LG Energy Strikes Battery-Metal Deal With Sigma Lithium

(Bloomberg) -- One of the world’s top electric-vehicle battery makers has struck a supply deal with Sigma Lithium Corp. as demand for the metal soars.

South Korea’s LG Energy Solution agreed to buy as much as 100,000 tons a year of battery-grade lithium as part of a six-year “take-or-pay” agreement, Vancouver-based Sigma Lithium said Tuesday in a statement. Sigma aims to ramp up production for commercial delivery next year, with LG Chem Ltd.’s battery-making unit agreeing to buy 60,000 tons in 2023 before the annual amount rises by an additional 40,000 tons from 2024 to 2027.

The purchase price for the lithium, a silvery white metal that’s key for many EV batteries, will be linked to market prices for high purity lithium hydroxide. The agreement comes as demand for batteries to power electric vehicles surges, with countries worldwide looking to transition from fossil fuels into less polluting energy sources. Sigma and LG Energy also agreed to negotiate each year for additional supply of lithium, starting in 2022.

The deal “ensures the future stability of our cash flows,” Sigma Co-Chief Executive Officer Ana Cabral-Gardner said in an interview. “It basically paves the way for a path to profitability.”

Sigma Lithium shares rose 3.2% to C$10.90 at 9:32 a.m. trading in Toronto. The stock has more than tripled this year.

The minerals explorer has a hard rock lithium deposit in Brazil and has been producing low carbon, high purity lithium concentrate at an on-site demonstration plant since 2018. Sigma Lithium also has an agreement with Japanese trading company Mitsui & Co., though the arrangement with LG Energy marks the first such deal with an end customer, according to Cabral-Gardner.

“It demonstrates the environmental superiority of the product,” she said.

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