July 7th, 2021 | 11:49 CEST
BYD, QMines, Xpeng - Play the Trend
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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
Copper - Hype or Supercycle?
Does the energy turnaround create a new supercycle in the industrial metal, or is the hype around the red metal exaggerated? Concerning climate protection and the decarbonization of the economy and transport, the answer is clear. The fact is no other material conducts electricity as well as copper. As a result, it plays a crucial role in achieving climate neutrality, whether in e-mobility, energy generation or digitization. Yet, there is already a shortage of copper - last year's shortage was around 560,000 tons.
However, the copper market is hardly prepared for such a boom in demand. A meager copper price and reluctance to approve new projects have slowed investment in future supply growth in recent years. It takes about 2 years to expand a copper mine. It is even estimated to take around 8 years to start a new copper project. As a result, the US investment bank JP Morgan expects an increasing supply gap and even a structural deficit in the copper market by 2025.
Bright prospects for QMines
Thus, golden times are coming for copper producers and explorers. QMines, listed on the Sydney Stock Exchange and in Frankfurt for a few weeks, is digging for gold and copper. With its flagship project, Mount Chalmers, the Australian Company is looking for the two metals on a 983 sqm property in Queensland around the ports of Gladstone and Brisbane. There are four projects in the portfolio at advanced stages of development, to which QMines has sole rights. Mount Chalmers is a historic mine that operated between 1898 and 1982, producing approximately 1.2 million tonnes of ore at a grade of 2%. Building on resource estimates, management anticipates 3.9 million tonnes at grades of 1.15% copper, 0.81 g/t gold and 8.4 g/t silver, up to 60,000m is expected to be drilled by early 2022.
First results impressive
The share price reacted to the publication of initial drill results with a share price firework as early as mid-May. In total, initial test drilling was carried out over just under 1,600m. This revealed maximum values of 13.4% copper, 6.11 g/t gold and 31 g/t silver. In addition, further drilling over 3,000m was started. Currently, the stock is trading back at EUR 0.22 after a short-term hype partly due to a weaker copper price. In the long term, QMines is an option on a rising copper price.
Strong sales figures
One of the primary consumers of copper is undoubtedly the electromobility sector. The study commissioned by the International Copper Association (ICA) shows that by 2030 more than 250,000 tons of copper per year will be used as part of the windings in electric traction motors in electric vehicles. Due to the rapidly growing sales figures, the demand is increasing enormously. Once again, Chinese automaker BYD shows this in its figures for June. The Company, which is financed by Warren Buffett, delivered 51,015 vehicles, compared with just 33,725 units in the same period last year. The New Energy Vehicles segment, which consists of hybrid and electric cars, continues to grow. Here, 41,336 units left the assembly lines. The figure was "only" 32,800 units in May, compared with just 14,165 in the same period last year.
The other Chinese electric car manufacturers were also able to shine with growing sales figures. Li Auto, for example, sold 7,713 units of its Li One model, an increase of 321% year-on-year. That put them just ahead of industry rival Xpeng, which managed 6,565 e-cars. Taking the silver spot behind BYD in June was NIO. A total of 8,083 electric SUVs were shipped in June in fiscal 2021, an increase of 116.1% compared to the same period last year.
Without a doubt, the future belongs to electric mobility. The replacement of the combustion engine by the battery-powered vehicle is in full swing. BYD is undoubtedly one of the most promising companies in the industry. Due to the increasing demand for renewable energies, the copper price should continue to trend north. In addition to copper producers, exploration companies such as QMines will also profit from this.
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