Blackrock Silver, BYD, Infineon - Silver: The new gold of the technology sector?

Blackrock Silver - Mineral resource increased by 135%

Silver demand has now outstripped supply for 5 years. Such years are often followed by a price increase in silver, which may have already begun. This is good news for Blackrock Silver, a Canadian mining company specializing in the exploration of silver and gold. The Company's flagship project, Tonopah West, is located in the Tonopah Silver District in Nevada, one of the best-known silver districts in North America. The Company has completed more than 150,000 meters of exploration drilling since 2020 and established the project as one of the highest-grade undeveloped silver projects in the world. The exploration work has paid off. On November 10, the Company released an updated Mineral Resource Estimate (MRE).

The resource estimate increased by 135% to 0.57 million ounces of gold and 47.74 million ounces of silver, corresponding to 100.04 million ounces of silver equivalent. The average grade of the inferred mineral resource is 508.5 g/t silver equivalent, an increase of 14% over the previous estimate. Discovery costs have been reduced to USD 0.29 per silver equivalent ounce. The updated MRE covers a strike length of approximately 3 km along the Tonopah West vein system. As the mineralization is still open on several sides, the project continues to offer great potential for expansion. This data was also submitted with the technical report to Sedar on November 8.

A large lithium deposit with similar grades to neighboring American Lithium was also discovered on the Tonopah property, covering 7.2 sq km. A joint venture with Tearlach Resources is working on the preparation of a resource estimate. With the Silver Cloud project, also located in Nevada, Blackrock Silver owns another gold and silver project on which a further high-grade gold and silver discovery was made this year. According to an announcement on October 27, the Company was able to significantly reduce costs, such as the lease, enabling the project to be developed further. The share price has risen by 62% since the end of September and is currently trading at CAD 0.365.

BYD - Price cuts cause share price to plummet

An electric car contains an average of 93 g of silver, corresponding to around 3 ounces. By comparison, only 15-28 g are needed in a vehicle with a combustion engine. The demand for the precious metal will, therefore, increase significantly solely due to the automotive industry, which is focusing on electric drives. The largest market for electric cars is China, where BYD is the leading manufacturer. On November 24, the six millionth electric vehicle rolled off the production line. However, investors saw no reason to rejoice, and the share price plummeted due to price reductions announced by the Group. For the market, this means that the price war for electric cars is far from over.

The price reductions were relatively moderate, ranging between EUR 650 and EUR 1,300. Analysts at Bernstein currently see a neck-and-neck race between Tesla and BYD. Analyst Toni Sacconaghi expects Tesla to achieve sales of USD 114 billion and EBITDA of USD 8.7 billion in the coming year. The Chinese competitor has sales of USD 112 billion and an EBITDA of USD 7.1 billion, with BYD growing significantly faster** and has only just begun its internationalization efforts. However, the market capitalization of the two companies is worlds apart.

Tesla has a market capitalization of almost USD 760 billion, while BYD has only USD 110 billion. Either Tesla is far too expensive, or BYD is far too cheap. The truth is likely somewhere in the middle. Analysts currently have different opinions: while UBS sees further potential and has issued a target price of EUR 46.50, UOB analyst Kay Hian is very pessimistic and has set his target price at EUR 18.20. Recently, the share has repeatedly shown downward price gaps but seems to have stabilized around EUR 24.50 and currently stands at EUR 28.89.

Infineon - Strong growth in the last year

Infineon is a leading semiconductor manufacturer based in Germany. The Company has a broad product portfolio ranging from microcontrollers and sensors to automotive and power management ICs. Under Infineon's project leadership, the European research project Progressus has developed solutions for current power grids to make them more resilient to the fluctuations of renewable energies. The aim is to reduce the load on the electricity grid. In the pilot project, intelligent energy management in 16 buildings reduced electricity demand by an average of 80%.

The Group has been back on track for some time and has benefited from the chip shortage. This can also be seen in the figures for the fourth quarter, which were presented on November 15. In the past quarter, the Company achieved sales of EUR 4.149 billion and a profit of EUR 1.044 billion, corresponding to a profit margin of 25.2%. A free cash flow of EUR 614 million was generated during this period. Sales of EUR 16.309 billion were achieved over the 2023 fiscal year, an increase of 15% compared to the previous year. Net profit for the year amounted to EUR 4.399 billion, up 30% on the previous year.

Adjusted earnings per share rose by 35% to EUR 2.65. Free cash flow amounted to EUR 1.158 billion, while adjusted free cash flow reached EUR 1.638 billion. The Group expects continued strong demand for semiconductor products, particularly in the fields of electromobility and renewable energies. In November, there were 6 "Buy" recommendations for the share with price targets of between EUR 40.00 and EUR 47.50. Only JP Morgan issued a "Hold" recommendation. The share recently broke through the important 200 mark and is now trading at EUR 36.16.

The silver deficit of recent years and rising demand from the automotive and renewable energy industries should lead to higher prices in the long term. Higher prices are particularly advantageous for silver companies such as Blackrock Silver. With over 100 million ounces of silver equivalent on the Tonopah property alone, plus the Bonanza Fund on Silver Cloud and the large lithium deposit, they have 3 hot irons in the fire. BYD slightly lowered prices and was brutally punished for it. Those who believe in electromobility may find a good long-term entry point here. For Infineon, things are going well, as evidenced by the chart. The Company is well positioned for growth markets.