05. May 2021 | 09:17 CET
Defense Metals, Daimler, Siemens Energy: Rare earths facing a new hype?
In 2010, the first hype about rare earths occurred. Even then, it was apparent that digital technology would not be able to do without rare earths. As a result, shares of mining companies increased in price by up to 1,000%.
Currently, there is a lot of talk about e-mobility causing raw material resources to become scarcer. However, the talk is mainly about copper, nickel, lithium and perhaps silver. Rare earths are mostly forgotten, although they are used in many electronic devices, fighter jets and wind turbines.
China controls 80% of the world market and, according to media reports, is considering restricting exports of rare earths. Doing so could have a significant impact on all industries that require rare earths.
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ISIN: CA2446331035 , DE0007100000 , DE000ENER6Y0
Defense Metals - NdPr is the trump card
Defense Metals has already confirmed rare earths at its 17 sq km site, namely the Wicheeda Rare Earth Project, located about 80 km north of Prince George, British Columbia. It is located in the middle of a mining center, offering excellent infrastructure with access to roads, rail lines, power and water. According to CEO Craig Taylor, this sets Defense Metals apart from the other rare earth deposits. The deposit features primarily neodymium-praseodymium (NdPr), the price of which has increased by more than 90% in the last year alone.
Considering the demand for rare earths, one finds that these magnetic rare earths, specifically NdPr, are in high demand. If China does stop the export of rare earths, the remaining resources will be even more valuable.
Currently, Mountain Pass mine is the only producing mine in North America and is owned by MP Materials. The geological setting of Mountain Pass is very similar to that of the Wicheeda Rare Earth Project.
Defense Metals' highly successful 26-tonne flotation pilot plant yielded approximately 1,200 kilograms of high-grade REE mineral concentrate. The Company is currently exploring agreements with several partners from Japan, the US and Canada. Production is expected to start from the first quarter of 2022 if everything goes as planned.
If you want to bet on rare earths, Defense Metals is well-positioned. In addition, there is a chance to become an acquisition candidate, knowing that MP Materials entered into a USD 1.5 billion merger deal with Fortress Value Acquisition in 2020 and holds USD 500 million cash to fund growth.
Daimler - Between chip shortages and new e-models
After the Corona crash down to EUR 22, Daimler significantly increased in value due to good sales figures in Asia. Since mid-February, the shares of the German carmaker have once again made significant gains. The reason is the focus on e-mobility.
At Daimler, the slogan is "Electric first." It means that in addition to the EQC and EQA, the EQB, EQE and EQS are now to be launched on the market. The latter two will also be available as SUVs. More rare earths are needed for the e-mobility fleet than for conventional vehicles.
The Executive Board and Supervisory Board have agreed that a spin-off of the truck division will be evaluated. The basis for this step is to be laid at an Extraordinary General Meeting in the 3rd quarter.
At present, however, the chip shortage is affecting Daimler just as it is many other automakers. Many employees are working short-time and it is still unclear when the supply of chips will return to normal. Therefore, one should closely monitor the developments before investing.
Siemens Energy - Taking a breather after a rally
Siemens Energy is active in energy technology and offers technically advanced services from planning to developing and delivering renewable energy plants. The focus is on wind turbines, and rare earths are needed there.
Looking at the annual report, one can see that currently, 66% of sales are still generated by gas turbines. 34% comes from the renewable energy sector. The Company wants to change this and is trying to establish itself in the hydrogen sector. The goal of climate neutrality in 2030 has been set. It will be interesting to follow this strategy.
After a substantial increase, the share is currently in a downward sideways phase. It should end between EUR 25.80 and EUR 24.50. At the end of April, JP Morgan issued an 'Overweight' recommendation, and Goldman Sachs considered the share a 'Buy.'