January 23rd, 2023 | 10:15 CET
Almonty Industries, ThyssenKrupp, Volkswagen - Tungsten: The raw material for high-tech applications!
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Almonty Industries - Sangdong mine opening is drawing near
Since 2020, the price of tungsten has been rising slowly and steadily. If tungsten succeeds in charging electric vehicles much faster, one problem of the new technology would be solved. At the same time, demand would pick up significantly, even though global production has declined over the past 7 years. The main producers are China and Russia, which are not considered reliable partners. In order to become independent, production in other countries is needed. Almonty Industries has the largest tungsten deposit outside China. In South Korea, the Sangdong mine is currently being developed, which will provide around 30% of the tungsten produced outside China.
The project is fully financed, including by KfW, and can produce at a very low cost. Average production costs are expected to be just USD 110. Also, a customer for the next 15 years is ready with Plansee, which has agreed to buy the tungsten at a minimum price of USD 235. Currently, the tungsten price stands at about USD 320. The mine life is about 90 years, and the annual EBITDA from the mine is estimated at USD 72 million. This value can be increased by mining the molybdenum deposit, which is also located on the property. The mine is expected to start operations this year and reach full capacity within one year.
The Company has acquired the know-how in mining tungsten through the Panasqueira mine in Portugal. Without experience, it is difficult to build a tungsten mine. The mine in Portugal brought in revenues of about CAD 18 million in the first 9 months of 2022. Those interested in learning more about the Company should mark their calendars for February 15. Then CEO Lewis Black will inform interested investors about the progress of the Sangdong Mine at the International Investment Forum online event. Attendance is free of charge. The stock sold off until December 22. Since then, it has gained about 50% at the peak, breaking the downtrend and establishing an uptrend. Currently, one share certificate costs CAD 0.85.
ThyssenKrupp - Q1 figures ahead
For steel producer ThyssenKrupp, tungsten is an alloying element to refine the steel produced. Its hardness and heat resistance make the steel more resistant, so it is used not only in aerospace but also in the defence industry. Demand for heavy vehicles and munitions has increased significantly due to the Ukraine conflict, positively affecting manufacturers in the long term. The opening up of China could also increase demand. Good prospects for the Group, which is still preparing for the future.
Most recently, the Essen-based company suffered from high gas prices. Since they have been falling, the share has also recovered. A closer look at the fiscal year 2021/22 shows how important the steel segment still is for the Company. Almost 50% of adjusted EBIT comes from this area. Since the announced opening of China after the Corona Lockdown at the beginning of December, the price of steel has been rising again. Without the high steel prices, ThyssenKrupp's EBIT would fall significantly. Figures for the first quarter from October to December are expected on February 14.
The stock bottomed out at EUR 4.168 at the end of September 2022. Even before the good news from China, the stock had formed an uptrend. The downward trend was then broken at the beginning of January. The share gained more than 75% at its peak and is currently available for EUR 7.068. Analysts are somewhat cautious about the share because some factors can decisively influence the figures, such as energy prices or the price of steel. JPMorgan and Barclays advise selling, Deutsche Bank advises holding, and Citigroup recommends buying. The price targets are between EUR 5.70 and EUR 9.50.
Volkswagen - Share of electric vehicles growing
If the breakthrough in charging electric vehicles succeeds, Volkswagen will be in a good position, as the Company was one of the first major automakers to embrace electromobility fully. The group's new boss Oliver Blume, who has been in office since September 1, is focusing more on decentralization and wants more teamwork within the group. In an interview with Handelsblatt, Blume announced a meeting with all members of the board of management at the end of January to determine upcoming goals after everyone has revealed their plans. It is expected that Audi and Porsche will be given more responsibility in the Group.
The transformation toward electric drive is moving forward, according to a company news release on January 12. A total of 572,100 all-electric vehicles (BEVs) were delivered. This brought the share of electric vehicles to 6.9%, up from 5.1% a year earlier. The Group remains No. 1 in the European BEV market and 4 in the USA. In China, the Group delivered 68% more BEVs than in the previous year. Overall, the Group handed over 8.3 million vehicles to customers, 7% fewer than a year earlier, mainly due to supply bottlenecks. The order backlog in Western Europe remains high at 1.8 million vehicles, including 310,000 BEVs.
The Wolfsburg-based company is planning to build a Gigafactory with the Canadian government. The group also announced that it is expanding the cooperation between its subsidiary PowerCo, which is responsible for global battery activities, and Umicore in the area of cathode materials to Canada. But there are also difficulties in the electric car sector. Due to a lack of semiconductors, customers are currently unable to have heat pumps installed in their electric vehicles to keep them warm in winter and cool in summer. The share still looks battered, but this is due to the Porsche IPO. One share certificate currently costs EUR 124.26.
Tungsten is increasingly becoming a high-tech raw material needed to implement technical revolutions. This will boost demand. At the same time, the West faces the challenge of becoming independent from China and Russia. In order to achieve this, it requires alternatives such as Almonty Industries, which owns the largest tungsten mine outside China. ThyssenKrupp needs tungsten as an alloying material to optimize its steel. Volkswagen is focusing strongly on electromobility, and already today, there is around 1.4 kg of tungsten in an e-car. The Group needs to eliminate its supply bottlenecks, and then higher sales figures are realistic.
Conflict of interest
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