Shares of Sigma Lithium Resources Corp (NASDAQ:SGML) fell 12.6% on Tuesday after a Brazilian judge ordered the suspension of environmental licenses and mining activities at the company’s Grota do Cirilo mine.
The preliminary ruling was issued by Judge Antonio Lucio Tulio de Oliveira Barbosa in a civil case filed by the Federation of Quilombola Communities of Minas Gerais, according to the court document reviewed by Reuters. The judge concluded there was sufficient evidence to consider that the Bau Quilombola territory falls within the project’s area of influence, which in turn activates procedural requirements for a free, prior and informed consultation with the affected community.
In his decision, the judge cited studies indicating the Quilombola territory lies approximately 2.7 km from the project’s directly affected area. That distance is inside the 8 km threshold referenced in the ruling as the boundary that triggers more extensive licensing processes. The court noted Quilombolas are traditional communities of African descent whose territories receive state protection and therefore invoke heightened licensing obligations when projects could have an impact.
Sigma Lithium issued a response stating it had not received any legal communication regarding the preliminary ruling and that its mining and industrial activities remain in operation. The company said the order was issued while courts were in recess in Teofilo Otoni, a jurisdiction located more than 300 km from the firm’s operations.
The company added it intends to begin its legal defense when courts return to regular operation on September 8. Sigma also disputed media characterizations suggesting the ruling would supersede its recent agreement with Minas Gerais State Authorities.
The court has appointed an independent georeferencing expert to establish the precise distance between the Grota do Cirilo project and the Bau Quilombola territory. Sigma maintains that the project sits outside the defined impact zone and has contested the assertion that consultation requirements were triggered.
Investors reacted swiftly to the court action, driving the stock lower on Tuesday. Despite the legal development, Sigma reiterated guidance on output, saying it remains focused on advancing expansion plans and expects to deliver 240,000 tonnes of lithium oxide concentrate within the next 12 months and 330,000 tonnes in fiscal 2027.
Context and next steps
The ruling is preliminary and includes a technical review by an independent georeferencing expert to determine the factual distance between the project footprint and the Quilombola territory. Sigma will pursue its legal defense when local courts resume, and the company continues to run its operations pending formal notification.