Thacker Pass project bolsters Lithium Americas portfolio
Lithium Americas Corp, the Vancouver manufacturer, recently provided a construction plan update for its Thacker Pass lithium project located in Humboldt County, Nevada, detailed in a March 14 press release from the company.
Lithium Americas has received a conditional commitment from the U.S. Department of Energy for a $2.26 billion loan under the Advanced Technology Vehicles Manufacturing (“ATVM”) Loan Program for financing the construction of the processing facilities at Thacker Pass, targeting to produce an initial 40,000 tonnes per year (“tpa”) of battery grade lithium carbonate (“Phase 1”). The expected Loan plus General Motors Holdings LLC (“GM”) strategic investment are expected to provide the vast majority of the capital necessary to fund Phase 1.
Site preparation for major earthworks has been completed, including all site clearing, commissioning a water supply system, site access improvements and site infrastructure.
The Company is currently focused on advancing detailed engineering, procurement and execution planning for the construction of Thacker Pass Phase 1. Detailed engineering is approximately 30% design complete to date, and the Company plans to continue to increase the level of detailed engineering in advance of issuing full notice to proceed (“FNTP”), which is expected in the second half of 2024.
The Company leased a parcel of land in the nearby City of Winnemucca for a transloading terminal (“TLT”) to be used during operations, providing direct access to the mainline railroad and an interstate highway.
The Company and its engineering, procurement and construction management (“EPCM”) contractor, Bechtel, entered into a National Construction Agreement (Project Labor Agreement) (“PLA”) with North America’s Building Trades Unions (“NABTU”) for construction of Thacker Pass.
Estimated total capital cost for Phase 1 construction has been revised to $2.93 billion to reflect updated quantities and execution planning tied to increased engineering progress, use of union labor through a PLA for construction of Thacker Pass, development of an all-inclusive housing facility for construction workers, updated equipment pricing and a larger project contingency.
During the year ended December 31, 2023, approximately $194 million was spent on Thacker Pass. The Company expects capital expenditures to be significantly lower in the first half of 2024 as the focus turns from early works to advancing detailed engineering and project planning ahead of FNTP.
Mechanical completion of Thacker Pass Phase 1 is targeted for 2027 following a three-year construction period. Major construction is expected to commence in the second half of 2024 following the anticipated closing of the DOE Loan and issuance of FNTP.
In light of current market conditions and to preserve strong liquidity, the Company has reduced project capital expenditures to minimal levels until closing of the DOE Loan and issuance of FNTP, which are expected in the second half of the year. In addition, the Company has taken actions to reduce its general and administrative and operating expense budget for 2024 by more than 25%.
“Our team has been focused on refining the development plan and de-risking construction execution of Phase 1 for Thacker Pass,” said Jonathan Evans, President and Chief Executive Officer of Lithium Americas. “We have de-risked execution by advancing detailed engineering and project planning. To date, we have completed all the early-works and infrastructure required for major construction, including excavating the processing plant areas. We anticipate issuing FNTP and commencing major construction shortly following the closing of the DOE Loan.”
Evans added, “In advancing Thacker Pass to production, we have an incredible opportunity to lead the next chapter of global electrification in a way that both strengthens our national security of critical materials and ensures that the economic benefits are directed toward American workers, companies and communities.”
PROJECT FINANCING
DOE ATVM Loan ProgramFollowing a robust due diligence and term sheet negotiation process since receiving the Letter of Substantial Completion in February 2023, the DOE has provided the Company with Conditional Commitment of an ATVM Loan for $2.26 billion with interest rates fixed from the date of each monthly advance for the term of the loan at then applicable U.S. Treasury rates. The Loan will include interest accrued during construction, which is estimated to be $290 million over the three-year construction period.
The Company expects the Loan to provide the cornerstone financing for the construction of Thacker Pass Phase 1, which the Company estimates could support lithium needs for a domestic production supply chain for up to 800,000 electric vehicles (“EVs”) annually.
The Conditional Commitment represents a significant milestone and demonstrates the DOE’s intent to finance the Project. Certain technical, legal and financial conditions, including negotiation of definitive financing documents, must be satisfied before funding of the Loan.
General Motors:
In January 2023, GM agreed to invest $650 million in Lithium Americas across two tranches for the development of Thacker Pass, representing the largest investment publicly disclosed to date by an automaker in a company to produce battery raw materials (the “GM Investment”). GM has exclusive access to 100% of the lithium production from Phase 1 for up to 15 years and has a right of first offer on Phase 2 production. In February 2023, Tranche 1 for $320 million of the total GM Investment closed and closing of Tranche 2 for the remaining $330 million is expected before or in connection with closing of the DOE Loan.
Together, the expected DOE Loan plus GM’s Investment are expected to provide the vast majority of the capital necessary to fund the construction of Phase 1.
CONSTRUCTION WORKFORCE
Project Labor and Economic ImpactPhase 1 is expected to create approximately 1,800 direct jobs during its three-year construction period and 360 jobs in operations for its 40-year mine life.
The Company commissioned the University of Nevada, Reno to complete an economic impact assessment, which estimated that every direct job created by Lithium Americas’ construction investment will generate an additional 1.5 local jobs during construction.
Lithium Americas and Bechtel entered into a PLA with NABTU for construction of Thacker Pass.