14. July 2021 | 12:32 CET
BYD, GSP Resource, Volkswagen - Follow the trend
The future is to become climate-neutral and low-carbon. With the energy concept and the energy turnaround, Germany is phasing out nuclear energy and switching from oil to renewable energies. Today, the entire mobility sector is still highly dependent on oil, but this is now to change as quickly as possible. The car industry has already sung the farewell song of the combustion engine in favor of battery-powered vehicles. But we are only at the beginning of long-term development.
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ISIN: BYD CO. LTD H YC 1 | CNE100000296 , GSP RESOURCE CORP. | CA36249G1090 , VOLKSWAGEN AG VZO O.N. | DE0007664039
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Enormous demand for metals
Due to the energy transition and the reduction of CO² emissions, coal, crude oil and gas are expected to lose importance in the future. In contrast, metals such as copper, cobalt, nickel, and lithium will be in greater demand to expand capacities for generating and storing renewable energies. Copper, in particular, is considered a key metal. Due to its chemical properties, it is irreplaceable in the electrification of the global economy.
According to the German Copper Institute, an electric vehicle contains almost three times as much copper as a vehicle with an internal combustion engine. Half of this copper is found in the accumulator. The generation of electricity from renewable energies and the infrastructure required to charge electric vehicles also create a high demand for copper. The lithium-ion battery alone consists of around 18% of the red metal, as the cathode is always made of aluminum and the anode of copper as the carrier material.
The exploding demand meets a limited supply. Global copper production fell by 0.5% by the end of October 2020, while copper consumption increased by 2%. As a result, a supply deficit of 559,000 metric tons was created, the most significant excess demand in a decade. Copper production is no longer keeping pace with rising demand. Currently, there are few new copper projects due to the reluctance to invest in recent years. Developing new deposits would take several years. According to Goldman Sachs, which predicts a copper price of USD 15,000 in the next few years, "Copper is the new oil."
Good starting position
Therefore, companies such as Copper Mountain, Teck Resources and Freeport McMoRan, which are already producing copper, or developers who have secured promising properties, are best positioned to increase their value. GSP Resource, a Canadian exploration company with two projects in southwestern British Columbia, is in league with the industry giants, at least in terms of deposit geography.
The experienced management, which has a track record of developing and financing mineral deposits, secured an option to acquire 100% of the Alwin Mine, a copper-gold-silver project located in the Kamloops Mining Division, 18km west of Logan Lake in British Columbia. The location is attractive. The Alwin mine borders, to the west, the Highland Valley mine of industry giant Teck Resources - a giant with a stock market value of nearly CAD 15 billion. Although the grade is less than 0.5%, the Highland Valley mine is considered Canada's most effective copper mine.
Historical values of the Alwin mine, which operated from 1916 to 1981 as a copper mine with gold and silver content, yielded copper ore grades of 1.5%. A 3D model has recently been created as several underground structures will allow more efficient planning of drill targets. The drill program was started in early June, and GSP Resource expects results by August at the latest.
In addition to Alwin, GSP Resource owns another high potential asset, the Olivine Mountain Project. The 3,020-hectare property is located in the Interior Plateau area of south-central British Columbia, 25km northwest of Princeton. Again, the strategy was to drill close to already producing mines. Just 25km away is Copper Mountain's copper mine, just under 50km is Westhaven Ventures' Shovelnose project and Kodiak Copper's MPD project.
The Company also raised CAD 350,000 for further exploration activities. In total, the market capitalization is only CAD 4.49 million. When successful results are announced, this should change. In the long term, we see GSP Resource as a classic takeover candidate due to its proximity to the mines of the larger copper producers.
BYD sees boom in demand
One of the primary consumers of copper is the Chinese electric car manufacturer BYD. In June, the Company's sales of plug-in hybrid and electric vehicles surpassed the 40,000-unit sound barrier for the first time. While overall sales were up 51% compared to June 2020, the group saw a 102% increase in BEV sales and a 536% increase in PHEV sales.
Targets set higher
The transformation to e-mobility is running successfully at Volkswagen, and the first half of the year was also more than satisfactory. That is reason enough for the Wolfsburg-based Company to raise its original forecast of an operating return on sales of between 7% and 8% for 2025, to 8% to 9%. They say that today's robust and high-margin business with combustion engines, with its high cash inflow, should finance and accelerate the switch to e-mobility. At the same time, the margins of e-cars should be improved by lower battery and production costs and increasing unit sales. In two to three years, the margins of the two technologies should have roughly converged, Volkswagen estimates.
Electromobility is the future of road transport. In addition to Volkswagen, which has its sights set on market leadership, BYD is also one of the winners in the industry. The copper price should also benefit from the rising demand in the long term. GSP Resource has long-term value enhancement potential due to its promising projects near the large copper producers.