Lithium Americas reaches pact with General Motors, DOE on first draw of loan

Lithium Americas (LAC) announced that together with General Motors (GM), its joint venture partner in the Thacker Pass lithium project, the company has reached a non-binding agreement in principle with the U.S. Department of Energy to advance the first draw of $435M on the previously announced $2.26B DOE loan. The key provisions of the first draw terms include: the DOE has agreed to defer $182M of debt service over the first five years of the DOE Loan. The DOE will receive: 5% equity stake in the company through warrants to purchase common shares of the company at an exercise price of $0.01 per share and 5% economic stake in the JV through warrants to purchase non-voting, non-transferable equity interest of the JV with an exercise price of $0.01 per unit. The company will post an additional $120M to DOE Loan reserve accounts, to be funded within 12 months of the DOE advancing First Draw. GM will provide additional support to the project by amending its lithium offtake agreement with the JV to permit the JV to enter into additional third-party offtake agreements for certain remaining production volumes not forecasted to be purchased by GM. As contemplated by the first draw terms, in the event that the DOE exercises the JV Warrants in full, the JV economic interests will be 59% held by Lithium Americas, which will continue to be the manager of the Project, 36% by GM and 5% by the DOE, with voting interest in the JV remaining 62% for Lithium Americas and 38% for GM. GM will have a call right to purchase, or cause the JV to purchase, the JV Warrants or, if the JV Warrants have been exercised by the DOE, the DOE’s JV Units following Thacker Pass achieving substantial completion if a price can be agreed upon between GM and the DOE at the time of the call right. If GM and the DOE cannot agree on the price to exercise the Call Right, the JV Warrants or the DOE’s JV Units, as applicable, will be exchanged for common equity in the company pursuant to a conversion ratio agreed upon by the DOE, GM and the company. The DOE will have a put right to cause GM to elect to either purchase, or cause the JV to purchase, the DOE’s JV Warrants or DOE’s JV Units, as applicable at fair market value or cause the DOE’s JV Warrants or DOE’s JV Units, as applicable, to convert to shares of common equity in the Company at the then applicable LAC warrant conversion rate. The DOE will also be granted the right to have an appointed representative as an observer at the JV board meetings for so long as the DOE holds JV Warrants, or JV Units. The expected total DOE Loan amount decreased to $2.23B. The DOE Loan principal of $1.97B remains the same, while the estimated capitalized interest during construction decreased to $256M, due to a lower projected interest rate of 5%. The interest rate that will be applied to amounts drawn under the DOE Loan remains unchanged at the applicable long-dated U.S. Treasury rate from the date of each draw with 0% spread. The DOE Loan tenor remains approximately 24 years from date of First Draw. The First Draw of $435M is expected in Q4. GM’s existing offtake agreement allows GM to purchase up to 100% of production volumes from Phase 1 and up to 38% of total production volumes of Thacker Pass for 20 years. GM retains the right of first offer on remaining Phase 2 production volumes and, following expiration of its offtake agreements, life of mine offtake rights, at market price, for a percentage of all volumes from Phase 1 and Phase 2 of the Project. The offtake agreement will be updated to allow the JV to enter into firm volume commitments with third parties for certain remaining Phase 1 production volumes not forecasted to be purchased by GM. The first draw terms remain subject to negotiation and completion of definitive agreements, corporate approvals and other customary conditions. 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 company intends to rely upon the exemption set forth in Section 602.1 of the TSX company manual, which provides that the TSX will not apply its standards to certain transactions involving eligible interlisted issuers on a recognized exchange.