General Motors (GM) is putting up $625 million to green-light Lithium Americas' (LAC) Thacker Pass project in Nevada, which has the largest-known deposit of the key battery metal in the U.S. The terms of the investment, which has GM investing directly in the mine rather than acquiring more shares, sent LAC stock jumping in early Wednesday stock market action.
GM will acquire a 38% ownership stake in the Thacker Pass mine for $430 million in cash and an additional $195 million interest-free credit facility. Lithium Americas said in a news release that its agreement with GM will provide the collateral to unlock a $2.3 billion loan from the Department of Energy announced earlier this year.
↑ XThe deal lifts a weight off LAC stock, "avoiding common equity dilution," according to the release. GM already acquired 15 million shares of Lithium Americas in February 2023 for $320 million. The current deal is incremental, meaning GM's total investment in Lithium Americas and its Thacker Pass mine now equals $750 million, excluding the loan.
The new agreement extends GM's offtake agreement for 20 years. Lithium Americas and GM are targeting a final investment decision in Phase 1 of the mine by the end of the year.
The development period comes as prices for lithium carbonate have fallen by more than 80% from its peak in November 2022 amid a supply surplus. However, lithium is still seen as an attractive commodity longer term, with supply deficits expected by many analysts to return later this decade as electric-vehicle adoption gathers steam.
That favorable long-term outlook led mining giant Rio Tinto (RIO) to announce an all-cash deal for Arcadium Lithium last week.
LAC stock jumped 21% to 3.23 in early stock market action, still well below its 200-day line. GM stock edged up 0.8%. GM is about 4% below a buy point from a cup-with-handle pattern, according to a MarketSurge analysis.
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