Lithium Americas (NYSE: LAC) stock is up 21% on the demerger. That LAC stock rises on a demerger might seem a little odd - there’s more risk exposed to just the one project than there is to a selection we might suppose. But that’s not how it’s playing out here. The separation of the Argentinian brine operations from the US clay lithium operations seems to be adding value to both. Investors have greater choice of the exposure they seek to carry.
As background here Lithium Americas is a lithium mining company with Ganfeng as its largest shareholder (as with Leo Lithium, it’s entirely normal to have a lithium processor as a major shareholder in a lithium mine). The assets are - or were - spread over two entirely different sets. In Argentina there are traditional salt brine assets and in the US there’s the Thacker Pass mine. That second is an entirely different even type of lithium asset, it’s a clay deposit. It’s also said to be truly vast by the standards of these things. It is possible to wonder a bit about Thacker Pass, given that it is a clay deposit - something that it should be entirely possible to mine but there’s not great evidence nor experience of having done so as yet.
Lithium Americas stock price from Nasdaq
What’s just happened is that the one company containing both assets has split into the two companies. Lithium Americas (NYSE: LAC) has Thacker Pass, Lithium Americas Argentina (NYSE: LAAC) has the brines operations in Argentina. Which gives investors the option of which they want to be exposed to. LAAC has pretty much no technical risk to it at all, indeed is just on the edge of producing in volume. It does have political risk because doing anything in Argentina has political risk.
Thacker Pass, or Lithium Americas, has no jurisdictional risk. Obviously there is legal risk because no one is to be allowed to develop anything inside the US without every environmental group using the courts to try to prevent it. That all seems to have been beaten back. There is some technical risk given that it’s a clay deposit.
Finally, there’s financial risk and or interest. It’s possible that the Feds will carry a lot of the financing. Talk that government might lend $1 billion or so into the development costs. Which is, in itself, something of a political risk but possibly onto the upside.
The rise in value here is because investors can now choose which set of risks they want to carry. More choice has value that is. Ourselves, well, we’re bear on lithium generally but then that’s us.
