Lithium Americas cleared a significant hurdle in funding its US$2.9bn lithium mining project by raising US$275m from a deeply discounted overnight follow-on stock sale late on Wednesday.
The offering takes the miner a step closer to securing another US$330m investment from General Motors and a US$1.97bn loan from the US government.
After confidentially marketing the offering to select investors beginning late on Monday, a syndicate led by Evercore, Goldman Sachs and BMO Capital Markets priced the sale of 55m Lithium Americas shares at US$5, the bottom of the US$5.00–$5.50 range and a near-25% discount to Wednesday's NYSE closing price of US$6.63 (the shares also trade on the TSX).
Lithium Americas’ shares closed Thursday trading at US$4.66.
Complicating the offering, Lithium Americas had a limited institutional following since its separation from Lithium Americas Argentina in January 2023. Lithium Americas is also pre-revenue with a principal asset in Thacker Pass that is years away from production.
“We really thought of this as a re-IPO,” said one banker involved in the offering. “Spin offs tend to dislocate ownership. By our estimation only 10% of Lithium Americas was held by active managers.”
Mirae Asset Management (1.5% of the company) and Van Eck Associates (1.3%) are among the largest active funds on the company's register, according to LSEG data.
Funding puzzle
The US Department of Energy is expected to close its loan in Q3 followed by GM's additional equity investment shortly thereafter, Lithium Americas management told investors while marketing the stock sale.
“[Lithium Americas] needed this money to meet the conditions of their equity agreement with GM,” the banker said. “There is still a lot of paperwork that needs to be put in place.”
GM already invested US$320m in January 2023, giving it a 9.2% stake (15m shares) in Lithium Americas. The second US$330m tranche is conditional upon securing the full funding for Phase I.
The auto maker’s investment will be priced at the stock's five-day VWAP once the funding conditions are satisfied.
At current prices, Lithium Americas would issue roughly 69.5m shares to GM, give it a roughly 30% stake, according to IFR calculations.
GM has rights to Phase I lithium production at prevailing market prices for 10 years. The project's 40,000 metric tonnes of targeted production is enough to produce roughly 800,000 electric vehicles annually.
Lithium Americas barely met the minimum funding requirements. The DOE last month agreed to the loan, conditional upon Lithium Americas securing the rest of the US$2.9bn needed to complete Phase I construction.
Having already spent roughly US$190m last year on early prep work and having finished 2023 with just US$196m of cash, Lithium Americas was about US$240m short of the cash needed to complete Phase I, according to analysts at Cowen.
Lithium Americas has until August 16 to close on the GM equity agreement.