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February 17th, 2022 | 13:22 CET

Allkem, Kodiak Copper, BHP - Profiteers of high commodity prices!

  • Copper
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The growth of electromobility will cause the prices of copper, lithium and other battery metals and critical raw materials to rise in the long term. Supply and demand are the determining influencing factors. Whether interest rates rise or not, whether stock markets wobble or not, the price trend will continue. Profiteers are (prospective) commodity producers.

time to read: 2 minutes | Author: Carsten Mainitz
ISIN: Allkem Ltd. | AU0000193666 , KODIAK COPPER CORP. | CA50012K1066 , BHP GROUP (ADR)/2 | US05545E2090

Table of contents:

    Allkem - After a sharp fall in the share price, entry is tempting

    The share price of lithium giant Allkem, a producer based in Brisbane, Australia, formed in the summer of 2021 from the merger of Orocobre and Galaxy Resources, is not really coming out of the cellar after an investment downgrade by the bank UBS. Despite the dazzling outlook for the price development of battery-grade lithium (forecast until the end of 2022: +80%), the Swiss had considered the price of the shares to be exhausted at a level of AUD 11.20 and lowered their recommendation from "buy" to "hold". The shares, which at that time had already reached AUD 11.90, subsequently fell to below AUD 10.

    However, analysts from other houses have since raised their forecasts. Morgan Stanley, for example, sees the price target at AUD 13.25, which corresponds to a potential of more than 40%. Given the business figures and forecasts published by Allkem so far, we still do not consider the drastic share price decline to be justified. For example, a few days ago, the lithium producer reported a 68% increase in revenues in Q2 for its Olaroz project compared to the same quarter last year. Expectations of the price development for battery-grade lithium carbonate were also confirmed again. For long-term investors, this is an entry opportunity.

    Kodiak Copper - 25,000 meters to the next success

    As early as 2021, the Canadian explorer Kodiak Copper, based in Vancouver, British Columbia, completed exploration drilling with a total length of 21,675m distributed over 36 drill holes at its 100% owned Man-Prime-Dillard (MPD) copper project. Very good results extended the strike length of the mineralization at "Gate" to 950 meters with a thickness of 350 meters and it is still open in multiple directions.

    After the drilling program had to be interrupted for several weeks last year due to an acute risk of forest fires in the summer and a flood of the century in the fall, a further 25,000 meters of exploratory drilling are scheduled for 2022. Thanks to the entry of Canada's largest copper producer, Teck Resources, in 2020, the drilling program is well financed. In addition, the Company has a further copper project of its own, Mohave (in Arizona, USA).

    BHP - Good half-year figures

    Thanks to higher raw material prices and high production, the mining group recently reported good half-year figures. In the first six months of the current fiscal year 2022, BHP posted a profit from continuing operations of USD 9.7 billion, up 57% YOY. Adjusted earnings per share were USD 1.92, compared with USD 1.22 in the same period last year.

    BHP reiterated its iron ore production guidance of 249 million to 259 million t for the current fiscal year, compared with 253.5 million t in 2021. The Company expects copper production to be near the lower end of its forecast range of 1,590 kt and 1,760 kt. Metallurgical coal production forecast is 38 to 41 million kt, while energy coal production is 13 to 15 million kt. Nickel production is expected to be in the range of 85 kt to 95 kt.

    Because of the major issues of our time - the energy transition and mobility transition - copper will remain in demand in the future. Commodity prices and related commodity shares should perform well given the high inflation. Those who want to play it safe will focus on commodity giants like Allkem or BHP. Those willing to take greater risks for higher returns will undoubtedly find an interesting investment opportunity in the securities of Kodiak Copper. In our opinion, the shares of the explorer have high price potential.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

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    Der Autor

    Carsten Mainitz

    The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.

    About the author

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