Unlocking Thacker Pass: General Motors to Contribute Combined $625 Million in Cash and Letters of Credit to New Joint Venture with Lithium Americas
VANCOUVER, British Columbia–(BUSINESS WIRE)–Lithium Americas Corp. (TSX: LAC) (NYSE: LAC) (“Lithium Americas” or the “Company”) announced the Company and General Motors Holdings LLC (“GM”) have entered into a new investment agreement (“Investment Agreement”) to establish a joint venture (“JV”) for the purpose of funding, developing, constructing and operating (the “JV Transaction”) Thacker Pass in Humboldt County, Nevada (“Thacker Pass” or the “Project”). The JV Transaction will deliver $625 million of cash and letters of credit from GM to Thacker Pass alongside the conditional commitment for a $2.3 billion U.S. Department of Energy (“DOE”) loan announced earlier this year.
Under the terms of the Investment Agreement, GM will acquire a 38% asset-level ownership stake in Thacker Pass for $625 million in total cash and letters of credit (“GM’s JV Investment”), including $430 million of direct cash funding to the JV to support the construction of Phase 11 and a $195 million letter of credit facility (“LC Facility”) that can be used as collateral to support reserve account requirements2 under the DOE Loan (as defined below). The JV Transaction replaces the $330 million Tranche 2 common equity investment commitment from GM under its original investment agreement with the Company (“Tranche 2”) announced in January 2023.
TRANSACTION HIGHLIGHTS
- Largest ever publicly announced investment by a U.S. OEM in a lithium carbonate project highlights the strategic importance of Thacker Pass in creating a domestic supply chain for critical minerals.
- Allows Lithium Americas to secure $625 million in cash and letters of credit, while avoiding common equity dilution associated with Tranche 2.
- Builds upon an already strong relationship with GM as strategic investor and extends Phase 1 offtake to 20 years.
The JV Transaction is incremental to GM’s February 2023 Tranche 1 investment of $320 million, which resulted in GM acquiring approximately 15 million common shares of Lithium Americas3. In addition to the JV Transaction, GM has agreed to extend its existing offtake agreement for up to 100% of production volumes from Phase 1 of Thacker Pass to 20 years to support the expected maturity of the DOE Loan. Upon closing of the JV, GM will also enter into an additional 20-year offtake agreement for up to 38% of Phase 24 production volumes and will retain its existing right of first offer on the remaining Phase 2 production volumes.
Jonathan Evans, President and CEO of Lithium Americas, said :
Our relationship with GM has been significantly strengthened with this joint venture as we continue to pursue a mutual goal to develop a robust domestic lithium supply chain by advancing the development of Thacker Pass,
“Today’s joint venture announcement is a win-win for GM and Lithium Americas. GM’s JV Investment demonstrates their continued support and helps us to unlock the previously announced $2.3 billion DOE Loan. We will be working closely with GM to advance towards the final investment decision, which we are targeting by the end of the year.”
Jeff Morrison, SVP, Global Purchasing and Supply Chain, said :
We’re pleased with the significant progress Lithium Americas is making to help GM achieve our goal to develop a resilient EV material supply chain,
“Sourcing critical EV raw materials, like lithium, from suppliers in the U.S., is expected to help us manage battery cell costs, deliver value to our customers and investors, and create jobs.”
JV TRANSACTION DETAILS
The key terms of the JV Transaction are summarized below:
- Lithium Americas will have a 62% interest in Thacker Pass and will manage the Project (the “Manager”) on behalf of Lithium Americas and GM (together the “JV Partners”).
- GM will have a 38% interest in Thacker Pass and commit $625 million in cash and letters of credit to the JV:
- $330 million cash to be contributed on the date of the JV closing;
- $100 million cash to be contributed at Final Investment Decision (“FID”) for Phase 1; and
- $195 million LC Facility prior to first draw on the $2.3 billion DOE Loan.
- Lithium Americas will contribute $387 million of funding to the JV for its 62% ownership in the Project:
- $211 million (with expenditures on capex after August 2024 being credited against and reducing this amount, along with other adjustments) to be contributed on the date of the JV closing; and
- The remainder to be contributed upon FID for Phase 1.
- As of June 30, 2024, Lithium Americas had approximately $376 million in cash and cash equivalents.
- LC Facility provided by GM to the JV as part of its consideration for its equity interest will have no interest and a maturity consistent with DOE Loan requirement that will be withdrawn once replaced with cash that is generated by Thacker Pass.
