January 17th, 2022 | 11:20 CET
BYD, Nevada Copper, Nordex - Copper, the next run
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"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
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.
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.
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.
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
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