Highlights:
Lithium Americas Corp. (TSX: LAC; NYSE: LAC) (“Lithium
Americas”, “LAC” or the “Company”) is pleased to announce
that it has entered into definitive transaction agreements to
implement a number of transactions (together, the
“
Transaction”), pursuant to which, among other
things, a subsidiary of Sociedad Química y Minera de Chile S.A.
(“
SQM”) has agreed to sell all of its interest in
Minera Exar S.A. (“
Minera Exar”), the holding
company for the Caucharí-Olaroz lithium brine project
(“
Caucharí-Olaroz” or the
“
Project”), to a subsidiary of Jiangxi Ganfeng
Lithium Co., Ltd. (“
Ganfeng Lithium” or
“
GFL”). As a result of the Transaction, Ganfeng
Lithium will become Lithium Americas’ partner in developing and
operating the Project, which is currently under development in
Jujuy, Argentina. Lithium Americas’ interest in Caucharí-Olaroz
will increase from 50% to 62.5%, with Ganfeng Lithium holding the
remaining 37.5% interest.
In connection with the Transaction, Ganfeng
Lithium has agreed to provide Lithium Americas with a new US$100
million limited recourse, subordinated loan facility to fully fund
Lithium Americas’ share of Caucharí-Olaroz’ capital
expenditures.
In addition, Lithium Americas and Ganfeng
Lithium have entered into a strategic collaboration agreement (the
“Strategic Collaboration Agreement”) to explore
future opportunities to collaborate (the “Strategic
Collaboration”) and develop lithium resources. The focus
of the Strategic Collaboration Agreement will be on technical and
financial collaboration with the objective of identifying and
developing lithium resource projects in North and South America
that leverage both companies’ respective strengths.
“We would like to thank SQM for providing the
support to advance Caucharí-Olaroz into construction, helping to
build an independent team in Jujuy and putting the Project on a
path to reach first production by 2020,” said Lithium Americas’
CEO, Tom Hodgson. “We are also very pleased to welcome Ganfeng
Lithium as our new partner at Cauchari-Olaroz to continue
development on our previously disclosed timeline and explore future
opportunities to collaborate.”
“We share Lithium Americas’ goal to advance
Caucharí-Olaroz to production as quickly as possible to further
diversify and reduce the cost profile of our lithium resource
portfolio,” said Ganfeng Lithium’s Vice Chairman, Wang Xiaoshen.
“We believe many opportunities exist to enhance and grow the
Project for the mutual benefit of all stakeholders, including the
local communities in Jujuy, Argentina, and look forward to working
more closely with Lithium Americas going forward.”
About the Transaction
Under the terms of the Transaction, Ganfeng
Lithium has agreed to purchase SQM’s interest in Minera Exar. SQM
will receive an aggregate of US$87.5 million in cash (including
repayment of outstanding indebtedness owing from Minera Exar and
certain other costs) plus a deferred payment of US$50 million,
which is payable on satisfaction of certain agreed milestones when
the Project has successfully reached production.
In addition, Ganfeng Lithium has also agreed to
provide a loan to Minera Exar to permit Minera Exar to repay US$25
million of its outstanding indebtedness owing to Lithium
Americas.
As a result of the Transaction, on closing,
Ganfeng Lithium will own 37.5% and Lithium Americas will own 62.5%
(an increase from 50% previously as a result of the conversion of
previously contributed funds) of Minera Exar1.
Ganfeng Lithium and Lithium Americas have agreed
to enter into a new shareholders’ agreement governing their
respective ownership interests and the business and operations of
Minera Exar. The new shareholders’ agreement will provide Lithium
Americas and Ganfeng Lithium with shared decision-making over
certain decisions of Minera Exar. The board of directors of Minera
Exar will have representatives from both Lithium Americas and
Ganfeng Lithium consisting of three Lithium Americas nominees and
two Ganfeng Lithium nominees. In addition, a management committee
consisting of representatives of Lithium Americas and Ganfeng
Lithium will be formed to direct the development of the
Project.
Loan Facility
Pursuant to the Transaction, Ganfeng Lithium has
agreed to provide Lithium Americas with a US$100 million
subordinated loan facility (the “Loan Facility”).
