Volkswagen Group will invest $69 million into Vancouver-based Patriot Battery Metals Inc. (PMET-T) for a 9.9 per cent stake in the company and a lithium offtake deal to supply its Ontario electric vehicle (EV) battery factory.

As part of the agreement, 100,000 tonnes of a lithium source called spodumene concentrate will be provided to Volkswagen’s PowerCo SE over 10 years from Patriot’s Shaakichiuwaanaan Lithium Project in Quebec.

The supply will be used for PowerCo’s Canadian and European operations, including its St. Thomas, Ont. factory that is expected to produce up to 90 gigawatt-hours of EV batteries per year. That is enough to power up to one million EVs a year, Patriot said in a release.

Proceeds from the investment will be used for exploration, development and completion of a feasibility study on the Shaakichiuwaanaan Project, and general and working capital purposes, the hard-rock lithium exploration company said.

“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,” Patriot’s president, CEO and managing director Ken Brinsden said in the announcement.

The investment aligns with the company’s long-term plan of being a global lithium supplier to the North American and European battery materials supply chains, he added.

Volkswagen’s investment is expected to close by mid-January 2025, and is subject to Toronto Stock Exchange approval.

About Patriot’s Quebec mine

The Shaakichiuwaanaan Project is located in Eeyou Istchee James Bay, a municipality in western Quebec. Patriot highlights its access to transportation infrastructure and renewable energy.

The 100,000-tonne offtake represents approximately 25 per cent of the production from the first stage of the mine and 12.5 per cent of the second stage, the exploration company said. PowerCo will have the option of extending the agreement for another five years.

A memorandum of understanding between Patriot and PowerCo will take effect upon the closing of the investment. Effective for 24 months, both companies will explore collaboration opportunities for the Shaakichiuwaanaan Project, such as:

• developing and funding the lithium mine by exposing it to a wider range of investors and partners;
• potentially developing a chemical conversion facility; and
• producing an intermediary product at the mine to lower transport costs and carbon intensity.

The final investment decision for the Shaakichiuwaanaan Project is expected to be made in 2027. If successful, Patriot plans to ramp up production in 2029 and have commissioning finished by June 30, 2031, according to a company document.

Volkswagen will have the right to participate in future Patriot equity raises upon closing of the investment.

Lithium to be sent to St. Thomas

The lithium from Quebec will be used in PowerCo’s St. Thomas gigafactory, which is its first in North America. It is being built on an approximately 370-acre site, with construction starting in 2024 and production scheduled to commence in 2027.

Called “an important milestone to becoming one of the leading providers of outstanding battery technology” by Jörg Teichmann, the chief procurement officer of PowerCo, the Volkswagen investment “enables us to fulfill our aspiration of covering relevant steps along the entire value chain – from sourcing of raw materials to the operation of gigafactories.”

The ambition coincides with Volkswagen setting out to have at least 70 per cent of its sales in Europe and over 50 per cent in the U.S. and China be EVs by as early as 2030. Meeting the goal will require far more batteries, which it is addressing with PowerCo. Outside of Canada, it also has plans for gigafactories in Germany and Spain.

Anticipated to receive $7 billion in investment by 2030, the St. Thomas factory is one of the pillars of the Canadian government’s plan to make the country a battery manufacturing hub.

But the endeavour has hit a snag as of late.

Northvolt, which plans to build a $7-billion battery factory near Montreal, declared bankruptcy in the U.S., miring its Canadian plan in uncertainty. Ford left a consortium with South Korean partners for an EV battery material facility in Becancour, Que. Lion Electric, an EV maker that planned to build battery packs as a revenue stream, filed for creditor protection this week after a series of financial troubles.