Yahoo Finance GM to make 'largest' investment in Canadian miner ever to build lithium mine in Nevada
General Motors Co. will invest US$650 million in Vancouver-based Lithium Americas Corp. to help develop the miner’s Thacker Pass project in Nevada, which hosts the largest-known source of lithium in the United States and the third largest in the world, the companies said.
The deal marks the largest investment made by an automaker to produce battery raw materials, GM said. The lithium extracted from the region can support the production of up to one million electric vehicles (EVs) per year, Lithium Americas said.
Lithium Americas’ chief executive Jonathan Evans said in a press release that the agreement was a “major milestone” in advancing the project. GM’s chief executive Mary Barra said the deal would help secure the North American supply chain for EVs.
The agreement is subject to two conditions, the first of which is linked to an ongoing court case in U.S. District Court, while the second deals with the separation of Lithium Americas’ businesses in the U.S. and Argentina.
The United States Bureau of Land Management approved Lithium Americas‘ project in January 2021. At the time, Evans said the decision was a result of “10 years of hard work” to ensure the company met the project’s environmental and community goals.
But a month later, claims against the decision were filed by a local rancher and, separately, by a number of claimants alleging violations of National Environment Policy Act and other federal laws in the regulatory permitting process, according to a company filing on March 2, 2021.
Located in the Humboldt County of Nevada, the Thacker Pass has been described as a “stunningly biodiverse, wild, expansive and beautiful desert in the mountains” by a grassroots collective called Protect Thacker Pass.
The group said the region is a critical wildlife habitat for threatened species and is still used today for ceremonies, traditional hunting and gathering by Indigenous people.
An appeal of the land management bureau’s decision took place on Jan. 5 and Evans said he expects a positive decision from the court in the next few months.
“We believe … the likelihood of a permit being pulled here is extremely low,” he said on a call with investors on Jan. 31. “Our legal opinion on this … we will either be allowed to move forward unfettered or if there is any sort of remedy that’s imposed, we will be able to move forward with our construction activities while the remedy is being put in place.”
If the outcome is in favour of Lithium Americas, GM will acquire 15 million shares — or 9.9 per cent — of the Canadian miner for US$320 million at a price of $21.34 per share. The miner will receive the remaining US$330 million once the planned separation of its U.S. and Argentinean projects take place.
Lithium Americas hopes to produce about 80,000 tonnes of battery-grade lithium carbonate per year in two phases. It expects to begin the construction of its first phase in mid-2023 and start producing about 40,000 tonnes annually from the second half of 2026 onwards.
The project has an expected mine life of 40 years and proven and probable reserves of 3.7 million tonnes of lithium carbonate. Capital cost estimates for phase one and phase two are about 2.27 billion and 1.73 billion, respectively.
GM will receive exclusive access to phase one production and will have the right of first offer on phase two. The company has announced four U.S. cell plants with an annual capacity of 160 gigawatt hours. It is currently building EVs at two plants in Michigan, one in Tennessee and one in Ontario.
Laurie Bouchard, a spokesperson for Canada’s industry minister, said in an email it was “good to see that GM is working with a Canadian company to build a resilient North American supply chain as part of its strong commitment to the transition towards EVs.”
Analysts say GM’s deal with Lithium Americas is part of a larger move in which the U.S., some European countries and Canada are trying to shift industry supply chains away from China, which dominates the EV sector, and towards friendlier nations.
The U.S. passed the Inflation Reduction Act (IRA) earlier this year, which offers a US$7,500 subsidy for EVs made primarily from materials sourced in North America. Ottawa in November ordered three Chinese companies to divest their stakes in three publicly traded Canadian lithium miners based on security concerns.
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Prime Minister Justin Trudeau, at an event on Dec. 5, said he wants to make sure Canada is “in control” of its critical minerals so that allies can rely on the country as the demand for these minerals is increasing, primarily due to the rise in global EV sales.
In December, GM rolled out its first electric delivery van at a plant in Ontario that had been making gas-powered vehicles for more than three decades. The company received $259 million each from Ontario and the federal government to convert the plant and produce about 50,000 EVs per year by 2025.
GM also inked an agreement with Brazil-based Vale SA to buy 25,000 tonnes of battery-grade nickel sulfate annually from the miner’s proposed plant in Bécancour, Que.
At 12:30 p.m., shares of Lithium Americas in Toronto were trading at $33.36, up $3.89 or 13.2 per cent, within a 52-week trading range of $23.80 and $50.42. The company has a market cap of about $4.5 billion.
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