The Loan Facility is repayable exclusively out of future
distributions from Minera Exar. The Loan Facility complements
Lithium Americas’ existing senior credit facilities from Ganfeng
Lithium and Bangchak Corporation in the aggregate amount of US$205
million and provides Lithium Americas with committed financing to
fully support all of Lithium Americas’ capital expenditure funding
obligations for the development of Stage 1 of the Project.
The Loan Facility will be unsecured and
subordinated to the Company’s existing senior credit facilities and
will be repaid from the proceeds of 50% of Lithium Americas’ share
of future distributions from the Project. Lithium Americas will
have the right to prepay the Loan Facility without penalty. Draws
may be made under the Loan Facility until December 31, 2025. The
Loan Facility will bear interest at a rate equal to 6-month LIBOR +
5.5% per annum, subject to a maximum of 10% per annum. Interest is
payable annually from 50% of the distributions paid directly and
indirectly by Minera Exar to Lithium Americas, subject to
compliance with the Company’s existing senior credit facilities and
the receipt of distributions from Minera Exar.
Caucharí-Olaroz Project
Update
In Argentina, there are currently over 400
employees and contractors mobilized to develop Caucharí-Olaroz.
Minera Exar’s management team will remain in place and continue to
grow and leverage Ganfeng Lithium’s technical and project execution
expertise. Ganfeng Lithium will commit their existing engineering
and testing teams, including dedicated engineering personnel, to
Caucharí-Olaroz.
Construction of Caucharí-Olaroz remains on track
to commence production of battery-grade lithium carbonate in 2020.
The Stage 1 development contemplates a production capacity of
25,000 metric tonnes per annum (“tpa”) of lithium carbonate.
Construction of production wells and ponds is well underway with
the first pond scheduled to be filled in second half of 2018 and
plant construction expected to commence in early 2019.
As part of the Transaction, SQM has agreed to
provide the support needed to ensure a smooth transition and the
continuity of ongoing work at the Project.
Review of the Transaction
The board of directors of Lithium Americas (the
“Board”) constituted a special committee of
independent directors (the “Special Committee”)
for the purposes of, among other things, considering the
Transaction, reviewing, directing and supervising the process to be
carried out by the Company and its professional advisors in
assessing and negotiating the Transaction, and considering and
making recommendations to the Board with respect to the
Transaction.
The Special Committee was composed of Jean
Fraser (Chair), Gary Cohn, George Ireland and Chaiwat Kovavisarach.
In considering the Transaction, the Special Committee retained
Osler, Hoskin & Harcourt LLP as its independent legal counsel
and Cormark Securities Inc. (“Cormark”) as its
independent financial advisor. Cormark has provided a fairness
opinion to the Special Committee, concluding that, as of August 12,
2018, the Transaction is fair, from a financial point of view, to
the Company and the shareholders of the Company (other than Ganfeng
Lithium and its affiliates).
After careful consideration and deliberation,
the Special Committee determined that the Transaction is in the
best interests of Lithium Americas and is fair to shareholders of
the Company (other than Ganfeng Lithium and its affiliates) and
unanimously recommended to the Board that the Board approve the
Transaction.
Following receipt of the unanimous
recommendation by the Special Committee, the Board (with an
interested director having recused himself) determined that the
Transaction is in the best interests of Lithium Americas and is
fair to shareholders of the Company (other than Ganfeng Lithium and
its affiliates) and unanimously approved the Transaction.
The funding by Ganfeng Lithium of Minera Exar in
connection with the Transaction and the provision of the Loan
Facility by Ganfeng Lithium to the Company constitutes a “related
party transaction” within the meaning of Multilateral Instrument
61-101 - Protection of Minority Security Holders in Special
Transactions (“MI 61-101”). Lithium Americas is
relying on the exemptions from the formal valuation and minority
approval requirements set forth in MI 61-101. Specifically, the
funding by Ganfeng Lithium of Minera Exar is exempt from the formal
valuation and minority approval requirements on the basis of the
exemptions in sections 5.5(a) and 5.7(1)(a) of MI 61-101, as
neither the fair market value of the subject matter of the relevant
transaction, nor the fair market value of the consideration for the
relevant transaction, insofar as it involves Ganfeng, is greater
than 25% of Lithium Americas’ market capitalization (calculated in
accordance with MI 61-101). The Loan Facility is not subject to the
requirement to obtain a formal valuation. The Loan Facility is also
exempt from the minority approval requirements on the basis of the
exemption in section 5.7(f) of MI 61-101, as: (i) the Loan Facility
is a loan that has been obtained on reasonable commercial terms
that are not less advantageous to Lithium Americas than if the loan
or credit facility were obtained from a person dealing at arm’s
length with the Company, and (ii) the Loan Facility contains no
equity component. Provision of the Loan Facility to Lithium
Americas and the intercompany loans to Minera Exar from
Ganfeng Lithium are subject to the approval of the shareholders of
Ganfeng Lithium. Lithium Americas has entered into voting support
agreements from Ganfeng Lithium’s largest shareholder, who holds an
approximate 24% interest in Ganfeng Lithium, pursuant to which such
shareholder has agreed to vote in favour of the transaction. If the
shareholder approval is not obtained, Ganfeng Lithium has agreed to
fund the intercompany indebtedness by way of equity in a manner
that does not impact the relative interests of the parties and to
cede a portion of its rights to off-take from Minera Exar to
Lithium Americas in respect of the US$100 million Loan
Facility.
