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December 1st, 2022 | 09:46 CET

BYD, Auxico Resources, Hensoldt, Rheinmetall - Prepared for the future

  • Mining
  • Gold
  • RareEarths
  • Defense
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Russia's invasion of Ukraine at the end of February this year changed everything. While global stock markets fell into a state of shock, shares in defense companies boomed. With the arms buildup in the Western world, the future looks bright for companies that were still viewed critically before the war of aggression. However, in order to produce enough tanks, aircraft and other war equipment, the industry needs a variety of critical metals for which demand already exceeds supply.

time to read: 5 minutes | Author: Stefan Feulner

Table of contents:

    Brodie Sutherland, CEO, Tocvan Ventures
    "[...] One focus will be on deposits near the surface. These would be good arguments for a quick production decision using the low-cost heap leaching method. [...]" Brodie Sutherland, CEO, Tocvan Ventures

    Full interview


    Hensoldt, Rheinmetall - Critical voices from the US

    "Heavy weapons for peace!" Due to the strategy of Western politics, which is difficult to understand ethically, both the order books and the share prices of the armaments companies exploded worldwide. Since the start of the Ukraine conflict, Rheinmetall, the supplier to the German Armed Forces, has seen its share price rise by over 110%, while Hensoldt AG, based in Taufkirchen near Munich, has seen its share price rise by around 90%.

    The 9-month figures showed Hensoldt's unabated growth. The Bavarians increased their revenues by 30% to EUR 1.1 billion compared with the same period last year. New orders rose from EUR 1.4 billion to EUR 5.4 billion. Adjusted EBITDA grew by more than 14% to EUR 126 million. Based on the positive business development, Hensoldt confirmed its annual targets. Accordingly, the Company expects annual sales in the region of EUR 1.7 billion and a substantial increase in earnings by EUR 300 million.

    Bank of America is less optimistic about German defense companies. The experts of the US bank had abandoned their previous buy rating in each case with a downgrade to "neutral". In return, the British competitor BAE Systems was recommended as a buy. According to analyst Benjamin Heelan, the driving forces in the defense sector are transparent with the defense budgets of the Western countries, but everything is taking longer than expected with the orders. The sector's growth spurt is lagging, which could become a burden for the demandingly valued shares of the two German groups.

    The Ukraine conflict heralded a turning point in the arms industry. Source: Rheinmetall AG
    • Auxico Resources - Critical raw materials for the West

      A problem for the defense industry could also be the procurement of rare earth metals due to the strong demand. Neodymium-iron-boron magnets are considered the strongest permanent magnets in the world. They are contained in many military weapons systems, for example, in precision-guided weapons, satellite and stealth technologies, as well as in unmanned vehicles and modern communication systems. In addition, the demand for rare earth metals is exploding due to the energy transition. The global expansion of renewable energies and the electrification of the transport sector are already causing an excess in demand. Using neodymium-iron-boron magnets in electric vehicles and wind turbines is expected to cause demand to skyrocket exponentially, resulting in a supply gap of 22kt by 2025 and 51kt by 2030.

    Due to geopolitical tensions, Western countries are threatened with a supply shortfall. China dominates not only mining but also downstream processing and, with over 90%, has a quasi-monopoly on the entire value chain for rare earth metals. In contrast, production and procurement in the Western world are scarce. In addition to the Mountain Pass mine in the US and producing mines of Lynas and Iluka Resources in Australia, there are only a handful of promising projects. Some are not yet in production.

    Auxico Resources, founded in 2014, could fill this supply gap. As such, the Canadians focus on producing and trading critical minerals and high-value metals, including niobium, tantalum, platinum group metals, and rare earth metals. In total, Auxico Resources has access, directly or through the formation of joint ventures, to a total of 4 million tons of such minerals in Colombia, Brazil, Bolivia, and the Democratic Republic of Congo.

    According to a NI-43101 report, the Minastyc property in Colombia has samples of rare earth oxide concentrates at extremely high grades of 68.25% and 65.57%. In addition, discoveries of high-grade gold at surface, platinum, titanium, zirconium, hafnium and iridium were made.

    In Brazil, a partnership agreement was signed with the mining cooperative CEMAL for the development of the Massangana tin tailings project with an estimated 30 million tons of tailings with an average TREO grade of 2.83%. In addition, a production plan for 750,000t per year of tin tailings has been established to extract tin, ilmenite, zircon and rare earth metals. A customer for 3,600t of tin has already been found with Cuex.

    A Memorandum of Understanding has also been concluded in Bolivia regarding the processing and sale of tantalum, niobium, iridium and tin from industrial sands in the province of Nuflo de Chávez. Again, samples grading 59.79% tantalum and 2.68 Kg iridium indicate high-grade discoveries. In addition, the Company and its partner Central American Nickel are the exclusive commercial agent for rare earth concentrates from the Democratic Republic of Congo.

    The Company is broadly diversified, with some properties showing significantly higher values than comparable peer group companies. With a total of CAD 18.85 million and a stock market price of CAD 0.42, Auxico Resources is highly undervalued according to analyst firm Hallgarten & Company. They see the Company as a buy candidate with a 12-month price target of CAD 1.48, representing a price potential of around 230%.

    Auxico Resources CEO Frederick Kozak will present the Company at the 5th IIF - International Investment Forum. Registration for the presentation is free of charge.

    BYD - Milestone and expansion

    Following a record month in October, when it sold over 200,000 NEV units, another milestone was reported during November. For the first time in the Company's history, according to data from China Merchants Bank (CMBI), the Shenzhen-based company overtook previous market leaders Toyota and Volkswagen to become the best-selling car brand in China in November. BYD's retail sales totaled 152,863 vehicles from November 1 to November 27, recording an 83% increase in average daily sales compared to the same period last year. Volkswagen's total was 143,602 units, while 115,272 passenger cars sold left the factory at Toyota.

    In addition to the planned further growth in China, BYD is also looking to expand into Mexico alongside Europe. Thus, the SUV model "Tang" and the "Han" sedan will be introduced at 7 dealers in the Aztec state. The target by 2024 is sales of around 30,000 vehicles in Mexico.

    Despite the fundamentally compelling news, the share price of the "Build Your Dreams" company is still in a correction. However, it was important that the support, which has already been approached four times this year, was successfully defended.

    Due to Russia's invasion of Ukraine, the German defense industry experienced a turnaround with a sharp increase in orders. However, according to BofA, the valuation is already ambitious. At BYD, the signs continue to point to growth. Auxico Resources should benefit long-term from rising prices for rare earth metals due to its diversified portfolio.

    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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