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, and Volkswagen 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 two 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.
Aim-traded Horizonte Minerals (HZM) is developing a Brazilian nickel project, but will sell to the steel industry, because it will mine ferronickel at its Araguaia asset. It has a nickel-cobalt project in the works, but this is much further off production.
Nickel is used in lithium-ion batteries, and demand is forecast to ramp up as electric vehicle 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 provided through $300mn in debt, and ACG will also raise another $300mn from institutional investors in a process starting this month and ending in mid-July.
Running the show is former Rusal and EN+ boss Artem Volynets. “ACG Electric Metals will be a company designed to take advantage of the opportunities presented by key global trends: the massive increase in demand for battery metals, the polarisation of supply chains, and the need to reduce carbon emissions,” he said.
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.
Last year, the mine produced 15,000 tonnes of nickel. For context, Glencore mines around 100,000 tonnes a year, although only a third of this is the ‘class 1’ product ACG will sell. Early estimates for the underground mine foresee 24,000 tonnes a year of nickel production – around the same as Horizonte hopes to dig up from its in-development Vermelho mine.
The copper mine, Serrote, has 20,000 tonnes a year of copper output. This is around a quarter more than Atalaya Mining (ATYM) at its Riotinto operation in Spain.
