Car makers coming down the chain16 Jun 2023 12:14
From todays IC.
Carmakers back new nickel miner in London Spac deal
The hunt for resources for electric vehicles has seen carmakers slowly move down the supply chain. Alex Hamer reports
The hunt for resources for electric vehicles has seen carmakers slowly move down the supply chain, first agreeing deals with miners and now investing in them. The latest such deal has seen Fiat’s parent company, Stellantis (US:STLA), and Volkswagen (DE:VOW3) back a mining special purpose acquisition company (Spac) that is buying two operating mines from private equity firm Appian Capital that are still the subject of a High Court fight.
Appian announced a year ago that it was suing platinum group metals giant Sibanye-Stillwater (US:SBSW) after it backed out of a deal to buy the Santa Rita and Serrote mines for $1.2bn (£0.9bn) in early 2022. Sibanye said at the time it would fight the claim that it had used a minor earth fall in the open pit to cancel the deal. The trial is set for June 2024.
Appian had bought Santa Rita out of a bankruptcy process in 2018 for $68mn, and the Serrote copper mine for $30mn in the same year. It spent $155mn at Santa Rita and $240mn at Serrote to get them up and running.
This Spac, called ACG Electric Metals, said it would be the only UK-listed “nickel sulphide producer with pure-play electric metals exposure” once it completes the $1bn deal for the Brazilian operations. Running the show is former Rusal and EN+ boss Artem Volynets.
Nickel is used in lithium-ion batteries, and demand is forecast to ramp up as electric vehicle (EV) sales rise. A sulphide deposit makes it easier to sell to the EV industry, but these are rarer: Chinese companies have committed to spending billions on projects that mine nickel laterite deposits and then process them into products suitable for batteries.
Even with this spending spree, investment bank Bernstein forecasts a nickel supply surplus out to 2028, however, when greater EV demand puts the market into deficit.
ACG will fund the $1bn purchase of the nickel and copper mines with equity backing from Stellantis, Glencore (GLEN) and mining fund La Mancha, which will all put in $100mn. Volkswagen is paying upfront for $100mn in nickel, alongside royalties specialist Royal Gold (US:RGOLD), which is prepaying for $250mn of the metal. The rest of the funding is coming from $300mn debt, and ACG will also raise another $300mn from institutional investors in a process starting this month and ending in mid-July.
Appian restarted the Santa Rita nickel mine in 2019, although its open pit only has six years left to run. A study into underground mining that could add 27 years to this mine life is being worked up, although the costs and returns on this are not clear. Last year’s sales at the mine were $406mn, with a cash profit of $210mn.
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