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After much patient waiting Judge Du has ruled on Lithium Americas (NYSE:LAC) lithium project called Thacker Pass. This is a lithium project that was approved during the Trump era by the Bureau of Land Management (BLMN) and support continued in the Biden Administration. The national strategic importance cannot be under estimated.
In this article we will offer our opinion on what the 49-page court document means to investors and to General Motors (GM). The one sentence summary however is Lithium Americas and the BLM won. However, if you want to wade deep in the dredges of 49 pages of legal mind benders read on.
Legal Ruling Summary
Looking at the 49 page document (linked at the bottom of the article), on page 2 we can see an intro where Judge Du tells the audience that her job is not to rule on policy but rather the law. Then we see the following on page 3 where the court rules in favor of the defendants, but tells the BLM they have to fix a technicality involving the waste clay.
The Court has also determined this is the rare case where remand without vacatur is appropriate primarily because the records suggest BLM could fix the error the Court identifies and Plaintiffs fail in their other legal challenges to BLM’s decision to approve the Project. The Court will remand for BLM to fix the error-to determine whether Lithium Nevada possesses valid rights to the waste dump and mine tailings land it intends to use for the Project. But the Court declines to vacate the ROD pending BLM’s review of the mining plan of operations portion of the Project.”
Mining and Minor Technicalities
What is the error the court talks about?
Basically, the Rosemont case revolves around mining law and public lands. A citizen can lay a claim if the BLM land has valuable minerals. Hence in Rosemont the Forest service granted rights to mine but did not determine if the land had actual valuable minerals on it.
Judge Du’s point of focus concerning Thacker Pass, is the BLM did not carry out this review on the waste area. This was even though the entire Thacker Pass area is brimming with valuable lithium. Common sense be damned as far as why do you need a review of a waste pit but such is the court system and technicalities when looking at prior decisions of other courts. Per Page 10 and 11:
Rosemont makes clear that the approving federal agency must evaluate the mining project proponent’s rights under lands they intend to use for waste dumps before they approve the use of that land for that purpose.”
The court then explains how to fix the problem.
Nothing Burger Fixed
It will be interesting to see how this case might impact the mining industry when it comes to BLM lands. I could see future projects having to drill unnecessary holes on potential waste sites just to prove the land has valuable minerals. It might even get sticky on what is the cut off for a valuable mineral or what valuable mineral are we talking about. Maybe I am mining for gold and I consider basic crushed rock valuable now? All sorts of new and interesting avenues of twisted logic arise from this but getting back on topic. The court says on page 12:
BLM could conduct such an analysis on remand, and evidence already in the record suggests that BLM could permissibly allow Lithium Nevada to occupy those land under Rosemont, which dealt with the admittedly different situation where no evidence of valuable minerals had been found in the waste dump land.”
Legal Summary So Far
The BLM was conforming to its hand book and policy logically and did not require a mining company to look at the waste area to see if it was valuable ground. Why would they? This is not to say that Lithium Americas was not aware of what the level of lithium was in that area. Simply put a review was not conducted because it was not BLM policy. The court however is looking at a prior court case for guidance. Hence Judge Du basically says to the BLM go review it and fix this technicality.
Judge Du Rules Against The Plaintiffs
Starting on page 13 and extending to page 46 we have page after page of a systematic Mike Tyson style beat down via Judge Du concerning Plaintiffs attempts at playing Spaghetti law (that is throw a zillion things at the Defense and see what sticks). It is paragraph after paragraph explaining why the Plaintiffs are incorrect. Over and over, page after page.
Demand and Vacatur
Lastly, starting on page 46 we see Judge Du explaining vacatur and how the one singular issue is really a correctable technicality.
“The Court may only order remand without vacatur in limited circumstances, and only when equity so demands. See Pollinator, 806 F.3d at 532. The Court must generally weigh the seriousness of the agency’s errors against the disruptive consequences of vacating the ROD. Examples of where it is appropriate to remand without vacatur include situations where environmental harm will result from vacatur, and situations where the Court reasonably expects the agency could reach the same result on remand but either offer better reasoning or comply with procedural rules to essentially fix the error the Court has identified in its review.
The Court finds that this is the rare case where remand without vacatur is appropriate because, as described supra in the section of the order addressing Rosemont in depth, BLM could fix the error-it could find on remand that Lithium Nevada possesses valid rights to the waste dump and mine tailings land it intends to use for the Project. There is at least some evidence in the record of sufficient lithium mineralization in those land such that BLM could find Lithium Nevada had discovered ‘valuable mineral deposits’ in them.”
Lithium Americas Future Risk
The Court of Appeals would be the next step and this could potentially delay things further. Yet the South American plant is due to come online soon providing plenty of revenue. Combine General Motors waiting in the wings to provide $650 million of funding and our concerns are low.
The Take Away
Common sense would say that any mining company would have a general idea of the property it was mining on be it good or bad. The decision of the court is a strange one but a win is a win. Yet this court case decision opens up all sorts of future oddities concerning mining companies working on BLM land like: Did you drill down far enough to prove the asset has value? Define valuable minerals. What is the cutoff grade? Do simple surface samples count? Can I substitute minerals? These are future questions that mining companies working on BLM land such as Century Lithium (OTCQX:CYDVF) or ioneer (IONR) might need to take into consideration when it comes to tailings pits.
Conclusion
By the time the reader consumes this article the stock will have hopefully reacted in a positive light but plenty of future catalysts are still pending. LAC has many times mentioned that they are in talks for Federal loans. If LAC is approved for these loans, the stock could react favorably. The ruling by Judge Du is a massive win for LAC and its new partner General Motors.
Note: The 49 page court document can be read here.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
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