Lithium Americas Corp (TSX:LAC, NYSE:LAC) is well on its way to becoming the next US lithium miner, PI Financial said as it initiated coverage on the company.
In a note this week, the research firm said that Lithium Americas offers an attractive opportunity to invest in domestic US production of battery-grade lithium chemical production.
“With an announced (but not yet detailed) plan to separate the company's North American and Argentinian assets, we see the current company providing shareholders with exposure to near-term production from the large (and in commissioning) Caucharí-Olaroz project, with significant upside from the development of Thacker Pass as the US's next source of domestic lithium chemicals for lithium-ion battery production,” analysts at PI Financial wrote.
The brokerage has a C$40 price target and a 'Buy' rating on the stock.
Argentinean joint venture asset soon to start production
With the Thacker Pass project in northern Nevada getting the bulk of the attention from mining investors, the group’s joint-ventured Caucharí-Olaroz project in Argentina could provide major upside.
Commissioning of the Caucharí-Olaroz salar project – of which Lithium Americas owns 44.8% – is underway, though analysts noted that initial production is not expected to be battery-grade as the completion of the purification process was deferred into 2023.
Analysts are expecting production from 2024 onward will be battery-grade and provide Lithium Americas with around 22,000 tons per annum of attributable LCE production.
But US production is key, according to PI Financial.
Demand for US-based production increasing
Currently, the only domestic production of lithium chemicals is from Albemarle's Silver Peak brine operation in Nevada.
“With only one domestic source of lithium currently operating (up to 5,000 tons per annum lithium carbonate), we see the demand for US-based production increasing, as requirements for US-sourced components increase to enable EVs to qualify for tax credits,” analysts wrote.
Construction of Thacker Pass is underway. Lithium Americas is anticipating beginning production by the second half of 2026, according to the note.
PI Financial arrived at its $40 price target by applying a 0.9x multiple on its DCF10% model for Thacker Pass, and a 1.0x multiple on its DCF12% model for Caucharí-Olaroz, with corporate adjustments carried at par. The target implies a 0.93x Adjusted P/NAV multiple.
Shares of Lithium Americas were down around 6.8% in Toronto at $30.26 and 7.4% at $21.81 in New York on Thursday afternoon.
Contact Angela at angela@proactiveinvestors.com
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