By Ernest Scheyder
(Reuters) -General Motors Co will invest $650 million in Lithium Americas (NYSE:LAC) Corp and help it develop Nevada's Thacker Pass lithium mining project, which holds enough of the battery metal to build 1 million electric vehicles annually.
The deal, announced Tuesday, is the latest by an automaker to lock up supply of the key metal as industry rushes to go green. It gives Lithium Americas a major partner as it tries to develop North America's largest lithium mine, which is mired in a long-running court case.
Shares of Lithium Americas rose more than 14% to close Monday at $25.23. Shares of GM, which on Tuesday unveiled a robust earnings forecast for the year, rose 8.4%.
In a speech to the U.S. Senate on Tuesday, Senator Joe Manchin called the GM investment in Lithium Americas "exciting" and a "tangible result" of the Inflation Reduction Act, which was passed last year.
Lithium Americas aims to extract lithium at Thacker Pass from a large clay deposit, something that has never been done before at commercial scale. The investment marks the second in as many years by the auto giant into novel lithium processes. GM signed a supply deal in 2021 with Controlled Thermal Resources Ltd, which is trying to filter lithium from geothermal brines in California.
GM would supplant China's Ganfeng Lithium to become Lithium Americas' largest shareholder. GM has also agreed to buy all the lithium from Thacker Pass when it opens in 2026 - roughly 40,000 tonnes per year.
The deal was in the works for nearly a year and came after rival U.S. lithium companies ioneer Ltd signd a deal to supply Ford Motor (NYSE:F) Co and Piedmont Lithium Inc inked a pact to supply Tesla (NASDAQ:TSLA) Inc .
"We wanted the right and holistic parter, rather than a bunch of offtake agreements," Jon Evans, the Lithium Americas chief executive, said in an interview. "It was worth it to wait."
Under the agreement, GM will buy $650 million of shares in Lithium Americas in two equal parts, with the first tranche coming only if Lithium Americas prevails in a court case. A U.S. judge this month said she would rule "in the next couple of months" in the case, which centers on whether former U.S. President Donald Trump erred when he approved the mine just before leaving office in 2021. Evans said the chances of the company losing the case and its permits are "extremely low."
The second tranche of funding would come after Lithium Americas completes a long-planned split, expected later this year, of its North and South American operations.
Lithium Americas raised its budget for the first phase of the Thacker Pass project to $2.27 billion, up from $1.06 billion, reflecting changes to its production plans.
The company plans to build several processing facilities at the site, including a plant to produce 3,000 tonnes per day of sulfuric acid, used to extract lithium from the clay.
Lithium Americas has applied for a loan from the U.S. Department of Energy, which Evans expects to fund a "major component" of the remaining project cost.
Lithium Americas has the support of one Native American tribe, but several other tribes and environmental groups worry it would harm wildlife and water supplies. "If I were GM, I would be asking some hard questions about how the company can remedy the issues at Thacker Pass," said John Hadder of Great Basin Resource Watch, a plaintiff in the court case.