July 13, 2024

By Fabio Teixeira

RIO DE JANEIRO (Reuters) -A Brazilian court injunction is halting the sale or mining of two plots of land where takeover target Sigma Lithium is planning open pits, according to court documents seen by Reuters.

Vancouver-based Sigma Lithium is one of the hottest names in Brazil’s budding lithium sector – a pioneer in sustainable mining practices and, according to the firm, a potential acquisition target for some of the world’s top carmakers.

But in recent months, Sigma has been embroiled in a legal battle between the husband-and-wife pair who ran the company together until earlier this year. The couple’s ongoing divorce touched off at least five lawsuits over the businesses they built, including a dispute over some of the mineral rights where Sigma plans to build mining pits.

Reuters reviewed four previously unreported lawsuits in Brazil involving current Sigma Chief Executive Ana Cabral-Gardner and Calvyn Gardner, her husband and former co-CEO, who stepped down in January, when Sigma gave no reason for his exit.

Asked about issues raised by Gardner in the lawsuits, a Sigma spokesperson said in a statement: “The majority of these allegations are factually incorrect, and we look forward to seeing them proved false during court proceedings.”

Gardner declined to comment. Cabral-Gardner did not reply to a request for comment.

In one of the lawsuits, Gardner accused his wife of misusing her powers as a majority shareholder in a firm they both have shares in, called RI-X Mineracao e Consultoria, to transfer mineral rights from an RI-X subsidiary to Sigma at no cost.

That transaction, Gardner’s lawyers argued, would grant Sigma mineral rights to valuable lithium deposits and hurt RI-X’s ability to develop its own mining project. At the time of the transfer, Gardner owned 49% of RI-X and Cabral-Gardner held 51%, documents show.

RI-X did not reply to a request for comment.

In a June 27 ruling, a Sao Paulo state judge issued an injunction over that May mineral rights transfer, on the grounds that the free transfer of the rights may harm Gardner’s interests. While the judge did not reverse the transfer, the injunction froze Sigma’s ability to sell, mine or use the two plots as collateral.

Reuters could not establish how or when the injunction may be lifted.

The disputed plots are located in the middle of two proposed mining pits planned for the second and third phases of Sigma’s flagship Grota do Cirilo project, in Minas Gerais state, according to documents in the lawsuit submitted by Gardner’s lawyers.

Sigma told Reuters the injunction would not hurt its expansion, as it said it can develop the area via a “waste sharing agreement” it signed with RI-X in August. The miner also said its dealmaking efforts were not affected.

“The dispute over these two small plots is not an impediment to Sigma’s ability to conduct its strategic review of potential partners in the global energy, automobile, battery and lithium refining industries,” the spokesperson said.

Sigma shares, which had been up 4% in afternoon trading on Thursday, erased gains to close more than 2% lower after Reuters reported on the court injunction.

The disputed plots include a combined area of at least 15 hectares (37 acres), according to a court filing, and Gardner’s lawyers estimate a value of 2.9 billion reais ($595 million).

Sigma disputed that valuation, calling it “outlandish” and adding that Gardner had previously agreed to the transfer in emails. Reuters could not independently confirm this.

The plots “contain no mineral reserves or resources,” Sigma said, adding that it has contracted Deloitte for a fair market valuation, “which we anticipate being not material.”

Deloitte declined to comment.

Sigma’s lawyers have asked the judge to lift the injunction, arguing in an Aug. 28 petition that it “affects the free development of Sigma Mineracao’s business.”

They also asked the judge to seal the lawsuit, in order to “preserve sensitive commercial data and information that emerges.” The judge has yet to rule on that motion.

Mining is already underway in the first phase of the Grota do Cirilo project, Sigma’s only productive asset, about 6 km (4 miles) north of the disputed area.

Sigma said in a press release this month that it expects to produce 270,000 metric tons of lithium concentrate in its first year of full operation – over twice the 112,000 metric tons of lithium concentrate produced in all of Brazil last year, according to the Brazilian Mining Association.

Sigma also said this month that the two-phase expansion, which it could start as soon as next year, according to a June 30 financial report, would boost output to 766,000 metric tons per year.

Sigma’s share price has risen around 20% this year on expectations of a takeover. Sigma said this month it had received multiple takeover offers from “global industry leaders in the energy, auto, batteries and lithium refining industries.”

The couple’s divorce has already cast a shadow over Sigma’s plans to sell itself, according to the miner. Last month, Sigma sued Gardner in a New York court, accusing him of stealing trade secrets to undermine the miner’s dealmaking efforts and “gain leverage in the divorce proceedings.”

Sigma declined to comment on the New York lawsuit, and said “the divorce proceedings are a private, personal matter and have no impact on how Sigma Lithium conducts business.”

Gardner declined to comment on the New York lawsuit.

(Reporting by Fabio Teixeira Additional reporting by Ernest Scheyder Editing by Gabriel Stargardter, Brad Haynes and Rosalba O’Brien)

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