Lithium Americas revamps Thacker Pass deal with GM in new US$625M JV

Shares in Lithium Americas (TSX: LAC; NYSE: LAC) jumped by 20.2% on Wednesday after it announced a new, US$625-million joint venture agreement with General Motors for its Thacker Pass project in northern Nevada.

Under the deal that the developer calls the largest ever by a U.S. original equipment manufacturer in a lithium project, GM is to acquire a 38% stake in Thacker Pass for US$625 million in cash and letters of credit. The JV deal replaces the US$330 million in second tranche equity investment from GM announced in January 2023, and is in addition to the US$2.3 billion loan from the U.S. Department of Energy (DOE). The deal also includes US$430 million of direct funding to the JV to build the project’s first stage, expected to cost US$2.9 billion.

“Our relationship with GM has been significantly strengthened with this joint venture as we continue to pursue a mutual goal to develop a robust domestic lithium supply chain by advancing the development of Thacker Pass,” Jonathan Evans, Lithium Americas president and CEO said in a release. “We will be working closely with GM to advance towards the final investment decision, which we are targeting by the end of the year.”

The JV deal is among some in the lithium space to be moving forward while low prices of the battery metal have seen many others face delays. Battery-grade lithium hydroxide prices have dropped to US$9,800 per tonne on Wednesday from US$22,275 a year ago and around US$85,000 a tonne in late 2022, according to The Wall St. Journal. 

Shares in Lithium Americas traded for $4.45 apiece on Wednesday morning in Toronto, valuing the company at $975.9 million. Its shares traded in a 52-week range of $2.87 to $12.71.

Manager with 62% stake

For its 62% ownership of Thacker Pass, Lithium Americas will contribute US$387 million to the JV and act as manager of the project. Of the total, US$211 million is to be paid when the JV closes and the rest when a final investment decision is made.

GM is to extend its existing offtake agreement with Lithium Americas for up to 100% of production volumes from Thacker Pass’ first stage to 20 years to support the expected maturity of the DOE loan. After the JV closes, GM will also make another 20-year offtake deal for up to 38% of stage two production volumes, retaining its right of first offer on the remaining stage two volumes.

Before Lithium Americas takes its first draw of the US$2.3 billion loan, expected in the middle of next year, it must fund about US$195 million towards reserve accounts linked to the loan, such as for construction contingency, ramp up and sustaining capital.

Design 40% done

Meanwhile, at Thacker Pass, located in Humboldt County, the company has completed about 40% of the project’s engineering design, and site preparation for major earthworks is complete. Excavation of the process plant area is about half-finished and preparations for concrete placement are underway.

The project hosts the largest known measured and indicated lithium resource in North America, with 385 million measured and indicated tonnes grading 2,917 parts per million (ppm) lithium, equivalent to 6 million tonnes of lithium carbonate. Another 147 million inferred tonnes grading 2,932 ppm lithium could provide another 2.3 million tonnes of lithium carbonate equivalent (LCE). The mine could potentially produce enough lithium to power 1 million EVs annually, the company says.