- Appian announces the sale of the Brazilian companies, Atlantic Nickel and Mineração Vale Verde, to ACG for USD 1,065 million
LONDON, June 12, 2023 /PRNewswire/ --
Appian Capital Advisory LLP ("Appian" or the "Company"), the investment adviser to long-term value-focused private equity funds that invest in mining and mining-related companies, announces the sale of its portfolio of companies Brazilian battery metals-focused companies Atlantic Nickel ("Atlantic Nickel") and Mineração Vale Verde ("MVV") (together, the "assets") to ACG Acquisition Company Limited ("ACG") for cash consideration of US$1 billion. together with the sale of its gold royalty in MVV to ACG for US$65 million (the "Transaction").
Appian funds acquired Atlantic Nickel (formerly Mirabela Nickel), owner of Santa Rita, one of the world's largest open pit nickel sulfide mines, located in Bahia, Brazil ("Santa Rita") from bankruptcy in 2018 The same year they also purchased MVV, which owns the Greenfield Serrote open pit copper-gold asset located in Alagoas, Brazil ("Serrote"). Subsequently, Appian successfully restarted Atlantic Nickel and commissioned MVV. Appian has done significant work to reduce risk and enhance assets, demonstrating the strength of the company's model and its ability to identify, acquire and optimize mining projects through technical arbitrage to create value. Both mines are long-lived, low-cost, and rank in the top decile for carbon emissions among all nickel and copper producers worldwide.
The transaction will provide a compelling value proposition for ACG, Appian and their respective investors. Upon closing, ACG will be renamed ACG Electric Metals, creating the only London-listed producer of nickel sulphide with pure exposure to electric metals, as a natural platform for further growth and consolidation of critical metals assets focused in deliveries to major Western OEMs.
Michael W. Scherb, founder and CEO of Appian, commented:
"Appian began investing in decarbonization commodities a decade ago, recognizing that society was structurally undersupplied for the upcoming energy transition. This groundbreaking transaction in the battery metals space will mark Appian's exits 10, 11 and 12, which reflects the strength of our operating model and our ability to identify, acquire and optimize mining assets Similarly, ACG is a large custodian of Atlantic Nickel and MVV, and is well positioned to unlock significant additional growth from these leading companies in the market.
The Glencore, Volkswagen and Stellantis partnerships are particularly noteworthy, underscoring the growing need for EV products and the demand for strong, transparent and traceable supply chains from Western automotive OEMs, industry and other stakeholders."
Artem Volynets, CEO of ACG, commented:
"We are very proud to announce this transaction in a strategic partnership with Glencore, Stellantis, La Mancha, PowerCo and Royal Gold, as well as senior debt providers such as Citigroup, ING and Societe Generale. It will establish ACG Electric Metals as a leading supplier of critical metals in the western electric vehicle value chain, with best-in-class ESG characteristics and minimal CO2 emissions.
ACG Electric Metals will be a company designed to seize the opportunities presented by major global trends: the massive increase in demand for battery metals, the polarization of supply chains, and the need to reduce the world's total carbon footprint, from the mine to the end customer.
These high-quality mines will enable ACG's mission to be the green metal supplier of choice for Western EV car manufacturers. This acquisition establishes a solid platform for further growth and long-term shareholder value creation."
Details of the transaction
Under the terms of the transaction, ACG has agreed to acquire all of Atlantic Nickel and MVV for cash consideration of US$1 billion, while ACG will also pay US$65 million in cash to extinguish the flow of gold at MVV.
The transaction is backed by financial commitments from financial and strategic parties, including notable partnerships with leading commodity merchants and automakers to support the electric vehicle transition:
These partnerships demonstrate the quality of the assets and their attractiveness to Western automakers at this point in the investment cycle, providing a transparent and secure supply of critical metals to meet future global demand.
The leading mining investment fund, La Mancha Resource Fund (“La Mancha”), has also committed to make an anchor equity investment of US$100 million in ACG.
The remainder of the Transaction financing comes from binding commitments in the form of royalty financing from Royal Gold, senior bank debt underwritten by Citigroup, ING and Societe Generale, who have also agreed to provide a revolving credit facility, and a planned equity offering. by ACG of 300 million US dollars. The equity offering offers a broader universe of institutional investors the opportunity to participate in ACG's future value creation. Appian funds have also offered to support up to C$50 million of equity financing.
The Appian funds will also retain its 2.75% net smelter royalty (“NSR”) at the Santa Rita mine, while La Mancha will be granted a 2.5% NSR on production at the Santa Rita mine.
