August 9th, 2021 | 12:14 CEST
BYD, GSP Resource, Standard Lithium - Lithium hype, but do not forget copper
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"[...] If we pursue our goals conscientiously, the market will adjust its valuation accordingly, I am sure. Often, all it takes is a trigger. [...]" Ryan McDermott, CEO, Phoenix Copper
BYD - Tesla's biggest competitor
Historically, BYD is a battery manufacturer that launched in 1995. Since 2003, the group has also been active in the automotive business. Due to the technological lead of the leading car manufacturers, BYD's founder decided to specialize in the development of e-vehicles as early as 2008. An idea that is now paying off more and more. Because the blade batteries are so good, there are already rumors that even the market leader Tesla wants to install them in its vehicles.
Such a battery for an electric car contains between 8 and 16 kg of lithium, and the lithium-ion battery consists of 18% copper. In total, over 70 kg of copper is needed for an e-car. Current combustion engines contain about 25 kg of copper. Here, too, the trend is upward because more and more electric motors are being installed to provide greater comfort. The copper requirement is therefore also increasing almost 3-fold. The significant increase in raw material prices for both components gives an idea of what the further increase in demand will mean.
The BYD share marked a new all-time high last week. Of course, this is also due to the rumors about possible deals with Tesla. But the numbers for July were excellent. There were 139% more electric vehicles sold year-on-year. With 24,560 cars sold, more vehicles were delivered than competitors NIO, Xpeng and XPEV combined. After the rally, we would wait for consolidation to enter. If the rumors surrounding Tesla are confirmed, the stock will continue to rise.
GSP Resource - A takeover candidate
Major commodity producers have sought large copper deposits for years, unfortunately without success. The demand for copper is constantly increasing, explaining the high copper price, even if a slight consolidation has recently set in. GSP Resource (GSP) owns two projects in British Columbia where copper was mined in the past. At that time, still with the lorry and pickaxe.
The smaller Olivine Mountain project was acquired on May 19 and is located just 25 km southeast of the Copper Mountain copper mine. Two discoveries have been reported to date, the Asp deposit at 3.51% copper and some silver over 3.4m and the Hop deposit at 7.49% copper, 23 grams of gold per tonne and 89.5 grams per tonne of silver. The flagship project, however, is the Alwin Mine, where the drill program is currently underway.
The results of the program are eagerly awaited by the end of August at the latest. The Alwin Mine is located in the immediate vicinity of Teck Resources' Highland Valley Copper Mine. If the results are correct, the likelihood of a takeover by the major competitor increases. After acquiring the Olivine Mountain project, the stock has given back all the gains from the jump in the share price to CAD 0.50. It has now formed a triple bottom at around CAD 0.22. With the results, another price jump could beckon here.
Standard Lithium - Pilot plant running
The Canadian lithium producer Standard Lithium should be known to many Tesla fans since Elon Musk certified a lot of potential to the Company in 2020. Although the Company is based in Canada, it has mining projects in the US. The first project is called Bristol Lake and is located in the Mojave Desert of California. It has agreements with two brine processing companies operating on-site for more than 20 years to get production going.
But the main project is the Smackover project in Arkansas, in partnership with Lanxess. In this area, Lanxess mines bromine from brines. The process used does not evaporate water to extract lithium but relies on the brine flow. Not only does this protect the environment, but it is also much faster than the conventional process. In June, Lanxess converted a loan it had granted into shares and warrants. Lanxess has thus increased its stake in Standard Lithium. The pilot plant is producing lithium after a few teething problems.
It is not only since the takeover of Millennial Lithium that rumors have been swirling around Standard Lithium that the Company could be taken over. There was talk of Tesla, Lanxess and others. Nothing has been confirmed so far. The share price has more than doubled since the beginning of the year, also due to the high lithium price. Should a takeover take place, the price should be even higher. However, we would wait for a setback before venturing an entry.
Due to the industrial revolution towards e-mobility, the required raw materials will become scarce in the future. While lithium is available worldwide in sufficient quantities but has yet to be brought into production, the situation is quite different for copper. Here, resources are scarce, and bottlenecks cannot be eliminated as quickly as with lithium. In our view, investing in copper, using GSP Resource as an example, is worthwhile and preferable to Standard Lithium. BYD may have to struggle with high raw material costs in the long run.
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