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January 27th, 2022 | 11:06 CET

BYD, Defense Metals, Tesla - The long-term beneficiaries of climate change

  • RareEarths
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The post-pandemic global economic recovery and rising investment in more climate-friendly energy infrastructure are driving higher commodity prices amid supply chain disruptions. Shortages of industrial metals, which are urgently needed for climate change, are likely to materialize further in the coming years. This will be significantly exacerbated by the swelling trade conflict between the USA and China. There is a threat of massive bottlenecks in production and sharply rising prices for the respective materials.

time to read: 3 minutes | Author: Stefan Feulner
ISIN: TESLA INC. DL -_001 | US88160R1014 , DEFENSE METALS CORP. | CA2446331035 , BYD CO. LTD H YC 1 | CNE100000296

Table of contents:

    New development phase at Defense Metals

    The sales figures of electric car manufacturers are rising, and with them, the demand for rare earth metals used in permanent magnet motors for electric vehicles. In addition to being an eminently important industry for implementing climate targets, the raw material is also used in the electricity market, the defense industry, the national security sector, and the production of green energy technologies, for example, wind turbines. Due to the ongoing crisis in the economic relationship between the USA and China, there could soon be supply problems. Around 80% of the rare earth minerals required come from the Middle Kingdom, and the European Union imports 98% of its requirements from China.

    Outside China, especially in North America, rare earth projects are few and far between. One of the few favorable bright spots can be found near Prince George in the Canadian state of British Columbia, where Defense Metals maintains its 2,008-hectare Wicheeda rare earth element concession area. The infrastructure is first-class, allowing Defense Metals to calculate drilling costs well below the industry average. According to management, mineral resources there are 4.9 million tons at an average grade of 3.02% LREO (light rare earth elements) and inferred mineral resources of 12.1 million tons at an average grade of 2.90% LREO. An additional 12 million tons are suspected in the area.

    Ambitious Targets

    With the submission of a preliminary economic assessment (PEA) and the acquisition of all rights to the Wicheeda project, the Canadian exploration company is now beginning a new phase of development. This has significantly upgraded the quality of the management team around the go-getting CEO Craig Taylor. Dr. Luisa Moreno has been appointed to the Board of Directors and will now assume the role of President and Director of the Company. An applied physics engineer with Ph.D. degrees in materials science and mechanics, she brings years of experience as a senior analyst at various investment banks and as an investment research analyst at an international investment research firm. In addition, Dr. William H. Bird, who brings a unique combination of business qualifications and commodity industry expertise, will also join the Board of Directors.

    Defense Metals has already set its goals for the current year. The mineral resource is to be upgraded and expanded, and geotechnical investigations are to begin. In addition to optimizing the flowsheet, implementing an environmental, social and governance strategy, and further engaging end-users, Defense Metals plans to start a preliminary feasibility study in the second half of 2022, which could extend into next year.

    The Company's stock market value, traded in Frankfurt and Toronto, currently stands at EUR 13.14 million. The share has corrected by about 60% since February last year and is forming a bottom at the level around EUR 0.15. In the long term, demand for rare earth metals is more likely to increase.

    The view on Tesla

    Interested parties in the electric car industry are looking across the pond with anticipation after the close of the stock exchange. Then none other than Elon Musk will announce the carmaker's figures for the fourth quarter. On consensus, analysts expect revenue of USD 16.9 billion and adjusted earnings per share of USD 2.46. In addition to the numbers, the community expects news regarding the cybertruck and the semi-truck, which Musk announced in his usual manner via Twitter. From a chart perspective, things look anything but rosy for the rock star among electric cars. After the slide below the USD 900 mark, a larger correction to the area around USD 621 is possible.

    On the other hand, Chinese competitor BYD once again held broad support at USD 30, but this is not an all-clear for further price corrections. Fundamentally, the Chinese Company plans to enter the foreign exchange market with a volume of around USD 4.3 million. The reason for this is the strong increase in the Chinese renminbi, which hit BYD hard in its foreign business last year.

    As BYD's foreign business continues to expand, the size of the Company's foreign exchange balance continues to increase. The move aims to prevent the Company from being affected by sharp exchange rate fluctuations and appropriately reduce financial costs.

    Due to climate change, the demand for raw materials such as rare earth metals is increasing. However, about 80% comes from China, while there is little supply in North America. Defense Metals should benefit in the long term as one of the few pure exploration companies. Although the future belongs to the electric car, caution is currently advised for both Tesla and BYD.

    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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