Tesla plans to acquire Sigma Lithium

Tesla plans to acquire Sigma Lithium

Tesla is reportedly considering buying Sigma Lithium, a Brazilian lithium mining company, for an estimated $3 billion.

Tesla and its CEO Elon Musk have shown an ongoing interest in lithium mining and refinement over the past five years. With the company’s exponentially growing demand for the substance and its eagerness to vertically integrate, a company’s purchase of a lithium miner is certainly in its MO. But now Tesla may be closer than ever to such a purchase, because Bloomberg reports that the automaker plans to buy Sigma Lithium for $3 billion.

Sigma Lithium is one of South America’s largest lithium extractors, thanks in large part to what the company calls “the largest hard rock lithium deposit in the Americas.” Located in the southeastern state of Minas Genrias, the massive mining operation has been in operation since 2018. Importantly for Tesla, Sigma’s proximity to the Atlantic coast means its mined lithium can easily be shipped across the globe. .

Credit: Sigma Lithium website

Simga Lithium did not respond to Teslarati Or Bloomberg regarding the potential sale, and representatives for Tesla CEO Elon Musk declined to comment. Bloomberg on what they called “rumors”.

Following the information leak, shares of Sigma Lithium on NASDAQ soared more than 25% in aftermarket trading.

What makes the acquisition of Sigma potentially very attractive for Tesla, besides its proximity to the coast, is its growth potential. According to Sigma Lithium’s website, it plans to increase its production to 270,000 metric tons of lithium per year, with the more distant goal of producing 766,000 metric tons of lithium per year in the coming years. Additionally, with an abundant supply of water and hydropower nearby on the Jequitinhonha River, the operation can achieve this growth at a lower cost than other operations.

With the acquisition of Sigma Lithium, Tesla would be just a few steps away from a completely vertically integrated lithium supply chain. Tesla already produces its own battery cells, and with an upcoming lithium refining facility in Corpus Christi, Texas, raw lithium from Sigma’s operations in Brazil could help the automaker continue to rein in battery costs.

With Tesla’s profit margins the envy of the auto industry, we could see an ever-increasing number of automakers getting into lithium mining and refining. However, with the expertise and properties that mining companies currently possess, this decision could come at the astronomical price of a corporate acquisition. It remains unclear whether other automakers will follow in Tesla’s footsteps.

William is a shareholder of Tesla but does not control any shares of Sigma Lithium or its subsidiaries.

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