- Board of Directors to be established at the JV level to oversee the JV and approve the Project’s budgets and business plans, and implement policies to align with GM’s vendor requirements, including GM’s Human Rights Policy.
- Upon closing of the JV Transaction, GM will also enter into an additional 20-year offtake agreement for up to 38% of production volumes from Phase 2 of Thacker Pass and will retain its right of first offer on the remaining balance of Phase 2 volumes.
GM’s JV Investment is subject to certain conditions precedent, including those related to the loan agreement for the DOE Loan.
BACKGROUND
U.S. DOE Loan
In March 2024, the Company received a conditional commitment for a $2.3 billion loan from the U.S. DOE under the Advanced Technology Vehicles Manufacturing (“ATVM”) Loan Program (the “DOE Loan”). Prior to making the first draw on the DOE Loan, expected sometime in the middle of 2025, the Company is required to fund approximately $195 million (funded by either cash or letters of credit) for reserve accounts associated with the DOE Loan (for construction contingency, ramp-up and sustaining capital). The GM LC Facility will be used to fund the DOE’s reserve accounts.
2023 GM Investment
On January 30, 2023, Old LAC5 entered into a purchase agreement with GM, pursuant to which GM agreed to make a $650 million equity investment (the “2023 Transaction”), the proceeds of which are to be used for the construction and development of Thacker Pass. The 2023 Transaction was comprised of two tranches, a first tranche investment of $320 million (“Tranche 1”) and Tranche 2. Tranche 1 closed and the Phase 1 offtake agreement was executed on February 16, 2023. On October 3, 2023, pursuant to the Separation, the full amount of the remaining unspent proceeds of Tranche 1 were included in the net assets distributed by Old LAC to the Company.
As the Separation was completed before the closing of Tranche 2, on October 3, 2023, the agreement for Tranche 2 in Old LAC was terminated and replaced by a corresponding subscription agreement between GM and the Company whereby the proceeds of Tranche 2 would be received by the Company.
On August 30, 2024, the Company and GM agreed to extend the outside date for the Tranche 2 subscription agreement until the end of the year to provide time for the parties to explore alternative structures for GM’s additional investment in a mutually beneficial manner. The Company and GM have terminated the Tranche 2 subscription agreement concurrent with the execution of the JV Investment Agreement.
THACKER PASS PROJECT UPDATE
The Company continues to focus on de-risking project execution by advancing detailed engineering, project planning and procurement packages.
- Detailed engineering continues to progress in advance of issuing full notice to proceed, currently at approximately 40% design complete.
- Site preparation for major earthworks has been completed and the process plant area is currently being excavated (approximately 50% complete) to prepare for concrete placement, forecasted to begin by mid-2025.
- Procurement packages for the top seven pieces of long-lead equipment have been awarded. Contracts for key construction materials have been awarded and field purchases of goods and services have commenced.
- Major earth works for the all-inclusive housing facility for construction workers (the Workforce Hub) are completed. The current focus is on finalizing engineering and permitting for utilities and preparing to award contracts for the detailed earthworks, foundation installation and erection of the housing units.
To date, the Company has achieved over one million work hours without a lost time injury.
NEXT STEPS
The Company continues to work closely with the DOE and expects to close the DOE Loan in the coming weeks. The Company and GM are targeting making the FID and issuing full notice to proceed for Thacker Pass by the end of the year, following closing of the DOE Loan and the JV Transaction.
ADVISORS
Goldman Sachs & Co. LLC and Evercore Group L.L.C. are acting as financial advisors to Lithium Americas and Vinson & Elkins and Cassels Brock & Blackwell are acting as legal counsel to Lithium Americas in connection with the JV Transaction. BMO Capital Markets acted as financial advisor to Lithium Americas in connection with GM’s original Tranche 2 investment announced in January 2023.
Morgan Stanley & Co. LLC is acting as GM’s financial advisor and Mayer Brown and Osler, Hoskin & Harcourt are acting as legal counsel to GM in connection with the JV Transaction.
TECHNICAL INFORMATION
The scientific and technical information in this news release has been reviewed and approved by Rene LeBlanc, PhD, SME, Vice President, Growth and Product Strategy of the Company, and a “qualified person” as defined under National Instrument 43-101 and Subpart 1300 of Regulation S-K under the United States Securities Act of 1933.
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Unlocking Thacker Pass: General Motors to Contribute Combined $625 Million in Cash and Letters of Credit to New Joint Venture with Lithium Americas, source