The Transaction is expected to close in the
fourth quarter of 2018, and is subject to customary closing
conditions.
Strategic Collaboration
Lithium Americas and Ganfeng Lithium recognize
the significant potential that exists in exploring future
collaboration opportunities. The Strategic Collaboration is
expected to leverage Lithium Americas’ experience and track record
operating in Jujuy, Argentina, and Nevada, USA, with Ganfeng
Lithium’s strong technical capabilities producing high-quality
lithium products, including producing concentrated lithium brine
into battery-quality lithium carbonate.
Lithium Americas’ relationship with Ganfeng
Lithium commenced in 2016 with the financing and off-take agreement
for Caucharí-Olaroz. Since that time, both companies have engaged
and worked extensively with one another, and understand each
other's respective values, strategic priorities and operating
capabilities. Senior management and technical teams have
participated in multiple site visits to Lithium Americas’ and
Ganfeng Lithium’s operations in Argentina, the United States, and
China. Complementing Lithium Americas’ experience and expertise in
project and process development, and exploration, Ganfeng Lithium
is expected to provide access to substantial internal engineering,
construction and project execution expertise. Lithium Americas and
Ganfeng Lithium both bring extensive management experience that is
aligned to the rapid development of lithium resources.
Beyond Caucharí-Olaroz, Lithium Americas and
Ganfeng Lithium have agreed to explore further opportunities to
work together on future partnerships.
As part of the Strategic Collaboration
Agreement, Lithium Americas and Ganfeng Lithium have agreed to form
a management committee and a technical committee (the
“Committees”), which will include representatives
from both companies. Global Lithium LLC, an independent lithium
advisory firm managed by its President, Joe Lowry (“Global
Lithium”), has agreed to advise the Committees on
potential opportunities, and work together with both parties on
business development opportunities.
“I have had the pleasure of knowing and working
with Ganfeng Lithium for 15 years,” commented Joe Lowry, President
of Global Lithium, “Ganfeng Lithium’s vision and project execution
skill has enabled the company to become a global power in
lithium and the related green energy ecosystem. In addition to high
quality resources, Lithium Americas has assembled the best
combination of top management and technical talent among emerging
companies, having drawn key personnel from major lithium producers
and some of the largest users. Global Lithium looks forward to
supporting the strategic alliance between Ganfeng Lithium and
Lithium Americas and the obvious synergy that will result from
expanding their relationship.”
Advisors and Counsel
Cormark served as financial advisor to the
Special Committee and Osler, Hoskin and Harcourt LLP served as the
Special Committee’s legal advisor. Cassels Brock & Blackwell
LLP and Alfaro Abogados served as legal counsel to Lithium
Americas.
Simpson Thacher & Bartlett LLP and Gowlings
WLG LLP acted as legal advisors to Ganfeng Lithium.
Winston & Strawn LLP, Blake, Cassels &
Graydon LLP and Marval, O'Farrell & Mairal acted as legal
advisors to SQM.
Conference Call
Lithium Americas will host a conference call for
analysts and investors on Tuesday, August 14, 2018 at 10:00 a.m.
EST, followed by a question-and-answer session.
