CA - Lithium Americas: Delay Disrupt And Destroy

2023-11-21 17:50:43 ET

Summary

• Insiders across the board are buying Lithium Americas.
• Lithium Americas wins yet another legal challenge to Thacker Pass.
• There is an updated timeline on the government loan per the CEO.

Since splitting in two, Lithium Americas ( LAC ) has been under pressure. Shorts have piled on and they have been correct... but for all the wrong reasons. Across the board, big picture economic decay has slammed lithium stocks. Meanwhile, LAC continues to move forward with insiders buying stock hardcore. This leads me to believe that LAC is undervalued. Additionally, we are going to provide some legal updates to the remaining nuisance lawsuit points over Thacker Pass.

Mass Insider Buying of Lithium Americas Is A Clear Buy Signal

Something that I have been recently advocating is that companies (that shan't be named) should be engaging in insider buying, given the depressed stock prices. I've heard all the arguments against insider purchases, ranging from they are receiving stock options to diversification, yet the fact remains insider buying sends a clear signal: People who should know the most think the stock is undervalued. As Gordon Gecko stated, "Greed is good". Ergo, we should see buying from greedy people when a stock is a value. Unfortunately, companies where the board neglects to engage in insider purchases are not uncommon; yet when we see LAC CEO Jonathan Evans and the board buying, it is a clear signal that savvy investors should not ignore.

The Million Dollar Lithium Question

They say a picture is worth a thousand words. Below we can see insiders buying $1,127,217 CND dollars' worth of LAC. Converted to USD, this represents $820,176 dollars. Note the CEO purchase of $655,118 CDN dollars of stock. This bodes well for the long term investor. Consider it an indicator of management confidence.

The Lithium Big Picture

Much has been said about lithium prices coming down recently. Yet, less chatter pops up concerning how lithium is nowhere near its lows and is still much higher in price than just a few years ago. Yet prices are down and this paints a negative picture.

What does concern me however is the current economic slowdown. Frankly, it has to happen in order to control inflation. The rapid increases in interest rates are starting to have the intended chaotic effect. Trucking companies are going bankrupt; automotive unions are striking (impacting EV sales at some companies); a few shipping companies like UPS are bowing to union demands and raising wages (only to pass expenses to consumers).

The point is a slowing economy with high interest rates is not good for EV sales. In his recent earnings conference, Elon Musk stated that 80% of Tesla ( TSLA ) buyers finance Tesla cars. This might be a reason Musk is working on a cheaper Tesla.

Government Loan Update for Thacker Pass

Lithium Americas put out a small update concerning the potential government loan for Thacker Pass. Timelines have shifted from now to early 2024.

The Company expects the DOE ATVM Loan Program conditional approval process to be completed in late-2023-early-2024, and if approved, to fund up to 75% of capital costs for construction of Phase 1. Development costs incurred by the project may qualify as eligible costs under the ATVM Loan Program as of January 31, 2023."

Additionally, an update was put out concerning the 2nd tranche of General Motors ( GM ) potential investment. "The maximum price for General Motors (“GM”) second tranche investment equal to an aggregate purchase price of $330 million (“Tranche 2") was adjusted post-Separation. GM is expected to invest Tranche 2 following the Company securing sufficient available capital to fund the development of Thacker Pass Phase 1 (the “Funding Condition”)."

Progress At Thacker Pass

Lithium Americas is making much progress clearing land and laying down pipe. They also they took possession of six HD785-8 trucks in September. This will allow LAC to progress faster and move dirt to shape the work location. A November update informed the masses that the company is also working on lodging for construction workers as well as associated logistics.

Delay, Disrupt, or Destroy - How Actors Impact Mining Projects

The fight over a mining area is not always clear cut: Interwoven are many actors and principalities, each with their own unique motivations and desires. Things become much grayer with some miners being ecologists and some so called "ecologists" having less than altruistic motivations.

