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Mining company ACG is to test the appetite for London’s capital markets as it seeks to raise $300mn to acquire two mines in Brazil — a deal underscoring growing interest from carmakers and investors in battery metals.
ACG, London’s first mining special purpose acquisition company or Spac, plans to acquire the nickel and copper mines in a $1.1bn transaction already backed by Swiss miner Glencore, investment fund La Mancha and carmakers Volkswagen and Stellantis, which have each invested $100mn
“London is perfect for us” and remains “the prime spot for mining companies” to raise capital, said ACG chief executive Artem Volynets, as he prepared for the launch of the roadshow for the fundraising on Monday.
“There is a great deal of expertise accumulated here among the investors who have been following mining stocks,” added the former chief executive of En+ Group.
The fundraising, which Volynets describes as more like an initial public offering than a Spac, will be a litmus test for natural resources investors and comes at a challenging time for the London market.
The recent $7.5bn IPO of WE Soda was abandoned owing to poor investor interest. Meanwhile, some London-listed companies are planning to move to New York’s market to take advantage of higher valuations.
“Everybody knows the capital markets are tough at the moment, the IPO market has been difficult for two years now. We all go into this, eyes wide open,” said Patrick Evans, managing director at Citi, an adviser on the deal.
While other mining companies have criticised European investors for being too focused on environmental, social and governance concerns (ESG), Volynets said he welcomed the focus on this type of criteria.
“We supply low-carbon metal units, which are produced with first-in-class ESG characteristics,” he said. “That resonates with the type of investors and the mood in London.”
The deal, in which ACG will acquire two mines from private equity group Appian Capital, also highlights how car groups are making direct mining investments, something unheard of even a few years ago.
Volkswagen, through its subsidiary PowerCo, is investing $100mn in the deal as a prepayment for future nickel supplied by the mines.
Stellantis, whose brands include Fiat Chrysler and Peugeot, has invested $100mn directly into ACG.
The Santa Rita mine in south eastern Brazil produces nickel sulfide, while the Serrote mine in eastern Brazil produces copper and gold.
As western governments become concerned over China’s dominance of the critical minerals used to produce electric vehicle batteries, carmakers have become more proactive in securing battery metals.
“The global supply chain is breaking up, and segregating into the eastern supply chain and the western supply chain,” said Volynets. “And we are very much on the forefront of that, supplying into the western supply chain.”
Citi’s Evans said the fixed-price fundraising deal, with significant cornerstone investors already signed up, has been structured in a way to minimise risks in a tough market.