Lithium Americas analysts sour as US stake sparks 188% rally
It’s almost old hat to the market by now. Take a struggling company, cut a deal with the US government, sealed with the approval of President Donald Trump, sit back and watch the stock take off.
But after shares of Lithium Americas Corp. soared 188% in just two weeks, analysts are starting to challenge the stock’s vaunted valuation and the deal’s less than favorable terms for stockholders in the Canadian mining company.
“Simply put, we failed to appreciate how a heated bull market would interpret Trump’s magic touch, on a thematic commodity starving for attention,” Ben Isaacson, an analyst at Scotiabank, wrote in a note downgrading his recommendation to sector underperform from sector perform on Monday. “Of course, this is despite the magic touch being dilutive to shareholders.”
He recommended investors take profits now, and “reload at lower levels.”
He’s one of four analysts that have downgraded their ratings since the agreement was announced. It’s a sign of the times — as US stocks climb to new heights while gauges tracking market mania flash a warning — that so far the market has largely ignored their calls. The stock reached a two-year in recent days and trades more than 40% above its average analyst price target.
Under the terms of the deal the US is taking a 5% equity stake in the Vancouver-based company and a 5% stake in its Thacker Pass mining project located in Nevada. The company is drawing $435 million from a loan given by the Department of Energy and $182 million of debt servicing will be delayed over the first five years.
It’s one of a handful of deals the current administration has hammered out since July, when the US Department of Defense made a $400 million equity investment in MP Materials Corp. Shares of the rare earth magnet producer are up more than 390% so far this year. Intel Corp. is up more than 50% since mid-August when details of the government’s nearly 10% stake in the beleaguered chipmaker started to surface. Late Monday, the White House announced a stake in another miner, Trilogy Metals Inc.
According to calculations from analysts at Jefferies, if each additional Lithium Americas loan drawdown requires similar concessions, that could dilute equity for existing shareholders by some 40% over the next several years.
“There’s other opportunities. If you’re an investor and you’ve seen this triple in a couple months, you take your profits,” said MacMurray Whale, an analyst at Cormark Securities. The analyst downgraded Lithium Americas to market perform from buy following the agreement. “I would rather tell people to wait to see whether there is a pullback after this excitement.”
Lithium Americas had a market value of more than $2 billion on Monday after shares more than doubled this year.
Morningstar Research also downgraded its rating on the stock to hold from buy after the share price bypassed its price target.
“The market’s gone from overly pessimistic on the stock to now overly optimistic, and so we don’t see a good price right now for someone looking to buy the stock,” analyst Seth Goldstein said.
Investors can expect more such deals to be hammered in the future, according to analysts at JPMorgan Chase & Co. Potential candidates for Energy Department loan revisions include EVgo Inc., one of America’s biggest charging companies, and hydrogen producer Plug Power Inc.
Titan Mining soars as EXIM weighs $120M graphite funding
Titan Mining (TSX: TI) says the US Export-Import Bank (EXIM) is weighing a potential funding of up to $120 million that would pave its way to becoming the first US-based fully integrated graphite producer.
Titan, one of the largest zinc producers in the US, also aims to become a key supplier of graphite for battery, defense and industrial applications by processing natural flake graphite produced at the Kilbourne deposit in upstate New York.
A central part of the Kilbourne project is a proposed 40,000-tonne-per-year commercial processing facility, to be built next to the company’s Empire State Mines zinc complex. At full capacity, the facility could supply about half of the US natural graphite market, the company has said.
The EXIM funding, if approved, will cover a “substantial portion” of the capital required to construct its Kilbourne project in St. Lawrence County, Titan stated in a press release Tuesday.
Under the terms indicated by the bank’s letter of interest, the $120 million loan will have a repayment tenor of approximately 12 years, including an interest-only period, and will reference the Commercial Interest Reference Rate (CIRR), currently around 5%.
“This letter of interest marks a major milestone toward securing long-term, competitive-rate financing for project development as we continue to prioritize capital efficiency and disciplined balance sheet management supporting any construction decision at the Kilbourne project,” stated Rita Adiani, Titan’s CEO.
Titan Mining’s shares surged over 9% to as high as C$2.42 apiece, its best since listing on the TSX in late 2017. The Vancouver-based miner has a market capitalization of C$328.3 million ($235.4 million).
EXIM commitment
The EXIM letter, part of the “Make More in America” initiative, further extends the bank’s funding commitment to Titan. In June, the export credit agency approved a $15.8 million loan to support the expansion of Titan’s zinc operations as well as the development of its graphite project.
According to a resource estimate in December, the Kilbourne project site holds 22.4 million tonnes of inferred material grading 2.91% graphitic carbon (Cg) for 653,000 tonnes of contained graphite. Processing of the graphite concentrates will initially occur at 20,000 tonnes per annum, before the targeted capacity of 40,000 tonnes is achieved in 2027.
Last month, Titan kicked off commissioning of its graphite processing facility. With all key operating permits secured, the company expects to produce its first processed natural graphite in the fourth quarter this year, with sales qualification to follow in early 2026.
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