A big day Tuesday for General Motors and for America’s struggling lithium industry.
Unlike the Australian, and South American lithium sectors, America’s is long on prospects and project ideas, and short on action thanks to a combination of ‘not in my back yard’ opposition, environmentalists determined to stop progress and a sluggishness among businesses to grasp opportunities – leaving them in stark contrast to companies such as Albemarle and Livent.
But now GM wants in on the lithium business and its announcement will see it no doubt followed by rivals such as Ford and Tesla.
GM revealed record 2022 results and a robust outlook for 2023 as it shrugged off the impact of high inflation, rising costs, component shortages while also revealing the first meaningful investment by a US carmaker in a domestic lithium mine project.
GM’s full-year 2022 revenue came in at $US156.7 billion, with net income $US9.9 billion and adjusted earnings before interest and tax at a record $US14.5 billion. This was at the top of the company’s previously revised guidance.
Revenue for the 4th quarter jumped to $US43.11 billion from just over $US33 billion in the final three months of 2021.
While earnings for 2022 were a little lower than expected, GM wrote off more than $US1.16 billion in costs associated with buying out some of its dealers and the costs of quitting its Russian businesses because of the Ukraine sanctions.
Earnings this year are projected to be steady to down on 2022 (and lower than 2021), which is higher than Wall Street forecasts.
But it was the company’s forecasts for its EV sales and the $US650 million investment in the Lithium Americas project in northern Nevada that took the eye of investors.
CEO Mary Barra said in a letter released with the results that 2023 will be a “breakout year” for the company’s electric vehicle business, with the introduction of more mainstream products as well as higher production targets for its current models.
Barra confirmed GM’s revised plans to produce 400,000 EVs in North America between 2022 and the first half of next year.
On Monday, GM launched production of the GMC Hummer SUV EV at a plant in Detroit which is expected to be followed by an electric Chevrolet Silverado work truck by midyear and electric versions of the Chevrolet Blazer and Equinox during the second half of 2023.
These will all need batteries and that’s where the Tacker Pass mine deal comes in.
When it comes on stream it is planned that lithium carbonate from Thacker Pass, the largest known lithium source in the US, will be used in GM’s proprietary Ultium battery cell.
“Direct sourcing critical EV raw materials and components from suppliers in North America and free-trade-agreement countries helps make our supply chain more secure, helps us manage cell costs, and creates jobs,” Ms Barra in a statement.
“The agreement with GM is a major milestone in moving Thacker Pass toward production, while setting a foundation for the separation of our US and Argentine businesses,” Lithium Americas CEO Jonathan Evans noted in a statement.
The investment will be split into two tranches. Funds for the first $US320 million-tranche will be held in escrow until certain conditions are met, including the outcome of a ruling currently pending in the US District Court.
This figure grants GM exclusive rights to the first stage of lithium production at Thacker Pass and almost 10% of the miner’s shares with a further $US330 million to follow.
The second payment will happen once the Thacker Pass mine has been separated from Lithium Americas’ Argentine businesses, which will be called Lithium International, as it revealed last November.
This will enable the Thacker Pass output to qualify for use in US EVs under the Inflation reduction Act’s rules for sourcing battery and renewable products in coming years.
GM’s move represents an important move in the growing chase by EV makers to secure battery metals.
It also highlights a growing trend of integration between the automotive and mining industries.
Elon Musk and Tesla have moaned about the costliness of lithium and other battery metals but apart from signing offtake deals, it has shied away from the sort of investment GM is proposing.
Before the celebrations can start, there is a court challenge to the approval of the project by President Trump several years ago. It’s claimed by environmental opponents that Trump erred in approving the mine proposal.
The Vancouver-based Lithium Americas has received all necessary permits to begin construction and had expected the court ruling by last September but the trial judge has indicated one will come in the next few months.
The mine has the capacity to produce lithium for up to 1 million electric vehicles (EV) a year and is expected to create 1,000 jobs during construction and 500 permanent positions.
It will be a big challenge to Albemarle which has the only operating lithium mine in the US and which has hopes for mines in Nevada and in the Carolinas, as does Piedmont Lithium and several other aspiring miners.
Lithium Americas is planning the open-pit project’s production capacity to reach 60,000 tonnes a year of battery-grade lithium carbonate over a 46-year mine life, according to a 2018 pre-feasibility study reported by Reuters.
