11:25 AM EST, 12/18/2024 (MT Newswires) -- (Adds analyst comment.)

Patriot Battery Metals (PMET.TO) shares were last seen up 28% after the company on Wednesday said German car maker Volkswagen is taking a 9.9% stake in the company for $69 million and agreed to an offtake agreement for Patriot's planned lithium project in Quebec.

Volkswagen is paying $4.42 per share to acquire for its stake, a 65% and 35% premium to the 30-day and 90-day volume weighted average trading price of the shares.

Proceeds from the investment will be used for exploration, development and completion of a feasibility study on the Shaakichiuwaanaan project, as well as for general and working capital purposes.

As part of the deal, Patriot will enter into a binding offtake term sheet with Volkswagen's battery manufacturer PowerCo for Patriot to supply 100,000 tonnes of spodumene concentrate per year over a 10-year term, with an option to extend for another five years.

The offtake is expected to supply PowerCo's battery production in Europe and North America, including its battery cell factory in St. Thomas, Ontario, intended to be PowerCo's largest with a production capacity of up to 90 gigawatt-hours.

The offtake is subject is conditional on Patriot successfully commissioning Stage 1 of the Shaakichiuwaanaan project by June 30, 2031.

Patriot and PowerCo have also entered into a non-binding and non-exclusive memorandum of understanding to be effective at deal closing for a 24-month term.

Under the MOU, the parties agreed to jointly explore opportunities for collaboration on shared strategic objectives relating to the Shaakichiuwaanaan Project.

National Bank of Canada maintained its outperform rating on the shares of Patriot with an $8.25 price target following the company's announcement.

National Bank said it used a higher discount rate of 12% on the project given its permitting and financing stage.

Patriot shares were last seen up $0.74 to $3.39 on the Toronto Stock Exchange.

Price: 3.40, Change: +0.75, Percent Change: +28.30