On Thursday, Evercore ISI made a significant adjustment to its stock price target for Lithium Americas (TSX:LAAC) Corp. (NYSE:LAC), reducing it from $13.00 to $9.00. The firm has maintained its Outperform rating on the stock. The revision follows an update on the company's financing for its Thacker Pass project, which includes a Department of Energy (DOE) Loan Programs Office (LPO) loan.
The analyst noted that securing the DOE LPO loan was a complex process, involving a loan of over $2 billion plus capitalized interest until completion. Lithium Americas Corp . has been actively working to meet various project finance-type requirements, including securing offtake agreements for the entirety of Phase I volumes with General Motors (NYSE:GM) and increasing its equity commitment to the project with GM's support.
Despite these efforts, concerns have arisen due to the extended negotiations, with some fearing that the loan would not cover the project's requirements, potentially leaving Lithium Americas Corp. shareholders to fill the financial gap.
Following the announcement of a 29% increase in Thacker Pass Phase I costs to $2.9 billion, there is still a funding shortfall. The loan's closure is contingent upon securing the second tranche of funding from GM, which in turn depends on securing all project funding. The shortfall is estimated to be over $300 million, which is significant given the company's current market capitalization.
Evercore ISI has updated its valuation view of the company's projects, now assuming a mid-cycle lithium carbonate equivalent (LCE) price of $25,000 per tonne, while adjusting for the revised Phase I capital expenditure. The updated price target reflects these revised project costs and funding considerations.
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