Green Sustainable SPAC Inks Deal to Acquire Seabed Mining Company

Posted on 03/05/2021


Metal prices are on the rise, which is great for miners, but not good for electric vehicle (EV) manufacturers. DeepGreen Metals Inc. is a Canadian developer of lower-impact battery metals from seafloor polymetallic nodules. DeepGreen Metals through its subsidiaries holds exploration and commercial rights to three polymetallic nodule contract areas in the Clarion Clipperton Zone of the Pacific Ocean sponsored by the governments of Nauru, Kiribati and the Kingdom of Tonga, which are regulated by the International Seabed Authority. DeepGreen has developed a process for producing metals from polymetallic nodules with near-zero solid waste, eliminating the need for tailings dams on land.

DeepGreen Metals claims, “the estimated resource on the seafloor in the exploration contract areas held by the company’s subsidiaries is sufficient for 280 million EVs – a quarter of the global passenger car fleet.”

The dirty secret in the EV battery world is the mining of raw materials. Like fossil fuel extraction, conventional metals extraction comes at a steep cost to people and the environment, leading to vast deforestation in some of the most biodiverse areas on the planet. DeepGreen Metals wants to source EV metals from Polymetallic Nodules found on the sea floor in the area between Hawaii and Mexico, known as the Clarion Clipperton Zone.

Betting on the clean energy transition theme, Sustainable Opportunities Acquisition Corporation is a SPAC that is merging with DeepGreen Metals. The transaction represents a pro forma equity value of US$2.9 billion (assuming no redemptions) for the combined company, which will be renamed “TMC the metals company Inc.” and operate as The Metals Company upon closing.

In its SEC investor report, The Metals Company considers Ivanhoe Mines, Western Areas, Trilogy Metals, Seabridge Gold, as peers when analyzing market cap / fundamental value.

Details

Sustainable Opportunities Acquisition Corporation, which currently holds over US$ 300 million in trust, will combine with DeepGreen Metals Inc. The transaction includes an upsized US $330 million fully committed common stock Private Investment in Public Equity at US$ 10 per share, anchored by an international consortium of strategic and institutional investors, including Allseas Group S.A., adding to the list of existing strategic investors such as Maersk Supply Service and Glencore.

Sources of Funds
SPAC Cash in Trust: US$ 300 million
PIPE proceeds: US$ 330 million
Sponsor Promote: US$ 68 million
The Metals Company rollover equity: US$ 2,250 million

Allseas Group invested in DeepGreen Metals in 2019. Maersk invested in 2017. Glencore was in fact an early investor in its business and holds offtakes for 50 percent of the nickel and 50 percent of the copper from the NORI area.

Advisors

Citi is serving as exclusive financial advisor and capital markets advisor to SOAC. Citigroup Global Markets Inc., Nomura Securities International, Inc. and Fearnley Securities Inc. are serving as placement agents on the PIPE offering. Kirkland & Ellis LLP and Stikeman Elliott LLP are serving as legal advisors to SOAC. Nomura Greentech is serving as exclusive financial advisor to DeepGreen. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Fasken Martineau DuMoulin LLP are serving as legal advisors to DeepGreen. Mayer Brown is acting as legal counsel to the placement agents.

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