November 30th, 2020 | 13:00 CET
Defense Metals, TUI, Everfuel - these are the new stars!
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These scarce raw materials are "rare earth metals." Permanent magnets for electric motors, for example, are produced based on "rare earth metals" - REM. Smartphones, monitors and even wind turbines contain dysprosium, neodymium, germanium or gallium. REMs play a decisive role in the production of weapons. For example, the US Air Force's most modern combat aircraft, the F-35, requires about 1,000 pounds of rare earth metals, most of which are currently sourced from China.
China on the move
The US is also dependent on China for REMs, needed for laser-guided missiles, other advanced weapon systems and space satellites. And here is the problem, currently 80% of rare earths are produced in China, a quasi-monopoly. Due to the trade dispute with the US, this can lead to enormous supply bottlenecks in the Western world. As early as 2017, outgoing President Trump tried to free the US from its dependence on China for rare earth metals by issuing an Executive Order. This Executive Order was followed with a statement by the President in early October declaring a national state of emergency in the mining sector to set up a US domestic REM storage facility for military requirements.
Alternative from Canada
The Canadian mineral explorer Defense Metals has its finger on the pulse here. Founded in 2016, the Company focuses on the acquisition of mineral deposits containing metals and elements used in the production of renewable energy technologies, such as rare earth magnets. The main focus is on the Wicheeda project in the province of British Columbia.
By the end of October, the Canadians were able to complete a private placement of 2,525,000 units for gross proceeds of CAD 505,000. Last week, the private placement of 800,000 shares was announced, which puts another CAD 200,000 in the pockets of Defense Metals. Defense Metals' CEO, Craig Taylor, commented on the use of the funds: "The previously closed 25-cent-per-share private placement financing will be used to conduct additional fill-in hydrometallurgical test work with the objective of capitalizing on opportunities that have been identified to optimize and improve on our already exceptional hydromet recoveries. As previously disclosed, we intend to complete the preliminary economic assessment by the end of the Q1 2021." The market capitalization of the Company is currently CAD 11.24. A bet on the future!**
Norwegian hydrogen producer Nel Asa posted a new all-time high on Friday at its home exchange in Oslo. At NOK 24.18, the previous August high of NOK 23, was surpassed for the time being. The reason for this was the successful IPO of the spin-off, Everfuel. The former Danish subsidiary made its stock market debut in October with an opening price of NOK 22. After a brief period of weakness at NOK 15, the share price was at NOK 57 before the weekend, an increase of more than 150%. Nel Asa is still the proud owner of almost 17%.
Another deal in the pipeline
With the new money from the IPO, Everfuel goes on a shopping spree. At the end of last week, the Norwegian filling station operator H2CO AS announced that it is selling its two hydrogen filling stations to the Danes. Everfuel also wants to take over the majority of the filling station operator, which in addition to the two filling stations also operates a hydrogen distribution plant in Norway. The Danish Company is also working on a takeover of H2Fuel, which happens to be a subsidiary of Nel Asa.
Asset Manager Kepler Cheuvreux has rated the share as "sell". The French see the price target at NOK 18.50, converted, EUR 1.73, which is well below the current level. In terms of charts, a fall below the previous high of NOK 23.0 would be negative. The price of Nel Asa would need a break to reduce the overbuying of the last weeks. Even a substantial correction to the upward trend that has been developing since April 2020 at currently NOK 18, the equivalent of EUR 1.70, would not be a break in the leg.
The tourism group TUI has already received a total of EUR 3.0 billion from the state since the beginning of the Corona Crisis. Now further state aid is to be provided. It is rumoured that between EUR 1.5 billion and EUR 2.0 billion will be forthcoming. That makes a total of EUR 4.5-5.0 billion. The current market capitalization is currently only EUR 3.4 billion. Yes, the developments in vaccine development can be viewed positively, and the government's goal of starting the vaccination program for the masses in spring is in place - in theory! The cash burn rate was certainly driven below the EUR 500 million per month mentioned in May due to massive job cuts of more than 8,000 jobs and a tight austerity program. Nevertheless, it remains uncertain how long and to what extent the pandemic will depress TUI's sales and earnings. Therefore, at the current level, the stock appears to be too expensive.
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