07. May 2021 | 13:11 CET
Kodiak Copper, BASF, Varta - Copper study ignored
The International Copper Study Group (ICSG) sees a slight oversupply of the copper market in 2021 and 2022. The main reason for this is said to be dwindling Chinese demand. The demand is decreasing because China is expanding mine production and copper refining by about 3% each. After the study's publication, the price per ton of copper rose again to over USD 10,000. Possibly driven by the news from Chile, which produced 2.2% less copper than last year. Similar news can be heard from other major copper producing countries such as Peru. Copper concentrate supply is low at the moment. We, therefore, look at one copper explorer, one copper producer and one consumer.
time to read:
ISIN: CA50012K1066 , DE000BASF111 , DE000A0TGJ55
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Kodiak Copper - On the way
Kodiak Copper is a sister Company of Great Bear Resources and was founded by Christopher Taylor. The strategy focuses on acquiring assets in prime locations and first holes have already been drilled.
The success of this strategy has been seen in the high-grade discoveries at the so-called MPD Copper-Gold Project in British Columbia. The area is 147 sq km, road accessible and located in a prolific copper-gold belt and is close to producing mines. Following initial discoveries in the area and a consolidated porphyry project, it was announced on April 19 that the Axe Copper-Gold Project had been acquired for 950,000 shares by Kodiak Copper. The acquired property hosts several significant historic copper-gold porphyry centers and has the potential for large-scale copper-gold porphyry mineralization. A fully funded 30,000m drill program has been announced for 2021. Drilling has been less successful over the winter, so greater progress is expected from the summer onwards.
The second property owned by Kodiak Copper in Arizona is called the Mohave Copper-Molybdenum-Silver Project. Attempts have already been made to buy the area from the Company, but it is suspected that there is too much potential there. Mohave is also right next to a large copper mine and has similar geological characteristics to MPD.
If you expect copper prices to rise due to electrification, Kodiak Copper is a stock with potential.
BASF - Coming out of the crisis well
Chemical companies like BASF are classics in the field of basic materials, and copper is, of course, just one of them. The group hopes to leave Corona behind quickly. In any case, BASF could use the Corona Crisis to reduce fixed costs and made a decent final spurt in the last quarter of 2020. The group increased sales in all regions and almost all market segments. Sales and revenue are expected to rise again in 2021. Management expects sales to increase from EUR 59.1 billion in 2020 to at least EUR 61 billion. Earnings before interest and taxes are expected to be between EUR 0.5 billion and EUR 1.4 billion higher than in the previous year.
Further growth drivers: The Company recently invested in the Novartis campus in Austria to further expand its production network in biotech products, specifically enzymes. On May 4, a patent cross-licensing agreement was signed with Umicore. The agreement covers cathode materials and precursors crucial for the cost, performance and safety of lithium-ion batteries. Together, new products are to be developed more quickly.
The share is currently below the EMA 50. Should the shares close above it, there is further upside potential.
Varta - Waiting for the numbers
On March 31, the Company released its 2020 annual report and achieved record results and also announced a cylindrical lithium-ion high-performance cell. The battery, called V4Drive, features low internal resistance and enables extremely fast charging and discharging. Applications include high-torque tools and drive concepts for electric vehicles. This high-performance cell is to be produced in a pilot line by the end of the year.
Shareholders are currently waiting for the publication of the figures for the first quarter on May 12. The operating business is influenced mainly by the demand for rechargeable lithium-ion batteries for wireless headsets. Therefore, a look at Apple is essential, as it is currently unclear whether AirPod 3 will be launched. Competing with Chinese suppliers is difficult for Varta if it wants to achieve high profits. The Company expects first-quarter revenue of EUR 208 million and adjusted EBITDA of EUR 56 million resulting in a profit margin of 26.9%.
The EBITDA margin is expected to increase by 2.5 percentage points to 30%. Analyst estimates value the stock in a range between EUR 83 and EUR 143.80. The average is EUR 115.54, which is where the share currently stands. There is not much upside potential at the moment. Perhaps the figures will surprise us - until then, we wait and see.