TMTPOST -- The U.S. government on Tuesday confirmed it is taking further steps to boost the supply chain of critical minerals.
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The U.S. government agreed to acquire a stake in Lithium Americas Corp., helping fund the Canadian company as it develops its Thacker Pass lithium project in Nevada, Secretary of Energy Chris Wright said in a Bloomberg interview, noting the move was necessary to help counter China's control of the lithium market.
Lithium Americas later Tuesday announced it has reached a non-binding agreement in principle with the U.S. Department of Energy (DOE) to advance the first draw of $435 million (First Draw) on the previously unveiled $2.26 billion DOE loan. The previous DOE loan, finalzied by the Biden administration a year ago, is helping to finance construction of a lithium carbonate processing plant, adjacent to the $2.2 billion mine, one of the U.S. most promising opportunities to produce the metal that』s used in electric-vehicle batteries, solar panels and wind turbines.
As part of key provisions of the agreement, the DOE has agreed to defer $182 million of debt service over the first five years of the DOE Loan. In return, the DOE will receive 5% equity stake in the Lithium Americas through warrants to purchase common shares of the company at an exercise price of $0.01 per share, and a separate 5% stake in its joint venture (JV) with General Motors Holdings LLC (GM) in the Thacker Pass lithium project (Project).
Lithium Americas under the deal will post an additional $120 million to DOE Loan reserve accounts, to be funded within 12 months of the DOE advancing First Draw. GM will provide additional support to the Project by amending its lithium offtake agreement with the JV to permit the JV to enter into additional third-party offtake agreements for certain remaining production volumes not forecasted to be purchased by GM.
Once the DOE exercises the JV warrants in full, the JV economic interests will, prior to funding of the additional $120 million reserve accounts discussed above, be 59% held by Lithium Americas, which will continue to be the manager of the Project, 36% by GM and 5% by the DOE, with voting interest in the JV remaining 62% for Lithium Americas and 38% for GM.
The total value of the deal was not disclosed. Lithium Americas shares rocked as much as 41% in aftertrading hours on Tuesday.
Lithium Americas CEO Joanathan Evans said the company, together with its partners, is onshoring large-scale U.S. lithium production, strengthening America』s supply chain. The Thacker Pass project 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, Senior Vice President Global Chief Procurement and Supply Chain Officer of GM.
The deal reflects the Trump administration is wielding power of the state to bolster critical mineral companies. The Pentagon』s equity stake in U.S. rare earth miner MP Materials announced nearly two months ago has investors wondering where the government might invest next.
MP Materials on July 10 said the Defense Department will become its largest shareholder after it agreed to buy $400 million of its preferred stock. MP Materials owns the only operational rare earth mine in the U.S. at Mountain Pass, California, about 60 miles outside Las Vegas. Proceeds from the Pentagon investment will be used to expand MP』s rare earths processing capacity and magnet production, the company said.
The White House is 「not ruling out other deals with equity stakes or price floors as we did with MP Materials, but that doesn』t mean every initiative we take would be in the shape of the MP deal,」 a government official told CNBC on Sunday.
Other critical minerals like lithium, cobalt and graphite are ripe for federal investment to smooth out volatile price fluctuations that undermine U.S. miners, according to Rich Nolan, CEO of the National Mining Association. Something 「in the ballpark」 of the MP deal could apply to the lithium sector said Kent Masters, CEO of North Carolina-based Albemarle, one of the world』s largest lithium producers.
