August 11th, 2022 | 11:26 CEST
Alarm at Plug Power, problems for Nordex is good for Alpha Copper
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
Alpha Copper: Too little copper for the energy transition?
Manufacturers of wind turbines, solar plants and electric cars should be concerned about the study by S&P Global. According to the study, the experts point to an impending copper shortage. It could pose a threat to the energy transition. After all, copper is urgently needed for the generation and use of renewable energy. In order to put it into perspective, between 5 and 8 tons of copper are necessary for a wind turbine or a solar plant with an output of 1 megawatt each. And electric cars contain 2.5 to 3 times more copper than vehicles with combustion engines. According to S&P Global, annual global copper demand is expected to nearly double to 50 million tons by 2035. The problem: Even in the best-case scenario - with higher utilization of mines and more recycling - supply will not be able to meet demand in the 2030s.
Alpha Copper should be able to benefit from this. The Canadian explorer has two promising projects in British Columbia. At the Indata project, the go-ahead for a 5,000m drilling program was given in mid-June. Drilling is to be carried out in particular in the Lake Zone, as exploration work has progressed furthest there. In total, the property covers 3,189 hectares and includes 16 mineral claims. Alpha Copper holds an option to purchase 60% of the property. The Canadian company may even acquire the second project in its entirety. The Okeover project covers 4,613 hectares and includes 11 claims. Historical data indicates 86.8 million tonnes at 0.31% copper and 0.014% molybdenum. A 2,000m drill program has also recently commenced here. A NI 43-101 standard report is expected to be prepared with the results in 2023. With the start of the drilling programs, the stock has jumped. In recent weeks, it has been able to pull away from its lows at EUR 0.20 and is trading at EUR 0.35. If the copper price remains stable, it could continue to climb, and the longer-term outlook is bright, according to S&P Global.
Nordex: Costs remain the problem
The Nordex share has also recovered somewhat in recent days. However, this is more likely due to the industry sentiment fueled by the climate package in the US. Nordex's own problems continue to predominate: small size compared to competitors and high production costs. It is also questionable whether Nordex will benefit operationally from the boom in the US. The analysts at Jefferies see at least a potential of EUR 13 for the stock - it is currently trading just above EUR 10. Sales in the second quarter are likely to be higher than in the first three months. However, high production costs and a cyber incident should have a negative impact on earnings. Whether profitability - as expected by analysts - will improve in the second half of the year may at least be doubted. And the example of copper shows that Nordex will have to contend with high production costs in the long term.
Plug Power: Loss higher than sales, regardless
High costs are also causing problems for Plug Power. Thus, the darling of many investors has generated more loss than revenue in the second quarter of 2022. Revenues rose to USD 151 million from USD 125 million in the same quarter last year - manageable growth for a company valued at USD 14 billion. Analysts had expected an average of USD 163 million. And Plug Power also disappointed in earnings. The loss widened from USD 99.6 million to USD 173 million, or USD 0.30 per share. Analysts had expected a loss of only USD 0.20 per share. Plug Power said it is suffering from the increased cost of hydrogen molecules combined with historically high natural gas prices and ongoing supplier disruptions. It said this will not change in the foreseeable future. At the very least, full-year revenue guidance of USD 900 million to USD 925 million was reaffirmed. The analysts' consensus estimate is USD 915 million. Overall, the Company believes it is well on track to meet its targets by 2025. The outlook for the electrolysis business is robust, and political support is providing an additional tailwind. Investors also seem to have confidence in this, with the share price trading higher yesterday afternoon.
The future prospects for renewable energies are good. Therefore, investors seem to trust Plug Power that sales can be increased sustainably and that the Company will be able to operate profitably in the future. It is certainly doubtful that Nordex will be able to achieve this. The Alpha Copper share should benefit from the increasing demand for copper - assuming positive drilling results.
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