VANCOUVER - Lithium Americas Corp (TSX:LAAC). (TSX: NYSE:LAC) (NYSE: LAC) has closed a significant $2.26 billion loan from the U.S. Department of Energy (DOE) to fund the construction of its Thacker Pass lithium processing facilities in Humboldt County, Nevada. This financial move is a part of the DOE's Advanced Technology Vehicles Manufacturing Loan Program, aimed at bolstering the domestic production of critical minerals and reducing reliance on foreign materials.
The loan is structured with a fixed interest rate based on the U.S. Treasury rates from the date of each monthly advance, with a term spanning 24 years from the initial draw. It encompasses $1.97 billion in principal and an additional $290 million to cover interest accrued during the construction phase.
Thacker Pass is poised to become North America's largest lithium operator with a projected initial annual production of 40,000 tonnes of battery-quality lithium carbonate. The project is expected to generate approximately 1,800 direct jobs over its three-year construction period and sustain around 360 full-time jobs during its 40-year operational life.
The loan announcement follows a partnership with General Motors Holdings LLC (NYSE:GM), where GM will acquire a 38% stake in Thacker Pass for $625 million, as detailed in an October 16, 2024, investment agreement. This joint venture aims to fund, develop, construct, and operate the lithium resource, which is anticipated to commence Phase 1 production in 2027.
The collaboration with GM includes a $195 million letter of credit facility, which will serve as collateral for reserve account requirements under the DOE loan. The first draw on the DOE loan is expected to occur in mid-2025, contingent upon fulfilling conditions such as closing the GM joint venture transaction and securing additional corporate working capital.
This strategic financial structuring is a critical step for Lithium Americas as it advances the Thacker Pass project, which is currently the largest known Measured and Indicated lithium resource in North America. The lithium produced is expected to support up to 800,000 electric vehicles (EVs) annually, aligning with U.S. government initiatives to secure a domestic supply chain for critical minerals and supporting the country's clean energy transition.
The information provided is based on a press release statement from Lithium Americas Corp.
In other recent news, Lithium Americas Corp. has entered into a joint venture with General Motors (GM) for the Thacker Pass lithium project in Nevada. GM will invest $625 million, acquiring a 38% stake in the project, which is seen as a positive development for Lithium Americas according to Scotiabank (TSX:BNS) and B.Riley. This investment will support the construction of Thacker Pass and complements GM's initial $320 million investment in Lithium Americas. The partnership aims to enhance the domestic supply chain for critical minerals, essential for electric vehicle batteries.
In addition, Lithium Americas and GM have extended the deadline for a second tranche investment until December 31, 2024. This extension is part of the strategy to finalize the Department of Energy (DOE) Loan and GM's investment before making the final investment decision later this year.
Several analyst firms have revised their outlook on Lithium Americas following these developments. B.Riley raised its price target for Lithium Americas to $4.50, maintaining a Buy rating, while Scotiabank reduced its price target to $2.50, maintaining a Sector Perform rating. Deutsche Bank (ETR:DBKGn) revised its price target to $2.50, maintaining a hold rating, and Piper Sandler initiated coverage with a neutral rating and a $3.90 price target.
In international developments, a senior U.S. official has accused Chinese lithium producers of saturating the global market, leading to significant price drops. This move has impacted global producers and the development of diverse supply chains. Despite these challenges, Lithium Americas continues to progress towards the production phase of Thacker Pass Phase 1, aiming for a capacity of 40,000 tonnes per annum of lithium carbonate.
InvestingPro Insights
As Lithium Americas Corp. (LAC) secures a substantial $2.26 billion loan from the U.S. Department of Energy for its Thacker Pass project, investors might be interested in additional financial insights. According to InvestingPro data, LAC currently has a market capitalization of $908.1 million USD, reflecting the market's valuation of the company's potential.
InvestingPro Tips highlight that LAC holds more cash than debt on its balance sheet, which could be seen as a positive factor considering the large loan it has just secured. This strong cash position may provide additional financial flexibility as the company moves forward with the Thacker Pass project.
However, it's worth noting that LAC is currently not profitable over the last twelve months, with a negative P/E ratio of -28.18. This is not uncommon for companies in the development stage of major mining projects. The InvestingPro Tip indicating that net income is expected to drop this year aligns with the company's focus on construction and development rather than immediate profitability.
Despite these challenges, LAC has shown strong returns over the last week, month, and three months, with price total returns of 22.26%, 38.35%, and 30.04% respectively. This recent positive momentum could be attributed to investor optimism surrounding the DOE loan and the partnership with General Motors.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for LAC, providing a deeper understanding of the company's financial health and market position.
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