22. September 2020 | 09:20 CET
Almonty, BASF, Bayer: where is it worth starting now?
The start of the week was marked by price losses. In Europe and North America, the leading indices closed in the red. The fear of further effects of the Corona Pandemic has dampened market sentiment. Given that the banknote presses are still running, the breather on the capital markets is again likely to be short-lived. At the time when a vaccine against Covid-19 receives approval, the economy will once again experience an unleashed boom - provided that people can and may want to return to their jobs. Which shares are worthwhile now?
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ISIN: CA0203981034 , DE000BASF111 , DE000BAY0017
Access in Europe and Asia
The Canadian tungsten producer Almonty Industries operates mines in Portugal and Spain. The company has plans to secure future access to the hardest metal on earth in South Korea. The deposit in South Korea is one of the largest of its kind in the world. The importance of this project for Almonty is therefore significant, as it will enable the company to meet the growing demand for the critical raw material.
State support for supply
One of the largest suppliers of tungsten in the world market is China, which has an almost monopoly-like position. The dependence of the other industrialized countries cannot be denied. However, with increasing prosperity, the demand for tungsten is also increasing in China. For this reason, industry representatives are concerned about the future supply for the market. The German Kreditanstalt für Wiederaufbau (KfW) is helping companies in the sector to secure access. In this context, KfW has also committed USD 75 million in project finance to Almonty so that the Sangdong project in South Korea can be further developed.
Fear of market dominance
According to a survey of US executives, 63% of respondents responding to the main challenges in the raw materials supply chain said that it was detrimental to their business that China controlled too much of the supply. A further 74% said that the greatest threat to their manufacturing business over the next 12 months would be disruptions and restrictions in the supply chain. It is clear that Almonty's work is of increasing importance.
Competitive disadvantage in the US increasing
"It is a dangerous time for U.S. manufacturers to face a limited supply chain of precious and strategic metals that are so important to the industry, businesses, and consumers today," said Lewis Black, CEO of Almonty and continued: "Covid-19 has put unwanted economic pressure on many U.S. manufacturers, in addition to the trade war between China and the U.S., which has already put U.S. industry in price and financial trouble."
Diversification for the portfolio
While Almonty's market value of around CAD 138 million is still low compared to the DAX companies BASF and Bayer, the two large companies are also worth considering an investment. BASF currently has a market capitalization of EUR 46.5 billion and Bayer EUR 52.9 billion. Almonty offers an opportunity to participate in the value creation of critical raw material. The analysts of First Berlin rate the share with a target price of CAD 1.45 as 'buy'.