Appian Capital Advisory agreed to sell Brazilian battery metals-focused companies Atlantic Nickel and Mineração Vale Verde to Sibanye-Stillwater for USD1b and an additional 5% NSR royalty on production from the Santa Rita underground expansion.

(Press Release) LONDON, Oct. 26, 2021 /PRNewswire/ — Appian Capital Advisory LLP (“Appian” or the “Company”), the investment advisor to long-term value focused private equity funds that invest solely in mining and mining-related companies, announces the sale of its Brazilian battery metals-focused portfolio companies Atlantic Nickel (“Atlantic Nickel”) and Mineração Vale Verde (“MVV”) (together the “Assets”) to Sibanye-Stillwater (“Sibanye”) for a cash consideration of US$1 billion (the “Transaction”) and an additional 5.0% NSR royalty on production from the Santa Rita underground expansion.

Appian acquired Atlantic Nickel (previously Mirabela Nickel), owner of Santa Rita, one of the largest open pit nickel sulphide mines in the world, located in Bahia, Brazil (“Santa Rita”) out of bankruptcy in 2018. The same year it also purchased MVV, owner of the Serrote greenfield open-pit copper-gold asset located in Alagoas, Brazil (“Serrote”). The Transaction reflects the Company’s progress in successfully de-risking and improving the Assets, demonstrating the strength of the Appian model and the Company’s ability to identify, acquire and optimise undervalued mining projects using technical arbitrage, creating significant value for its investors.

The successful restart of Atlantic Nickel and commissioning of MVV, combined with support from strong base metals markets, in particular nickel and copper for electric vehicles and decarbonisation, provides a logical time for Appian to exit the Assets. The Company considered a range of options, including listing the Assets, and the Transaction follows a competitive, multi-stage dual-track process with interest from a large number of groups globally looking to gain exposure to decarbonisation metals. Sibanye was selected for the strength of its bid and focus on ESG, based on its alignment with Appian’s values and commitment to continued responsible stewardship of the Assets. The entire workforce of Atlantic Nickel and MVV, which Appian grew from around 50 to 3,387 employees, will transfer to Sibanye.

Citi and Standard Chartered acted as M&A financial advisors to Appian on the Transaction, with McCarthy Tetrault as legal advisors and Ernst & Young as tax advisor, with BMO and RBC acting as financial advisors around Equity Capital Markets options.

Michael W. Scherb, Founder and CEO of Appian, commented:

“These exits – the fourth and fifth from Appian this year – further underline the strength of our unique operating model, with our ability to identify, acquire and develop projects effectively. Sibanye will be a great custodian for this asset base, and with our ongoing exposure I am confident that Atlantic Nickel and MVV will continue to deliver long-term value as well as taking care of its local communities and stakeholders. The transaction also highlights the strong and growing demand for decarbonisation commodities. Appian’s portfolio is ideally positioned for its next phase of growth with a major focus on the metals driving the critical global energy transition.”

Appian’s ongoing exposure to the Assets

Under the terms of the Transaction, the Company will retain significant exposure to the Assets with a 2.75% royalty on the open pit and a 7.75% royalty on the underground resources at Atlantic Nickel’s producing Santa Rita mine and exploration properties held by Atlantic Nickel and a 35% stream on gross gold revenue payable from MVV’s Serrote mine and exploration properties.

Appian is considering strategic alternatives for its royalty portfolio.

Appian will also retain the Pereira Velho gold project, which will be spun out of MVV. Pereira Velho is a highly prospective gold exploration project located 20km to the east of the Serrote mine, consisting of a 1,500m long gold-in-soil anomaly and gold mineralization hosted in quartz-sulphide veins. Exploration activities to date, including an ongoing drill campaign, have yielded promising results, including trench intercepts of 22m @ 1.05 g/t Au and 74m @ 0.63 g/t Au, as well as visible gold in drill core samples.

Atlantic Nickel acquisition and optimisation

Appian acquired Atlantic Nickel out of a complex bankruptcy process for US$68 million in 2018, after identifying an opportunity to implement a differential operating approach to restart the mine at a first quartile cost position and benefit from over US$1 billion of previously sunk capital.

