Lithium Americas Corp (LAAC)

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Lithium Americas: New Russian Sanctions Should Push Lithium Higher
Mar. 09, 2022 9:00 AM ETLithium Americas
Austin Craig
https://seekingalpha.com/article/4493864-lithium-americas-new-russian-sanctions-should-push-lithium-higher
Summary
Thacker Pass will most likely spin off from Lithium Americas. This would make it a pure USA lithium play and open doors to gov funding.
Rising oil prices per Russian sanctions will benefit EV adoption.
Government loans could fund 50% of Thacker Pass via a 25-year loan (per CEO Interview) at lower treasury rates.
Lithium prices and demand continue to rise.
Given that the South American project will come online this year, Lithium Americas stock appears to be very undervalued in this market.

Lithium Americas (LAC) CEO Jonathan Evans was interviewed by Kitco News. This was one of the better lithium interviews. Frankly, you should watch the entire interview, but we will give readers a recap and analysis. Before we begin, realize that all electric cars require lithium. If you think EV is the future, then the reader needs to identify lithium producers that offer a good risk to reward ratio. Furthermore, rising oil prices (per Russian sanctions) will apply additional pressure to adopt EV vehicles as pain at the pump motivates consumers to vacate ICE engines.

Lithium, From Russia With Love
Casting aside the geopolitics of Russia and Ukraine, one has to simply look at the White House to get a rough guess where energy is going. Hint: Up, Up and away! The Keystone pipeline is still shut down. Now politicians want to block oil supplies from Russia and Belarus. In turn, the consequence will be higher fuel prices which we are already experiencing at the pump. We feel the pinch of increased inflation for the broad economy. In an interesting note, Saudi Arabia seems to be playing its cards well.

Conversely, efforts are in place to obtain oil from less-than-savory sources such as Iran (with its deep history of supporting terrorism) or Venezuela. Rising oil prices will put additional pressure on EV adoption and this presents us with opportunity. All we need to do is target lithium stocks, buy and hold. While Ukraine impacted metals are at the moment all the rage, lithium prices are rocketing higher. Eventually, Mr. Market will wake up and take notice. We need to have lithium stocks ready in our holdings and one of the best is Lithium Americas. Let's take a moment to review the CEO interview highlights and then cruise over to some demand news.

Lithium Americas CEO Interview Highlights
Moving on, let's look at some interview highlights from the CEO of Lithium Americas. Highlights of the CEO interview include:

At the 2:15 mark -

"For supply chain in the US today, for batteries is about 40,000 tons per year which is going to go to excess of 400,000 tonnes per year by 2030. So imagine the entire world supply today needs to be replicated just for use in North America in just ten years."

3:00 mark - lithium prices are discussed and Mr. Evans quips

"[Lithium prices] have certainly come up quite a bit and they will come up more where the price of lithium will never be in the range it was a few years ago. It's actually needed though because the question you asked me earlier "How do you get there?", It requires a lot of investment and that's the thing that has lacked in this industry for more than a decade."

4:00 mark - Industry consolidation is discussed.

5:00 mark - Long term pricing of lithium is discussed.

"The pricing that I think you are going to see is going to be above $20,000 a ton. Now your finally at a place that you can get sufficient capital returns to risk that capital, put it in the ground, in order to deliver it to customers at the end of the day."

Now at first glance you might be wondering what Mr. Evans is talking about, since Lithium is obviously much higher priced than $20,000 a ton at the moment. In fact, it is near $75,000.

price of lithium, lithium going to $100,000
Lithium Price in Metric Tons (Dailymetalprice)

(Source: Dailymetalprice.com - Arrow is per the author)

5:57 Mark - Ukraine and the impact on lithium via higher gas prices are discussed.

6:50 Mark - "80% of the processing is done in China, it's probably a little bit more actually". Further discussions of China processing is discussed. Well worth hearing.

8:40 Mark - Electric update by consumers is discussed. Update faster than expected per Mr. Evans.

Thacker Pass Government Funding Exposed
9:30 Mark - The discussion starts and Mr. Evans states in a little bit:

"Post appeal this summer, we are shovel ready. We are starting to line up financing sources, the strategic partnerships, but also leveraging the Department of Energy, which has a very active loan program office now, which offers basically debt up to 50 to 60% of the capital costs of the project at fixed treasury rates for up to 25 years."

