October 8th, 2021 | 13:04 CEST
Central African Gold, Varta, Standard Lithium - Get in or get out?
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"[...] 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
CENTRAL AFRICAN GOLD INC - Cobalt play
Central African Gold focuses on prospective copper, cobalt and nickel projects to develop and operate them. Regionally, the focus is on the Democratic Republic of Congo. In the past, the African country was often criticized for corruption, child labor and a high level of environmental pollution in the mining of raw materials. However, the situation has improved significantly.
In addition to the King Luba properties - the concessions are 100% owned by the Company - Central African Gold also holds the option to participate in the state-controlled Musefu Gold Project. This project has historical grades of 2.5m at 28.4 g/t gold and 11m at 8.1 g/t gold. In total, the Canadian-listed Company owns six mineral concessions covering a total area of 176 sq km, including both forests and farmland. Recently, the Canadians announced new plans that could result in significant shareholder value. They are currently evaluating the possibility of generating cash flow from carbon credits on the large land package, which includes 160 sq km of farmland.
Getting to the heart of the investment story: cobalt plays a special role for the Company. The Democratic Republic of Congo accounts for 59% of global production. China accounts for 7% of the global output, and Canada 6%. Cobalt is a transition metal that is primarily extracted as a byproduct from nickel and copper ores. Cobalt is used mainly in lithium-ion batteries. It is also used in magnets, alloys and catalysts. The recently released NI 43-101 Canadian Standard resource estimate for the Zani-Kodo Gold Project did not significantly impact the share price. The Company currently has a market capitalization of only CAD 10 million.
VARTA AG - Strategic plans confirmed
Varta confirmed plans to build V4Drive lithium-ion cells for battery electric vehicles at its recent Capital Markets Day. The Company also intends to expand its portfolio in this area further. Earlier this year, the technology and innovation leader in microbatteries announced its entry into producing large lithium-ion round cells for battery electric vehicles. These new next-generation cells enable long ranges and additional power for dynamic driving.
Company CEO Schein commented, "Varta is bringing performance to e-mobility. Today's energy batteries offer automotive engineers the ability to build cars with long ranges. V4Drive will also offer additional performance qualities. That makes it ideal for the performance segment of the automotive industry. An electric car powered by V4Drive cells will be able to travel long distances while offering more dynamic driving - and it can be charged much faster than is possible today."
The stock has been very volatile over the past 12 months. The share price is trading at about the same level as at the beginning of the year. Varta's half-year figures disappointed many market participants, showing only minimal sales growth and only a moderate increase in profits - given the Company's sporty valuation. Many analysts classify the title as a hold position.
STANDARD LITHIUM LTD - Share price performance vs. analysts' opinions
The Standard Lithium share is worth a closer look for those who want to bet on the electromobility card and especially on lithium. After all, the stock is one of the few with which this topic can be covered. In addition, the value has recently corrected and is currently trading slightly below the CAD 10 mark. Thus, the Company is valued at around 1.4 billion. Analysts, however, consider the title to be overvalued and, on average, formulate a price target of around CAD 6.60. The long-term outlook, however, is good. The high demand for lithium as one of the primary raw materials for electromobility speaks for the good long-term prospects.
The presented shares benefit from the electromobility megatrend. Lithium and cobalt are key raw materials for this, represented by stocks such as Standard Lithium and Central African Gold. Central African Gold has the highest risk within the trio but undisputedly also the greatest potential. Varta has to deliver large lithium-ion round cells for battery electric vehicles; only then could the share rise again sustainably.
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