The Thacker Pass lithium mine is constructed near Orovada, Nev. Last year, the Biden administration agreed to provide a $2.26-billion conditional loan to Lithium Americas to help cover its construction costs.Rick Bowmer/The Associated Press
U.S. President Donald Trump‘s administration has wrestled an equity stake in Lithium Americas Corp. LAC-T, and an ownership stake in its U.S. lithium mine, as part of a renegotiation of a financing package previously agreed upon with the Biden administration.
Vancouver-based Lithium Americas is building a massive new lithium mine in Nevada called Thacker Pass that over time should help wean the U.S. off of China for one of the key minerals used in low carbon energy. The Asian superpower is a major miner and refiner of lithium.
U.S. Energy Secretary Chris Wright said in a release that the government’s stake in Lithium Americas “helps reduce our dependence on foreign adversaries for critical minerals by strengthening domestic supply chains and ensures better stewardship of American taxpayer dollars.”
Late last year, Lithium Americas announced it had secured US$2.26-billion in loans from the Biden administration to build Thacker Pass. But in recent months, as the company was attempting to draw on that loan, the Trump administration took a second look and ultimately obtained both a 5-per-cent equity position in the company and a 5-per-cent stake in the mine itself.
The U.S. will be issued warrants that allow it to buy the equity stake in Lithium Americas for 1 US cent a share, a level that makes them essentially free.
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The Trump administration in recent months has essentially become an activist investor in its negotiations with private enterprise. No longer content with advancing loans, the U.S. government is demanding equity stakes in companies in its negotiations. The Trump administration has recently taken stakes in chip maker Intel Corp. INTC-Q and rare earths company MP Materials Corp MP-N, as part of that strategy.
“It’s hard to spin this transaction as anything other than what it is: dilutive,” Scotia Capital analyst Ben Isaacson said in a note to clients on Wednesday about Mr. Trump’s deal with Lithium Americas. “That said, we understand there was really no choice for LAC management, and they brought shareholders the best possible deal from the U.S. government.”
Despite the dilution, shareholders cheered the deal as a sign the company’s future is more secure, given the substantially bigger interest the Trump administration has in the success of the company.
Shares in Lithium Americas rose by 23 per cent to close at US$7.04 apiece on the Nasdaq on Wednesday.
As part of the reworked transaction with the Trump administration, Lithium Americas obtained a deferral on US$182-million of debt service over the first five years of the government loan. That will give the company added cash flow flexibility in the early years of the mine’s operation.
“We greatly appreciate the support of the administration, General Motors and our partners in advancing this vital world-class project,” Lithium Americas chief executive officer Jonathan Evans said in a release.
Lithium Americas will issue warrants to the U.S. government at the nominal price of 1 US cent a unit for the ownership stake in Thacker Pass.
As a result of the Trump administration taking its stake, Lithium America’s ownership in the mine will fall to 59 per cent from 62 per cent.
General Motors also has a stake in Thacker Pass and its ownership is slated to fall to 36 per cent from 38 per cent.
The first phase of the mine is projected to go into production in late 2027. Thacker Pass is expected to produce up to 40,000 tonnes a year of lithium carbonate, a level that would bump up U.S. output close to China’s and Chile’s, two of the biggest global producers. Australia is the world’s biggest lithium producer. Last year, it produced 88,000 tonnes, according to the United States Geological Survey.
GM holds an offtake agreement to purchase a significant amount of the lithium from Thacker Pass.