Lithium Americas Corp T.LAC

Dundee Capital Markets comments on Lithium Americas Corp.

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According to Dundee Capital Markets:

https://personal.crocodoc.com/UZXVeal

Lithium Americas Corp.

(LAC-T: C$0.38), intraday

May 5, 2015

BUY, Speculative Risk

Dundee target: UNDER REVIEW

Successful Demo Plant Trial Leads to Negotiations to Develop Cauchari

We maintain a BUY and Speculative risk rating for Lithium Americas, but our target remains Under Review until we receive economic data on POSCO's processing technology, and terms of a deal are ironed out. A couple of months after it was reported that the upsized POSCO lithium brine technology process worked, it reports that 1) the demo plant worked at capacity for prolonged periods, and 2) commercialization discussions for development of Cauchari-Olaroz Project in Argentina have begun. While not stated in the release, we expect that the clock has started on a 90 day exclusivity period to arrange a deal. This announcement provides good news at both the project and corporate levels - it helps de-risk the operation and hopefully a suitable deal will now follow to get investors more excited. We see this opportunity as a good entry point into the stock.

Heads of Agreement is due shortly. This will formally define conditions of a LAC and POSCO JV to be negotiated. We view this turn of events as positive, as there was a chance that the previous brine access arrangement would not come to this - POSCO could simply have walked away, knowing that its technology worked. We do believe that POSCO does seek access to lithium. Having said that, there is no guarantee terms will be reached. We expect the fine details to be significant - and quite important to LAC's future. Main points are simple - POSCO would contribute its new proprietary lithium extraction technology into the JV, while LAC would contribute brine from Cauchari, and perhaps Olaroz. Beyond that, we lack estimations of operating parameters, capital requirements or sources, contribution valuations, stakeholder interest, off-takes or operating team. We believe LAC will work diligently to get a deal done - we don’t see it in a position to finance this operation itself. Particularly, as it would lose the benefits touted by POSCO for its technology - lower capital, smaller footprint, and shorter timeframes. Plus we see POSCO wanting access to lithium. Phase 1 plans are to produce up to 20,000 tpa LCE with construction due later this year, pending formation of a JV and financing.

Demo plant a success. The 200 tpa LCE plant is essentially a 1:100 scale model of the final plant (less final step to LCE production). POSCO confirms that its technology can produce LCE in 8 hours at 90% recovery, as 20 t Li phosphate ( Li3(PO4)) was created from 22-Dec-14 to late Jan-15. Product was shipped to Korea for final processing into Li carbonate and hydroxide (no word on purity - also very important). It was previously reported that 6t Li3(PO4) was produced in 29 days (1/3 capacity out of the gate, see note), thus we speculate that 14t may have been produced in the next ten days (~1.5x plant capacity? The Li3(PO4) to LCE mass conversion ratio is unknown - but we assume it's near 1:1).