Stellantis inks rare earths offtake accord with NioCorp

In its latest deal to lock down raw materials supplies, automaker Stellantis N.V. (NYSE: STLA) has signed a preliminary agreement with NioCorp Developments (TSX: NB; NASDAQ: NB) for access to rare earth product from the junior’s Elk Creek plant and mine in Nebraska.

The non-binding term sheet outlines a 10-year offtake contract for specific amounts of neodymium-praseodymium, dysprosium, and terbium oxide. The final volumes will be determined in a definitive agreement, subject to project financing.

The companies say the agreement supports NioCorp’s path to commercial production of magnetic rare earth oxides in the U.S. while strengthening Stellantis’s commitment to building resilient supply chains and achieving carbon neutrality by 2038.

The deal follows Stellantis’s pledge to invest $207 million in McEwen Copper, a subsidiary of McEwen Mining (TSX: MUX; NYSE: MUX), which holds the Los Azules copper project in Argentina.

In a press release, Stellantis’s chief purchasing and supply chain officer, Maxime Picat, connected the deal with the company’s goal to become carbon neutral by 2038. Picat stressed the importance of redefining sourcing strategies and collaborating with partners like NioCorp to achieve decarbonization in mobility and secure raw materials for the company’s global electrification plans.

Mark Smith, executive chairman and CEO of NioCorp, highlighting the collaborative development of Stellantis’ magnetic rare earth supply chain. Smith emphasized the importance of supporting Stellantis’ commitment to carbon neutrality by 2038 and securing supply chains for their growth targets.

Elk Creek has an indicated resource of 632.900 tonnes of total rare earths oxides (TREO), including 26.900 tonnes of praseodymium, 98.900 tonnes of neodymium, 2,300 t000 of terbium, 9.100 tonnes of dysprosium, 970,300 tonnes of niobium oxide, 11,337 tonnes of scandium oxide and 4.2 million tonnes of titanium oxide.

The binding offtake agreement is contingent on completing due diligence, negotiation of final terms, and customary closing conditions, including regulatory approvals. The possibility of a binding agreement remains uncertain.

Earlier this week Ontario announced a deal with Stellantis and LG Energy Solutions to continue construction on the NextStar electric vehicle (EV) battery plant, potentially worth up to $15 billion in tax breaks for the project. The province will provide $5 billion in tax breaks over 10 years, while the federal government will contribute $10 billion.

The deal aims to secure jobs and keep Ontario competitive in the global EV industry. Construction has already resumed, and the agreement is conditional on the continuation of the U.S. Inflation Reduction Act.

The agreement has been hailed as a “good deal” by Victor Fedeli, Ontario’s Minister of Economic Development, who highlighted its benefits for workers and the industry. Deputy Prime Minister Chrystia Freeland and Minister of Innovation, Science and Industry François-Philippe Champagne said in a statement that the deal will create and secure thousands of jobs in Canada, solidifying the country’s position in the global electric vehicle supply chain.

The negotiations for the battery plant in Windsor were in jeopardy for over seven weeks. However, Stellantis has confirmed the deal and expressed satisfaction with the government’s support.

The public negotiations caused some anxiety in the supply industry, but industry representatives believe the full investment commitment will be honored, and the deal will not set a precedent for future negotiations.

Early last year, Stellantis and LG Energy Solution announced an investment of over $5 billion to construct a large battery plant in Windsor, Ontario, with an anticipated annual production capacity of more than 45-gigawatt hours. The battery plant aims to support Canada’s auto sector and contribute to a net-zero emission future. The demand for electric vehicles and the need to strengthen the battery supply chain aligns with global net-zero goals by 2050.

These developments highlight the growing focus on critical minerals and materials required for EVs and renewable energy technologies. Companies like Stellantis are actively seeking partnerships and investments to secure supply chains and drive their sustainability objectives.

NioCorp shares are down about 26% over the 12 months at $6.65, giving it a market capitalization of $202.8 million.