September 26th, 2022 | 10:28 CEST
BYD, Globex Mining, Newmont, Freeport-McMoRan - Copper with doubling potential
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The decade of critical raw materials
Emerging recession fears have brought the price of copper to its knees by nearly 35% since the beginning of March. A ton of the red metal is currently priced at USD 7,433. Citigroup expects copper to fall further in the coming months due to the recession, especially in Europe. The bank forecasts a price of USD 6,600 in the first quarter of 2023. On the other hand, industry experts have been warning for years of a possible copper crisis in terms of excessively tight supply. The recent downturn in copper prices will only exacerbate an impending shortfall, as the slump will discourage new investment in the metal, which is elemental in electric vehicles and power grids.
News recently hit the ticker that Newmont Corp. has scrapped plans for a USD 2 billion gold and copper project in Peru. Freeport-McMoRan Inc, the world's largest publicly traded copper supplier, also warned that prices are currently insufficient to support new investment. Supply problems are only likely to worsen as a result, as it takes at least 10 years to develop and commission a new mine.
In contrast, demand is rising dramatically due to the energy transition. Due to its nature, copper is elementary for electromobility and the expansion of renewable energies. According to a study by S&P Global, demand for the metal will double to 50 million tons per year by 2035 as the world switches to electricity and net-zero emissions targets are met. As a result, Goldman Sachs forecasts that the benchmark price on the London Metal Exchange will nearly double to an annual average of USD 15,000 per ton by 2025. Similarly dramatic are the shortages of the key component for batteries, lithium, as well as raw materials needed for the energy transition, nickel, cobalt and steel.
Globex Mining - The asset manager of the raw materials industry
Despite current price dips, critical commodities will likely reach their correction targets relatively quickly due to the enormous demand overhang and rush to new highs in the next upward wave. Thus, at current levels, there are attractive, anticyclical entry opportunities. However, it is difficult for private investors to pick out the best companies from the respective sector in order to optimally anticipate the expected super cycle. In addition to funds and ETFs, there is an alternative with Globex Mining. It has been operating successfully in the commodity sector for around 40 years.
The incubator of the commodity industry, which is traded in Canada and Germany and has a market capitalization of CAD 41.00 million, owns more than 210 projects in Canada, the USA and Germany. The diversified portfolio includes precious metals such as gold, silver, palladium and platinum, base metals such as copper, zinc, lead and nickel, and specialty metals and minerals such as iron, molybdenum, lithium and rare earth metals.
The Canadians alone have CAD 20 million in cash in their bank account, generating their cash flow by optioning inventory properties for cash and shares. In doing so, the optionee pays royalties and assumes the exploration risk. In addition to this corporate arm, Globex Mining also explores and develops its own properties.
At the Silver City project in Saxony, Germany, on which Globex holds an option, partner Excellon Resources is considering a spin-off and subsequent IPO. Excellon holds exploration licenses totaling 340 sq km over a significant epithermal silver system that has been encountered in nearly every drill hole. Globex Mining management welcomes this plan to further advance exploration on the Silver City property and sees the potential for high valuations in a European-focused exploration company.
Globex Mining's CEO, Jack Stoch, will present the Company at the 4th International Investment Forum - IIF tomorrow, Tuesday, September 27, 2022. To register for the virtual conference free of charge, visit ii-forum.com.
BYD - Independent into the future
One of the main buyers of the critical raw materials for electromobility is the Chinese market leader BYD. In order to minimize the dependencies of global supply chains, the Shenzhen-based company is tinkering with the development of its own value chain.
Months ago, BYD took a stake in the Shenzhen Chengxin Lithium Group with an investment of EUR 425 million. In return, BYD receives secured lithium supplies. In addition, the commitment to the lithium producer Shanshan Lithium Battery Material Technology was expanded. In addition, the Company is investing with partners in Zhongrun Chemical, a manufacturer of NMP solvents, which are required to produce lithium batteries. The acquisition of 6 African lithium mines, which according to circles contain more than 25 million tons of ore with a lithium oxide content of 2.5%, would theoretically make it possible to mine up to 1 million tons of lithium carbonate and secure demand for the scarce raw material for the next decade.
Recently, Yichun BYD Mining Company was founded as a separate mining company for production in China. The share capital of the new Company amounts to EUR 290 million. The business purposes are stated as mining other than coal, sales of non-metallic minerals and products, and research and development of resource recycling technologies.
Following the publication of the sale of shares by investment legend Warren Buffett and the general market correction, the shares of the "Build Your Dream" company lost about 40% in value since the end of June and are trading at USD 26.40. The next significant support level is the upward trend formed since May 2021, which is currently at USD 23.83.
Due to fears of recession, copper, which is known as an economic barometer, is also falling. According to experts, the correction is likely to be short-lived, as demand for the red metal already significantly exceeds supply due to the energy transition. The situation is similarly dramatic for other critical commodities. Globex Mining owns over 210 projects in its portfolio and offers itself as an optimal investment to participate in the coming supercycle.
Conflict of interest
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