Key Takeaways
The Department of Energy has acquired a 5% stake in Lithium Americas and a separate 5% stake in its Thacker Pass lithium project joint venture with General Motors.
The Trump administration wants to strengthen domestic production of critical minerals vital to electric vehicle battery production and reduce reliance on foreign supplies, particularly from China, where over 75% of the world’s lithium is processed into battery-grade material.
The first phase of Thacker Pass is expected to produce 40,000 metric tons a year of lithium carbonate — more than eight times the amount the United States currently produces.
The Trump administration has struck other deals with industry to improve their viability amid fierce competition from China.
The Energy Department has taken a 5% interest in both Lithium Americas, a Vancouver, B.C.-based mining company, and its Thacker Pass project in Nevada to support the U.S. supply chain for lithium and reduce dependence on foreign sources. To do so, a $2.26 billion government loan agreement from 2024 had to be restructured. According to Energy Secretary Chris Wright, the deal will help ensure the mine is built and remains financially sound. The project is being developed through a joint venture with General Motors (GM). According to Bloomberg, Lithium Americas and GM asked the Department of Energy to restructure the loan because they could not meet its initial conditions.
As the Wall Street Journal explains, the government intends to improve the U.S. supply chain for lithium, an important industrial material used in electric vehicle batteries, smartphones, solar panels, wind turbines, and renewable energy storage, and reduce reliance on overseas supplies. The equity stake was needed to help make the mine project viable after a drop in the price of lithium. The development of Thacker Pass, one of the largest known lithium deposits in the United States, could help lessen China’s hold on the lithium market. China produces more than 40,000 metric tons of lithium each year, making it the third-largest producer after Australia and Chile. However, China dominates refining, processing over 75% of the world’s lithium into battery-grade material.
Via the Wall Street Journal, the deal will help finance the construction of manufacturing facilities at Thacker Pass, which are eventually expected to produce 40,000 metric tons a year of lithium carbonate for lithium-ion batteries. According to Reuters, the United States currently produces less than 5,000 metric tons of lithium at a Nevada facility owned by Albemarle.
According to Bloomberg, in its loan negotiations with the Energy Department and General Motors, it was reduced slightly to $2.23 billion. The company reached an agreement to draw $435 million of the loan. The Energy Department also agreed to defer $182 million of debt service over the first five years. According to the Wall Street Journal, the revised deal includes more than $100 million of new equity, with the changes being made to protect taxpayers, according to the Energy Department. Still, Lithium Americas will need to raise more capital to make the mine financially sound.
The loan agreement for Lithium Americas originated under the Biden administration and has been reviewed under the Trump administration. Finalized in October 2024 under Biden, the loan will also help finance the construction of a lithium carbonate processing plant, adjacent to the $2.2 billion mine. GM agreed to amend its offtake agreement under the joint venture, allowing other parties to buy lithium that the automaker does not take from the mine. According to Reuters, GM, which invested $625 million in the mine last year for a 38% stake, has the right to buy all of the project’s lithium from its first phase and a portion from the second phase for 20 years.
Other Trump Administration Critical Minerals Industry Involvement
Lithium Americas is another example of the Trump administration’s involvement in industry. In July, the U.S. War (Defense) Department announced a $400 million equity investment in MP Materials Corp. to fund a new plant making rare-earth magnets. The 15% stake in MP Materials and commitment to spending billions investing in the company and purchasing its output should help undercut China’s dominance of rare earth magnets needed in the manufacture of weapon systems.
Analysis
While the concentration of control over the mining and processing of certain minerals by China is a real concern, it is not clear that the federal government having stakes in mining companies will help address that problem. The history of state interventions in the private sector does not include many successes. More often, companies end up redirecting priorities to please political masters rather than focusing on actions and investments that improve the long-term success of the business itself. These mining projects were already struggling, even with billions of dollars in federal loans. A federal equity stake does nothing to change the underlying dynamics of the projects. However, federal ownership does increase the likelihood of more taxpayer funds being called upon if Lithium Americas continues to struggle. The long-term impact of these decisions is still uncertain, but a better approach would be for the federal government to focus on removing the regulatory barriers that make mining so expensive and difficult in the United States, rather than pursuing backdoor subsidies.
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