21. May 2021 | 09:28 CET
BYD, Nevada Copper, AT&T - Nothing works without copper
More and more people worldwide have access to electricity. The electrification of the world is progressing and this requires copper - the non-precious metal that conducts electricity best. Copper was one of the most widely used industrial metals even before the advent of renewable energies and e-mobility. It is found in consumer goods such as air conditioners, telephones and everything around power grids. Increased sales of e-cars are also increasing demand for the "red gold" here, as more copper is needed for these than in conventional passenger cars. Added to this is the charging infrastructure for e-cars, which still has to be built nationwide. Demand will certainly not decrease, but since the supply is not growing at the same time, rising prices are the result.
time to read: 3 minutes by Armin Schulz
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
The Chinese economy is booming, which can also be seen in BYD's sales figures for e-cars. In April, 25,662 vehicles were sold, exceeding the excellent result from March. Most recently, the 1,000,000th e-car also rolled off the production line - a milestone in the history of the Company. Sales activities are now to be driven forward in Europe as well.
What many people do not know is that the Company sells not only e-cars but also e-buses and cars with combustion engines. It started as a battery producer and wants to develop a zero-emissions energy ecosystem. Electricity is to be generated via solar energy, which can be temporarily stored in appropriate electricity storage systems and called up as needed.
The vision and growth are great, but the share has lost more than 50% since January. Despite the much better sales figures, the profit in the first quarter fell by 71% compared to the fourth quarter of 2020. On the one hand, the reasons are the rising raw material prices such as copper and on the other hand more and more competition in the e-mobility market. In addition, the spin-off of the Semiconductor division may have prompted some investors to sell. Those who want to bet on e-mobility in the long term can open an initial position but must be able to withstand possible downward price fluctuations.
Nevada Copper is a copper producer whose main project, Pumpkin Hollow, is located in Nevada. The area has extensive reserves of copper, gold and silver. After some start-up difficulties, the underground mine and processing plant came into production. At its peak in March, 5,000 tons of copper ore were being mined daily.
On Tuesday, the Company issued an update on ongoing operations. It will be several more weeks before full production capacity is achieved. Until then, the Company expects to mine 3,000 tons of copper ore per day. The processing plant's capacity has been improved to 5,000 tons per day. In the first quarter, 3,173 tons of concentrate were produced with a copper content between 24 and 26%. Yields improved from 82% in Q4 2020 to over 90% in Q1.
Drilling is planned at the open pit to provide a resource and reserve update and further enhance the value of the project. Litigation has been settled, and some financing transactions have been completed to provide liquidity until the project is in full production.
Since production has started, there has been movement in the stock. The downward trend has been broken, and with the prospect of a further increase in the copper price, one can position oneself here at the beginning of the value chain. Conservative investors are waiting for a setback to around CAD 0.20.
On Monday, the stock still opened with a GAP-up, but then the selling wave started at AT&T. The reason is the spin-off of the Warner-Media subsidiary, which was bought only 3 years ago. Warner-Media will merge with Discovery to create a large media Company. AT&T will receive USD 43 billion for this.
Investors are disappointed that the Company is giving up the high-yield media business and fear that the dividend could fall. One might think that previous CEO Stephenson's strategy of positioning himself as a content company must now be considered a failure. Perhaps the debt burden of around USD 170 billion was too oppressive and after the sale of the advertising business also failed, action had to be taken.
If the dividend is capped as expected, AT&T will lose its dividend aristocrat status, as it cannot be increased further. The stock is approaching a resistance area that ranges from USD 28.50 to USD 27.89. If the stock closes below it, things look bleak. In the current situation, one should wait until the fog clears.