To access the call, please dial:
North America (toll-free): 1 (888)
231-8191International: 1 (647) 427-7450
A telephone replay of the call will be available
from 1:00 p.m. EST on August 14, 2018 until 11:59 p.m. EST on
September 9, 2018. To access the call replay, please dial:
North America (toll-free): 1-855-859-2056;
passcode 3588296International: 1-416-849-0833; passcode 3588296
A recording of the conference call will also be
available at www.lithiumamericas.com.
About Ganfeng
Lithium:
Ganfeng Lithium is one of the largest lithium
product makers in China, with a diverse product mix including
lithium carbonate, lithium chloride, lithium fluoride, lithium
metal, and butyl lithium. Ganfeng’s business model is mainly
procuring lithium minerals, both of spodumene and brine, from
upstream suppliers and processing those materials into lithium
products. By the end of 2018, Ganfeng’s lithium carbonate and
lithium hydroxide capacities are expected to reach over 40,000 tpa
and 30,000 tpa, respectively, and the total lithium product
capacity of over 75,000 tpa LCE.
Founded in 2000, Ganfeng Lithium is listed on
the Shenzhen Stock Exchange (SHE: 002460) and has a market
capitalization of over US$5 billion.
About Lithium
Americas:
Lithium Americas is developing Caucharí-Olaroz,
under construction in Jujuy, Argentina, and on closing of the
Transaction will have a 62.5% interest in Cauchari-Olaroz with
Ganfeng Lithium holding a 37.5% interest. In addition, Lithium
Americas owns 100% of the Thacker Pass project (formerly Stage 1 of
Lithium Nevada project), and RheoMinerals Inc., a supplier of
rheology modifiers for oil-based drilling fluids, coatings, and
specialty chemicals. The Company trades on both the Toronto Stock
Exchange and on the New York Stock Exchange, under the ticker
symbol “LAC”.
For further information contact:
Lithium Americas Corp.Investor
RelationsSuite 1150 – 355 Burrard StreetVancouver, BC, V6C
2G8Telephone: 778-656-5820Email:
ir@lithiumamericas.comWebsite: www.lithiumamericas.com
Forward-Looking Statements
This news release contains “forward-looking
information” and “forward-looking statements” (which we refer to
collectively as forward-looking information) under the provisions
of applicable securities legislation. Such forward-looking
information is subject to various risks and uncertainties.
Forward-looking information in this news release includes, but is
not limited to, statements with respect to: (i) the timing and
completion of each component of the Transaction; (ii) the timing
and results of the development plan and ongoing development at the
Caucharí-Olaroz project; (iii) the composition of the board,
management committee and management team of Minera Exar; (iv)
the potential for future collaboration with Ganfeng Lithium and any
benefits therefrom; (v) Lithium Americas’ ability to fund the
Caucharí-Olaroz project; (vi) statements regarding anticipated
decision making with respect to Minera Exar; and (vii) anticipated
rates of production at the Project. Forward looking information is
subject to a variety of risks and uncertainties and other factors
that could cause actual events or results to differ materially from
those projected in the forward-looking information, including, but
not limited to, risks relating to changes in Project parameters as
plans continue to be redefined, including the possibility that
mining operations may not commence at the Project, risks relating
to variations in mineral resources and mineral reserves, risks
relating to the ability to access infrastructure, risks relating to
changes in the price of, or worldwide demand for, battery-grade
lithium carbonate, sulfuric acid or other commodities, risks
relating to increased competition in the market for batter-grade
lithium carbonate and related products, risks relating to global
financial conditions, reliance on key personnel, operational risks
inherent in the conduct of mining activities, increases in capital
or operating costs and the risk of delays or increased costs that
may be encountered during the development and construction process,
regulatory risks, including risks relating to the acquisition of
necessary permits and licenses, financing risks, including the risk
that funding required for development and construction activities
may not be available on satisfactory terms or at all, environmental
risks, risks relating to completion of the Transaction and the
additional risks identified in the “Risk Factors” section of
Lithium Americas’ annual information form and other reports and
filings filed with applicable securities regulators. There can be
no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Forward-looking statements are made
as of the date hereof and the Company does not intend, and
expressly disclaims any obligation to, update or revise the
forward-looking information contained in this news release, except
as required by law. Accordingly, readers are cautioned not to place
undue reliance on forward-looking information.
1 Note: Jujuy Energía y Minería Sociedad del Estado, a
Government of Jujuy wholly-owned entity, has an option to acquire
an 8.5% interest in Minera Exar.
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