Volkswagen, Stellantis and Glencore backing ACG in $1B purchase of Brazilian nickel sulfide and copper mines
Volkswagen, Stellantis and Glencore are supporting the purchase of the Atlantic Nickel nickel sulfide and the Mineraçao Vale Verde copper mine in Brazil by ACG, a London-listed special purpose acquisition company (SPAC), for US$ 1 billion. Critical minerals mined at the Brazilian sites will be refined in Europe and North America and then supplied to car manufacturers, fortifying the EV supply chain in western countries.
The Atlantic Nickel nickel sulfide mine in Santa Rita and the Mineraçao Vale Verde (MVV) copper mine in Serrote will be acquired on a cash- and debt-free basis from funds advised by Appian Capital Advisory LLP for an enterprise value of $1.0 billion. Both mines are long-life, low-cost and ranked within the first decile for carbon emissions amongst all nickel and copper producers worldwide. They have a combined 2022 Adjusted EBITDA of $260 million.
The resulting company will be named ACG Electric Metals.
Global commodities group Glencore has committed to subscribe for $100 million in ACG equity as anchor investor and will become an off-taker of choice for ACG, allowing for supply of ACG Electric Metals’ nickel sulfide concentrate to Glencore’s western European and North American refineries.
Stellantis has committed to subscribe for $100 million in ACG equity as anchor investor (subject to customary closing conditions).
PowerCo, a wholly owned subsidiary of Volkswagen, has committed to make a $100-million prepayment to ACG for equivalent nickel units to the tonnage contained in a portion of the concentrates produced by the Atlantic Nickel mine at Santa Rita.
Leading mining investment fund, La Mancha Resource Fund has committed to subscribe for $100 million in ACG equity as anchor investor (subject to customary closing conditions). La Mancha is advised by La Mancha Resource Capital, a leading investment adviser focused on the precious and energy transition metals sector that is authorized and regulated by the FCA.
Both Stellantis and La Mancha will have the right to nominate one director each to the Board of ACG.
Royal Gold, a major precious metal stream and royalty investor, has committed $250 million in royalty finance across both Atlantic Nickel and MVV.
Citigroup, ING, and Societe Generale, three global financial institutions with a long track record in Brazil and the mining sector, will be acting as Coordinating Lead Arrangers and have underwritten $300 million in senior debt through a $225 million term loan facility and a $75-million revolving credit facility.
Mineraçao Vale Verde
The acquisition is expected to close on 25 July 2023.
The Atlantic Nickel mine at Santa Rita possesses a rare nickel sulfide resource, a key input into the class 1 nickel products used in EVs. The mine possesses an attractive life of mine average C1 cash cost in the first quartile of the global nickel cost curve (c. $3.16/lb nickel for open pit; c. $2.02/lb nickel for underground).
The operation currently comprises an open pit mine which produced c. 15 kt of payable nickel equivalent in 2022, with a planned expansion into an underground mine once the open pit reserves are depleted. It plans for an average contained nickel equivalent production of 31ktpa over a 33-year life of mine with an attractive average C1 cash cost in the first quartile of the global nickel cost curve. The site benefits from more than $1 billion in historical capex since initial construction began in 2007.
The Mineraçao Vale Verde mine at Serrote operates a conventional open pit mine and processing operation producing high quality copper-gold concentrate. It plans for an average copper equivalent production of c. 20ktpa over a 12-year life of mine, at an average C1 cash cost of $1.37/lb copper. There is potential to significantly extend the life of mine through extension of the mining deposit, which is already under assessment.
Both mines possess expansive land packages for further exploration. The Santa Rita site contains 32 tenements covering c.36k hectares, with a deposit already identified within a 25km radius. The Serrote site containing 10 tenements covering c.14k hectares, with a preliminary economic assessment currently underway for a deposit 15km from the existing site.