Construction continues at the Lithium Nevada Corp. mine site Tracker Pass project on April 24, near Orovada, Nev.Rick Bowmer/The Associated Press
Lithium Royalty Corp. LIRC-T has won a court battle over a stake in one of the world’s largest lithium projects, the Thacker Pass mine in Nevada, setting the stage for a settlement analysts estimate could be worth more than $300-million.
Toronto-based Lithium Royalty, which has helped finance 32 mining projects, spent the past two years in a dispute with asset manager Orion Resource Partners over a royalty on future revenues from Thacker Pass, which is owned by Vancouver-based Lithium Americas Corp.
New York-based Orion acquired a royalty on Thacker Pass in 2013, providing upfront funding for the mine in exchange for approximately 1.75 per cent of all future revenue.
In a case before the Ontario Superior Court of Justice, Lithium Royal claimed it acquired an 85-per-cent interest in Orion’s stake in January, 2021, for $18.7-million. The Canadian company said that two months later, Orion reneged on the agreement by selling a 60-per-cent stake in the royalty to a rival company for $28-million.
On Tuesday, the Ontario court ruled in Lithium Royalty’s favour, stating the company had a “binding and enforceable contract” to acquire the 85-per-cent stake from Orion. A spokesperson for Toronto Stock Exchange-listed Lithium Royalty declined to comment on the ruling because the company is still negotiating damages with Orion and the fund manager may appeal the decision.
As the court fight played out, Thacker Pass become one of the lithium sector’s most promising projects. In January, General Motors Co. GM-N invested US$650-million in Lithium Americas to fund development of the mine. In return, the automaker locked in a future supply of lithium, which is used to make batteries for electric vehicles.
In the wake of the court ruling, Scotia Capital analyst Ben Isaacson said in a report: “What makes this so interesting is that Lithium America’s Thacker Pass project boasts the largest lithium resource in the U.S., with construction already underway.”
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The mine is scheduled to begin production in 2026, and Mr. Isaacson said it is projected to satisfy 11 per cent of current global demand for lithium. He said: “Thacker Pass will be one of the next world-class/scale lithium projects globally.”
To settle their dispute, Orion could give Lithium Royalty the 40-per-cent stake in the Thacker Pass royalty the asset manager still owns, then strike an agreement that compensates Lithium Royalty for the remaining 45 per cent, Mr. Isaacson said.
Orion manages US$8.5-billion for institutional investors, with a focus on investments in minerals and infrastructure that are essential to decarbonization. Executives at Orion did not respond to a request for comment on the court decision.
Tuesday’s ruling shows how royalty agreements struck early in the development process, when junior miners need capital to find and build mines, can have enormous value once a project is completed. Mr. Isaacson calculates the stake in Thacker Pass that Lithium Royalty acquired for $18.7-million is now worth at least $300-million.
Lithium Royalty’s stock price rose by 8 per cent on Tuesday after the company announced the court decision. Founded in 2018, Lithium Royalty went public in March on the TSX by raising $150-million. The company is using the cash to increase the size of investments it makes in projects.
Lithium Royalty’s current portfolio represents a portion of future revenues on 32 properties in Canada, the U.S., Europe, Australia and South America. It includes six royalties acquired for a total of $53-million since the beginning of the year. Lithium Royalty’s current market capitalization is $640-million.
The International Energy Agency forecasts demand for lithium will grow by 30 per cent annually over the next decade, outstripping growth in the market for other minerals critical to a decarbonized economy, such as nickel and copper.
Editor’s note: A previous version of this article incorrectly reported Lithium Royalty's market capitalization. This version has been corrected.
Andrew Willis