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January 13th, 2023 | 12:14 CET

Auxico Resources, Rheinmetall, Rock Tech Lithium - Important news

  • Mining
  • RareEarths
  • Defense
  • Lithium
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Fears of a global recession are still pervasive, and commodity prices are at moderate levels after the sell-off of recent months. In contrast, the price of lithium remains high. The reason is the continued strong demand from the electric car industry. However, the existing supply of lithium resources is scarce. The primary beneficiaries of this shortage, in addition to existing producers, are exploration companies that have already secured attractive properties. A similar phenomenon is occurring now with the critical commodity of rare earth metals.

time to read: 4 minutes | Author: Stefan Feulner

Table of contents:

    Rock Tech Lithium - Important step

    The German-Canadian GreenTech company announced another milestone towards constructing the first lithium converter in Europe. After signing a binding offtake agreement with Mercedes-Benz AG for the supply of an average of 10,000t of lithium hydroxide per year, representing an estimated sales volume of around EUR 1.5 billion, Rock Tech Lithium received approval for an early start to the construction of its lithium converter in Guben, Brandenburg.

    As a first step, the responsible State Office for the Environment has granted the Company approval for an early start concerning the first tranche of the permit. Rock Tech plans to start initial work on the approximately USD 683 million project on its own property in the coming weeks. In February 2022, Rock Tech applied for the first partial permit and early start approval with no permit objections. The approval for an early start is also a welcome indicator of the expected construction permit for the Guben converter. In November, Rock Tech submitted the second and final permit application for this to the authority. A favourable decision is expected in summer 2023.

    Klaus Schmitz, Rock Tech's Chief Operating Officer, added: "Our converter will be one of the first of its kind in Europe. The production of our battery-grade lithium hydroxide will be an essential part of the raw material supply chains for battery metals in Europe - this is another reason why the positive decision by the authority is an important step towards this and sends an important signal to the market."

    Rock Tech's stock rallied 25% after the announcement, trading in the area around EUR 2.05. The downward trend formed since October 2021 runs in the area around EUR 2.08. Should this be sustainably broken, both the bottom would be formed, and a buy signal would be generated with a next target of EUR 2.47.

    Auxico Resources - Problem solver of climate change

    The dependencies on China for critical metals, which are essential for the energy transition, are overwhelming. Especially for rare earth metals, Asia's largest economy has a monopoly on the entire value chain with over 90%. The alternatives in the western jurisdictions are scarce, and the policy tries spasmodically, with billions in subsidies, to compensate for this dilemma. However, Auxico Resources is in the market and has three promising rare earth projects and the potential for cash flows in multiple jurisdictions.

    The Canadians have access to three projects in Colombia, Brazil and the Democratic Republic of Congo, as well as another potential project in Bolivia. The Congo project produces rare earths in the form of monazite sand and is operated by a private company. Auxico Resources is the exclusive distributor for the monazite and receives a 15% commission for each ton exported. In the process, exports began generating cash flow last year. The short-term goal is to export 500 to 1,000t per month, equating to cash flow between CAD 500,000 and CAD 1 million.

    At the project in Brazil, there is access to tin tailings from several decades of tin mining. These are estimated at around 30 million tonnes. As a first step, the Company plans to process 2,500 t of the material daily. A geological sampling program is also scheduled to begin in the first quarter of this year to evaluate a portion and prepare an initial NI 43-101 resource report.

    The Colombia project again offers potential for various rare earths and critical minerals such as tantalum, niobium and tin. A NI 43-101 technical report on the project is already available here. A resource estimate is expected by the end of the second quarter of 2023.

    Overall, the Company's management is planning for earnings of between CAD 10 million and CAD 18 million in 2023. The analysts at Hallgarten, therefore, see significant upside potential for Auxico Resources by the end of 2023 and assigned a price target of CAD 1.48. At a current quotation of CAD 0.41, this would be a price increase of around 300%.

    You can read a detailed interview with the CEO of Auxico Resources, Frederick Kozak here.

    Rheinmetall - All-time high in sight

    As noted in a previous report, the stock of the arms manufacturer Rheinmetall was able to generate a buy signal by jumping above the vertical resistance at EUR 202.70. It is now getting closer and closer to the all-time high at EUR 227.90. Thus, investors who followed the signal should place their stop just above the breakout line discussed.

    Fundamentally, the outperformance continues to be underpinned by orders, especially from the defense division. The Düsseldorf-based company received orders for ammunition supplies from two European NATO states. Both countries had ordered programmable cartridges, Rheinmetall announced. These will be used primarily to combat drones. Deliveries are to take place this year and in 2024. One of the countries had also signed a seven-year framework agreement for 300,000 rounds of 40mm ammunition and had already called off the first delivery of 75,000 rounds, it said. The defense group put the total value of the contracts at more than EUR 30 million.

    Rock Tech Lithium was able to announce an important milestone with its partial approval. Rheinmetall undertook another attack towards an all-time high. In contrast, analysts see a 300% chance at Auxico Resources.

    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.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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