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Volkswagen Invests CAD69M in Patriot to Acquire 9.9% Stake

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Volkswagen AG (VWAGY - Free Report) and its subsidiary, PowerCo, have entered into a strategic partnership with Patriot Battery Metals, a Canadian lithium developer, to make an investment of CAD69 million at CAD4.42 per share, which equates to a 9.9% stake in the company. This partnership includes a 10-year binding offtake agreement with PowerCo for 100,000 tonnes of spodumene concentrate per year, accounting for about 25% of Stage 1 production or 12.5% of combined Stage 1 and Stage 2 output from the Shaakichiuwaanaan Lithium Project.

The investment price reflects a premium of 65% and 35% over the 30-day and 90-day volume-weighted average trading prices, respectively. The deal involves a strategic memorandum of understanding to explore opportunities for downstream processing, including chemical conversion facilities and environmental, social and governance initiatives. Volkswagen will also gain representation on a technical advisory committee and future equity participation rights.

Proceeds from the investment will fund exploration, development, a feasibility study for the Shaakichiuwaanaan Project and general corporate purposes. The agreement with PowerCo ensures the supply of spodumene concentrate with a target specification of 5.5% Li2O for PowerCo's battery production facilities in Europe and North America, including its planned 90 GWh battery cell factory in St. Thomas, Canada, designed to support the production of over one million electric vehicles annually.

Volkswagen, Europe’s largest EV manufacturer, continues to expand its North American EV footprint with significant investments, including $5.8 billion in Rivian, the revival of the Scout brand and a partnership with QuantumScape for solid-state batteries.

The pricing for the spodumene concentrate will be indexed to lithium chemical market rates with periodic reviews. Key conditions for the offtake agreement include final investment decisions, regulatory approvals and the commissioning of Stage 1 by June 30, 2031. The current term sheet will transition to a comprehensive agreement post-feasibility study or the existing terms will remain in effect if not finalized within 90 days.

Volkswagen’s Zacks Rank & Key Picks

VWAGY currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the auto space are Dorman Products, Inc. (DORM - Free Report) , Tesla, Inc. (TSLA - Free Report) and Blue Bird Corporation (BLBD - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for DORM’s 2024 sales and earnings suggests year-over-year growth of 3.66% and 51.98%, respectively. EPS estimates for 2024 and 2025 have improved 75 cents and 88 cents, respectively, in the past 60 days.

The Zacks Consensus Estimate for TSLA’s 2024 sales suggests year-over-year growth of 3.36%. EPS estimates for 2024 have improved 22 cents in the past 60 days. EPS estimates for 2025 have improved 6 cents in the past 30 days.

The Zacks Consensus Estimate for BLBD’s fiscal 2025 sales and earnings suggests year-over-year growth of 10.97% and 12.14%, respectively. EPS estimates for fiscal 2025 have improved 18 cents in the past 30 days.

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