04. August 2021 | 10:11 CET
Defense Metals, BYD, Nordex - Buy the trend!
Whether a laptop, cell phone, electric motor or wind turbine - rare earths are an indispensable raw material for producing all these goods. The megatrends of electromobility and renewable energies, in particular, are fuelling demand. Motors for electric vehicles and generators for wind power plants require powerful permanent magnets, and this is where rare earths such as neodymium and dysprosium come into play. We show you how to profit from this trend.
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ISIN: DEFENSE METALS CORP. | CA2446331035 , BYD CO. LTD H YC 1 | CNE100000296 , NORDEX SE O.N. | DE000A0D6554
DEFENSE METALS CORP - Profiting from rising prices
Rare earths also play a significant role away from civilian applications. The defense industry is a major consumer of critical raw materials. An American submarine requires around four tons of rare earths, a destroyer around two tons and a fighter jet over 400 kilograms. These are huge quantities. In general, China has a dominant market position in rare earths with significant potential supply and value chain risks. That is why international efforts are being made to rapidly ramp up rare earth production outside China. However, this endeavor will take several more years.
Here, among others, the exploration Company Defense Metals comes into play. The Canadians are developing the Wicheeda Rare Earth Project, which covers about 1,700 hectares in British Columbia. The Company is still at a relatively early stage. Past drilling programs have delivered good results. Indicated mineral resources amount to 4.89 million tonnes at an average grade of 3.02% light rare earth elements (LREO) and suspected mineral resources of 12.1 million tonnes at an average grade of 2.90% LREO.
The Company secured CAD 5 million in a capital increase. With these funds, a new drill program will commence in the summer to build on the success of the 2019 campaign. The current 2021 drill program is expected to cover 2,000 to 5,000 meters. The goal is to expand the zone of rare earth enrichment to the north of the property. In addition, targets in the center and northwest of the property are on the action plan.
Investors can profit from an emerging rise in rare earth prices with Defense Metals' stock. The Company has a high-opportunity project with good infrastructure. China's dominant market position and the increasing demand for rare earths from many industries, including the defense industry, underlines the focus of Defense Metals and how vital the mining of critical raw materials outside the People's Republic is.
The shares have corrected significantly from this year's performance high of around CAD 0.70 to CAD 0.23. Thus, the explorer is currently valued at a moderate CAD 18 million. The shares are also interesting from a timing point of view at the moment. In a few weeks, the first results of the new drilling program should be available. If the Canadians succeed in continuing the previously delivered good results or even discover new mineralization zones, this will positively impact the share price.
BYD CO LTD - Goldman Sachs is bullish
Recently, Chinese stocks have been properly shaken up in the wake of the Chinese government's regulatory frenzy. But in the past few days, they have been able to regain ground. The BYD share has gained around 40% within a few days and could now attack the high marked at the beginning of the year. The fundamental data provides a tailwind here. The automaker was able to increase sales in the first half of the year. Goldman Sachs then reiterated its buy recommendation of USD 40 for the electric car and battery producer. The investment case of star investor Warren Buffett's Chinese flagship holding is fully intact. New highs, as forecast by Goldman Sachs, are only a matter of time.
NORDEX SE - Balance sheet strengthened going forward
Recently, the North German wind turbine manufacturer carried out a capital increase with a volume of EUR 586 million. In the process, just under EUR 340 million was raised in cash and, an investment in-kind of just under EUR 197 million was made. With a subscription ratio of 11:4, the capital increase was placed at a price of EUR 13.70. The major shareholders went along with the capital measure. The Group is increasing its financial flexibility for further growth and improving its balance sheet ratios. In addition, net debt and consequently the interest burden are falling. Most analysts rate the share as a "buy" but lower their price targets due to the dilution effect. Since March, the share has dropped significantly from EUR 28 to EUR 16. Currently, the market capitalization is around EUR 2.5 billion. On August 12, the Group will publish its half-year results.
Numerous industries are dependent on rare earths. Price increases due to a substantial increase in demand and/or a supply shortage caused by China are serious risks. Investors can benefit from the trend of higher rare earth prices in the long term by investing in rare earth producers or explorers. Defense Metals is a promising company in this regard.