Sigma Lithium, has announced an inaugural deferred payment US$22.4 million letter of credit (L/C) for export financing with Banco do Brasil at very low interest rates.

This transaction strengthens Sigma's commercial position, enabling it to offer 90-day export vendor financing to its clients at very low interest rates.

One of the world's largest lithium producers, Sigma aims to take advantage of the burgeoning market for electric vehicles that use carbon neutral, socially and environmentally sustainable lithium concentrate.

Terms of agreement

Under this L/C agreement, Banco do Brasil agrees to guarantee payment on behalf of a buyer to Sigma for US$22.4 million, with payment deferred to a later date after the company's quintuple zero green lithium is delivered.

Quintuple zero green lithium refers to a specific grade or type of lithium that meets extremely stringent environmental and sustainability standards.

Replacing existing trade finance

The transaction represents the inaugural solution for the company developed in tandem with Banco do Brasil to deepen Sigma's commercial partnerships during the seasonal lithium purchase cycles.

As a result of the transaction, Sigma will gradually phase out existing trade finance lines that are drawn but mostly unused in the company's treasury. It will then move from a position of receiving advance payments to providing vendor financing.

Competitive positioning

The transaction allows Sigma to improve its competitive position by strengthening its commercial flexibility with the goal of offering a premium for its lithium concentrate.

According to Sigma, the company's ability to access this category of export financing also demonstrates it has achieved maturity as a producer within its first year of operations.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.