December 29th, 2022 | 08:37 CET
200% possible at ThyssenKrupp and Tocvan Ventures, and question marks at VW and BASF
As we approach the end of the year, it is difficult to separate the real economic opportunities from the current war and crisis scenarios. The forecasting institutes are also poking around in the fog with their statements for 2023, with a still conciliatory economic development at the zero line being defined subject to falling interest rates and declining inflation. Under the sword of Damocles of a possible gas crisis starting in March, however, all predictions turn negative because Germany as an industrial location is already struggling considerably with the energy and electricity price increases. So how do you select a top performer for the portfolio?
time to read: 5 minutes
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Author:
André Will-Laudien
ISIN:
THYSSENKRUPP AG O.N. | DE0007500001 , TOCVAN VENTURES C | CA88900N1050 , VOLKSWAGEN AG ST O.N. | DE0007664005 , BASF SE NA O.N. | DE000BASF111
Table of contents:
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Author
André Will-Laudien
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
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ThyssenKrupp - Opportunities in industrial hydrogen production
"For ThyssenKrupp, hydrogen is the key technology for making our industry fit for the future and sustainable," said CFO Klaus Keysberg. He knows what he is talking about because the ThyssenKrupp Group emitted a full 23 million tons of CO2 in 2019. That is almost 3% of all German greenhouse gas emissions. But those who emit a lot can also make a big difference. That is why the Duisburg-based technology group is committed to the Paris Climate Agreement of 2015: by 2030, it aims to reduce its home-grown emissions by 30%, and by 2050 it wants to be completely climate neutral. Now that is a statement!
The potential of hydrogen plays an important role at ThyssenKrupp, which is in the unusual situation of being both a consumer and producer of green hydrogen. ThyssenKrupp uses its core expertise in alkaline water electrolysis and has been developing climate-neutral supply concepts for industrial applications for years. The business area has already realized a total of 10 gigawatts of installed capacity for the chemical industry. In parallel, it is working at full speed on developing climate-neutral steel production.
One approach that has already been widely discussed is using green-generated electricity to produce hydrogen. Current research areas are stationary energy generation and the development of H2 drives for vehicles in continuous use, such as in the transportation and logistics sector. ThyssenKrupp AG is already making good progress in the US with its H2 subsidiary Nucera. Here it is supplying engineering services for alkaline hydrogen production to various Air Products sites for the mobility market in California. Unfortunately, the Duisburg-based company had to postpone the planned IPO of Nucera indefinitely. ThyssenKrupp's stock fell sharply by 40% in 2022. For 2023/24, however, the signs again point to a storm due to public budgets for the fight against climate change. Before Corona in 2019, the stock was still at EUR 18, around 200% higher. Analytically, the share is currently cheap.
Tocvan Ventures - Gold and silver mining in Sonora
The end of the year has also seen a noticeable stabilization in gold and silver. With a compounded return of 8.8% per annum since 1995, gold is one of the best-performing investments in recent memory. In 2022, it reached USD 2,050 right at the beginning of the year, and silver was able to march up to USD 26. Currently, prices are consolidating at a high level. Due to the currently high inflationary pressure, diversification in gold and silver continues to make sense. In addition to the physical precious metal, one should also consider resources in the earth that have not yet been tapped. Because when they are discovered, this leads to a renewed appreciation of the property in question.
In the case of the Canadian explorer Tocvan Ventures, the measures are going in the right direction. The prospective resource company from Canada, with two significant gold projects in Sonora, Mexico, reported good drill results from their first 1,382m program in late summer. Mineralization grades at the Pilar project ranged from 0.4 to 12 grams per tonne, and now Tocvan Ventures has reached an agreement with a neighboring mining company to take the first bulk sample from the Pilar gold-silver project. Material from the bulk sample of up to 1000 tonnes will be processed for heap leach processing less than 25 km west of Pilar in early 2023.
"We are fortunate to have access to a local facility with all the necessary equipment and personnel to conduct the sample. Planning is now underway to begin sampling and processing in early 2023," CEO Brodie Sutherland said recently. At a current price of CAD 0.51 per Tocvan share, the market valuation of the precious metals deposit is a low CAD 19 million. If 2023 is going to be a gold-silver year, the entry point for Tocvan in the current "tax-loss season" environment is very favorable.
VW and BASF - The German location question
Often asked - insufficiently answered: The question of the German industrial location. Since the beginning of the Ukraine crisis, fossil fuels have doubled in price and electricity costs have increased by at least 50%. Meanwhile, the new government continues talking about the favorable possibilities of alternative energy production. What is forgotten here is that the procurement prices of essential metals such as copper, steel, nickel and titanium have also risen sharply, driving the premium costs of energy generation plants to an extreme. The electricity then generated may be climate-friendly, but it is anything but cheap.
The decision-makers of German industrial groups such as VW and BASF have recognized the signs of the times and prefer to build promising and energy-intensive plants abroad. For example, one of the largest battery gigafactories in Europe will be built near Valencia in the next three years. VW is using its good connections with the Spanish government to invest almost EUR 10 billion in its subsidiary SEAT. BASF is gradually scaling back its main Ludwigshafen plant, which remains Germany's largest chemical site, and reducing local jobs. In the next 2 years, EUR 500 million in costs are to be saved here. By contrast, the Group is investing in China, where EUR 10 billion is also being invested in a Verbund site. Despite internal resistance, the chemical group intends to go ahead with the largest single investment in its history in the southern Chinese province of Guangdong. For BASF, this is the largest single project in decades. The megaproject, driven by Group CEO Martin Brudermüller, is controversial in the current political climate because it makes the Group more dependent on foreign countries. At the same time, the site should save several 100 million euros a year in costs compared with Europe.
The developments of the shares of VW and BASF will follow the external circumstances in 2023. VW is focusing very strongly on e-mobility, which could also backfire due to high electricity prices and the loss of subsidies. BASF is under cost pressure and relies on cheap gas. Both shares harbor considerable opportunities and risks, are currently valued low, and pay decent dividends. Long-term investors will not make a mistake by investing around EUR 115 and EUR 46, respectively.
GreenTech could become the hot topic of 2023. German industrial stocks such as ThyssenKrupp, VW and BASF are in demand. If a positive gold trend prevails, Tocvan Ventures should be on the radar because there will be a lot of news from Mexico.
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