The Company subsequently carried out major work to improve and optimise Santa Rita, developing a redefined mine plan with a lower strip ratio and more selective mining, with a successful restart in January 2020 and subsequent ramp-up. Appian has de-risked the asset with a defensive operational strategy and definition of underground extension, driving value creation with a first quartile cost position (C1 cost of US$2.97/lb Ni payable achieved since restart compared to the nickel price of US$9.03/lb at announcement date.

The Company has grown the Resources at Santa Rita significantly since 2018 through systematic infill and expansion drilling of the open pit and underground Resource areas. Since acquisition, Appian has been able to extend the life of mine by 27 years to 35 years in total, by defining an underground Resource of 202Mt total MI&I at 0.60% NiS, 0.19% Cu and 0.01% Co plus PGEs+Au.

Since restart, Appian has built out the team at Atlantic Nickel from 40 to 2,527 employees, providing significant local employment and benefits. Over that time, Atlantic Nickel has produced 156kt of nickel concentrate containing 21kt of nickel, with 15 shipments of in-spec concentrate, while the asset has generated gross revenue of US$286 million, with EBITDA of US$118 million.

MVV acquisition and optimisation

The Company acquired MVV from Aura Minerals for a total consideration of US$40 million in 2018, consisting of a US$30 million cash payment and a US$10 million subordinated vendor loan. Appian identified Serrote as a rare standalone, construction-ready, copper project with meaningful precious metal by-product credits that could benefit from Appian’s technical arbitrage strategy.

Appian initiated extensive technical work to optimise Serrote’s mine plan in preparation for construction, resulting in an updated Definitive Feasibility Study (“DFSU”) that maximised the asset’s efficiency and economic profile. Appian’s 14-year, 4.1Mtpa mine plan validated the potential for enhanced returns from a smaller-scale, lower-cost, more efficient operation, with higher grade and a lower-strip ratio, while still maintaining medium-term expansion optionality. The initial 50.4Mt Reserve pit is based on a subset of the defined Resources based on a defensive US$2.70/lb copper price, and further potential exists to extend the life of mine and copper production from the 112Mt of MI&I Resources defined.

Appian has unlocked significant value for investors, by bringing Serrote into production in May 2021 under budget and ahead of schedule, with US$195 million spent versus an initial budget of US$243 million. The operational development and team growth of 10 to 860 employees, has provided significant employment and economic development for the local community. The mine is forecast to operate with a defensive second quartile C1 cost position of US$1.11/lb Cu payable net of by-products. Construction was fully funded by Appian alongside a US$140 million project financing facility from Société Générale, ING and Natixis. Attractive offtake terms were also secured for Serrote’s high-quality copper-gold concentrate, with the first shipment expected before year-end.

The exploration program at MVV continues to prove out the broader regional upside potential, identifying additional targets that could be brought into the Serrote mine plan over the longer-term.

The Appian Way Charitable Foundation’s impact on the local Brazilian communities

Appian’s Charitable Foundation has played a key role in enhancing social and community engagement, and an estimated 37,000 people have directly benefited from the Foundation’s programs over the previous three years. We look forward to Sibanye continuing a similar approach. For 2021, the AWCF Trustees approved a combined social and community budget of US$2.25 for Appian’s operations in Brazil. This budget is being used to support social initiatives in the local communities as well as environmental measures. A substantial part of the budget is dedicated to the STEAM teacher training initiative that the AWCF is cooperating on with Educando and UNEAL, two local teacher training programs.

Outlook and strategic focus

Appian will continue to enhance its unique operating model, and focus on energy transition commodities used in batteries, electric vehicles, and renewable power systems, including copper and nickel, with 70% of Fund I and 50% of Fund II (to date) invested into this critical sector, balanced by investments in precious metals and other commodities.

About Appian Capital Advisory LLP

Appian Capital Advisory LLP is the investment advisor to long-term value focused private equity funds that invest solely in mining and mining-related companies.

Appian is a leading investment advisor in the metals and mining industry, with global experience across South America, North America, Australia and Africa and a successful track record of supporting companies to achieve their development targets, with a global operating portfolio overseeing nearly 5,000 employees.

Appian has a global team of over 50 experienced professionals with offices in London, Toronto, Lima, Belo Horizonte and Sydney.