This Lithium Stock Is Soaring Again. How Government Money Is Giving It a Boost.

Lithium is a key component in lithium-ion batteries. Lithium Americas plans to mine lithium at its Thacker Pass mine being developed in Nevada. (Photo by SEBASTIEN SALOM-GOMIS/AFP via Getty Images)

Key Points

• Lithium Americas shares surge after the Department of Energy agrees to a $435 million loan draw.
• The Department of Energy will receive a 5% equity stake in Lithium Americas and a 5% stake in the Thacker Pass joint venture.
• The government recently has taken stakes in other publicly traded companies, including MP Materials and Intel.

Lithium Americas soared after the federal government took a stake in the company.

Shares of the miner developing the Thacker Pass lithium deposit in Nevada rose 23.3% to $7.04, while the S&P 500 and Dow Jones Industrial Average gained 0.3% and 0.1%, respectively.

The move came after the company announced on Tuesday that it had reached an agreement with the Energy Department to advance the first draw of $435 million on the previously announced $2.3 billion loan from the U.S. government.

As part of the agreement, the government will receive a 5% equity stake in Lithium Americas and a 5% equity stake in the joint venture developing Thacker Pass.

Lithium America’s joint venture partner is General Motors, which will permit the project to enter into additional third-party offtake agreements for volumes not purchased by GM.

Lithium is a key component of electric vehicle batteries, and GM is ensuring the supply of the material. Thacker Pass isn’t up and running yet, and Lithium Americas doesn’t generate sales yet.

“We greatly appreciate the support of the Administration, General Motors, and our partners in advancing this vital world-class project,” said Lithium Americas CEO Jonathan Evans. “Together, we are onshoring large-scale U.S. lithium production, strengthening America’s supply chain, creating exceptional jobs and enhancing our long-term energy security and prosperity.”

The Energy Department said the revised deal includes more than $100 million of new equity. The changes protected taxpayers, it said.

The government has been more active in taking stakes in publicly traded companies lately. The deal with the Energy Department follows the Defense Department’s investment in rare earth miner and processor MP Materials . Rare earth materials end up in everything from iPhones, to EVs, to F-35 fighter jets and most currently come from China. The Pentagon was interested in developing a domestic supply of rare earth materials. The government also took a share stake in Intel in August.

Part of the changing philosophy appears to be that if the government is providing capital to companies, it wants more than interest on loans; it wants equity.

It also wants security of supply. The “Trump Administration [is] looking to new equity stakes for national security,” wrote Wedbush analyst Dan Ives on Wednesday. “Thacker Pass represents a massive opportunity for the U.S. to reduce reliance on China.” It processes a lot of lithium partly because it’s the largest maker of lithium-ion batteries for EVs.

Electrified cars, including all-electric and hybrids, account for more than half of all new car sales in China.

Coming into Wednesday, Lithium Americas’ stock has gained 91% over the past month as reports about a potential government stake sent the shares climbing.

Write to Al Root at allen.root@dowjones.com