At the top of the food chain are the state actors such as China that fund so called environmentalist groups. The purpose behind these proxies are to DDD (Delay, Disrupt or Destroy) projects. Does LAC suffer from this? I cannot say, but the comments from LAC CEO Jonathan Evans points towards the likelihood. Let's listen to the CEO interview from Nevada Newsmakers to learn more.

Interviewer: "One of the things that I've heard and you can tell me if this is based in fact or not, is that there's actually foreign money that's trying to fight environmentally what's happening here."

CEO Jonathan Evans: "It's been in the newspapers. [In] Canada there are rare earth projects in the U.S. as well, I think the U.S. government alerted the Canadian authorities to fake Twitter account or I guess you call it X now, fake Facebook and so forth for people that didn't even exist and frankly speaking, I mean we knew for a fact that the folks that came here from out of state just morphed from another project and they're paid. This isn't a grassroots effort, this is like a professional group. It's like the old cartoons or the sheepdog and the fox, you know, checking out at the end of the day after they chased around each other. This is a professional group."

Lithium Americas Legal Update

While various protestors have delayed Thacker Pass, LAC has won every single court case. You can think of the remaining items as "Hail Mary" plays at best and at worse nuisance items.

Another ruling, yet another win. Rest assured this is not the end of the case though, as the Judge did allow the plaintiffs to amend portions of the suit for another go. Let's explore the ruling of the Reno-Sparks Indian Colony vs the Federal Defendants concerning Thacker Pass to see what LAC won this go around.

Looking over the case let us see what the court ruled on each section.

A. Breach of Contract -

Outcome: Federal Defendants win with an additional dismissal with prejudice slam dunk, "as amendment would be futile".

B. NHPA Claim - Post-Review Discovery Process -

Outcome: Plaintiffs can amend complaint. The basis could be summed up as plaintiffs did not win this point, but if plaintiffs modify it the court will give it another go for a final decision.

C. HNPA Claim - Pre-ROD Consultation with SLPT -

Outcome: Federal Defendants win but grants the ability to amend to plaintiffs.

D. NEPA -

Outcome: Federal Defendants win.

E. FLPMA -

Outcome: Federal Defendants win. An amendment is possible because "Plaintiffs could conceivably add more factual allegations to this claim". Followed by "The Court has now twice agreed with Federal Defendants as to this claim and Plaintiffs did not vary their argument at all the second time." "The Court is skeptical that Plaintiffs could successfully amend it. But skeptical does not mean futile. So the court grants Plaintiffs' leave to amend this claim as well."

IV. Conclusion - Dismiss ECF No. 36

The takeaway is the Federal Defendants won several parts and the Plaintiffs were told to punt and try again via an amendment on a few points.

Risk

The geographic risk in Nevada is low since it is a very mining friendly state. Aside from a few bad players, locals appear very supportive (and the project is hiring locals as well). The project is moving forward but we should expect delays via Mr. Murphy (he of Murphy's law fame) as this is common in the mining industry. Mr. Murphy always shows up for a mining project.

While a government loan should arrive in Q4-Q1, you really never know how slow the government will move. Thus a loan delay could happen. Receiving round two of the General Motors investment could be dependent upon receiving a government loan. Hence another risk. The largest risk though is the macro risk. Frankly put, the economy is decaying in a rapid fashion. This could continue to impact the short term performance of the stock, but long term I see EV panning out and with that LAC panning out.

$3.5 Billion In Lithium Funding

Lastly we can see the U.S. government is moving forward in funding EV and miners via:

"The U.S. Department of Energy (DOE) announced Wednesday that it will award an additional $3.5 billion for companies to produce and develop battery technology and components."

Conclusion

Given the massive land package that LAC has in Nevada (pictured below), I view LAC as a fantastic long term play. Once Thacker Pass is generating revenue, expansion plans might come into being for the additional areas of known lithium mineralizations (aka lithium deposits).

Mix in legal win after legal win followed by LAC conducting ground work on the site with living quarter arrangements and we see progress. We should also expect IRA loans along with a second GM loan with time. The biggest indicator though is insiders are engaging in heavy open market purchases. Follow the smart insider money.

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