US$1Bn SPAC deal backed by Glencore, Stellantis and PowerCo was terminated owing to weak market conditions

The US$1Bn acquisition of the Santa Rita nickel sulphide and Serrote copper mines in Brazil by blank-cheque fund ACG Acquisition Company (ACG) has collapsed. In June 2023, the backers of ACG (Glencore, Stellantis, Volkswagen’s battery unit PowerCo and mining equity firm La Mancha Resource Capital) agreed to back the deal which was expected to be completed in August.

According to a statement released by ACG, “…despite its best efforts, revisions to the Acquisition Agreement have not been agreed and the Acquisition Agreement has been terminated.” It is thought that weak market data, particularly in China, along with sliding nickel prices, impacted the investors’ willingness to proceed with a deal as reported by sources close to Reuters.

During the sale process, ACG had been set to become ACG Electric Metals with Glencore, Stellantis and La Mancha each proposing to invest US$100M to become 51% owners with 49% remaining for free float. PowerCo, it was proposed, would have made a US$100M nickel prepayment and would therefore have secured an important source of nickel units for its battery cell production. Nickel concentrate produced at Santa Rita had been touted to be refined at Glencore’s operations in North America and Western Europe with the end product used in EV batteries for Stellantis, PowerCo and other automakers.

Nickel has been the worst-performing base metal on the London Metal Exchange (LME) this year. The LME daily nickel cash price closed at US$18,650/t on 26 September, down 40% since the beginning of the year and the lowest level in almost two years. As well as being impacted by China’s stuttering economic recovery, and rising oversupply because of surging Indonesian output, a better description of nickel’s recent price performance is a ‘normalisation’ from the inflated highs that have characterised the metal since Russia’s invasion of Ukraine. Recent prices in the US$19-20,000/t region still reflect the strong demand outlook for nickel in EV batteries.

News of this deal’s collapse serves to highlight the real investor caution that exists in the volatile world of critical minerals and is evidence of the challenge faced to build out the supply required to enable the energy transition.