Lithium Americas: Media Report Says US Government Looking for a 10% Equity Stake

Key Morningstar Metrics for Lithium Americas

• Fair Value Estimate: $5
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

Reuters reported that the Donald Trump administration is looking to take a 10% equity stake in Lithium Americas LAC. Lithium Americas shares were up 70% in after-hours trading at the time of writing Sept. 23.

Why it matters: The 10% equity stake is a part of a broader renegotiation for the company’s $2.3 billion loan from the US Department of Energy to fund the majority of construction of the Thacker Pass lithium project, which is owned 62% by Lithium Americas and 38% by General Motors.

• If the US government takes an equity stake in Lithium Americas, it would be the second equity stake in a US critical materials producer, following rare earths producer MP Materials.
• Similar to the deal with MP Materials, a US equity stake could come with offtake price guarantees, which could make the project profitable even if lithium prices remain lower for longer.

The bottom line: For now, we maintain our USD 5/CAD 7 fair value estimates for no-moat Lithium Americas. We view shares as fairly valued at current prices, with the stock trading around 5% above our fair value estimates.

• An equity stake with a broader deal, including the US government purchasing lithium, fits the Trump administration’s framework for supporting US producers of critical materials.
• This would help the US government build materials reserve stockpiles and could support US automakers and other battery producers to be able to domestically source lithium, rather than relying on China, which currently refines the vast majority of lithium globally.