April 22nd, 2021 | 09:44 CEST
Defense Metals, Lynas, NEL - Profit from the shortage of metals!
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Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Defense Metals - The Wicheeda project moves forward
The supply situation of scarce and especially rare raw materials is highly debated. Thereby the overpowering dependence on China leaves western politicians with a feeling of powerlessness. Worldwide there are only about 20% of free resources in this area. Many properties are too small for industrial exploitation. As the majority owner of rare metals, China could sometimes play this monopoly against the other industrial nations, especially if childish trade wars do not find a lasting solution.
In many future applications and high-tech devices, we refer to electromagnetically important metals such as neodymium, praseodymium, dysprosium and terbium. According to recent studies, in 10 years, the demand will be 5 times the current demand; this is due to the exponential growth of energy storage and power generation technologies. If e-mobility grows at 25% or more per annum, as currently expected, we will be in a complex supply situation in as little as 2 years.
Canadian explorer Defense Metals has secured a deposit in Wicheeda, BC, that could supply in the foreseeable future. A feasibility study is already underway and the Company is currently receiving bids for a hydrometallurgical pilot plant. The Wicheeda project has Indicated Mineral Resources of 4,890,000 tonnes averaging 3.02% LREO (Light Rare Earth Elements) and Inferred Mineral Resources of 12,100,000 tonnes averaging 2.90% LREO. Highly successful testing of the Company's 26-tonne flotation pilot plant, also conducted at SGS Lakefield's metallurgical test facility, has already yielded 1,200 kilograms of high-grade REE mineral concentrate. The goal is to produce a saleable NdPr oxide product - Defense Metals could be there by 2022.
So given the current situation, this issue could fly at some point. Defense shares have consolidated extensively and are now trading for a low CAD 0.35, roughly in the middle of the last 12 months of trading.
Lynas Corporation - Rare earth prices are picking up
Another player in the critical metals market is Australia's Lynas Corporation. It operates the Mount Weld mine in Western Australia and a processing plant in Kuantan in Malaysia. With sales of AUD 360 million, Lynas is one of the larger suppliers outside China.
Total quarterly rare earth oxide production was 4,463 tons in the first quarter, up from 3,410 tons previously. Corresponding sales were AUD 110 million, slightly less than the AUD 119 million realized in the previous quarter. The cash nevertheless grew to AUD 568.5 million, allowing Lynas to expand its resource, as demand in the current year is barely manageable. Currently, China is still willing to serve the shortfalls of the Western industry, but this condition should not turn into recklessness.
NdPr and SEG sales prices reached new records this year, and Lynas had to curtail its production in Southeast Asia somewhat due to COVID security requirements. In turn, this increases the international demand for new projects, such as Defense Metals. The Company noted that a judicial review application has been filed in Malaysia to get government approval for higher production rates. Lynas shares had a TOP 12-month performance of plus 300%, since 2 months the stock has been consolidating at a high level.
Nel ASA - The story goes around some more
Another quick look at Nel ASA, the hydrogen logistics expert from Norway. We took a closer look at the stock in recent weeks. The share reached a high of EUR 3.4 in January, after which it fell to EUR 2.1. Currently, the share is moving sideways. The former fans of the share are trying to revive the share price every day - but the success is missing. It seems that the time of hydrogen stocks is over.
Morgan Stanley was nevertheless optimistic about the entire H2 sector in a study. The analysts examined the future potential of hydrogen and praised Nel, in particular, for its pioneering role as a pure player in the field of water electrolysis in Europe. The study and the positive market environment could bring new momentum to the stock. Still, justified doubts remain as to whether the current pronouncements on e-mobility will not push hydrogen into the background for the time being. We do not expect a new hype in the short term, rather a gentle recovery from the 40% correction shock.
Therefore, pay attention to the technically important lines at EUR 2.13 and EUR 1.91. These are two stops on the way down. The NEL share will only become truly bullish again above EUR 2.72.
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