Lithium Americas Corp (OTCMKTS:LACDF) Is Today's Lithium Focus

There is perhaps no better story than lithium right now among small caps. We’ve been covering the lithium sector here at Insider Financial and have already profiled Oroplata Resources Inc (OTCMKTS:ORRP), Lithium Corporation (OTCMKTS:LTUM), Lithium X Energy Corp (OTCMKTS:LIXXF), and Pure Energy Minerals Ltd (OTCMKTS:PEMIF). Now we're turning our attention to Lithium Americas Corp, which trades under the symbols LAC in Canada, LACDF in the U.S., and WUC in Germany.There are countless reasons to be excited about lithium. Lithium is right now the one commodity everyone can agree upon that will continue rising in price. This comes as the lithium-ion battery is the battery of choice for cell phones, laptops, tablets, cameras, and power tools. Consumer electronics will need 4 to 5% more lithium each year for the rest of the decade.Further driving the demand for lithium is the electric car market. In a report from Goldman Sachs called “What if I told you” Goldman refers to lithium as the “new gasoline”. Goldman Sachs expects electric vehicles will make up 22% of the auto market by 2025, up from just 3% now. For every 1% increase in electric vehicle market share, Goldman Sachs expects lithium demand to rise by 70,000 tonnes per year. With the current lithium market at just 160,000 tonnes, demand from electric vehicles alone could triple the size of the entire lithium market by 2025, taking it from 160,000 tonnes today to 470,000 tonnes.We also have the Tesla Motors Inc (NASDAQ:TSLA) Gigafactory, which will produce advanced lithium batteries for Tesla. Elon Musk has stated that Tesla will need to consume the entire lithium market to meet its demands of 500,000 Model 3’s by 2018. Chinese demand of lithium has been another factor behind the surge of the lithium market which is driven by the country’s desire for electric cars and buses.In addition, you have industry leaders like Pilbara Minerals MD and CEO Ken Brinsden who sees many parallels between the iron ore boom that started in the early 2000s and the lithium market today. He told CNBC that he sees China driving lithium demand as the country becomes a powerhouse in lithium-ion battery production. Just as China drove demand for iron ore and the price of iron ore for its steel industry, he expects China to do the same for the lithium market. All of this means only one thing in our opinion – much higher lithium prices and which brings us to today’s lithium focus – Lithium Americas Corp.Lithium Americas Corp was formerly known as Western Lithium USA Corp until March 2016 when it changed its corporate name to Lithium Americas Corp and its wholly owned subsidiary, Western Lithium Corporation, to Lithium Nevada Corp. Lithium Americas, together with its joint venture partner SQM, is developing the Cauchari-Olaroz Lithium project, located in Jujuy, Argentina, through its 50% interest in Minera Exar S.A. In addition, Lithium Americas owns 100% of the Lithium Nevada project (formerly Kings Valley project), and RheoMinerals Inc., a supplier of rheology modifiers for oil-based drilling fluids, coatings, and specialty chemicals.Lithium Americas Corp has become one of the most talked about lithium players after landing $286 million in financing from two of its largest investors. This funding will advance the construction of the Cauchari-Olaroz lithium project in Jujuy, Argentina. GFL International Co., Ltd. is investing US$174 million to increase its ownership stake to 19.9% of the outstanding common shares of Lithium Americas by purchasing 75,000,000 common shares at a price of C$0.85 per common share for C$64 million (US$49 million); the right to buy a fixed portion of the lithium carbonate production from the Cauchari-Olaroz project; and a US$125 million project debt facility.The second tranche of money (US$112 million) is coming from The Bangchak Petroleum Public Company Limited out of Bangkok. The deal allows Bangchak subsidiary BCP Innovation Pte Ltd to increase its ownership stake to 16.4% of the outstanding common shares of Lithium Americas by purchasing 50,000,000 common shares at a price of C$0.85 per common share for C$42.5 million (US$32 million); the right to buy a fixed portion of the lithium carbonate production from the Cauchari-Olaroz project; and a US$80 million project debt facility. Vice Chairman John Kanellitsas said:

"Upon the completion of the Ganfeng transaction announced two days ago and this BCPI transaction announced today on virtually identical terms, Lithium Americas will have raised US$286 million, which we believe will satisfy the financing requirements for Lithium America's 50% share of Stage 1 of the Cauchari-Olaroz joint venture. The terms and size of the debt facilities provide Lithium Americas increased financial flexibility, limit dilution to existing shareholders, and avoid onerous covenants, prepayment penalties or costs other than interest on the amount drawn."

Lithium Americas and SQM are proceeding with development planning for 50,000 tonnes per annum of lithium carbonate production from the Cauchari-Olaroz project, to be built in two stages, with initial work modelling a first stage of production of 25,000 tonnes per annum of lithium carbonate ("Stage I") on a two-year construction and commissioning timeline. As part of the Investment Agreement with Ganfeng, the parties have agreed to terms of the Offtake Entitlement whereby Ganfeng has the right to acquire 70% of Lithium Americas' share of Stage I production from Cauchari-Olaroz for a period of 20 years following the commencement of commercial production.

In addition, Ganfeng has agreed to work with Lithium Americas on any future financings needed to fund Lithium Americas' share of a second stage of the Cauchari-Olaroz project. Subject to the parties agreeing to an acceptable financing proposal, Ganfeng would receive the first right to purchase a portion of production from the second stage of production from Cauchari-Olaroz.

Currently trading with a market cap of US$235 million, LACDF looks to be one of the best plays on lithium in the space. With Stage 1 of the Argentina project fully financed, LACDF has a lot less risk than many of the other players that lack the financing needed to complete their projects. We believe that Lithium Americas Corp remains a top pick for lithium investors seeking exposure to this fast-growing commodity. We will be updating our subscribers as soon as we know more. For the latest updates on LACDF, sign up below!

Disclosure: We have no position in LACDF and have not been compensated for this article.