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S&P 500   4,330.00
DOW   34,070.42
QQQ   357.86
3 Reasons this Tech Giant is Going Back to Highs
Options Trading Plan–Perfect For Beginners (Ad)
3 Compelling Reasons to Start Buying Undervalued Amazon
5 Reasons Why Amprius is About to Take Flight 
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Stock market today: Asian shares mixed after interest rates-driven sell-off on Wall Street
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FedEx, Greenbrier rise; Cisco Systems, KB Home fall, Thursday, 9/21/2023
S&P 500   4,330.00
DOW   34,070.42
QQQ   357.86
3 Reasons this Tech Giant is Going Back to Highs
Options Trading Plan–Perfect For Beginners (Ad)
3 Compelling Reasons to Start Buying Undervalued Amazon
5 Reasons Why Amprius is About to Take Flight 
Laser breakthrough could send stock soaring 2,467% (Ad)
Stock market today: Asian shares mixed after interest rates-driven sell-off on Wall Street
Analysts Recommend These Mining Stocks Before Metal Prices Rally
1907, 1929, 1998, 2007--and now 2023? (Ad)
5 Sizzling Tech Companies on the Brink of Bullish Reversals
FedEx, Greenbrier rise; Cisco Systems, KB Home fall, Thursday, 9/21/2023

Lithium Americas Goes into Production in 2023. Time to Buy?

Lithium Americas stock

Key Points

  • Lithium Americas 44.8% owned Cauchari-Olaroz mine in Argentina is slated to go into production in 2023, expecting to produce 40,000 tonnes annually.
  • Its 100% owned, Nevada-based Thacker Pass has received approval to commence its lithium mining project.
  • Phase 1 production is expected to start by mid-2026.
  • General Motors has agreed to invest $650 million in two tranches to become Lithium Americas largest shareholder and gain exclusive access to Phase 1 production through a binding supply agreement.
  • 5 stocks we like better than Lithium Americas

Lithium junior mining company Lithium Americas Corp. NYSE: LAC is finally ready to go into lithium production this year. The demand for lithium is expected to continue growing with the migration to electric vehicles (EV).

The big three automakers have all invested in electrification. Volkswagen AG OTCMKTS: VWAGY expects all its models to be electric by 2030. Electric vehicles (EV) can’t operate without batteries. Batteries can’t operate without lithium. The original Tesla Inc. NASDAQ: TSLA Model S required 6,000 lithium batteries.

China Powerhouse

China is leading the world in global lithium processing and refining. China’s CATL is the world’s largest battery maker. The word that it has offered discounts to some Chinese automakers sent lithium producer stocks tanking on Feb. 17, 2023.

One of the world’s largest publicly traded lithium producers Albermarle Corporation NYSE: ALB, shares tanked nearly 10%, and Tesla supplier Piedmont Lithium Inc. NASDAQ: PLL shares fell 12%. While China leads in processing lithium, it only held a 12% stake in the planet's raw lithium supply as of 2020.


General Motors Investment Details

On Jan. 31, 2023, Lithium Americas announced a purchase agreement with General Motors Co. NYSE: GM. The GM deal calls for GM to make a $650 million investment in two separate tranches. The first tranche involved GM acquiring 15 million common shares of LAC at $21.34 per share for $320 million in proceeds.

These proceeds will remain in escrow until conditions under the Transaction Terms are met. If the terms are met, the funds will be released to LAC, and GM will take a 9.999% equity stake in LAC. LAC expects this to occur by mid-2023.

GM has also agreed to subscribe and invest $330 million for new Lithium America stock shares after its separation at a market price of 130% of the subscription price of Tranche 1. General Motors will be Lithium Americas largest shareholder.

Thacker Pass Mine Ruling

Thacker Pass is a 100% owned 17,000-acre mining project in Nevada. It’s estimated to contain 13.7 million tonnes of lithium carbonate making it the largest known lithium resource in the U.S. The project targets the production of up to 80,000 tonnes of battery-quality lithium carbonate per year.

Lithium Americas attained a Record of Decision (ROD) from the U.S. Bureau of Land Management (BLM) for its Thacker Pass mine and lithium project. Environmental groups opposed and filed a lawsuit against BLM and Lithium Americas, stating that they didn't adequately consider the environmental impacts on water resources and wildlife.

On Feb. 6, 2023, Lithium America's Thacker Pass mine was approved by Judge Du of the U.S. District Court of Nevada. It rejects the plaintiff's claims against revoking the Thacker Pass permits except for the BLM fixing a technicality concerning waste clay. There is a low probability that the decision will get appealed.

