Lithium Americas' Thacker Pass Is Under Construction at one of the World's Largest Lithium Resources

Strategist

Seth Goldstein

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Lithium Americas aims to become a pure-play lithium producer. The company was created as a result of the former Lithium Americas separation, which separated the firm's North America business, which is the current Lithium Americas, from its Argentina business, which was named Lithium Argentina.

Lithium Americas' only resource is the Thacker Pass lithium project in the U.S. state of Nevada. Thacker Pass is currently in construction, with plans to enter production later in the decade.

Upon entering production, Thacker Pass would become the first clay-based lithium resource in the world. Historically, all lithium production has come from either brine or spodumene. Spodumene assets, which are prevalent in Australia, is a mining procedure where spodumene is mined, treated, and refined to produce a lithium product. Although new, Thacker Pass’ clay-based operation will more closely replicate that of spodumene mining. Alternatively, brine, which is prevalent in South America, is pumped from an underground aquifer above ground into evaporation ponds, which over time is concentrated into a lithium-rich salt. This salt is then processed into a lithium chemical at a downstream conversion plant.

Thacker Pass is set to be a large-scale lithium production site. Management targets 80,000 metric tons of annual capacity from its first two phases. However, the McDermitt Caldera resource, where Thacker Pass is being constructed, is one of the largest known lithium resources globally, and we see opportunity for further capacity additions. We estimate the asset can build out to a total 240,000 metric tons of lithium capacity per year.

As electric vehicle adoption increases, we expect maintained double-digit annual growth for lithium demand. Lithium Americas should benefit as there should be more than enough demand for company’s three resources to enter production and expand capacity over time.

Aside from the Thacker Pass project, Lithium Americas also owns small equity stakes in Green Technology Metals, a company that is developing two spodumene projects in Ontario, Canada, and Ascend Elements, a company that is developing battery recycling technology.

Business Strategy & Outlook

We assign Lithium Americas a no-moat rating. The firm’s only asset, Thacker Pass, is currently in construction, and we estimate the firm enter production, albeit marginally, in 2026.

Globally, lithium has been produced from either the evaporation of brine or the mining of hard rock minerals (spodumene or lepidolite). In general, lithium carbonate production via brine, which is prominent is Chile and Argentina, costs less than that of spodumene production, which is prevalent in Australia, and far less than lepidolite, which is produced in China.

With Thacker Pass, Lithium Americas aims to introduce a new type of lithium resource, clay mining, which will more closely replicate hard rock-based production. Global lithium demand has quickly been ramping over the last several years given EV adoption, but historically, the lithium market was relatively small. New greenfield projects weren’t needed to supply the market, with brownfield investment being enough to meet demand growth. However, we estimate global lithium demand will more than triple by 2030 to 2.5 million tons, well above the roughly 800,000 metric tons in 2022. As such, new greenfield projects will be required to supply the market, including new methods of lithium extraction, such as clay-based mining.

Thacker Pass is located in the McDermitt caldera mountain range in northwest Nevada. Based on management’s recent technical studies, the caldera is one of the largest rock-based lithium resources in the world. Additionally, Lithium Americas has only surveyed the area necessary for its two planned stages, which will ramp to 80,000 metric tons of annual capacity. Within the current resource estimate, there is room for significant expansion. Lithium Americas also owns land rights to the northern part of the caldera, where there is potential for additional investment in production capacity.

Once the project enters production, Thacker Pass should sit on the bottom half of the lithium carbonate cost curve, and we estimate will be the second lowest rock-based resource globally (behind Albemarle and Tianqi’s Greenbushes asset). As such, Thacker Pass should be profitable on an all-in-sustaining cost basis, which accounts for operating costs, taxes and royalties, and maintenance capital expenditures. Based on economics alone, we estimate the asset to be a relatively low-cost producer on the global cost curve, producing at $7,000 per ton. 

However, our no-moat rating is due to the material threat of value destruction related to project uncertainty. Although project feasibility studies indicate clay-based mining is a viable method for lithium extraction, the project carries additional risk as it is the first of its kind. Thacker Pass is currently in construction and could face material delays and cost overruns that could hurt shareholder returns. Even after construction is finished, we see risk that clay-based mining may ultimately prove to have a materially higher cost than currently forecast, potentially ending up on the higher end of the global cost curve. Given the material threat of value destruction for the project, we view a no-moat rating as appropriate for now but will revisit our rating as the project enters production.

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Economic Moat

Lithium Americas Corp

Lithium Americas Corp. is a resource company, which engages in lithium development projects. Its projects include: Thacker Pass and Caucharí-Olaroz. The company was founded by Raymond Edward Flood, Jr. on November 27, 2007 and is headquartered in Vancouver, Canada.

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Lithium Americas Corp. owns and operates the Thacker Pass project. It is focused on advancing Thacker Pass to production it is located in northern Nevada. The company is headquartered in Vancouver, Canada.

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