December 10th, 2021 | 11:26 CET
BASF, Kodiak Copper, Salzgitter - Inflation stays longer
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
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.
Kodiak Copper - Flagship in North America
Copper is essential for the energy turnaround. Here, the red metal serves as a functional material and is predominantly used as an electrical conductor. Copper's excellent thermal conductivity, together with its corrosion resistance, ease of processing, strength, durability and formability, offer unbeatable advantages in solar thermal applications. In wind energy, copper is used in wind turbines in the generator stator and rotor windings, power cables, transformers and grounding systems.
According to analysts, the copper sector would need to grow by 5.7% annually through 2030 to meet the additional demand from renewable technologies - but historically, the copper sector has only been able to grow by 2.6% between 2000 and 2018. Therefore, copper production would need to grow more than twice as fast as it did at the beginning of this millennium. However, the high demand is matched by an extremely limited supply. Due to the low copper price in the last decade, too little has been invested in new projects. As a result, there has already been a supply deficit for two years.
Here is where the exploration company Kodiak Copper comes into play. With two promising 100% owned projects in Canada and the USA, the Canadians want to counteract the supply shortage and achieve copper producer status soon. The MPD project in British Columbia, in particular, has recently produced high-grade drill results and has attracted major shareholders such as the large Canadian commodity company Teck Resources. The project is located in close proximity to the producing mines of Copper Mountain, Highland Valley and New Afton.
This year's drill program, which was completed with a total of 21,675m due to continued flooding, focused on extending the prospective Gate Zone. Excellent results have already been achieved with the strike length extended by more than seven times to 950m north-south and an intersection of significant copper-gold mineralization 350m wide east-west to a depth of 800m. In addition, it has been identified that the Gate Zone remains open.
For the coming year, the successful strategy will now be applied to other targets, such as the Dillard zone with a planned 25,000m drill program. Kodiak Copper's share price has corrected in recent months from CAD 3.35 to currently CAD 1.12 and offers an attractive buying opportunity if the copper price is expected to rise.
BASF - Positive analyst commentary
Analysts at Kepler Chevreux see a buying opportunity in the shares of chemicals group BASF. The investment bank has raised its price target for the DAX company from EUR 94 to EUR 100 and confirmed its "buy" rating. At the same time, analyst Christian Faitz is irritated by the hesitant attitude of the financial market to take a correct and fair look at the valuation of the chemical company's stock.
The Ludwigshafen-based Company is also planning to reorganize its research activities for 2022. "The transformation to sustainability already starts with research," board member Melanie Maas-Brunner explained in Ludwigshafen on Thursday. She said BASF has set itself ambitious sustainability goals. "To meet the challenges of transformation even faster and be successful in the long term, we need to increase our proximity to customers further and leverage the strength of our Know-how network," she said at the Company's research online press conference.
Salzgitter AG - Drop after downgrade
The Salzgitter AG share lost considerable ground following a downgrade by US investment bank Morgan Stanley. The verdict was downgraded from "Equal weight" to "Underweight", the price target fell from EUR 32.00 to EUR 30.70. According to analyst Alain Gabriel, China's demand for industrial raw materials has slowed sharply. From the second half of 2022, construction starts should rise again, which should favor an upswing in iron ore. However, the shares of Salzgitter and Voestalpine offered the least upside potential compared with their peers.
Due to the energy transition and the growth of electromobility, the demand for copper will increase over the next few years. In contrast, there are few first-class copper projects due to the reluctance to invest in recent years. Kodiak Copper is a positive exception with its MPD project. The situation at BASF is also favorable, while analysts at Salzgitter AG advise against an investment.
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