Lithium Americas spikes on plans for the Department of Energy to take 5% stake in exchange for early access to financing and deferred debt service
Shares of Lithium Americas are up more than 30% as of 7:35 a.m. ET after the miner announced a nonbinding agreement for the US government to receive an equity position in the company, in exchange for providing accelerated funding of a loan and offering more favorable repayment terms.
The DOE would get a 5% equity stake in the company via warrants in exchange for advancing $435 million of its previously announced loan (now worth a total of $2.23 billion) to Lithium Americas this quarter, as well as deferring interest payments on $182 million of those funds for five years.
“There can be no assurances that definitive documentation memorializing the First Draw Terms will be completed on the terms currently contemplated or at all,” the Vancouver-based company cautioned in its press release.
The first draw of Lithium Americas’ loan from the DOE is slated to be used to advance its joint venture with General Motors, a mine being developed in northern Nevada. GM is also amending the terms of this joint venture to facilitate the sale of production it does not expect to purchase. The DOE will also receive a 5% nonvoting, nontransferable economic stake in this particular project, also via warrants.
This planned pact comes on the heels of separate deals earlier this year that saw the government receive an equity stake in MP Materials and Intel, which has helped spur massive gains in those stocks.
“This proposed stake is another example of the Trump Administration taking equity stakes with American companies to promote industries seen as critical to national security with the majority of lithium reserves coming from foreign adversaries, especially China with the Thacker Pass Facility Buildout seen as crucial to national security,” Wedbush Securities analyst Dan Ives wrote. “This is important as the Trump Administration is now looking far and wide (globally) for stakes in strategic companies, not just US names.”
As we’ve written, why follow the Fed when you can just follow the feds?
