Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / How Lithium Americas Is Reshaping the US Battery Supply Chain
Transcript
- Lucas: Lithium Americas just closed on a $2.26 billion loan from the Department of Energy — the largest-ever for a mining project in US history — and it's not even producing a single ton of lithium yet. Luna: That's a massive bet on one mine. Thacker Pass in Nevada, right? Lucas: Right. And if it works, it breaks something that's been a quiet choke point in the US supply chain for years. Right now, China controls about 60 percent of the world's lithium processing capacity. Not mining — processing. You can dig the ore anywhere, but turning it into battery-grade lithium carbonate or hydroxide? That's overwhelmingly Chinese. Luna: So the US has been shipping raw lithium to China, they refine it, we buy it back. That's the loop Thacker Pass is trying to close. Lucas: Exactly. And honestly, if today's conversation moved your thinking on supply chains even a little, that's the link — buy me a coffee dot com slash fexingo. It's what keeps this show ad-free and focused on angles like this one. Luna: Yeah, we don't do sponsors, we don't do ads. Listener support is the whole engine. Small thing, big difference. Lucas: So back to the mine. Thacker Pass sits on what the US Geological Survey calls the largest known lithium deposit in the United States — roughly 3.7 million metric tons of lithium carbonate equivalent. Lithium Americas plans to produce about 40,000 tons a year at full capacity. That's enough to supply batteries for roughly 800,000 electric vehicles annually. Luna: And they already have offtake agreements. Tesla and Ford have signed on to buy a chunk of that output. Lucas: More than a chunk. 160,000 tons over three years from the second phase, if I remember right. And the DOE loan is specifically for the first phase — 40,000 tons per year starting in 2027. But here's the thing: the DOE loan is structured as a direct loan under the Advanced Technology Vehicles Manufacturing program. It's not a grant, it's not a guarantee. Lithium Americas has to repay it. So the project economics have to work. Luna: And currently lithium prices are in a trough. They peaked at nearly $80,000 a ton in 2022, now they're around $12,000. That's brutal for a new mine's IRR. Lucas: Brutal is the word. But Lithium Americas has been very deliberate about building in phases and securing low-cost power. They're co-locating a geothermal facility at Thacker Pass that could supply renewable electricity and even produce lithium from the brine. That dual-use model is something no Chinese producer has replicated at scale. Luna: It also helps that the Biden — or now the current administration — designated lithium as a critical mineral under the Defense Production Act. That unlocks faster permitting and more funding. Lucas: Right. And the Inflation Reduction Act provisions are still in place — any EV with battery components from a foreign entity of concern, which includes China, is not eligible for the full federal tax credit. So automakers have a direct financial incentive to buy domestic lithium, even if it's slightly more expensive. Luna: That's the policy backstop. But let's talk about the macro picture. The trade-weighted dollar is down a bit — 120.5 from 120.75 — and the yuan is slightly weaker at 6.78 per dollar. That makes Chinese exports cheaper, which puts pressure on US producers to keep costs low. Lucas: And yet we're also seeing emerging market ETFs like FXI, which tracks Chinese equities, up nearly 3 percent in the last five days. EWZ, Brazil, similar. There's a rotation happening — capital flowing toward developing markets as the dollar softens. But if you're trying to build a domestic lithium industry, a weaker dollar actually helps. Your capital costs are in dollars, your revenue is in dollars, and imported equipment gets more expensive for competitors. Luna: So the currency environment is actually supportive for a project like Thacker Pass. Not decisive, but supportive. Lucas: And the regulatory environment is the wild card. The mine has been tied up in litigation for years. Environmental groups — led by the Burns Paiute Tribe and a local rancher — challenged the Bureau of Land Management's approval. A federal judge ruled in their favor in 2023, then the Ninth Circuit reversed parts of that ruling in 2024. Now the BLM is redoing its environmental impact statement. Luna: Which means the mine might not start construction until late 2026 or 2027. That's a two-year delay from the original timeline. Lucas: And that's the tension. We have an industrial policy that says 'onshore critical minerals' and a legal system that gives standing to local communities who don't want an open-pit mine in their backyard. Both are legitimate. The question is whether the US can resolve that tension faster than China builds out its own processing capacity. Luna: And China is not standing still. They're building more lithium processing capacity in Tibet and Argentina. They're also investing heavily in sodium-ion batteries, which don't use lithium at all. Lucas: That's the long-term technology risk for any lithium project. If sodium-ion scales faster than expected, demand for lithium could plateau sooner. But most analysts still see lithium demand growing at 20 percent compound annual growth through 2030, driven by grid storage and EVs. Sodium-ion is complementary, not a replacement, at least for the next decade. Luna: Let me ask a question I think a lot of listeners have: Is Lithium Americas the only game in town, or are there other us based lithium projects that could compete? Lucas: There are a few. Piedmont Lithium has a project in North Carolina — more conventional hard-rock mining. Albemarle has a processing plant in North Carolina, but they're primarily a producer in Chile and Australia. Ioneer has a project in Nevada called Rhyolite Ridge, but that's been delayed by environmental concerns over a rare wildflower. So yes, Lithium Americas is the closest to production of any new greenfield lithium project in the US. Luna: Which means if Thacker Pass stumbles, the whole 'US domestic lithium' narrative takes a big hit. There's no plan B. Lucas: No, there isn't. And that's why the DOE loan is so significant. The government is effectively saying: we will backstop this project because the strategic imperative outweighs the financial risk. If it works, you get a template for how to do industrial policy in a market economy. If it fails, you've spent $2.26 billion and have nothing to show for it. Luna: And what are the odds? You've been following this longer than I have. What does success look like? Lucas: Success is Thacker Pass producing 40,000 tons a year at a cash cost below $5,000 a ton. At current prices of $12,000 a ton, that's a healthy margin. But they need to get through permitting, construction, and ramp-up without cost overruns. Lithium companies have a bad habit of blowing through budgets. If they can execute, they'll be the first large-scale domestic lithium producer in a generation. And that changes the geography of the battery supply chain permanently. Luna: It also changes the conversation around EVs. Critics say American EVs are not truly American because the battery materials come from China. If Thacker Pass works, that argument loses a lot of force. Lucas: Exactly. And that's the bigger picture. It's not just about one mine. It's about whether the US can rebuild a strategic industry that it allowed to migrate overseas over the last 20 years. Lithium is the test case. If we can't do lithium, what chance do we have with rare earths or semiconductor-grade silicon? Luna: So the stakes are huge, but the timeline is long. And the market is impatient. Lucas: Always impatient. Lithium Americas stock has been volatile — up on the DOE news, down on the legal delays. But if you're investing on a five-to-ten-year horizon, this is one of the few pure plays on US industrial policy in the energy transition. Just be prepared for a bumpy ride. Luna: I think we'll be checking back on Thacker Pass in a year to see if that first shovel has actually hit the ground. Lucas: We absolutely will. For now, the financing is in place, the partner is committed, and the clock is ticking.