Thacker Pass Update: Conditional Commitment for $2.3 billion DoE Loan

Trident Royalties Plc (AIM: TRR, OTC: TDTRF), the diversified mining royalty company, is pleased to note recent positive announcements by Lithium Americas Corporation (“LAC”, NYSE: LAC) in relation to its Thacker Pass Lithium Project (“Thacker Pass”). Trident holds a net 1.05% gross revenue royalty over Thacker Pass (after expected exercise of a partial royalty buyback, which would see $13.2 million to Trident).

U.S. Government Advanced Technology Vehicles Manufacturing Loan

• LAC has received a conditional commitment (the “Conditional Commitment”) from the U.S. Department of Energy (“DOE”) for a $2.26 billion loan under the Advanced Technology Vehicles Manufacturing (“ATVM”) Loan Program (the “Loan”) for financing the construction of the processing facilities at Thacker Pass.
• The Loan is intended to help finance the construction of Thacker Pass, targeted to produce an initial 40,000 tonnes per year (“tpa”) of battery grade lithium carbonate (“Phase 1”).
• Thacker Pass supports the U.S. government’s commitment to securing a domestic supply chain for critical minerals to reduce reliance on foreign materials. Phase 1 production could support lithium needs for up to 800,000 electric vehicles annually.

Construction Update

• Approximately US$194 million was spent on Thacker Pass in 2023, with site preparation for the first phase of major earthworks completed, including all site clearing, commissioning a water supply system, site access improvements and site infrastructure.
• General Motors released $320 million in funding in February 2023 in the largest investment publicly disclosed to date by an automaker in a company to produce battery raw materials, with the second tranche of $330 million expected before or in connection with closing of the DOE loan.
• Lithium Americas 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. Lithium Americas 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.
• 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.
• Mechanical completion of Thacker Pass Phase 1 is targeted for 2027 following a three-year construction period, with full capacity production targeted for 2028. Major construction is expected to commence in the second half of 2024 following the anticipated closing of the DOE Loan and issuance of FNTP.

Jonathan Evans, President and CEO of LAC, commented for the purposes of their announcement:

“The United States has an incredible opportunity to lead the next chapter of global electrification in a way that both strengthens our battery supply chains and ensures that the economic benefits are directed toward American workers, companies and communities. The ATVM Loan Conditional Commitment announced today by the DOE is a significant milestone for Thacker Pass, which will help meet the growing domestic need for lithium chemicals and strengthen our nation’s security.

“We are pleased to have completed the rigorous DOE due diligence process. The Loan plus GM’s strategic investment will provide the vast majority of the capital necessary to fund Phase 1. We deeply appreciate the U.S. government’s support as we advance the responsible development of Thacker Pass, and we are excited to continue collaborating with all of our stakeholders to bring shared success for America.”

Adam Davidson, Chief Executive Officer of Trident commented:

“Thacker Pass is a high priority asset with considerable strategic value for the United States, and the commitment of a $2.26 billion loan from the U.S. Department of Energy underscores the level of support to bring this asset to production. The DoE loan is expected to coincide with the release of the second tranche of funding from General Motors of $330 million, such that the capex for Phase 1 production is largely secured.

“We anticipate first production from Thacker Pass within three years and the associated royalty payments thereafter. As previously disclosed, we expect Thacker Pass royalty receipts to have a dramatic impact on our revenue, with $10.5 million generated per year at Phase 1 production and a $25,000 lithium price, increasing to $21 million per year at Phase 2.”

News in full

Whilst at the Mining Indaba conference in Cape Town, we caught up with Julien Bosche, Vice President, EMEA at the firm