Lithium

Tesla's Potential Lithium Deal with Sigma Has Begun to Be Evaluated by Analysts

Tesla's Potential Lithium Deal with Sigma Has Begun to Be Evaluated by Analysts

Recent rumors that Tesla is considering acquiring battery-metals miner Sigma Lithium drew a reaction from analytic firms. Bank of America and Wells Fargo have begun evaluating a potential deal.

Late last week, Bloomberg, citing unnamed sources, said that Tesla is considering acquiring battery-metals miner Sigma Lithium. The message included information that the Texas-based manufacturer was in talks with unnamed consultants about a proposal. Neither Tesla nor Sigma Lithium have confirmed or denied the information that appeared. However, analysts are interested in the rumor and even gave their evaluations of the potential deal, which may also indicate that they consider it to be highly possible.

Bank of America said the acquisition of Sigma Lithium would give Tesla control over annual lithium production, enough to produce 1.25 million to 1.5 million electric vehicles, which would be quite strong. The firm said it still sees significant value in Sigma’s shares given the discount to valuation and upside potential to the resource size through further drilling activity.

Wells Fargo believes that the potential Tesla-Sigma deal will secure needed supplies of lithium and help the US-based maker turn a profit going forward. At the same time, analyst Colin Langan warned that the location of the lithium mine is likely to be exempt from the Inflation Reduction Act (IRA). He points out that this would create new operational risks. The analyst sees that a Sigma deal could add capacity to produce around 1.7 million vehicles a year, assuming the mine operates at planned levels.

“Sigma is targeting 36.7 ktpa LCE of lithium production in Phase 1 and 67.4 ktpa LCE in Phases 2 & 3. GM's LAC investment secured 40 ktpa LCE which impliesly supports 1M vehicles. This Sigma Phase 1 could support ~0.9M vehicles and Phase 2 & 3 could add capacity for ~1.7M vehicles, if the mine produces at targeted levels. This compares to TSLA's 2022 delivery target of >1.8M.”

© 2023, Eva Fox | Tesmanian. All rights reserved.

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Article edited by @SmokeyShorts; follow him on Twitter

About the Author

Eva Fox

Eva Fox

Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.

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