The Trump administration just added another chip to its growing sovereign wealth fund stack - and this time it's lithium.
America is betting that direct equity stakes and price floors can level the playing field against Chinese market manipulation - and reshape America's critical minerals supply chain in the process.
Locking in a 5% equity stake in Lithium Americas and a stake in the lithium mine itself, the U.S. Department of Energy now has exposure to the treasures contained within Thacker Pass in Nevada.
A good deal? Probably. The government let Lithium Americas defer US$182 million-worth of debt payments over five years on their hefty $2.2 billion DOE loan.
In return, Uncle Sam gets a seat at the table of what's set to become one of North America's largest sources of the battery metal.
Why lithium matters (again)
Thacker Pass is expected to pump out 40,000 tonnes (t) of battery-quality lithium carbonate annually when it opens in late 2027 - enough to power some 800,000 electric vehicles.
Having already bet big on securing upstream materials for batteries, carmaker General Motors holds a sizeable 38% stake after dropping a cool $625 million on the project last year.
The investment also gives it the rights to purchase all first-phase production.
Following the MP Materials playbook
Sound familiar? It should.
This move follows the Pentagon's landmark July investment in rare earths producer MP Materials - a deal that analysts are calling the strategic blueprint for America's critical minerals policy.
The U.S. Defense Department became MP Materials' largest shareholder back in July with a 15% stake for $400 million, complete with a clever price floor mechanism.
The government pays MP when rare earth prices fall below $110/kg, but takes 30% of the upside when prices exceed that threshold.
Why the price floor?
For decades, China has systematically crushed Western competition in critical minerals through aggressive industrial policies and artificially low prices.
When U.S. producer Molycorp tried reopening the Mountain Pass mine in 2010, China flooded the market with cheap rare earths. Molycorp subsequently collapsed in 2015 with $1.7 billion in debt.
The U.S. government has put an end to that practice.
The bigger picture
Since Trump signed an executive order in February launching a U.S. sovereign wealth fund (SWF), the administration has been on a buying spree:
- Intel: 10% stake worth ~$8.9 billion through CHIPS Act grants
- MP Materials: $400 million Pentagon investment for 15% stake with price floor guarantees
- Nvidia/AMD: 15% revenue cut from China chip sales
- Lithium Americas: Dual 5% stakes in the company and project
Investors like what they're seeing, as Lithium Americas (TSX: LAC) stock jumped over 30% on the finalisation of the agreement.
