BYD, Defense Metals, Rheinmetall - Rare opportunities

Defense Metals - The Hope of the West

In an interview with news portal Kitco, Defense Metals CEO Craig Taylor commented on Western governments' investments in rare earth projects. According to him, China has basically weaponized rare earths. The Company's leader holds out hope that this will prompt Western governments to put more money into the sector. "The energy transition will encourage higher prices for rare earths," said Taylor. He drew a parallel with MP Materials, which has produced over 38,000 t of rare earths from its Mountain Pass mine since 2020.

"The demand is overwhelming," Taylor said. "We need to double production over the next decade. That means we need to bring a Mountain Pass-like project online every year for the next 10 years. There are only two viable projects in North America: Defense Metals' Wicheeda project and Mountain Pass.

Defense Metals, which owns 100% of the 4,262-hectare Wicheeda project in British Columbia, weighs in at CAD 55.28 million on the stock market. In comparison, MP Materials is already a heavyweight at USD 3.98 billion. In addition to the world-class infrastructure, the conditions are favorable due to similar metallurgy to Mountain Pass.

Last year, the Canadians completed their preliminary economic valuation, which showed an after-tax net present value, at 8%, of CAD 397 million and an after-tax internal rate of return of 18%. Currently, Defense Metals is working on a preliminary feasibility study. According to the Company, this should be completed in the first quarter of next year. "We should be ready in the first quarter of 2024, and then we will be one of the few rare earths projects in North America and globally that has reached the pre-feasibility stage and then the feasibility stage," Taylor said.

Rheinmetall - Demand is on the rise

In addition to demand due to the energy transition, demand from the defence industry is also rising due to the ongoing arms buildup since the start of the Ukraine war. Neodymium-iron-boron magnets are considered the strongest permanent magnets in the world. They are contained in many military weapons systems, such as precision-guided weapons, satellite and stealth technologies, unmanned vehicles, and modern communications systems. They are of strategic importance to the functionality of modern and increasingly networked armed forces, which is why a growing number of countries see securing access to these elements as essential to future economic and military stability.

For the integrated technology group, the procurement of scarce raw materials is likely a top priority, judging by the continuing full-order books. Another billion-dollar order with a volume of around USD 45 billion beckons Rheinmetall from the US armed forces. In the endgame, the German defence company is competing only with the US defence contractor General Dynamics. This involves the development of a successor to the US Bradley infantry fighting vehicle.

From a chart perspective, Rheinmetall has once again risen above the EUR 270.00 mark. The all-time high to date is EUR 281.30. Should this be broken, prices well above EUR 300 should only be a matter of time.

BYD - Another sound barrier broken

In 2003, the Shenzhen-based company entered the car market, and in 2008 BYD sold its first electric vehicle. Today, 20 years later, the 5 millionth NEV from BYD rolled off the assembly line. BYD aims to sell at least 3 million vehicles this year and aims to reach 3.6 million, the Company's Chairman and President, Wang Chuanfu, said in late March this year. In the first half of the year, BYD extended its lead over its US rival, selling 29% more pure electric cars in China than Tesla.

The Company, financed by Warren Buffett, intends to further increase sales primarily by expanding into other countries. BYD presented its Atto 3 model in South Africa at the end of July. The vehicle is a compact SUV from the C-segment based on the BYD e-platform 3.0. According to the manufacturer, the car achieves acceleration from 0 to 100 km/h in 7.3 seconds. The WLTP range of the vehicle is 420 km.

Increased demand due to the energy transition and the defence industry is expected to further increase demand for rare earth metals. Defense Metals, with its Wicheeda project, is considered one of the few alternatives in the Western world, along with the Mountain Pass mine.