Needless to say, we are miles away from his or the consensus target. GLTA BMO Nesbitt Burns analyst Joel Jackson warns Sigma Lithium Corp.’s (SGML-Q, SGML-X) fourth-quarter update on Monday is likely to be “noisy.”
“Q4 won’t be pretty because of industry-wide multi-month delays in finalizing spodumene price realizations including one Q3 SGML shipment’s provisional price trued up in Q4 - we now model Q4E EBITDA of negative $37-million,” he said.
“First, we assume Q4 spodumene shipments (64kt) are priced US$1k/t (end-of-quarter pricing). Second, we assume the second Q3 shipment (22kt) was also repriced at US$1k/t (vs. Q3 ASP US$2.5k/t) resulting in a $45-million negative retroactive hit in Q4. Third, we assume US$553/t fob port cash costs, slightly better than US$577/t in Q3 (while October was indicated US$485/t, November costs were higher with magnetic separation added). Fourth, we assume G&A stayed high at $15-million.”
Also modifying his expansion schedule for the Vancouver-based company, Mr. Jackson lowered his target for Sigma Lithium’s Nasdaq-listed shares to US$30 from US$38, reiterating an “outperform” recommendation. The average is $47.74 (Canadian).
“Despite continued noise around Sigma, we still see upside as SGML (with sizable Brazilian spodumene assets) continues to re-rate to lithium feedstock producer, and ramps production over subsequent years,” he said. “While an imminent takeout now seems unlikely, there is ample upside if SGML delivers on targets.”