19. March 2021 | 10:02 CET
BP, Deutsche Rohstoff, Lynas - Attention: a long boom is going on here!
Extreme shortages due to the enormous demand for raw materials of the planned energy turnaround and a dispute that continues to swell between China and the US could escalate at any time, even after Donald Trump. A new energy crisis due to a lack of resources is looming. The prices of copper, lithium and rare earth metals are rising rapidly. The demand overhang is likely to accelerate in the coming years. Significantly rising prices are also expected for oil.
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ISIN: GB0007980591 , DE000A0XYG76 , AU000000LYC6
"[...] 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
Experienced and flexible through the crisis
Crises or not. Thanks to management's many years of experience and flexibility in decision-making, it is possible to profit even from the depths. In Germany, we are currently seeing how not to do this with the Coronavirus containment by politicians. The Deutsche Rohstoff AG did better last year. Through foresight, oil production at the holdings was reduced to a minimum and active hedging was carried out. In addition, the Mannheim-based Company went on a bargain spree and bought several oil fields at sell-out prices. Outside the oil business, the Company seized the opportunity to build up an equity and bond portfolio currently bearing fruit. The NASDAQ-listed Oasis Petroleum, for example, has now been fully exited after having been entered in the second and third quarters of last year. Enormous profits of EUR 7.5 million were realized, with the average selling price more than tripling compared to the purchase price. In addition, a further EUR 3.8 million in unrealized gains are lying dormant in the portfolio.
Pumps running at full speed
With an oil price of around USD 65 per barrel, the pumps are running at full speed again. Significant volume growth can therefore be expected this year. At the end of 2021, the first revenues are expected to be generated from the extensive Knight wells. The Company has invested USD 60 million in this project, which is expected to increase production volumes from 2022. With the bulging cash box of EUR 35.3 million, plus the realized share price gains, further acquisition targets would also be possible. Another investment outside the oil segment, which can still become cash for Deutsche Rohstoff AG, also offers enormous leverage.
The Company holds a 12.8% stake in Almonty Industries. They are on the home stretch to build the largest tungsten mine in the world. Within the next 5 years, when fully commissioned, the Sangdong mine in South Korea is expected to produce 30% of non-Chinese and 7-10% of global supply. From a chart perspective, the resistance at EUR 12.75 stands in the way of further development. Should this be broken, the next price target would be EUR 14. Due to the oil price, which we expect to remain strong, and due to the management's experience, we see good long-term chances of attacking the high at EUR 27.10 again.
Scarcity leading to an explosion
Copper, lithium and rare earth metals - the demand for these raw materials is increasing dramatically. Extreme demand in new technologies is to blame. Rare earth metals are needed, for example, for permanent magnets that drive electric motors. The fact that China has a quasi-monopoly with 80% of production makes the situation even more dramatic. As a result, there are desperate attempts to increase production in North America. The few producers searching for rare earth metals in North America are in demand as never before and are to be heavily subsidized financially by the current government. The largest rare earth metal producer, Lynas Rare Earth, is benefiting tremendously from this booming industry's development. The share price has increased tenfold since the low last year.
Opportunity from the second row
Defense Metals, a Canadian rare earth metals exploration Company, is another player on the verge of a breakthrough with its Wicheeda project. In early March, the Company reported extremely positive results from hydrometallurgical testing of flotation concentrate in advance of the pilot study with a high rate of impurity precipitation with minimal rare earth loss. Next on the schedule is the completion of the hydrometallurgical pilot plant before a drill program is scheduled to commence in the third quarter to further upgrade and increase the size of the deposit.
Based on the extremely positive results and the project's good infrastructure, Defense Metals should advance as one of the most important players in North America. Defense Metals is already well known to politicians. This week, the US Embassy invited the Company to participate in the Select USA Investment Summit. At the Summit, Canadians will have the opportunity to meet global investors and connect with US economic developers and service providers who can offer advice regarding a potential growth strategy in the US. Defense Metals is currently valued at less than EUR 20 million. Industry neighbor, USA Rare Earth, is to be listed on the stock exchange with a valuation of USD 1 billion.
BP turns blue
With BP foreseeing the end of the oil age, the Group is looking for an alternative. At "Power Day," it discussed with Volkswagen the expansion of its public sales network for electric vehicles across Europe. The goal is also to install 18,000 new fast-charging points in attractive locations by 2025. Now the former oil multinational is planning to build the UK's largest hydrogen project. BP announced developing plans for the UK's largest blue hydrogen production plant, aiming for 1 GW of hydrogen production by 2030. The project would capture up to 2 million tons of carbon dioxide (CO2) per year and send it on for storage, equivalent to the emissions from heating 1 million British homes.