Upon completion of the transaction, the operating teams of the assets will join ACG, providing continuity to drive future success. Current managers, Paulo Castellari-Porchia and Milson Mundim, will continue to oversee Atlantic Nickel and MVV, having managed the assets for several years, achieving strong operating results, ESG performance and a leading safety record.
As part of the transaction, ACG has strengthened its commitment to sustainability practices at its mine sites by agreeing to implement the IRMA Standard for Responsible Mining at Santa Rita and undergo an IRMA assessment in 2025 and 2030.
The transaction is expected to close in July 2023 and is subject to customary shareholder consents and conditions precedent. Citigroup and Standard Chartered are serving as financial advisors to Appian on the transaction, with Norton Rose Fulbright and Cescon, Barrieu, Flesch
Acquisition and optimization of Atlantic Nickel
Appian funds acquired Atlantic Nickel in the wake of complex bankruptcy proceedings in 2018, after identifying an opportunity to implement a differential operating approach to restart the mine in a first quartile cost position and benefit from more than $1 billion previously sunk capital.
Subsequently, the company undertook significant work to upgrade Santa Rita, developing a refined mine plan with a successful restart in January 2020. As a result, Appian de-risked the asset with an attractive C1 average cost of cash in the first quartile of the global nickel cost curve. (c. US$3.16/lb Ni for open pit and c. US$2.02/lb Ni for underground). Appian has significantly increased resources at Santa Rita since 2018 by systematically infill drilling and expanding the underground and open pit resource areas, extending the mine life from 27 years to 35 years in total.
Atlantic Nickel recently reported record operating and financial performance for 2022, producing 117kdmt of nickel concentrate (107kdmt 2021) containing 15.9kt nickel (14.5kt 2021), 5.0kt copper (4.7kt 2021) and 291t of cobalt (266t 2021). This resulted in US$210 million of EBITDA (US$127 million in 2021) on US$406 million of revenue (US$2,289 million in 2021).
Santa Rita has an industry leading ESG and safety record with a Lost Time Injury Frequency Rate of 0.18 in 2022 (compared to 0.20 in 2021). Since the restart, Appian has grown the team at Atlantic Nickel from 40 to ~3000 employees, providing significant local employment and benefits.
MVV acquisition and optimization
MVV was acquired from Aura Minerals in 2018, having identified Serrote as a rare, stand-alone, ready-to-build copper project with significant precious metal by-product credits that could benefit from Appian's technical arbitrage strategy. Appian optimized the Serrote mine plan, updated the final feasibility study and brought the asset into production in May 2021 on budget and ahead of schedule.
Appian recently announced the successful ramp up through 2022, with full year production of 19.8kt copper and 9-10koz gold contained in 84.5kdmt of concentrate. This resulted in EBITDA of US$60 million on revenues of US$155 million, with average commodity prices of US$3.71/lb CuEq. MVV has an average C1 direct cost of US$1.37/lb Cu.
MVV has a best-in-class safety and ESG record with zero lost-time injuries through 2022 (over 1.9 million cumulative hours worked). Other initiatives include providing support to local schools, social projects for women entrepreneurs, and environmental education.
The exploration program at MVV continues to demonstrate its significant potential for broader regional growth, identifying additional targets that could be included in the long-term Serrote mine plan.
Strategic perspective and approach
Appian will continue to enhance its unique operating model and focus on energy transition commodities used in batteries, electric vehicles and renewable energy systems, including copper and nickel, balanced by investments in precious metals and other commodities.
Acerca de Appian Capital Advisory LLP
Appian Capital Advisory LLP is the investment adviser to long-term value-focused private equity funds that invest solely in mining and mining-related companies.
Appian is a leading investment advisor to the metals and mining industry, with global experience in South America, North America, Australia and Africa and a successful track record of supporting companies to achieve their development objectives, with a global operating portfolio that oversees 6,300 employees.
Appian has a global team of 65 experienced professionals with offices in London, New York, Toronto, Vancouver, Lima, Belo Horizonte, Montreal, Dubai and Perth.
For more information, visit www.appiancapitaladvisory.com, or find us on LinkedIn, Twitter or Instagram.
ACG is a company with the vision of consolidating the critical metals industry. Through a series of cumulative acquisitions, ACG intends to become a Tier 1 supplier of critical metals to the Western OEM supply chain, with best-in-class ESG and carbon footprint characteristics. On October 12, 2022, ACG successfully raised proceeds of approximately US$125 million in its initial public offering and is listed on the London Stock Exchange (symbols: ACG and ACGW).
For more information, visit: www.acgcorp.co
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