The price of lithium, a key EV battery metal, has been soaring this year, raising investor interest in lithium stocks. Lithium Americas Corporation (NYSE: LAC) is a favorite among lithium investors, but LAC stock has endured a choppy year.
What Does Lithium Americas Do?
Lithium Americas is a pre-revenue miner focused on advancing lithium projects in Argentina and the United States to production. In Argentina, Caucharí-Olaroz is advancing towards its first production, and Pastos Grandes represents regional growth.
In the United States, Thacker Pass has received its Record of Decision and is advancing toward construction.
Lithium Americas LAC Separation
On November 3, Lithium Americas announced its plans to separate into two leading lithium companies.
The reason for the split is that its operations in Nevada, North America, are at a very different stage to its operations in Argentina, South America.
While in the north, LAC is moving towards construction, in the south, LAC is nearing production.
Subject to conditions and approvals, the separation is likely to bring benefits to existing shareholders.
Focusing on South America, Lithium International will continue to hold a 44.8% interest in Caucharí-Olaroz and a 100% interest in the Pastos Grandes lithium brine project in Salta, Argentina (Pastos Grandes). It will also hold LAC’s approximately 17% investment in Arena Minerals Inc. (TSX-V: AN).
Meanwhile, Lithium Americas (NewCo) will hold its 100% interest in Thacker Pass, Nevada, along with LAC’s investments in Green Technology Metals Limited (ASX: GT1) and Ascend Elements, Inc.
The Thacker Pass Lithium Mine is a proposed lithium clay mining development project in Humboldt County, Nevada. This is one of the most advanced lithium projects currently known to be under development in the United States. Lithium Americas (NewCo) shareholders will benefit from the value created by financing and developing this extensive lithium resource.
LAC is moving Thacker Pass towards production and has received all federal and state permits needed to commence construction, with a ruling on the Record of Decision appeal expected early next year.
Thacker Pass is aligned with the US national agenda to enhance the domestic supply of critical minerals and has the potential to be a leading near-term source of lithium for the North American battery supply chain.
Lithium International will be focused on ramping up Caucharí-Olaroz to bring Stage 1 operations of 40,000 tonnes per annum lithium carbonate to production in the first half of 2023. Once at full capacity, Caucharí-Olaroz will be the largest known new battery-quality lithium carbonate brine operation to come into production in over 20 years.
Lithium International will also be focused on further maximizing shareholder value within its Argentinian portfolio from a Stage 2 expansion at Caucharí-Olaroz and advancing regional growth opportunities through Pastos Grandes and the Company’s collaboration with Arena Minerals.
Q3 Earnings Highlights
Cash and Equivalents: $392m
Available Credit: $75m
On July 18, 2022, LAC made a $5m equity investment in Ascend Elements, Inc., a US-based lithium-ion battery recycling and engineered material company, by way of a subscription for Series C-1 preferred shares.
On September 20, 2022, LAC entered a Strategic Collaboration Agreement with Green Technology Metals Ltd. (ASX: GT1), in which it owns a 5% stake, to advance a common goal of developing an integrated lithium chemical supply chain in North America.
In September 2022, LAC stock was recognized on the TSX30 for the second consecutive year, ranking as one of the top 30 performers on the TSX.
Lithium Americas continues to advance a potential separation of its US and Argentina operations to unlock shareholder value and better position each business to pursue its independent strategy and growth.
LAC Stock Financial Metrics
As of September 30, 2022, the Company had $392m in cash, cash equivalents and short-term bank deposits, with an additional $75m in available credit.
Losses widened in Q3 missing analyst expectations. The company attributed the higher net loss to an $18.4m loss on change in the fair value of convertible notes derivative driven by an increase in the market value of its shares.
Lithium Americas also flagged its $8.3m share of loss in the Cauchari-Olaroz project in Argentina linked to foreign exchange loss on the property's loans and deferred taxes. Forex losses are another reason the company seeks to separate its business entities.
LAC stock has a forward price-to-earnings ratio (P/E) of 60.6, which suggests it may be expensive at its current price. Its price-to-book-value (P/BV) is 4.5.
12 FactSet analysts have a consensus Buy rating on LAC stock with a target share price of $37.05.
On October 28, Deutsche Bank adjusted its LAC stock price target to $34 from $36, maintaining a Buy rating.
This was followed by B. Riley lowering its Lithium Americas' share price target to $39 from $41, also keeping a Buy rating.
Is LAC Stock a Good Investment?
With the rise of EVs, lithium is a hot commodity, and investors are actively seeking out lithium stocks to capitalize on. Lithium Americas has been a favorite in recent years, with the LAC share price up 775% since the end of 2019. But it’s not fared so well this year, with LAC stock down 13.5% YTD.
So, is LAC stock a good investment? As it’s not yet generating revenue, it remains speculative. For those investors keen to catch the lithium wave, it’s a popular choice, and the separation should help unlock additional shareholder gains.
Furthermore, geopolitical unrest is leading governments to take a hard line with national security and securing domestic lithium supply plays a part in this. Here’s where Lithium Americas has a unique competitive advantage with its operations at Thacker Pass.
Whether you invest in LAC stock depends on your appetite for risk and investing time horizon.