$LAC - America is Securing Their Supply of Lithium and LAC Owns the Largest Reserve in America

Lithium Americas Corp TSX:LAC NYSE :LAC Summary With increasing demand for Lithium I wanted to find a Lithium producer that has strong reserves and upside in the medium to long term LAC has the largest known NI 43-101 lithium brine resource in development in South America and the largest-known lithium resource in the United States These two assets are under development but are nearing completion. Price dipped recently but based on their existing assets and recent analyst price targets LAC seems like a decent investment Lithium Background I wanted to understand how Lithium is extracted to make sure I could gauge the viability of the lithium mining companies I was looking at. I summarized my findings below if you are curious. Most lithium is commercially produced from either the extraction of lithium-containing salts from underground brine reservoirs or the mining of lithium-containing rock, such as spodumene. Lithium production from clay sources is expected to become commercially viable, though perhaps not until 2022. here Tpa = Tonnes Per Annum – essentially how much Lithium they can extract on a yearly basis Market Overview To summarize – Lithium demand is expected to grow exponentially. 2 main factors: Falling Lithium prices over the last 3 years reduce investment in Lithium production globally Surging demand for EVs and shift to green energy Lithium prices continue to soar – up 88% in 2021 here Schlumberger unit to launch Nevada lithium plant as EV demand rises here If you haven’t heard of Schlumberger check them out, they are the world’s largest oilfield service company. If they are shifting into the lithium production space then the leadership team sees value and growth here. Also from the article “Demand for battery-grade lithium is projected to grow exponentially, driven by growth in the electric vehicle market, and efficient production of the metal has become an important topic for regions, industries, and technology companies.” Battery grade lithium prices in China surge 68% here While lithium’s majors are beginning to reengage in expansion plans, three years of falling lithium prices have failed to incentivise sufficient investment into the supply chain, leading to greater risks of price volatility as battery demand ramps up. Trading Economics forecast of Lithium Prices here The prices here are in yuan/tonne so if we use a conversion rate of 1 yuan = $0.15 USD. Assume price is around 80,000 yuan/tonne then it is about $12,000 USD/tonne Lithium Americas Leadership is one of the key aspects I look at when considering an investment. Most of their leadership team has 20+ years in lithium or resource production. They have a CTO who has 1-_ year of lithium processing experience and used to work for Tesla. Check out their investor presentation for a bit of background, but essentially from what I’ve seen they have a strong management team. 2 Main sites under development for Lithium Caucharí-Olaroz, Argentina (Brine Extraction) Caucharí-Olaroz is the largest known NI 43-101 lithium brine resource in development in South America Partnered with Ganfeng Lithium on the jointly owned operation in Jujuy, Argentina Average production 40,000 tpa battery-grade Li2CO3 After-Tax NPV10% is $1.5 billion Quick math: 40,000 tpa x $12,000 USD/tonne = $480M USD annually Note: Production doesn’t start until 2022 Capital expenditures for the Project remain on budget with $477 million (84%) of the $565 million committed, including $388 million (69%) spent, as of December 31, 2020. THACKER PASS LITHIUM PROJECT (Clay Extraction) Developing the largest-known lithium resource in the United States 100% owned by Lithium Americas with offtake rights uncommitted On January 15, 2021, the US Bureau of Land Management issued the Record of Decision following completion of the National Environmental Policy Act process. All remaining state permits and water right transfers required to commence construction are expected later this year. Top ten biggest lithium mines in the world here Thacker Pass Lithium Project is #2 Summary of March 2, 2021 Full Year and Q4 Report I highlighted some key points and provided commentary to their recent Annual report. Link here As at December 31, 2020, the Company had $148 million in cash and cash equivalents ($518 million as at February 28, 2021). à great position to be in, especially with heavy CAPEX projects, especially with amount that has been spend in Argentina On January 22, 2021, the Company closed an underwritten public offering of shares of its common stock and issued 18,181,818 common shares at a price of $22.00 per Common Share for gross proceeds to the Company of approximately $400 million (approximately $377 million net proceeds). à This is big especially if you look at the current price On November 30, 2020, Lithium Americas completed an at-the-market equity program (“ATM Program”) and issued a total of 9,266,587 common shares from treasury for gross proceeds of approximately $100 million ($97 million net proceeds). à Price was ~$10 a share at this point in time Analyst Price Target (link here) High: $30.50 Average: $21.42 Low: $16.00 TLDR Price of lithium is increasing due to increased demand and ramp down of production over last 3 years Current US administration is looking to support and secure supply chain of critical materials and production – LAC owns 100% of the largest known lithium resource in America Opportunity to buy the dip and hold medium to long term

