In the mid-1970s, a real treasure was discovered in the north of the U.S. state of Nevada. In the rocks of McDermitt crater, Chevron initially set out to find uranium. Lithium was also discovered in the process. Today, the "Thacker Pass" mine is considered the largest known deposit of this raw material, which is central to electric mobility, in the USA. A total of 3.1 million tons of battery-grade lithium carbonate lie in the mine. Over a period of 46 years, 60,000 tons of the coveted material are to be extracted annually - and make the cash register of Lithium Americas ring strongly. As the sole owner of the "Thacker Pass" mine, the Canadian company estimates the net present value (NPV) of the mining site at USD 2.6 billion.
If management has its way, all permits for operations should be in place before the end of the first quarter of 2022. Later in the year, Lithium Americas aims to start production in Nevada and benefit from the rapidly growing demand for this essential element of battery technology. Given this outlook, it's no surprise that the company's stock was "energized" last year. 2021, Lithium Americas shares have gained 130% in value. At the end of November, the balance looked much better. The commodity stock was trading at more than three times last year's price before turning lower. In addition to profit-taking, the placement of a convertible bond worth a total of USD 258.75 million probably played a role in the setback.
However, CEO Jon Evans has no shortage of uses for the freshly raised capital. In addition to a strengthened balance sheet and the reduced interest burden, he was able to liquidate a collateralization encumbering the "Thacker Pass" mine. Meanwhile, the top executive wants to finance the ongoing acquisition of Millennial Lithium mostly with treasury shares. Lithium Americas had made the roughly USD 400 million offer for the competitor in early November. Millennial holds the "Pastos Grandes" lithium brine project. This deposit in Argentina's Salta province is only about 100 kilometers away from the "Caucharí-Olaroz" mine, Lithium Americas' second major project. In the course of the year, the CEO would like to start production there. Over 40 years, 40,000 tons of lithium per year are to be produced. In the medium term, another 24,000 tons per year could be added from the mining site currently in the takeover process.
While Lithium Americas is operationally in the starting blocks, the company might still need some time on the stock market to process the ups and downs of the past months. Two new softcallable barrier reverse convertibles offer the right investment solution for a longer consolidation phase. In the product currency CHF, the product comes with a guaranteed coupon of 14% p.a.. In the USD version, the payout is 100 basis points higher. The barriers are uniformly set at 59% of the initial level, while the maximum term is one year. After six and nine months, respectively, the issuer can make use of a soft callable feature. In case of early termination, investors would receive the full nominal as well as the pro-rata coupon. Should Lithium Americas fall to or below the barrier, the partial protection would expire. The investment would then be exposed to the full price risk of the underlying.
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