Change of favorites in hydrogen shares! ThyssenKrupp instead of Nel ASA? Can Grid Metals take off?

Grid Metals too cheap? Lithium production set to start in 2024

Standard Lithium's stock has gained almost 50% in the past six months. For those who missed out on the rally, it is worth taking a look at Grid Metals. Both companies are exploration companies in North America. While Standard is nearing the results of the feasibility study of its first project, Lanxess 1A, Grid Metals is working on its resource estimate. The different stages on the way to becoming producers is reflected in the valuation. While Standard Lithium is valued at around CAD 1 billion, Grid Metals is valued at less than CAD 25 million. Is this too cheap, especially considering their cash and cash equivalents were approximately CAD 7 million as of March 31, 2023?

Grid Metals is already going into production next year with the Donner Lake lithium project. Donner Lake is one of four projects (besides Falcon West, Makwa Mayville and a nickel mineral exploration licence) and the most advanced. All four are located in Canada. In order to be able to start lithium production as early as 2024, Grid Metals has concluded a cooperation agreement with the already-producing neighbouring mine, Tanco, to be able to use the machines there. This also reduces the need for capital and the dilution of shareholders through possible capital increases.

More drill results from Donner Lake have been released this week. Drill core samples were collected from the Main and Northwest Trenches and will be incorporated into the ongoing NI 43-101 resource estimate. The mineralogical study clearly identified the main mineral in the samples as high-grade spodumene lithium mineral. Both areas returned high-grade lithium concentrates of 6.2% (Northwest Dyke) and 5.7% (Main Dyke).

Further metallurgical testing will be carried out, and the material will be tested at processing partner Tanco. "We are pleased to have tangible test results confirming that spodumene is the predominant lithium mineral and that standard flotation processing appears to be effective in recovering lithium into a marketable concentrate," said Robin Dunbar, CEO of Grid Metals. The stock was trading at CAD 0.14, well below its annual high of CAD 0.23 in January.

ThyssenKrupp in the Nucera hype

The ThyssenKrupp share is a different story. The stock is trading at a 52-week high. The share price has risen by around 25% in the current year alone. The DAX Performance Index, on the other hand, has only gained 13.5% in this period.

The IPO fantasy of the hydrogen subsidiary Nucera fueled the share price. And this matter is now becoming concrete. Last Friday, the subscription period for the Nucera share started. Shortly afterwards, the bank consortium already reported an oversubscription. The shares can still be subscribed until July 5 2023, in a price range between EUR 19 and EUR 21.50. Including the new shares, ThyssenKrupp Nucera is thus valued at between EUR 2.4 billion and EUR 2.7 billion. Based on the price range, the Company would receive gross proceeds of between EUR 500 million and EUR 566 million. The capital is to be used for investments in the electrolysis business.

Dr Werner Ponikwar, CEO of ThyssenKrupp Nucera: "With our technology for the production of green hydrogen, we want to help shape the new era of sustainable energy use. Green hydrogen is a key factor for the decarbonization of industry and, thus, the achievement of climate protection targets. Our technology produces green hydrogen on a large scale and supports our customers on the path to climate neutrality."

ThyssenKrupp Nucera is a provider of world-leading technology for highly efficient electrolysis plants. With over 600 completed projects, 240,000 electrolysis cells produced and over 10 gigawatts of installed electrolysis capacity, the Company is a market leader in the chlor-alkali business with five decades of experience. The development and expansion of alkaline water electrolysis (AWE), which produces green hydrogen on a large scale, is based on this strong expertise. Compared to other technologies, ThyssenKrupp Nucera's alkaline water electrolysis enables customers to produce green hydrogen on a larger and more centralized industrial scale**. A standardized, modular approach allows for producing large volumes at low costs.

Plug Power and Nel in Nucera's shadow: Entry opportunity?

While demand for Nucera shares is high, investors are leaving the securities of Plug Power and Nel ASA to the side. After a price rally in May, both shares are heading sharply downward again. Nel ASA is particularly battered on the chart and is currently trading just above EUR 1, just above the low of the past 2.5 years. The market capitalization is NOK 20.4 billion, below the level of newcomer Nucera. Plug Power is still valued at USD 5.5 billion. The share is trading at USD 9.26, close to its lowest level since the end of 2020. But is the share price weakness of the two hydrogen specialists or the hype around Nucera perhaps an entry opportunity? At least with the IPO, investors should be cautious. The shares rarely trade below the IPO price in the months after the IPO.

The lithium sector is gaining momentum again. Given the start of production in the coming year and the market capitalization of less than CAD 25 million, the share has catch-up potential. Investors should look closely at Nucera's IPO. Due to the hype, subscription gains are quite possible, but the euphoria can also end quickly. In the case of Nel and Plug Power, the recovery after the figures is already over. They are currently overshadowed by Nucera, but this can also be an opportunity.