Defence Boom Meets Critical Metals: Rheinmetall, Renk, Globex Mining and Hensoldt in Focus

Rheinmetall and Renk: High Expectations Temporarily Dampened

The rally in European defence stocks has suffered its first noticeable setback after an unprecedented run from one record high to the next. Despite persistently high geopolitical tensions and full order books, investors in the capital markets are now increasingly demanding fundamental evidence of sustainable margin and cash flow growth. And this demand cannot be met 100%—the reason: cancellations, renegotiations, and delivery delays for key components. For example, the Düsseldorf-based defence giant Rheinmetall is facing a harsh reality check on the stock market, as the pace of industrial scaling falls far short of market expectations. Despite an order backlog of over EUR 80 billion, the stock is struggling at critical technical support levels of EUR 915 and EUR 937, far from previous highs above EUR 2,000. While major shareholders and management are sending a clear signal of confidence through insider purchases worth millions, short-term market sentiment remains fragile. The company is now attempting to break into promising high-tech sectors, such as military satellite reconnaissance, through strategic partnerships to reduce its dependence on the traditional hardware business. Overall, 23 out of 26 analysts on the LSEG platform are giving it a thumbs-up and expect an average price of EUR 1,672. Well then!

The Renk Group is also going through a challenging period on the stock market and, following a significant analyst downgrade by Bank of America in early October, hit a new annual low of around EUR 36. The specialist in tank transmissions is also raising concerns about capacity, and so far, rising margins and solid cash flows have yet to meet expectations. The massive price drop of over 60% from its high within a year clearly shows how mercilessly exaggerated valuation experiments are currently being corrected in the markets. Compounding the issue is the need for significant investment in capacity expansion, which is temporarily weighing on the company's financial foundation. While the highly profitable aftermarket and service business remains a stable anchor, the stock is still caught in the sector's downward trend. Trading-oriented investors should wait for momentum to resurface. The recent headwinds clearly show that even the biggest beneficiaries of the defence bull market are temporarily reaching the limits of their industrial scale.

Hensoldt: Holding Up Well in the Storm So Far

Defense electronics specialist Hensoldt proves that things can go differently. The stock has built up remarkable relative strength in the range around EUR 80 in recent weeks, leaving it only about 20% below its all-time highs. Fundamentally, the company is benefiting from the changing dynamics of modern conflicts, in which drone-based warfare, sensor technology, and high-precision air defence systems play a key role. This unique technological position was reflected in record operating results, and order intake also doubled spectacularly in the first half of the year. As a result, the order backlog surpassed the historic EUR 10 billion mark for the first time in the Group's history. The stock is currently consolidating at a high level, while the company continues to garner positive analyst comments, such as those from Bank of America and Kepler Chevreux. Only the comparatively high 2027 P/E ratio of 32.7 calls for caution. However, analysts are willing to overlook the temporary premium for a technological leader and have agreed on a 12-month target price of EUR 91.27, a solid 13% above the last closing price.

Globex Mining: The Strategic Wild Card in the Defence Sector Boom

In Québec, things move at a different pace! Europe's cry for help in the metals sector has certainly been heard, but many raw materials still lie dormant underground and must first be industrially identified and ultimately mined. CEO Jack Stoch paved the way for such an endeavour back in the 1970s; today, he owns more than 270 properties and is ready to deliver. Globex Mining, the company he founded, has evolved in recent years into a kind of mineral holding company without the traditional capital requirements of an explorer. The company owns and controls an exceptionally broad range of mineral projects, while partners drive exploration forward and assume the geological risk with their capital. This model is currently generating a remarkable string of news stories, as within just two days, Globex reported progress on three different assets—ranging from high-grade gold in Québec to a new resource estimate in New Brunswick to a large polymetallic system containing zinc, gold and silver.

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The Duquesne West project, in which Globex continues to hold a 50% interest, remains of interest. Partner Emperor Metals has now drilled a total of 142,758 m on the project, and results are already available for 44 of 66 drill holes from the ongoing program. The most recent hit returned 5.9 g/t gold over 32 m at a vertical depth of just 335 m—a result that once again underscores the scale of the mineralized system. Developments at the Vail Road/Devils Pike Gold Project could prove even more significant for the company's valuation. Following additional drilling and improved geological modeling, Albright Metals has updated the resource to 188,000 metric tons averaging 9.0 g/t gold, corresponding to 54,200 ounces contained. Notably, 33,500 metric tons are in the "Indicated" category and, at 20.9 g/t gold, contain at least 22,500 ounces; a scoping study will now be prepared based on this resource. The Berrigan Project in the Chibougamau Mining Camp adds another facet to the business model. There, Globex holds a 2% gross metal royalty, while TomaGold is expanding the scope of the polymetallic Berrigan Deep Zone through further drilling. The most recent drill hole intersected an average of 3.46% zinc equivalent over 69.4 m, including 40.1 m with 5.38% zinc equivalent. The mineralization now extends approximately 250 m along strike and about 400 m vertically to a depth of nearly 900 m.

This creates an interesting contrast to the numerous other commodity projects. Globex has exposure not only to the gold price but increasingly to zinc and other industrial metals. This development is particularly noteworthy in the context of a royalty structure, because a future commercial exploitation of the project could theoretically generate revenue without Globex having to finance the mine, infrastructure, and ongoing operations itself. The latest announcements therefore represent less a single sensational piece of news and more evidence of the effectiveness of the entire Globex model. This is crucial for investors: With every successful partnership program, another asset in the portfolio can reach a higher level of maturity, while Globex simultaneously maintains its outstanding diversification. With over CAD 25 million in liquidity to boot, Globex Mining remains an extremely attractive opportunity for investors!

The capital markets are operating very selectively. While the NASDAQ, with its high-tech blockbusters, can reach new highs almost daily, other sectors, such as chemicals, construction, and automotive, are steadily trending downward. Here, high interest rates are having a noticeable impact. Defense stocks are also mostly struggling. However, thanks to its balanced business model, the metals specialist and asset manager Globex Mining is able to make further progress in this environment. From a risk perspective, good diversification across countries and sectors remains essential.