Lithium junior miner, Lithium Americas (NYSE:LAC) stock has surged on the prospects of mining and supplying lithium to the ever hungry electric vehicle (EV) battery segment. The race for EV battery optimization requires hefty supplies of rare earth element lithium. On a geopolitical basis, the efforts to prevent the total domination of rare earth elements by China (owns 70% of world’s production) has also boosted initiatives to produce rare earth elements in the U.S. The demand is not surprising considering the original Tesla (NASDAQ:TSLA) Model S required 6,000 lithium ion batteries to operate. Europe’s largest automaker Volkswagen (DE:VOWG_p) (NYSE:VWAGY) plans to have all its vehicle models be electric by 2030. Lithium Americas is a junior exploration company with plans to become a major producer of lithium. The recent approval for its Thacker Pass mine, located in Nevada, brings the Company closer to this objective. The EV momentum has surged the worldwide demand for lithium, as evidenced by the world’s largest supplier Albemarle (NYSE:ALB)) already being sold out for 2021. Speculative investors looking to place bets on a junior miner with the potential to become a major producer of lithium notably lithium metal, needed for solid state batteries, can monitor shares of Lithium Americas for opportunistic pullback levels.
On Jan. 10, 2021, Lithium Americas received the Record of Decision (ROD) from the U.S. Bureau of Land Management (BLM) for the Company’s 100% owned Thacker Pass mine and Thacker Pass lithium project. The 10-year effort paid off as the Company received federal permits for the project. Application for the key state permits and water rights are expected later in 2021. The Thacker Pass mine is expected to produce in excess of 60 thousand tons of lithium when operating at full production. The mine is capable of producing lithium carbonate, lithium hydroxide, lithium sulfide and lithium metal. Company estimates producing approximately 800 tons of lithium metal annually during Phase I and up to 1,600 tons in Phase II. This is the key material in solid-state batteries, which are highly publicized with the upcoming QuantumScape (NYSE: QS) lithium metal EV battery. Solid state is hyped as the “holy grail” of lithium batteries in terms of charging time, safety, durability, and output. If all goes well, the Company is expected to go into commercial production reaching 60,000 tons of lithium starting in 2024.
$400 million Secondary Offering
Lithium Americas closed a $400 million secondary offering on Jan. 22, 2021, buy issuing 18.18 million shares at $22. This included the 2.27 million shares exercised by the underwriters. The fund proceeds will be used to finance the Thacker Pass lithium project as well as working capital.
Argentina Lithium Project
Lithium Americas is a 49% owner with partner GangfengLithium on the Argentina lithium project. The Company is scheduled to complete the construction on the Cauchari-Olaroz mine in Argentina by the end of 2021. This mine is expected to produce 40,000 tons of battery grade lithium carbonate at a cost of approximately $3.60/KT for the next 40-years.
Risk Factors
As with any junior miners, Lithium Americas is a speculative bet that can play out if supply remains constrained and the Company is able to meet the supply demand for lithium. Lithium prices have been holding steady around $9/KT through January 2021. The mass rollout of EVs should theoretically continue to grow demand outstripping supply of battery grade lithium, but the risk of oversupply is always a factor.
LAC Opportunistic Pullback Levels
We use the rifle charts on the monthly and weekly charts to provide a wider time frame price analysis for shares of LAC. The monthly rifle chart uptrend is still intact with a rising 5-period moving average (MA) at $12.90. However, the parabolic price spike peaking just above the $28.58 Fibonacci (fib) level and subsequent reversion back under the monthly upper Bollinger Bands (BBs) caused the monthly stochastic to cross down. The weekly rifle chart formed a market structure low (MSL) buy trigger above $12.98, but also formed a market structure high (MSH) sell trigger under $18.56. The weekly 5-period MA deflected the pullbacks to stall out the weekly stochastic from crossing down while potentially forming a mini pup towards the weekly upper BBs at $23.97. Weekly stochastic crossover to the downside can present opportunistic pullback levels at the $17.01 fib, $15.59 fib, $14.80 fib, $13.24 fib and the $11.23 fib. Be aware this is a speculative play relying on the Company producing lithium from its mining properties while the lithium demand and pricing remain high. The Company has the potential to become a major producer if plans come to fruition. Potential upside trajectories range from the $24 fib up through the $36.36 fib.