a $100 million debt raise in Q4 to manage maturities and cash risk.
"Securing the $100 million prepayment would provide further balance sheet flexibility, though we do exclude this from our base case," the firm added.
BofA Securities upgraded Sigma Lithium to buy from neutral and raised its price target to $17 from $14.
Shares of the company rose 20% in the session.
Price: 14.13, Change: +2.30, Percent Change: +19.44
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