DeepGreen Metals Inc., a Vancouver-based producer of minerals used to make electric vehicle batteries, will become a publicly listed company after being acquired by Sustainable Opportunities Acquisition Corp. (SOAC) in a US$330-million deal.
Founded in 2009, DeepGreen sources minerals known as polymetallic nodules from the ocean floor, which are used to power electric vehicle batteries. The company has exploration contracts in the Pacific Ocean’s Clarion-Clipperton Zone between Hawaii and Mexico. DeepGreen estimates its exploration zone has the potential to power 280 million electric vehicles.
SOAC, which is a special purpose acquisition company, raised US$330-million in what is known as a private investment in public equity, or PIPE, financing for the DeepGreen acquisition. This is in addition to the US$300-million SOAC raised in its initial public offering in May, 2020. The new financing will give the combined entity a valuation of $2.4-billion, according to the company.
DeepGreen says it will change its name to The Metals Co. when the deal closes. DeepGreen chairman and chief executive Gerard Barron will lead Metals, and Scott Leonard, CEO of SOAC, will join its board. The deal is expected to close in the second quarter of 2021. While SOAC is listed on the New York Stock Exchange, it has not yet disclosed where The Metals Company will list.
Special purpose acquisition companies, or SPACs, are shell companies that list on an exchange with the sole purpose to acquire target companies, which are usually private. Once the acquisition is complete, the SPAC trades as the company it acquired. So once the deal is closed, SOAC (ticker symbol SOAC) will trade under a new symbol, TMC.
“EVs and battery storage are a critical part of the climate change solution,” Mr. Leonard said on a Thursday investor call. “We just do not currently have enough raw materials to meet the world’s ambitious electrification goals.”
Mr. Barron predicts there will be a “slump” in the discovery of new battery metal deposits on land by 2024.
“This metal supply situation can derail the EV transition,” he said on the investor call. “Rising metal prices risk undermining EV manufacturers’ efforts to drive down the cost of EV batteries necessary for mass adoption.”
DeepGreen says its concentrated supply of minerals gives it a competitive advantage over companies that spend significant resources searching for small deposits of battery minerals on land. DeepGreen says its approach to sourcing metals is more environmentally sustainable than conventional land mining, where blasting and drilling is often necessary. In contrast, the company collects minerals that are unattached to the sea floor. One rock, it says, can contain four minerals used for batteries: copper, nickel, manganese and cobalt.
SOAC was formed to acquire a business with a “strong environmental sustainability profile” that would spur a “brown-to-green” transition, according to a company prospectus. On the investor call, Mr. Leonard said SOAC is the first SPAC with an environmental, social and governance (ESG) mandate.
“We looked at over 100 companies, many of them in the EV and renewable energy space,” he said in a news release. “DeepGreen stands above the rest ... we expect The Metals Company to be among the lowest cost nickel producers in the world.” The combined entity forecasts earnings before interest, taxes, depreciation and amortization (EBITDA) of US$2-billion by 2027, according to the company.
Citigroup Inc. is the financial adviser to SOAC. Stikeman Elliott LLP and Kirkland & Ellis LLP are its legal advisers. Nomura Greentech Capital Advisors LLC is the financial adviser to DeepGreen; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., and Fasken Martineau DuMoulin LLP are its legal advisers.
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