28. October 2020 | 09:38 CET
BYD, Defense Metals, VW - the next boom after hydrogen!
Tesla wants to break the sound barrier of one million vehicles with delivery in 2021. The biggest competitor from China, BYD, has at least as ambitious goals and is rushing from record to record with its new model, Han. Even German car manufacturers like VW have awoken from their deep sleep and now find electric cars sexy. The production of rechargeable batteries is increasing rapidly, but so is the demand for the necessary materials. Surpluses in demand, supply bottlenecks, and exploding prices are threatening.
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ISIN: CA2446331035 , CNE100000296 , DE0007664039
Demand not to cover
The situation is dramatic with the scarcity of "rare earth". Permanent magnets for electric motors are produced based on rare earth metals. In ten years, the experts at Adamas Intelligence predict that the demand for rare earth oxides for use in magnets will increase from the current USD 2.98 billion to USD 15.65 billion. The analysts of Adamas Intelligence see by far the most significant demand for magnetic rare earth such as neodymium, praseodymium, dysprosium, and terbium.
Almost 80% of rare earth metals are produced in China. The trade conflict between the USA and China is still ongoing and is not likely to calm down after the possible re-election of Donald Trump. As early as 2019, the Middle Kingdom threatened to stop exporting rare earth metals to the USA. Alternatives ex-China are therefore needed here as quickly as possible.
Current production capacities too low
The short-term view of a period of three to five years is incredibly critical. The reason being, the demand for rare earth is exploding to such an extent that production capacities, which are already insufficient today, are likely to collapse. Enormous investments in the mining industry are needed here to increase supply.
The Canadian mineral exploration Company Defense Metals can already point to tangible successes in this area. Founded in 2016, the Company focuses on the acquisition of mineral deposits containing metals and elements used in the production of renewable energy technologies, such as rare earth magnets.
The main focus is on the Wicheeda project in the province of British Columbia. According to the Company, the mineral resources are 4.9 million tonnes at an average grade of 3.02% LREO (light rare earth metals), and inferred mineral resources are 12.1 million tonnes at an average grade of 2.90% LREO.
About four weeks ago, the Company received the final report of the study, which was prepared by SGS, the world's leading inspection, verification, testing, and certification Company. Craig Taylor, CEO of Defense Metals commented: "The success of the flotation pilot and 1,200 kilograms of high-grade REE concentrate produced places Defense Metals and the Wicheeda REE deposit among rare company and opens the door to future hydrometallurgical pilot trials at SGS, with the ultimate goal of producing a Nd-Pr oxide product stream."
Defense Metals is at the beginning of a success story. At the moment the market capitalization is a mere EUR 6.00 million. An entry into the stock would be a bet on the future. However, if you see the exponentially growing demand for electric vehicles, you can't ignore the producers of the raw materials.