DOE agrees to buy 5% stake in Lithium Americas

The United States’ Department of Energy (DOE) agreed to buy minority stakes in Lithium Americas (TSX, NYSE: LAC) and its Thacker Pass project in Nevada in exchange for authorizing funding linked to a previously negotiated $2.26 billion loan. Shares surged.  

The 5% stake in Vancouver-based Lithium Americas comes with a direct 5% economic interest in the Thacker Pass joint venture that the company has with General Motors (NYSE: GM). In return, Lithium Americas will be allowed to draw $435 million on the loan and the DOE has deferred $182 million of debt service over the loan’s first five years, the company said Wednesday.

“We greatly appreciate the support of the Administration, General Motors and our partners in advancing this vital world-class project,” Lithium Americas president and CEO Jonathan Evans said in a release. “Together, we are onshoring large-scale U.S. lithium production, strengthening America’s supply chain, creating exceptional jobs and enhancing our long-term energy security and prosperity.”

From talks to deal

News of the agreement comes just one week after reports from Reuters and Bloomberg indicated the Trump administration was trying to renegotiate the terms of the $2.26-billion loan – which the Biden Administration had authorized in March 2024 and was aimed at financing construction of processing facilities at Thacker Pass. The DOE was reportedly concerned about repayment amid low lithium prices due to overproduction in China.

Lithium Americas shares gained 21.5% to $6.97 apiece on Wednesday morning in Toronto, for a market capitalization of $1.64 billion. The stock has traded in a 12-month range of $2.31 to $7.55.

The equity stakes in the company and JV come through warrants to buy common shares at 1¢ each. Lithium Americas is to post an additional $120 million to DOE loan reserve accounts that will be funded within 12 months of the first loan draw, which is expected in the fourth quarter.

“We’re confident in the Thacker Pass project, which will reduce U.S. dependence on imported lithium and can support domestic manufacturing across many industries, such as aerospace, defense and electrical grid resiliency, in addition to automotive,” said Shilpan Amin, General Motors’ senior vice president of global chief procurement and supply chain officer.

Value implications unclear

But while the U.S. government taking more interest in a domestic critical minerals project might seem positive, the recent rise in Lithium Americas’ share price is “overdone,” Canaccord Genuity analyst Katie Lachapelle said in a note.  

Third-party offtakes

GM, which last year invested US$625 million to acquire a 38% stake in the project, will amend its lithium offtake agreement to allow the JV to enter into third-party offtakes for remaining production volumes that the auto maker wouldn’t buy.

Its existing offtake deal permits it to buy up to 100% of production from the project first stage and up to 38% of production for 20 years. 

National security moves

The administration’s purchase of an interest in Lithium Americas represents the latest intervention by Washington in sectors regarded as critical to national security. In recent months, the U.S. has acquired stakes in Intel, MP Materials (NYSE: MP) and other technology and mineral producers.

Lithium Americas won approval for the $2.9-billion project at the end of Trump’s first term in January 2021 and the loan was finalized in 2024 under the administration of Joe Biden.

The company joins Ioneer (ASX: INR), Exxon Mobil (NYSE: XOM), Standard Lithium (TSXV: SLI) and others in advancing U.S. projects aimed at lessening reliance on China, which dominates critical mineral refining and processes more than three-quarters of the world’s lithium into battery-grade material.

Prices of battery-grade lithium carbonate jumped about 20% almost two months ago after Chinese battery producer Contemporary Amperex Technology (CATL) suspended production at its Jianxiawo lithium mine in Jiangxi province. The price rose to 85,492 yuan ($12,000) per tonne on Aug. 20, before easing over the following weeks after CATL resumed production. It now sits at $10,375 per tonne, according to The Wall St. Journal.