Lithium Americas Announces Spin-Off
Lithium mining start-up Lithium Americas has successfully completed its transformation into two separate companies, with the creation of Lithium Americas Argentina as a spin-off to shareholders. This move provides investors with an additional avenue to invest in lithium, a vital component in the transition to electric vehicles.
The separation was announced on Wednesday by Lithium Americas (ticker: LAC). John Kanellitsas, Interim CEO of Lithium Argentina, expressed his pride in the teams of both Lithium Argentina and Lithium Americas for their hard work and dedication in restructuring these companies to thrive independently. He sees the completion of this separation as a significant milestone that will allow each company to concentrate on its specific growth opportunities within the lithium industry.
Lithium Americas Argentina possesses approximately 45% ownership of the Cauchari-Olaroz brine asset in Argentina, along with two other deposits. The extraction of lithium involves various methods, including salt brine, hard rock minerals, and clay deposits. Brines are generally the most cost-effective, followed by rock and clay. Production of lithium from the Cauchari-Olaroz brine deposit commenced in June.
Lithium Americas retains ownership of the Thacker Pass asset in Nevada, which is a clay-based deposit. Construction is already underway, and the company anticipates beginning lithium production at this site in 2026.
Lithium Americas Argentina is now listed under the stock symbol "LAAC," while Lithium Americas continues to use the "LAC" stock symbol. The total number of shares issued for both companies is approximately 160 million.
It is important to note that trading of Lithium Americas Argentina stock has been conducted on a "when-issued" basis, enabling investors to trade shares even before possessing physical stock. The finalization of the deal is still pending. On Tuesday, Lithium Argentina stock concluded at $6.16, resulting in a market capitalization of around $1 billion.
On the other hand, the new version of Lithium Americas shares closed at $9.67 on Tuesday, equating to a market capitalization of approximately $1.5 billion.
The Evolution of Lithium Americas Stock
The old Lithium Americas stock, previously valued at $16.19, has undergone significant changes resulting in the emergence of two new stocks. While the old stock's price serves as a reference point, it is important to note that the original company no longer exists. However, examining the historical pricing can provide valuable insights into recent market trends.
Over the past year, Lithium Americas shares have experienced a decline of approximately 43%. Curiously, this decline comes at a time when electric vehicle (EV) sales are reaching new records in major markets such as the United States, Europe, and China.
The primary factor contributing to this divergence is commodity prices. Specifically, benchmark lithium prices have plummeted by around 67% in the past year. Typically, commodity prices do not always align with demand patterns for the products in which the commodity is utilized. Oversupply by producers and diminished buying activity resulting in reduced demand from buyers can cause significant fluctuations in prices.
In the case of lithium, it appears that reduced purchasing and depletion of inventories have impacted the market. However, there is reason for cautious optimism. Notably, Citi analyst Jack Shang has revised his outlook from "bearish" to "neutral" on lithium. Shang anticipates a resurgence in "restocking" activity as lithium buyers begin replenishing their inventories. Additionally, lower prices have prompted some production cuts due to seasonal maintenance.
Despite the substantial decline, benchmark lithium prices currently stand at approximately $23,000 per metric ton. While this represents a significant decrease, it is noteworthy that prices remain substantially higher than pre-pandemic levels of around $7,000 per metric ton. This increase reflects the growing demand for EVs. In 2020, global sales of plug-in electric and hybrid vehicles amounted to about 3 million units. By 2022, this figure had surged to approximately 10 million, with a projected increase to 14 million in 2023.
In premarket trading, Lithium Americas Argentina stock has shown an impressive increase of 11%, while Lithium Americas stock has risen by approximately 8%. Additionally, S&P 500 and Nasdaq Composite futures exhibit optimistic gains of 0.2% and 0.3%, respectively.
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