SPAC Deal Sparks Surge in EV Battery Supply Chain

As the world gears up for a sustainable future, the electric vehicle (EV) industry is poised to become a key player in the global economy. The demand for EVs and their components, especially batteries, is set to rise exponentially. In the wake of this green revolution, strategic investments in raw material supplies for EV batteries are becoming a focal point for automakers and investors alike.

VWAGY, STLA & GLNCY Power Trio Backs $1B SPAC Deal

In an exciting development, global miner Glencore GLNCY, Italian-American automaker Stellantis STLA, and German auto giant Volkswagen’s VWAGY battery unit PowerCo have teamed up to back a significant $1 billion deal. The partnership will support ACG Acquisition Company, a London-listed special purpose acquisition company (SPAC), in acquiring two mines in Brazil, namely the Santa Rita nickel sulfide and Serrote copper mines. The acquisition of these mines will offer a reliable and sustainable supply of critical raw materials like nickel and copper required for the electric future.

This deal is part of an emerging trend of mining mergers and acquisitions driven by investor confidence in the increasing demand for metals necessary for the global green energy transition.

After the acquisition, the nickel concentrate from the mines will be refined at Glencore's facilities in Western Europe and North America. The refined nickel will be utilized in the production of EV batteries by Stellantis, PowerCo, and other manufacturers. This positions these companies strategically in the EV supply chain, with a stable supply of critical raw materials for battery production.

Glencore, Stellantis, and mining investment fund La Mancha Resource Capital will each invest $100 million in ACG equity. In addition, PowerCo will make a $100 million prepayment for nickel supplies. This investment highlights the growing role of automakers and miners in securing raw material supplies for the burgeoning EV industry.

Interestingly, both mines utilize hydropower for production, further aligning this venture with global sustainability goals. As part of the deal, ACG will rebrand to ACG Electric Metals, underlining its commitment to the EV sector. The newly-issued shares will make Glencore, Stellantis, and La Mancha 51% owners, leaving 49% for free float.

The deal will establish ACG Electric Metals as a significant supplier of critical metals in the western EV value chain, further strengthening the position of the involved companies in the industry. As the demand for EVs continues to grow, such investments pave the way for a greener and more sustainable future.

The Fierce Race to Strengthen Battery Backbone

The global EV market is projected to increase from around 8 million units in 2022 to approximately 40 million units by 2030, at a CAGR of around 22% in the 2022-2030 timeframe. Amid the EV revolution, a fierce race is underway for critical raw materials that power these machines. With batteries forming the cornerstone of an EV's performance, major automakers are increasingly betting on nickel and lithium to strengthen their supply chain systems.

Ford F, for instance, announced a partnership in March with mining company PT Vale Indonesia and China-based material processor Zhejiang Huayou to spur nickel production in Indonesia. Last month, Ford announced a series of deals with companies like Albemarle, Nemaska Lithium and others to secure battery-grade lithium. Close peer General Motors GM signed agreements with Vale and Queensland Pacific Metals of Australia last year to procure nickel supplies. Early this year, GM announced plans to invest $650 million in Lithium Americas to secure lithium access to support its electrification goals.

F and GM currently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Early this year, Stellantis signed an agreement with Terrafame, per which the latter will supply the auto giant with nickel sulfate to be used in EV batteries. Last year, STLA deepened its collaboration with Vulcan Energy for lithium procurement.

Volkswagen has forged partnerships with mining companies in Canada to secure supply agreements to meet its electric targets. It has also collaborated with Huayou and Tsingshan for a joint venture in Indonesia to secure nickel and cobalt supplies.

Wrapping Up

The latest collaborative investment by PowerCo, Stellantis, and Glencore in ACG Acquisition Company demonstrates the strategic importance of securing raw materials for the burgeoning EV industry. As the EV revolution gathers pace, the quest for nickel and lithium will intensify and shape the future of the automobile industry.

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Ford Motor Company (F) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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