Additional details can be found via this PR. It would behoove other lithium/cobalt companies such as HeliosX (OTCQB:HXLTF), Cypress Development (OTCQB:CYDVF), Electra Battery Metals (OTCQX:ELBMF), and Standard Lithium (SLI) to take a similar approach to obtain funding. Moving on.

11:14 Mark - Mr. Evans goes on to talk about the legal case. Well worth hearing for anyone investing in Lithium Americas.

Thacker Pass Spin Off Discussed
12:30 Mark - A detailed discussion involving spinning off Thacker Pass is discussed. Investor concerns; geopolitics; a ban on China investing in crucial elements in the U.S.; national security are discussed. Consider it mandatory listening.

Lithium Americas Eying Canada?
I've known for quite some time LAC is poking around and looking for new projects. As I've previously stated, they are the most aggressive North American lithium company. It comes as little surprise that LAC might eventually look at Canada, but at this point it is just a blurb; however, still one to watch and be aware of as it makes the puzzle pieces easier to fit into place.

14:00 Mark - "In the US, Thacker Pass is actually, could be a cornerstone asset for a business that could follow another regional strategy here, because there is actually more resources in the U.S. and several in Canada that could be developed by the team here."

Strategic Partnership Process
16:00 Mark - Per Mr. Evans, "The Strategic partnering process has started for Thacker Pass". "Filed with the Department of Energy for a loan", "Process takes 6-9 months". "We have $500 million on the balance sheet".

Moving on to lithium prices and demand.

Lithium Prices
We can also see prices blasting off at Benchmark Mineral Intelligence below.

lithium prices, lithium, Jonathan Evans, Lithium Americas, HeliosX
Lithium Prices (Benchmark Mineral Intelligence)

(Source: Benchmark Mineral Intelligence)

lithium prices, lithium blasting off, Thacker Pass, Lithium Nevada
Lithium Prices (Benchmark Mineral Intelligence)

(Source: Benchmark Mineral Intelligence)

Most lithium project studies (PFS / DFS) price lithium in the $9000 to $12,000 range. Given the explosion in lithium prices these figures are rather stale and inaccurate now. Eventually yes lithium prices will come down. However, we can all safely assume that $20,000 is a very conservative estimate of long-term future lithium prices for the ground level. Hence, a lot of the NPV (Net Present Value) figures in the studies are now much lower than they should be as lithium has blasted off. The takeaway is when you read the company's NPV figures, realize they were calculated when lithium was $9,000 to $12,000 typically and are nowhere near reality. This bodes well for lithium investments.

Lithium Supply & Demand News
Demand for lithium is rising and future demand is in the works via various projects that will come online in the future. Projects such as:

Tesla Gigafactory in Germany has been approved.
Panasonic is rumored to be considering a battery deal w/ Tesla in Kansas or Oklahoma.
Unconfirmed reports place Ford at investing $40-$50 billion in EV.
A Porsche Taycan goes coast to coast on 2.5 hours of charging.
Firestone offers charging stations.
LG Energy to spend $1.7 billion on battery factory in the US.
Glencore & Britishvolt to build lithium / cobalt recycling plant in the U.K.
US Gov to put $5 billion into EV chargers nationwide over five years. An additional $2.5 billion will be released later on. (Total $7.5 billion)
EV models will double by 2024.
Pentagon to stockpile rare earths (includes lithium).
Mississippi snags a $500 million Nissan EV plant.
Conclusion
With rising lithium prices, eventually the masses will, once again, focus on lithium investments. Right now various lithium companies are trading at fire sales prices that are frankly not logical. Yet, that is the nature of the market. On the flip side, inflation is a concern and years of loose money have indeed propped up the market. Could the market pain train continue? Absolutely, and it can continue longer than you have liquidity.

The point is if you are in this game for the long term, then lithium needs to be in your holdings. At the same time be careful and nibble in small portions. Various short-term negative events will get resolved with time. We need to have solid investments in place for when good times cycle around again. Lastly remember that rising fuel prices (per internal and external Russian sanctions) will quicken EV adoption.