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April 26th, 2023 | 08:55 CEST

Caution at Nel ASA and drumbeat at Volkswagen: Can Canadian North Resources profit?

  • Mining
  • PreciousMetals
  • Nickel
  • Lithium
  • Electromobility
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Things are getting exciting for shareholders of Nel ASA. The hydrogen pioneer will publish its figures for the first quarter tomorrow. A current buy recommendation does not help the share price. At least the expectations for the figures are anything but high at the moment. Is there anything positive to report on the order book? Plug Power recently placed an order with a competitor. In the battery sector, Volkswagen has caused a sensation. The Wolfsburg-based company has announced its intention to build its largest battery factory to date in Canada. The Canadian government is subsidizing the project and expects thousands of new jobs at VW and its suppliers. The latter could include Canadian North Resources. The Company is currently developing a vast area and has already found copper, nickel, cobalt, platinum, and palladium there. Another drilling programme has just been launched. It is hoped that lithium will also be found.

time to read: 4 minutes | Author: Fabian Lorenz
ISIN: NEL ASA NK-_20 | NO0010081235 , CANADIAN NORTH RESOURCES INC | CA1364271017 , VOLKSWAGEN AG VZO O.N. | DE0007664039

Table of contents:

    Terry Lynch, CEO, Power Nickel
    "[...] Nickel, therefore, benefits twice: firstly from its growing importance within batteries and secondly from the generally growing demand for such storage. [...]" Terry Lynch, CEO, Power Nickel

    Full interview


    Volkswagen: The largest battery factory to be built in Canada

    When it comes to battery production, Volkswagen seems to be the German carmaker that is stepping on the gas the most. The Wolfsburg-based company wants to significantly reduce its dependence on Asian battery manufacturers in the medium term and produce 50% of the batteries required for its e-car fleet itself. To this end, six battery factories are to be built in Europe in the coming years. The first of the Company's factories is to be opened in Sweden before the end of the year. The first battery production plant in Germany is scheduled to open in Salzgitter in Lower Saxony in 2025.

    But there are also big plans for Canada. The planned plant in St. Thomas, Canada, has a production volume of up to 90-gigawatt hours per year - it is to become the group's largest battery site to date. According to VW, 90 GWh can equip around one million e-cars. Volkswagen is investing up to EUR 4.8 billion in the project. The Canadian government is subsidizing the project with several billion CAD. The government is hoping for an economic upswing in the region in southern Canada. That is because, in addition to the employees at the VW site, it will, of course, also need numerous suppliers. Cell production is scheduled to start in 2027.

    Canadian North Resources: Exciting raw material mix and VW fantasy

    This means that the time is running out for VW to build up supply chains in order to have the necessary raw materials available in time for the start of production. It is, therefore, a good thing that North America is pushing for independence from China in terms of raw materials for electromobility. A possible partner for VW could be Canadian North Resources. The explorer is focused on metals for clean energy, electric vehicles, batteries and high-tech applications. For this purpose, Canadian North is developing a 253.8 sq km area in the Kivalliq region of northern Canada. Exciting for investors: Several critical raw materials have already been proven on the Ferguson Lake project in the past year, including nickel, copper, cobalt, palladium and platinum. Last year's programme comprised 18,144 m and 68 drill holes. The result: Indicated Mineral Resources of 24.3 million tonnes grading 0.85% copper, 0.60% nickel, 0.07% cobalt, 1.38 g/t palladium and 0.23 g/t platinum, and Inferred Mineral Resources of 47.2 million tonnes.

    Such a broad mix of raw materials in just one project is rare and spreads risks. And it is not to stop there. Recently, Canadian North Resources started another 20,000 m drilling programme. In doing so, the Company is focusing on the 15 km long main mineralized horizon. The aim is to expand and upgrade the mineral resources. In addition, management is confident of adding lithium to the project's resource mix. The stock has been running sideways since mid-February and is currently trading at CAD 2.55. The market capitalization is around CAD 260 million. If the current drilling programme brings similarly positive newsflow, the share seems anything but expensive. The news about VW should also bring the local commodity companies further into the focus of investors.

    Like the ID.7, the Cupra Tavascan will have new software. Source: Seat SA

    Nel ASA: Will the order book reassure investors again?

    So while investment in electromobility continues worldwide, the fantasy is out for hydrogen at the moment. Too often, Plug Power, ITM Power and Ballard Power have disappointed. This also applies to the European hydrogen specialist Nel ASA. The share is approaching the October low of just under EUR 1. And tomorrow, the Norwegians will report on the operating performance in the first quarter of 2023. Recently, quarterly figures have tended to go down, but expectations have recently fallen significantly, as seen in the share price. At least Nel could always point to a large order backlog in the past. But in the past few weeks, there have been no success stories. Most recently, Nel has once again come up empty on a project from Plug Power. The US company has ordered another hydrogen filling station from Hydrogen Refuelling Solutions (HRS). It is now the fifth order in the current year. Plug Power and the French HRS are thus further expanding their partnership in the field of hydrogen filling stations.

    Analysts are divided ahead of the figures. JP Morgan does not expect any new momentum from tomorrow's numbers announcement. The analysts recently renewed their "Underweight" rating. The price target was minimally reduced from NOK 11.60 to NOK 11.50. The analysts thus expect the Nel share to slip below EUR 1 again. JP Morgan considers ITM Power to be more promising. However, the analysts are currently sceptical about the entire European hydrogen sector. The entry only becomes urgent when stronger sales growth and improved margins become apparent. Investors should not forget that Nel's market capitalization is still close to EUR 2 billion.

    RBC is more optimistic. The analysts of the Canadian bank continue to rate the Nel share as "Outperform". The price target is NOK 22. The analysts believe that Nel will beat consensus estimates on sales tomorrow. Strategically, Nel would stand out from the industry with its large electrolysis capacity.

    Not much is expected from the Nel numbers. Nevertheless, a significant positive share price reaction is unlikely. A purchase as a long-term investment does not suggest itself at the moment. Volkswagen is stepping on the gas in battery production, but it will take years to build up its own capacities. At the same time, the corresponding raw materials have to be secured. This puts companies like Canadian North Resources in the spotlight.

    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

    Fabian Lorenz

    For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.

    About the author

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