Lithium Americas (LAC +0.00%), a late-development-stage lithium miner, announced on Thursday that it plans to split into two public companies.
Lithium Americas stock is up 4% on Thursday as of 12:59 p.m. ET. This move probably reflects, at least to some degree, that investors are pleased with the news. Market dynamics are also surely influencing the stock's movement.
Lithium stocks have garnered much investor attention over the last year because lithium prices have skyrocketed due to soaring demand for the material, which has boosted the profits of major lithium producers. The so-called "white oil" is needed to produce the lithium-ion batteries that power electric vehicles (EVs).
NYSE: LAC
Key Data Points
Splitting its North America and Argentina operations
Lithium Americas, based in Canada, is separating its North American and Argentine business units into two independent public companies.
The North America-focused lithium company will retain the name Lithium Americas. It will own the company's Thacker Pass lithium project in Nevada, as well as its investments in Green Technology Metals (an Australian company that's listed on that country's stock exchange) and Ascend Elements (a privately owned U.S. company).
Thacker Pass is on track to be the first lithium project to mine lithium from clay at scale. Currently, lithium is mined at scale from only two sources: brine and hard rock.
The progress of this project has moved slowly because of lawsuits from environmentalists and Native American groups. Lithium Americas has received all state and federal permits required to begin construction. It has what should be just one more regulatory hurdle to jump before it can move forward on this project: an oral hearing, scheduled for Jan. 5, 2023, on the appeal of the issuance of the Record of Decision for this project.
It seems likely to me that the appeal will be denied, as Lithium Americas has emerged victorious in the various other appeals of its regulatory approvals.
Lithium Americas' Argentina-focused lithium company will be named Lithium International. It will own the company's current interests in its Argentine lithium assets, including:
- A 44.8% stake in the Caucharí-Olaroz lithium brine project, which is near the commercial production stage.
- A 100% interest in the Pastos Grandes lithium brine project.
- An approximately 17% investment in Arena Minerals (a Canadian company listed on the TSX Venture Exchange).
The company's rationale for the separation
In the press release, CEO Jonathan Evans explained the rationale for splitting Lithium Americas into two companies:
[It is our belief] that separating the North American and Argentine businesses will facilitate unlocking the full potential of their significant asset base to deliver maximum value to our shareholders and other stakeholders.
Upon completion of the separation, Lithium Americas shareholders will retain ownership in two leading lithium businesses -- one of the largest-known lithium developments in North America, which is central to the U.S. domestic supply chain, and a near-term producing portfolio with significant growth from two high-quality projects in Argentina.
Separation process
Here are some key things investors should keep in mind about this news:
- The company intends to complete the separation into two companies via a spinoff of the North America-focused lithium business.
- It anticipates the separation to occur on a tax-deferred basis for U.S. shareholders for federal income tax purposes and for Canadian shareholders.
- It aims to complete the separation by the end of 2023.
- The company's current CEO, Jonathan Evans, intends to remain the CEO of the North America-focused lithium company.
Of course, Lithium Americas' separation plan is subject to regulatory approvals. It must also receive a final nod from the company's board of directors and a green light from shareholders.
A good move
Lithium Americas' plan to separate into two companies is a good move, in my view. It should increase investor interest because the two stocks will likely appeal to somewhat different groups of investors. Moreover, the separation should allow for management to be more focused.
