August 3rd, 2022 | 14:15 CEST
Alpha Copper, Nordex, Volkswagen - Has the copper price found its bottom?
Table of contents:
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Alpha Copper - Drilling programs underway
Copper is needed for new technologies in particular. In the case of renewable energies, a wind turbine alone requires between 5 and 8 tons of copper per megawatt. In the case of solar energy, the figure is around 5.5 tons per megawatt. Electromobility also has an increased demand for copper. Pure electric cars require about 75 kg of the red metal, three times more than the old combustion engines. Demand is rising, and the major producers have long been looking for new large deposits to meet future demand - ideal conditions for the Canadian explorer Alpha Copper, which owns two promising projects in British Columbia.
The Company's flagship is the Indata project, owned by Eastfield Resources. Alpha Copper has secured the option to earn a 60% interest. The property is 3,189 hectares, covers 16 mineral claims and is located just 3km from the significant Kwanika discovery. On June 16, it was announced that the go-ahead had been given for the 5,000m drill program. The focus is on the Lake Zone, where exploration work is most advanced. The second project is called Okeover, which covers 11 claims on 4,613 hectares and here, Alpha Copper may even take 100% ownership of the project. The copper and molybdenum project has historical reserves of 86.8 million tonnes at 0.31% copper and 0.014% molybdenum. An initial 2,000m drill program has been initiated on the property, the Company announced on July 13.
The results are expected to be used to produce a NI 43-101 standard report in 2023. Operationally, then, things are progressing well. The share price, however, has been dragged down by the overall market. At the beginning of February, it was still at CAD 1.09. After that, it went down rapidly, with the low marked at CAD 0.24. From there it went up by more than 90%. Currently, one share costs CAD 0.465. With positive drilling results, the share can quickly run again in the direction of the year's highs. The important thing here is that the copper price does not fall again.
Nordex - Finally on the upswing
Nordex struggled with all kinds of difficulties in recent months - starting with two capital increases for a total of EUR 351 million, through supply chain problems to significantly increased costs. As mentioned above, a wind turbine requires between 5 and 8 tons of copper per megawatt; therefore, the high copper price was poison for Nordex's business. Good news from the US recently provided a boost. The US President wants to push through a bill to provide USD 369 billion for climate and clean energy programs. Nordex could benefit from this.
In July, the Company was able to report four orders. A 58-megawatt order came from Poland and a 59-megawatt order from Finland. In addition to these smaller projects, there was another order from Finland for a 148-megawatt wind farm. The largest order comes from Brazil. There, 80 N136/5.X turbines are planned for a wind farm, as well as a premium service with a term of 20 years. On July 13, the Group announced closer cooperation with UKA. The wind farm developer is one of the TOP 3 in Germany and plans to purchase 80 wind turbines with a total capacity of around 500 megawatts from the cooperation over the next 2 years.
But just when it looks as if the Group is returning to calmer waters, it is once again turbine manufacturer Siemens Gamesa that is causing a bad mood in the sector. The competitor has again had to cut its forecast. Declines are expected in sales and operating margin. Even though Nordex's half-year figures will not be published until August 14, it can be assumed that sales are likely to have increased, as order intake in the second quarter was higher than in the previous year. The stock is currently trading at EUR 9.43, having broken the downtrend and entered an uptrend. It remains intact as long as the EUR 7.81 mark is not broken on a closing price basis.
Volkswagen - Decent half-year figures
At the beginning of 2021, Volkswagen announced that it would focus only on electric vehicles in the future. A revolution in the long-established automotive industry. The Wolfsburg company is investing around 35 billion in the new technology. The Company wants to sell more than one million e-cars as early as 2025. In 2021, there were only 452,900 electric vehicles. The new generation of vehicles requires around three times as much copper as the old combustion engines. Demand for copper will therefore increase significantly in the coming years. However, the 2021 sales figures also show that the Company is suffering from a chip shortage, as sales figures were roughly the same as in 2011.
On July 22, the Group announced the departure of CEO Herbert Diess. He will be succeeded by current Porsche chief Oliver Blume, who is also expected to continue leading Porsche. The half-year figures, which were presented on July 28, clearly show how sales of electric vehicles have picked up. Deliveries were up 27%, and orders were up 40% YOY. Overall, sales were 2% above the previous year's level. CFO Arno Antlitz expressed his satisfaction: "Despite unprecedented global challenges, Volkswagen has demonstrated considerable financial robustness. In this context, the operating margin in the first half reflects the strong product substance and proportionately higher sales in the premium segment."
However, the Group is still struggling with production difficulties due to supply bottlenecks and the COVID lockdowns in China. It remains to be seen to what extent the new VW CEO will adjust the Group's strategy. After the half-year figures, there was a hail of buy recommendations from JPMorgan, UBS, Goldman Sachs, Deutsche Bank and others. The price targets range from EUR 191 to EUR 316. So there is a lot of upside potential, based on the current price of EUR 138.52.
Even though the fear of recession has negatively affected the copper price in the short term, the long-term increase in demand will pull the price up again. That is good for the copper explorer Alpha Copper, which is investigating two promising projects more closely. Nordex is currently benefiting from the low copper price, but the cost of other raw materials remains high. One should wait for the half-year figures. Volkswagen will also need more copper in the future. In addition, supply bottlenecks must be eliminated, and then larger price jumps are possible.
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