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January 17th, 2022 | 11:20 CET

BYD, Nevada Copper, Nordex - Copper, the next run

  • Copper
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After a prolonged sideways movement and a bottoming out in the USD 9,000 area, copper celebrated the recapture of the psychologically important USD 10,000 mark last week. The triumphant march of the red metal is likely to continue in the coming years due to the energy transition. Stronger demand is offset by scarce supply, which is being further fueled by the electrification of transport, among other things.

time to read: 3 minutes | Author: Stefan Feulner
ISIN: BYD CO. LTD H YC 1 | CNE100000296 , NEVADA COPPER CORP. | CA64128F7039 , NORDEX SE O.N. | DE000A0D6554

Table of contents:

    Most important metal for climate change

    The regular cycle of rising and falling prices is typical of mineral commodity markets. High prices trigger investment in raw material extraction and processing. On the other hand, if raw material prices fall in phases of overcapacity and stagnating demand, investors shy away from market risks and withhold their capital for investment in new projects. As supply falls, commodity prices then rise again. This phenomenon is currently exemplified by the copper market. In recent years, new projects could be counted on one hand due to the low copper price.

    As a result of the energy transition, copper is experiencing a renaissance due to its properties and high conductivity. The price of copper, which is existentially important as a base metal for electrification, reached a 10-year high in the middle of last year. It was driven by a supply deficit that has already been growing for two years. Major US investment houses were already calling for a new supercycle in the copper market. They say the sector is not prepared for rapid growth, and there is simply a lack of new, promising projects.

    New cornerstone investors

    Experts see great potential in Nevada Copper, a mining company operating since 2007. It maintains its 60 sq km Pumpkin Hollow project in the state of Nevada, not far from the headquarters of Google and Tesla. The high-grade project, which in addition to copper also contains gold and silver, involves major players such as Castlelake, Blackrock and Pala Investments. With the change in leadership last fall, Nevada Copper finally seems to be on track after years of delays and fallout.

    New CEO Randy Buffington solved the first difficult task with flying colors. He secured additional financing and a significant deferral and extension of credit facilities with KfW, a senior lender to Pumpkin Hollow, and major shareholder Pala Investments, which holds about 38% of Nevada Copper. In addition, the Canadians secured around EUR 78.50 million through a capital increase. Here, two additional major investors were landed, each with a shareholding of 10.4%. Both Solway and Mercuria secured a larger piece of the pie by subscribing for USD 30.00 million each.

    Operational successes

    In addition to securing financial backing for the next few years, Nevada Copper is also stepping on the gas operationally. The news that the Company has 50% higher development rates than in November 2021 and an increase of almost 100% compared to August 2021 shows a clear trend. The acceleration is expected to continue in the first quarter. This year, the Canadians also plan to mine another high-grade copper adit called "Sugar Cube". Nevada Copper is once again a force to be reckoned with. Fundamentally, the Company is on a healthier footing. The increase in Pala's stake and the addition of the two new major shareholders, Solway and Mercuria, speak for themselves.

    Bottom found?

    After a stronger correction, the Chinese automaker BYD may also have found its bottom at around 27%. The news that the Chinese government has cut its subsidies to purchase NEVs by 30% this year is likely already reflected in the share price. As a result, attention is turning to the future and growth. And this looks more than rosy. While the sales figures for NEVs in the past fiscal year were 593,700 units, the "Build Your Dream" Company is expected to sell 1.5 million units in 2022, according to a research report by CITIC Securities.

    It is now well known that electromobility requires large quantities of lithium. To not jeopardize growth, BYD has been involved in lithium production via subsidiaries for some time. The subsidiary BYD Chile has now been awarded the contract for a lithium mining project, winning the tender together with the Chilean Company Servicios y Operaciones Mineras del Norte. Both companies will receive the right to mine 80,000t of lithium each.

    Further contracts

    The year 2022 continues as the old one ended - with orders for wind turbine manufacturer Nordex. It was not the volume of orders in 2021 that caused the share price to plummet by a good 50% to the current EUR 14.05. Instead, it is about the weak margin achieved on the orders.

    This time, major orders for 245 MW were reported from South America. The northern Germans said that Norwegian utility Statkraft has ordered 14 turbines for its planned 80 MW Morro do Cruzeiro wind farm in Brazil. The order also includes a three-year service contract with an option to extend. There was also an order from a developer in Chile for turbines for a 165 MW wind farm, plus a two-year service contract.

    Copper is taking another run at jumping above the USD 10,000 mark. Demand means there are prospects for prices to rise further. Nevada Copper is fully on track and could benefit significantly from the copper boom. BYD should have found a bottom, and Nordex continues to struggle with margins.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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