Massive Rising Capital Costs Since PFS

Since its 2018 pre-feasibility study (PFS), LAC estimated $4,088/tonne in production costs for Phase 1. In 2023, LAC had to raise its estimated production costs by 43% to $7,198/tonne. Capital costs for Phase 1 jumped almost 4X from $581 million in 2018 to $2.268 billion.

Phase 1 production is expected to commence in the second half of 2026. Phase 2 capital costs jumped over 400% from $478 million to $1,729 billion. It leaves a $1.618 billion shortfall to finance the Thacker Pass project even after GM's $650 million investment. This could set up more debt raises. Thacker Pass production is supposed to supply lithium for up to 1 million EVs annually.

Argentina Mine Production Starts in 2023

Lithium Americas has a 44.8% stake with partners Gangfeng Lithium at 46.7% and JEMSE at 8.5%, targeting Phase 1 production of 40,000 tonnes per year. It's expected to expand to add 20,000 tonnes per year. The Cauchari-Olaroz mine in Argentina is slated to go into production later this year.

This mine will produce 40,000 tons of battery-grade lithium carbonate for the next 40 years. It transforms Lithium Americas from a junior exploration company to a bonified lithium producer.

Lithium Americas Goes into Production in 2023. Time to Buy?

Weekly Falling Price Channel

The weekly candlestick chart on LAC illustrates a falling price channel that commenced in September 2022 after peaking at $32.50. Each drop fell to a lower low and bounced to a lower high. These falling parallel trendlines form the upper and lower channel. LAC bottomed at $17.58 in January 2023 before triggering a weekly MSL breakout through $20.92.

The General Motors deal detailing the 15 million share of the common stock purchase at $21.34 in its first tranche investment put a floor on LAC shares. Shares have attempted to break the falling channel but have yet to close a weekly candle above the upper trendline.

The weekly 20-period exponential moving average (EMA) sits at $23.42, while the 50-period MA sits flat at $25.30. Pullback support levels are $21.34 GM floor, $20.92 weekly MSL trigger, $19.45, and $17.58. 

 

 

Should you invest $1,000 in Lithium Americas right now?

Before you consider Lithium Americas, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Lithium Americas wasn't on the list.

While Lithium Americas currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Lithium Americas (LAC)
2.1743 of 5 stars
$17.94-1.5%N/A-163.08Buy$34.78
General Motors (GM)
2.9362 of 5 stars
$32.70-1.5%1.10%4.57Moderate Buy$50.67
General Motors (GMM)
0 of 5 stars
C$0.00-100.0%N/AN/A
General Motors (GMM.U)
0 of 5 stars
C$0.00flatN/AN/AN/A
Lithium Americas C (LACDD)
0 of 5 stars
$9.36flatN/AN/AN/A
Lithium Americas (LAC)
0 of 5 stars
C$24.17-1.4%N/A-172.64HoldC$41.00
Piedmont Lithium (PLL)
2.2281 of 5 stars
$38.98-5.4%N/A-54.14Buy$128.75
Piedmont Lithium (PLL)
0 of 5 stars
A$0.00-100.0%N/AN/AN/A
Tesla (TSLA)
2.3618 of 5 stars
$255.70-2.6%N/A72.44Hold$239.43
Volkswagen (VOW3)
1.4927 of 5 stars
€111.62-0.2%7.85%4.66€169.64
Volkswagen (VWAGY)
0 of 5 stars
$13.70-0.6%4.74%3.84HoldN/A
Volkswagen (VWAPY)
0 of 5 stars
11.80+0.9%N/AN/AN/A
Volkswagen Aktiengesellschaft (VLKAY)
0 of 5 stars
$32.01flat2.12%6.25N/A
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Jea Yu

About Jea Yu

Contributing Author: Trading Strategies

With over 20 years of active participation and analysis of the US equities, options and futures markets, Mr. Yu brings fresh insights into the workings of the financial markets. He has published four books by esteemed publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. His brainchild, the Underground Trader, was voted Forbes Best of the Web for four consecutive years under the active trader category. He has been a featured speaker all over the country at various expos and seminars who enjoys a standing-room-only reception in the largest convention halls from New York to Las Vegas. He has been quoted and featured in USA Today, Wall Street Journal, Traders Magazine and the Financial Times and various trade publications like Stocks & Commodities, Active Trader and Online Investor. Mr. Yu has a B.A. in Liberal Arts and minor in Business Administration from the University of Maryland.
Contact Jea Yu via email at JeaYu21@gmail.com.

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