Company Reports

On May 23, a short-seller released a report asserting that Lithium Americas' Thacker Pass project is uneconomic and shares are likely to be further diluted. After reviewing the report, we see no reason to change our $12 (CAD 16) fair value estimate for no-moat Lithium Americas. The stock plunged over 6% on the day as the market reacted negatively to the report. At current prices, we view shares as materially undervalued, with the stock trading well below our fair value estimates.

The US on May 13, 2024, announced a series of new tariffs on Chinese imports. These include a 100% tariff on electric vehicles and a 25% tariff on lithium-ion batteries and battery parts. There was also a 25% tariff on critical minerals, which include graphite, permanent magnets, and cobalt.

We're maintaining our USD 12 fair value estimate for Lithium Americas following the company's first-quarter results. We've trimmed our Canadian dollar-denominated fair value estimate to CAD 16 per share from CAD 17 due to currency movements since our last update. Our no-moat rating is unchanged. At current prices, the shares appear materially undervalued, trading at less than 40% of our fair value estimate and in 5-star territory.

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

On April 29, lithium stocks rallied on the news of China's recently issued automobile subsidy. Consumers who trade in an older vehicle and buy a new vehicle that meets energy-saving requirements, including electric vehicles, can get a subsidy of up to CNY 10,000 (about $1,381) to reduce the purchase price through the end of 2024.

Lithium Americas announced plans to issue up to 63.25 million shares, including underwriter options, which is nearly 38% of shares outstanding as of Dec. 31, 2023. The offering will be issued at a price of $5 per share. The equity raise is necessary as it will fully fund the phase 1 capital expenditures for the Thacker Pass project. However, the price is highly dilutive to shareholders. Having updated our model to incorporate the equity issuance, we reduce our Lithium Americas fair value estimates to $12 (CAD 17) from $18 (CAD 24). We maintain our no-moat rating.

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 reported a fiscal 2024 fourth quarter in line with our expectations. Management announced on March 15 two key updates, which can be found in our note from March 14, regarding the status of Thacker Pass, a lithium clay mining project in Nevada. First, Lithium Americas received a commitment from the US Department of Energy for a USD 2.26 billion loan to fund most of the project. Additionally, management announced a slight delay and enhanced capital cost; the project is now expected to begin production in 2027 at a total capital cost of USD 2.9 billion. We are maintaining our USD 18 per share fair value estimate (CAD 24) and no-moat rating. At current prices, Lithium Americas is significantly undervalued, with shares trading at a more-than 60% discount to our fair value estimate.

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 announced that it received a conditional commitment from the US Department of Energy for a $2.26 billion loan to fund the majority of capital expenditures related to the company's Thacker Pass lithium project in the US state of Nevada. Separately, the company announced an updated project phase 1 capex estimate of $2.9 billion, up from the prior estimate of $2.3 billion and a delayed timeline to start production in 2027 versus 2026. We had previously assumed Lithium Americas would be able to secure the loan. Having updated our model to incorporate the higher capex cost and delayed production start, we trimmed our Lithium Americas fair value estimate to USD 18 (CAD 24) from USD 20 (CAD 28). Our Morningstar Economic Moat Rating of none is unchanged.

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 spot prices fell over 80% in 2023. As prices reached all-time highs in 2022, new, higher-cost supply brought the market to balance, sending prices plummeting. Bears say oversupply conditions will occur in 2024 amid rising supply and slowing demand as battery electric vehicle, or EV, sales falter.

Lithium producer stocks fell on ExxonMobil's announcement that the company is planning to enter the lithium production industry through the development of a lithium project in the U.S. state of Arkansas. While Exxon provided little details on its plans, the company said it aims to begin lithium production in 2027 and produce around 100,000 tons per year by 2030.

Lithium Americas reported its fiscal 2023 third quarter, its first update as a standalone company after the separation from Lithium Argentina. Thacker Pass is the sole focus of the company, which began construction earlier this year. We maintain our $20 fair value estimate and a no-moat rating. Our CAD fair value estimate has increased to CAD 28 from CAD 27 due to currency movements.

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.

On Nov. 6, shares of lithium producers Albemarle, Livent, and SQM fell on a broker downgrade. After reviewing the note, we see no reason to change our fair value estimates for the three narrow-moat companies. At current prices, we view all three lithium producers as materially undervalued relative to our base-case fair value estimates. Albemarle and Livent both trade at roughly 40% of our $300 and $38 fair value estimates, respectively, and in 5-star territory. SQM trades at a little less than 50% of our $95 per share fair value estimate. Along with Lithium Americas and Lithium Argentina, we view these five stocks as the most undervalued among our specialty chemicals coverage.

On Oct. 18, lithium stocks plummeted following a sell-side broker's downgrade for Albemarle and SQM. The downgrade is due to the outlook that the lithium market will move into a supply surplus in 2024 and 2025, leading to lower lithium prices. We disagree and continue to forecast a price rebound as strong demand growth outpaces supply leading to a supply deficit in 2024.

We are initiating coverage of the newly formed Lithium Americas with a $20 (CAD 27) per share fair value estimate. The company was created in the separation of the former Lithium Americas that divided the company's North American business, which retains the Lithium Americas name, and the Argentina business, which is now named Lithium Argentina.

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.