Patriot Battery Metals Inc. (the “Company” or “Patriot”) (TSX: PMET) (ASX: PMT) (OTCQX: PMETF) (FSE: R9GA) is pleased to announce that it has entered into a subscription agreement with Germany’s largest car manufacturer, Volkswagen, providing for the issue and sale to Volkswagen of 15,557,500 Common Shares at an price of C$4.42 per share (the “Subscription Price”), for aggregate gross proceeds of approximately C$69 million to be paid on closing in U.S. Dollars in the amount of US$48 million (the “Strategic Investment”).
The Subscription Price represents a 65% and 35% premium to the 30-day and 90-day volume weighted average trading price of the Common Shares on the Toronto Stock Exchange (“TSX”) for the period ending December 17, 2024, the last trading day prior to the announcement of the Strategic Investment.
Upon closing of the Strategic Investment, Volkswagen will own approximately 9.9% of Patriot’s issued and outstanding Common Shares on a pro forma non-diluted basis and will be granted certain rights pursuant to an investor rights agreement to be entered into between Volkswagen and the Company (the “Investor Rights Agreement”).
The proceeds from the Strategic Investment will be used for exploration, development and completion of a feasibility study on the Shaakichiuwaanaan Project, as well as for general and working capital purposes.
As part of the Strategic Investment, Patriot will enter into a binding offtake term sheet (the “Offtake”) with Volkswagen’s wholly-owned and vertically integrated battery manufacturer, PowerCo, for Patriot to supply 100,000 tonnes of spodumene concentrate (SC 5.5 target) per year over a 10-year term.
The Offtake is expected to supply PowerCo’s cell production activities in Europe and North America, including its battery cell factory in St. Thomas, Canada. St. Thomas is intended to become PowerCo’s largest cell factory with a production capacity of up to 90 GWh, enough to produce over one million electric vehicles a year. Building a North American EV supply chain, from raw materials supply to the construction and operation of Gigafactories, is part of PowerCo’s mission.
Volkswagen has become the largest European manufacturer of electric vehicles. The company has made substantial strategic and financial commitments to the EV industry in North America. Among these investments to drive growth include the US$5.8 billion investment in Rivian to jointly develop EV architecture and software, the revival of the Scout brand and its partnership with solid-state cell manufacturer QuantumScape.
Ken Brinsden, Patriot’s President, CEO & Managing Director, said: “We welcome Volkswagen and PowerCo as our strategic partner. This is a pivotal milestone for Patriot as we bring in a long-term strategic partner who is already a major participant in the European and North American battery supply chain as the first customer of the globally significant Shaakichiuwaanaan Project. This investment is consistent with our long-term strategy for Patriot to become a global lithium leader and a key supplier of lithium raw materials to the emerging North American and European battery materials supply chains.”
“The initial investment by PowerCo and Volkswagen validates the world-class nature of the Shaakichiuwaanaan Project and the Offtake cements the Company’s future as a major lithium raw materials supplier of choice in their EV supply chain.”
Thomas Schmall, Volkswagen Group Board Member for Technology, said: “This investment represents a significant milestone in our journey toward a fully electric future. By collaborating with Patriot Battery Metals, we are not only securing key raw materials for cutting-edge sustainable battery technology but also reinforcing our commitment to North America. Together with partners, we are building a dedicated e-mobility ecosystem in North America, ranging from battery technology to software and specific vehicle architectures.”
Jörg Teichmann, Chief Procurement Officer of PowerCo, said: “This is an important milestone to becoming one of the leading providers of outstanding battery technology. At the same time, it enables us to fulfil our aspiration of covering relevant steps along the entire value chain – from sourcing of raw materials to the operation of gigafactories. We are very pleased to have found such a partner in Patriot and to support the team in becoming one of the global lithium leaders and key supplier of lithium raw materials to the emerging North American and European battery materials supply chains.”
Offtake
In the Offtake, to be entered into with PowerCo upon closing of the Strategic Investment, PowerCo will be entitled to an annual supply of 100,000 tonnes of spodumene concentrate with a target specification of 5.5% Li2O for a term of 10 years, with the option to extend for another five years upon mutual agreement of the parties. The offtake pricing mechanism is linked to reported indices for lithium chemicals and spodumene using modifying factors against the indices to derive an adjusted long-term contracted price for spodumene concentrate recognising that PowerCo has provided a strategic investment in the Company. The pricing mechanism is subject to regular price reviews to ensure pricing continues to remain connected to reported prices for spodumene concentrate.
The Offtake is subject to a number of customary terms and conditions reflecting the pre-feasibility status of the Shaakichiuwaanaan Project. The conditions precedent in the Offtake include a final investment decision (“Project FID”), obtaining all necessary authorizations and approvals and successful commissioning of Stage 1 of the Shaakichiuwaanaan Project by 30 June 2031.
The parties intend to replace the Offtake term sheet with a more comprehensive offtake agreement following completion of the feasibility study. If a comprehensive offtake agreement has not been entered into within 90 days of the feasibility study (or a later date as agreed by the parties), the binding Offtake term sheet will continue to apply.
Investor Rights Agreement
The Investor Rights Agreement to be entered into by Patriot and Volkswagen on closing of the Strategic Investment will grant Volkswagen the right to participate in future equity raises by the Company. The Company has also agreed to use commercially reasonable efforts to assist Volkswagen to acquire additional Common Shares at then-current market prices in connection with ordinary course dilution. Volkswagen has agreed in the Investor Rights Agreement to a 24 month standstill on customary terms. Volkswagen has also agreed not to transfer the Common Shares acquired in the Strategic Investment for a period of two years, except in certain customary circumstances including takeovers, mergers or plans of arrangement.
Volkswagen and PowerCo will be represented on an advisory technical committee to be formed by Patriot to support the planning and development of the Shaakichiuwaanaan Project.
The Investor Rights Agreement contemplates that following release of the feasibility study for the Shaakichiuwaanaan Project, Volkswagen will have the opportunity to act as a cornerstone investor for Project FID funding in return for additional offtake, in each case on terms to be mutually agreed by the parties. Any such Project funding provided by Volkswagen would form part of the Company’s overall funding strategy for the Shaakichiuwaanaan Project.
MoU
As part of the Strategic Investment, Patriot and PowerCo have entered into a non-binding and non-exclusive MoU to be effective on closing of the Strategic Investment for a 24 month term. In the MoU, the parties have agreed to jointly explore opportunities for collaboration on shared strategic objectives relating to the Shaakichiuwaanaan Project including:
- providing assistance and support for the future development of the Shaakichiuwaanaan Project including broadening the Shaakichiuwaanaan Project’s exposure to a wider range of investors, financiers and other commercial or strategic partners who can assist with the funding and development of the Shaakichiuwaanaan Project;
- exploring potential downstream partnership opportunities for the development of a chemical conversion facility at a location to be determined;
- exploring midstream opportunities to produce an intermediary product at the mine to lower transport costs and carbon intensity;
- achieving industry-best ESG standards;
- collaborating on tolling opportunities;
- targeting partnerships with proven chemical conversion knowhow and technology partners; and
- leveraging existing relationships toward government support, incentives and funding.
Timing
The Strategic Investment is subject to TSX approval and other customary closing conditions and is expected to close on or before mid-January, 2025. The Common Shares issued to Volkswagen will be issued under the Company’s existing ASX Listing Rule 7.1 capacity without shareholder approval.
