Key Takeaways
- Thacker Pass holds an estimated 3.7 million tonnes of lithium carbonate equivalent one of the largest lithium deposits in the Western Hemisphere.
- The Department of Energy provided a $2.26 billion conditional loan guarantee in 2023, the largest-ever DOE loan for a critical mineral project.
- General Motors committed $650 million in equity financing and has an offtake agreement for Phase 1 lithium output.
- Phase 1 is targeting 40,000 tonnes per year of battery-grade lithium carbonate, enough for approximately 800,000 EV batteries.
- Lithium Americas (TSX: LAC) trades at a discount to Phase 1 NAV due to construction timeline uncertainty and lithium price risk.
Thacker Pass in northern Nevada is the most consequential lithium project currently under construction in North America. Owned by Lithium Americas Corporation (TSX: LAC), the project holds an estimated 3.7 million tonnes of lithium carbonate equivalent in a sedimentary claystone deposit a geology that is unusual for lithium but extremely well understood in terms of metallurgy and processing.
The DOE and GM Backing
What distinguishes Thacker Pass from dozens of other lithium hopefuls is the calibre of its financial backers. The U.S. Department of Energy provided a $2.26 billion conditional loan guarantee in 2023 the largest DOE loan ever made for a critical mineral project. This backing reflects both the strategic importance of domestic U.S. lithium supply and the DOE’s confidence in the project’s technical and economic viability.
General Motors invested $650 million in Lithium Americas in 2023 in exchange for equity and an offtake agreement covering Phase 1 production. For GM which is spending billions on the transition to EVs having a domestic U.S. lithium supply locked up at pre-construction economics is strategically valuable regardless of the current spot price environment.
Phase 1 Construction Progress
Phase 1 of Thacker Pass targets 40,000 tonnes per year of battery-grade lithium carbonate enough to supply batteries for approximately 800,000 electric vehicles. Construction began in early 2023, with first production targeted for 2027. The Phase 1 capital cost is estimated at approximately $2.27 billion, aligned with the DOE loan facility.
“Thacker Pass will be the United States’ largest domestic lithium producer when it reaches full capacity. This is exactly the kind of project the IRA was designed to support.” DOE Loan Programs Office, 2023
The Investment Thesis
Lithium Americas’ investment thesis depends heavily on two variables: the construction timeline at Thacker Pass and the lithium price when Phase 1 comes online. At current spot prices of $12/kg, Phase 1 economics are marginal. At $20/kg which Goldman Sachs forecasts for 2027-2028 the project generates substantial free cash flow. The DOE loan and GM equity investment effectively de-risk the construction phase; the bet is on the price recovery.