Lithium Americas Announces $174 Million Strategic Investment

2017 is poised to be a big year for Lithium Americas (TSX:LAC). The company announced on Jan. 17 that it had signed an investment agreement with GFL International (Ganfeng) for funding to advance construction of its Cauchari-Olaroz project in Argentina.
Under the terms of the agreement, Ganfeng will finance an aggregate amount of $174 million for 19.9 percent of Lithium Americas’ outstanding shares and the right to buy a fixed portion of the lithium carbonate production from the above-noted project and a $125 million project debt facility.
In the company’s press release, Tom Hodgson, CEO of Lithium Americas, said the company is “delighted” to add Gangfeng as a partner, who is also now its biggest shareholder.
“We have long believed that the right partnerships bring important benefits to the Cauchari-Olaroz project, the local communities in Jujuy, and to our shareholders,” he said.

With the investment, Hodgson continued, Lithium Americas–together with its joint venture partner SQM (NYSE:SQM)–will be able to begin construction of the project.
Li Liang Bin, chairman and president of Gangfeng, expressed similar sentiments regarding the partnership, and believes this will be “one of the world’s largest and lowest cost lithium projects.”
“This investment is fully in line with our resource development strategy,” he said. “We also look forward to working with Lithium Americas on further collaboration in the lithium industry.”
In a LinkedIn blog post, Joe Lowry of Global Lithium said the announcement is “extremely important.”
“This is the first major development in what I believe is a new chapter in the growth of the lithium industry where alliances and the leveraging of core competencies among cooperating companies will lead to a significant shake-up in the world of the lightest metal,” he wrote.
Further, Lowry said the partnership “creates the world’s most powerful lithium alliance.”
That said, in a research note from Dundee Capital Partners, it states that SQM will maintain the remaining 50 percent interest in the project, and that the investment includes equity and debt portions with an associated off-take. Ganfeng’s 19.9 percent interest will be in effect upon closing on Mar. 31, 2017.
Further, Ganfeng will provide a $125 million six year project debt at eight percent for the first three years. In the fourth year, it will go up to 8.5 percent, nine percent in year five, and 9.5 percent in the sixth year.
No doubt, the partnership is indeed exciting for the lithium space, and for Argentina who is third top lithium-producing country in the world.
Following the announcement, shares of Lithium Americas were unsurprisingly on the upward trend: at the close on Jan. 17, the company’s share price had increased 7.87 over the one-day period to $0.96. Year-to-date, shares of Lithium Americas have gone up by 20 percent.
 
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.