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GeorgeL88

Mar 18, 2021

32.30%

Change % Since Posting

16.10

Price When Posted

5.20

Change Since Posting

LAC

Lithium Americas Corp

21.30

-1.01
-4.53%
Current Price

$LAC - America is Securing Their Supply of Lithium and LAC Owns the Largest Reserve in America

bullish

Lithium Americas Corp

TSX:LAC NYSE :LAC

Summary

  • With increasing demand for Lithium I wanted to find a Lithium producer that has strong reserves and upside in the medium to long term
  • LAC has the largest known NI 43-101 lithium brine resource in development in South America and the largest-known lithium resource in the United States
  • These two assets are under development but are nearing completion. Price dipped recently but based on their existing assets and recent analyst price targets LAC seems like a decent investment

Lithium Background

I wanted to understand how Lithium is extracted to make sure I could gauge the viability of the lithium mining companies I was looking at. I summarized my findings below if you are curious. Most lithium is commercially produced from either the extraction of lithium-containing salts from underground brine reservoirs or the mining of lithium-containing rock, such as spodumene. Lithium production from clay sources is expected to become commercially viable, though perhaps not until 2022. here

Tpa = Tonnes Per Annum – essentially how much Lithium they can extract on a yearly basis

Market Overview

To summarize – Lithium demand is expected to grow exponentially. 2 main factors:

  1. Falling Lithium prices over the last 3 years reduce investment in Lithium production globally
  2. Surging demand for EVs and shift to green energy

 

Lithium prices continue to soar – up 88% in 2021 here

Schlumberger unit to launch Nevada lithium plant as EV demand rises here

If you haven’t heard of Schlumberger check them out, they are the world’s largest oilfield service company. If they are shifting into the lithium production space then the leadership team sees value and growth here. Also from the article “Demand for battery-grade lithium is projected to grow exponentially, driven by growth in the electric vehicle market, and efficient production of the metal has become an important topic for regions, industries, and technology companies.”

Battery grade lithium prices in China surge 68% here

While lithium’s majors are beginning to reengage in expansion plans, three years of falling lithium prices have failed to incentivise sufficient investment into the supply chain, leading to greater risks of price volatility as battery demand ramps up.

Trading Economics forecast of Lithium Prices here

The prices here are in yuan/tonne so if we use a conversion rate of 1 yuan = $0.15 USD. Assume price is around 80,000 yuan/tonne then it is about $12,000 USD/tonne

 

Lithium Americas

Leadership is one of the key aspects I look at when considering an investment. Most of their leadership team has 20+ years in lithium or resource production. They have a CTO who has 1-_ year of lithium processing experience and used to work for Tesla. Check out their investor presentation for a bit of background, but essentially from what I’ve seen they have a strong management team.

2 Main sites under development for Lithium

Caucharí-Olaroz, Argentina (Brine Extraction)

  • Caucharí-Olaroz is the largest known NI 43-101 lithium brine resource in development in South America
  • Partnered with Ganfeng Lithium on the jointly owned operation in Jujuy, Argentina
  • Average production 40,000 tpa battery-grade Li2CO3
  • After-Tax NPV10% is $1.5 billion
  • Quick math: 40,000 tpa x $12,000 USD/tonne = $480M USD annually
  • Note: Production doesn’t start until 2022
  • Capital expenditures for the Project remain on budget with $477 million (84%) of the $565 million committed, including $388 million (69%) spent, as of December 31, 2020.

 

THACKER PASS LITHIUM PROJECT (Clay Extraction)

  • Developing the largest-known lithium resource in the United States
  • 100% owned by Lithium Americas with offtake rights uncommitted
  • On January 15, 2021, the US Bureau of Land Management issued the Record of Decision following completion of the National Environmental Policy Act process.
  • All remaining state permits and water right transfers required to commence construction are expected later this year.
  • Top ten biggest lithium mines in the world here Thacker Pass Lithium Project is #2

 

Summary of March 2, 2021 Full Year and Q4 Report

I highlighted some key points and provided commentary to their recent Annual report. Link here

  • As at December 31, 2020, the Company had $148 million in cash and cash equivalents ($518 million as at February 28, 2021). à great position to be in, especially with heavy CAPEX projects, especially with amount that has been spend in Argentina
  • On January 22, 2021, the Company closed an underwritten public offering of shares of its common stock and issued 18,181,818 common shares at a price of $22.00 per Common Share for gross proceeds to the Company of approximately $400 million (approximately $377 million net proceeds). à This is big especially if you look at the current price
  • On November 30, 2020, Lithium Americas completed an at-the-market equity program (“ATM Program”) and issued a total of 9,266,587 common shares from treasury for gross proceeds of approximately $100 million ($97 million net proceeds). à Price was ~$10 a share at this point in time

Analyst Price Target (link here)

  • High: $30.50
  • Average: $21.42
  • Low: $16.00

TLDR

  • Price of lithium is increasing due to increased demand and ramp down of production over last 3 years
  • Current US administration is looking to support and secure supply chain of critical materials and production – LAC owns 100% of the largest known lithium resource in America
  • Opportunity to buy the dip and hold medium to long term

 

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4 min

19.90

Target Price

9/ 10

Confidence

2-6 Months

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