In a pivotal development for the U.S. lithium market, Lithium Americas (TSX:LAC, NYSE:LAC) has partnered with General Motors (NYSE:GM) and the U.S. Department of Energy (DOE) to access an initial tranche of $435 million from a federal loan. This funding is essential for advancing the Thacker Pass lithium project in Nevada, which is poised to become a cornerstone of lithium production in North America.
On October 1, Lithium Americas announced that the DOE will hold warrants providing it with a 5 percent equity stake in the company, along with a parallel 5 percent economic interest in the joint venture with GM.
This agreement is part of a broader strategy to unlock a total of $2.23 billion approved for the project’s construction.
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Significance of the Thacker Pass project
The Thacker Pass site, located approximately 25 miles from the Oregon border, is increasingly recognized as a key asset in U.S. efforts to reduce dependence on foreign lithium supplies, particularly from China. Currently, U.S. lithium production is minimal, primarily reliant on Albemarle’s Silver Peak operation in Nevada, generating fewer than 5,000 metric tons annually. In contrast, China processes over 75 percent of the world’s lithium into battery-grade materials.
Phase 1 of the Thacker Pass initiative aims to produce 40,000 metric tons of battery-grade lithium carbonate each year, sufficient to support approximately 800,000 electric vehicles. This production capacity could significantly enhance the domestic supply chain, aligning with Washington’s goal of reducing reliance on foreign lithium.
Understanding the federal investment
The agreement with the DOE also includes deferring $182 million in debt service for the first five years, while Lithium Americas commits to depositing an additional $120 million into reserve accounts within a year of the funds being utilized. This financial structure alleviates initial financial pressures and secures the project’s long-term viability.
After weeks of speculation regarding the extent of the federal equity interest, the final arrangement grants the DOE a modest stake. It allows the DOE to appoint an observer to the joint venture’s board meetings for the duration of its economic interest. Should the DOE fully exercise its warrants, the ownership distribution will comprise 59 percent for Lithium Americas, 36 percent for GM, and 5 percent for the DOE, while voting control will remain at 62 percent for Lithium Americas and 38 percent for GM.
Implications for the U.S. energy landscape
Jonathan Evans, CEO of Lithium Americas, expressed gratitude for the collaboration, emphasizing the importance of this project in promoting large-scale lithium production in the U.S. He stated, “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.”
This partnership signifies a broader initiative by the U.S. government to secure minority stakes in companies essential for national security and industrial resilience, particularly in the face of increasing global competition for critical minerals.
Market reactions and future prospects
Following the announcement, shares of Lithium Americas experienced a substantial uptick, surging over 30 percent in pre-market trading. This increase built on a rally that had begun in September when news of potential federal involvement first emerged. The stock had previously soared more than 90 percent after reports surfaced about the Trump administration’s intention to secure an equity stake, reflecting the market’s positive reception of the project.
Construction efforts at Thacker Pass are underway, with over 600 contractors currently engaged on-site. The mine and processing facility are anticipated to achieve full commercial output by 2028, marking a significant milestone for the U.S. lithium industry.
On October 1, Lithium Americas announced that the DOE will hold warrants providing it with a 5 percent equity stake in the company, along with a parallel 5 percent economic interest in the joint venture with GM. This agreement is part of a broader strategy to unlock a total of $2.23 billion approved for the project’s construction.0
