August 31st, 2022 | 14:15 CEST
E-mobility before hydrogen! Watch out for Plug Power, Edison Lithium, Mercedes-Benz and Rock Tech
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
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.
Mercedes-Benz - Memorandum of Understanding with Rock Tech Lithium announced
The top news from the last week: Automotive giant Mercedes-Benz is exploring a strategic partnership with German-Canadian start-up Rock Tech. Is this the breakthrough for the not yet fully-licensed mine operator-to-be? Former CEO and Chairman Robert Harbecke is proud of his green tech company and has big ambitions. In two years, they want to start up the first factory for battery-grade lithium hydroxide in Europe and become the leading supplier of the raw material to the local electric car industry by the end of the decade.
As part of the binding agreement being sought, Rock Tech has agreed to supply up to 10,000 metric tons of lithium hydroxide of the planned production annually to Mercedes-Benz and its partners starting in 2026. Rock Tech chose Guben in Brandenburg, Germany, as the site for the first European converter. This marks the start of the first German-Canadian lithium partnership. Nevertheless, there will probably still be some corporate actions before the first lithium delivery. Shareholders have recently had little reason to rejoice, as the share has lost around 50% since the beginning of the year.
Economics Minister Robert Habeck and Federal Chancellor Olaf Scholz achieved more in the background during their visit to Canada than was previously assumed. As the carmaker Mercedes-Benz announced in an ad hoc, they have signed a comprehensive memorandum of understanding with the Canadian government. The intention is to intensify cooperation along the entire automotive value chain, from technical development and raw material extraction to production, service life and recycling. Mercedes-Benz aims to become fully electric by the end of the decade and plans to offer all vehicle architectures for battery electric vehicles from 2025. EQE SUV production will start this year at the US plant in Alabama, with the battery coming from the Company's plant in Bibb County.
Over the past 12 months, Mercedes shares have lost only 7%, making it one of the best performers in the DAX. From a chart perspective, a solid buy zone should form between EUR 50 and 56. However, the paper must not fall below EUR 48!
Edison Lithium - In the right place at the right time
The Mercedes-Rock Tech deal is a good template for the activities of other lithium explorers worldwide. While Rock Tech will extract the white metal from hard rock, Argentina's deposits are more likely to be found in the form of lithium brine deposits. Argentina is part of the so-called lithium triangle, which covers over 30% of the world's lithium trade.
The Volkswagen Group alone plans to put around 26 million pure e-vehicles on the road by 2029. In the long term, a large part of the raw materials used should be recycled, reducing the need for "new" lithium. However, this is not likely to become noticeable until 2030, when used batteries start to come back in larger quantities. Until then, new deposits must be developed and made marketable. The Canadian explorer Edison Lithium is working intensively on two Argentinean properties in Salar Antofalla and Salar Pipanaco. In total, there are 24 claims with an area of about 100,000 hectares. The wells drilled to date indicate a potential brine zone with a thickness of at least 300 meters.
Argentina is already the fourth largest lithium producer in the world, but the government is consistently expanding its efforts to attract more companies. It is doing so via new roads, friendly laws and many promises. Edison has invested just under USD 2 million in the licenses so far, and the start-up is worth less than EUR 10 million on the stock market. With the right strategy and some luck in exploration, Edison Lithium could emulate the big producers like Albemarle, Livent, SQM or Allkem, but it probably needs some time for that. EDDY shares can currently be purchased for between CAD 0.06 and 0.07, and there is also turnover on Tradegate. Because of the hot battery sector, the share is speculatively highly interesting!
Plug Power - Strong revival after the Canada summit
The hydrogen sector has also benefited from the German-Canadian raw materials summit. After all, in addition to battery raw materials, the topic of fuel cells is also to be advanced further. Canada is considered a predestined H2 production country because of its almost infinite supply of green energy. The climate change bill from the White House also suggests some investment in hydrogen.
Amazon was the first major address to turn to Plug Power. The collaboration between the two companies involves supplying green hydrogen starting in 2025 to help meet the shipping giant's decarbonization goals - a big fish for the H2 specialists from New York but also a big challenge. Plug will probably get one step closer to its ambitious revenue target of USD 3 billion in 2025 with this blockbuster order, but it needs to have a comprehensive ecosystem for integrated green hydrogen solutions up and running in the foreseeable future.
The highly valued PLUG share developed upwards by almost 100% in August due to the favorable tailwind for the entire sector. Having hit the top at USD 32, the value is currently consolidating at around USD 28. If the good sentiment on the Nasdaq returns quickly, a resumption of the uptrend can be expected. Stocks in Plug Power should be technically stopped out at USD 26. We only expect new upward momentum above USD 32. Plug Power is an overpriced hope stock for GreenTech fans due to its 16x sales valuation.
Developments around the decarbonization of the planet are moving investors worldwide. Whether battery metals, hydrogen or other green tech applications. Valuations play a subordinate role in this hype. The main thing is that fossil fuels disappear from the scene as quickly as possible. One thing investors should keep in mind: diversification lowers portfolio risk!
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