Lithium Americas Corp (TSX:LAC, NYSE:LAC) has received a favourable ruling from the US District Court regarding its Thacker Pass project in Nevada’s Humboldt Country, which is the first step to unlock General Motors’s investment in the project, broker Stifel GMP said in a note as it kept its ‘Buy’ rating and $37 price target on the stock.
Noting that the Nevada District Court declined to vacate the Bureau of Land Management (BLM)’s Record of Decision (RDD) that approved LAC's mine plan for its Thacker Pass lithium project, the analysts said the ruling is an overall positive for LAC that confirms the BLM adequately considered environmental and social impacts in issuing their permit.
The ROD, which approved the mine plan in 2021, had been challenged by a number of opposing plaintiffs, including arguments that the project will cause undue environmental damage, or that the BLM inadequately considered cultural and religiously significant areas or acted in bad faith in consultation with local communities.
“The decision will allow the company to begin construction activities at the site and satisfies a condition's precedent on the first tranche of GM's $650 million in project financing,” the analysts wrote, while cautioning that appeals to the decision are still possible.
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“We would note that the ruling includes a remand to the BLM relating to the determination of mining claim rights for tailings. LAC is to work closely with the BLM to complete the required assessment, which includes demonstrating mineralization extending to tailings area,” they added.
The Stifel analysts said they anticipate a catalyst-rich near-term for LAC, highlighted by the first production from its Cauchari-Olaroz operation in the first half of 2022 and progress on a loan application with the US Department of Energy (DoE). The application is seeking funds from the DoE's approximately $57 billion Advanced Technology Vehicles Manufacturing (ATVM) loan program, launched to support the transition to electric vehicles in the US.
"We continue to highlight the non-traditional sources of financing available for LAC,” the analysts said. “While the capital bill for Thacker Pass has increased with the recent DFS (definitive feasibility study), we highlight the significant sources of capital available for domestic critical minerals projects.”
Apart from the outstanding loan application with the ATVM program, which could potentially fund a significant portion of upfront capital, they noted that GM and LG Energy Solutions have already sourced a $2.5 billion loan from the DoE for their Ultium Cells battery manufacturing joint venture (JV).
“With the potential for material from Thacker Pass eventually able to feed this JV, we are encouraged the DoE will see the benefits of a vertically integrated domestic supply chain,” they said.
At recently realized transaction prices by major lithium producers, the analysts said the Thacker Pass project has the potential to generate approximately $2 billion in average annual underlying earnings (EBITDA) over the first five years.
Contact the author at stephen.gunnion@proactiveinvestors.com