January 31st, 2023 | 14:48 CET
Energy transition price rockets: American Lithium, Plug Power, Auxico Resources
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"[...] In 2020, the die is finally cast in the automotive industry towards electromobility. [...]" Dirk Harbecke, Executive Chairman, Rock Tech Lithium Inc.
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
Auxico Resources in a highly attractive market: is a 300% price increase possible?
The Auxico Resources share has yet to take off. Yet Hallgarten analysts see considerable upside potential in the current year. Their target price for the shares of the Canadian company is CAD 1.48. The share is currently quoted at CAD 0.43. As a result, the price potential is almost 300%. Where does the optimism of the analysts come from?
First, Auxico Resources is active in a highly attractive market: trading in rare earths and critical raw materials. Both groups of metals are found in almost all high-tech products of our time and are essential for the energy and mobility transition, among other things. The problem: China is the leading supplier of these raw materials. Against the background of tensions between Western countries and the Middle Kingdom, alternatives are desperately sought. Auxico Resources has been searching for these alternatives for almost ten years. The Company is now the exclusive agent for rare earth concentrates from the Democratic Republic of Congo and has direct or joint venture mineral rights in Colombia, Bolivia and Brazil.
Business is already underway in Congo. The short-term goal is to export 500 to 1,000t per month, equating to cash flow between CAD 500,000 and CAD 1 million. In Brazil, a resource estimate is expected to begin in the first quarter. In the meantime, cash flow can be generated from the modern processing of historic tin tailings. In Colombia, a resource estimate is expected at the end of the second quarter. Here, larger quantities of rare earths and critical minerals such as tantalum, niobium and tin are expected.
In the current year, Auxico expects a commission income of CAD 10 to 18 million. Since trading costs are manageable, a high margin should be realistic. The Company is currently valued at CAD 31 million. This underpins the analysts' price target.
American Lithium: Week of truth?
The shares of American Lithium have more than doubled within two months to around CAD 4.70, making the Canadians one of the high flyers of recent months. The reasons: First, the plans for the IPO of the uranium subsidiary were published. The value of the Macusani project is not fully reflected in the Company's value, and the IPO is intended to change this. The second price driver was the listing of the share on the NASDAQ stock exchange. But that is not all. American Lithium has a project in the US state of Nevada (TLC) and Peru (Falchani). The TLC project is said to be one of the largest in the world, with a deposit of 8.8 million tons of lithium carbonate. Investors are expecting the release of the preliminary feasibility study (PEA) any day now. The value is speculated to exceed the Company's current market capitalization. The Company may then become a takeover target. After all, the TLC project is not far from the Tesla factory in Texas. Tesla CEO Elon Musk already highlighted the high lithium production margins last year. Therefore, extending value creation would make perfect sense.
Is American Lithium making itself pretty for a buyer? The buyback of a 1% royalty from Nevada Alaska Mining Co. Inc. is seen as such.
Simon Clarke, CEO of American Lithium, stated, "We are very pleased to have reached an agreement with the royalty holder to buy back this valuable royalty, which also ensures that the Company will control 100% of all of TLC's concessions. As TLC is developed and production commences, this transaction should prove to be highly accretive and maximize the value of the project. The elimination of this remaining royalty also allows us to present TLC as fully unencumbered in our first PEA, which is expected to be released in the next few days."
Plug Power: How are investors reacting to renewed guidance adjustment?
Plug Power was arguably one of the disappointments of the past year. Especially in the third quarter, the stock went down sharply. Whether the share will perform better in 2023 will depend heavily on its operating performance. It is undisputed that the potential for hydrogen in the future energy mix is huge. But the operational development of companies like Nel, Plug Power or even ITM Power leaves much to be desired. Valuations often run far ahead of the actual development of sales and earnings. Most recently, Plug Power again lowered its outlook for 2022. According to this, revenue growth will be between 45% and 50%. Previously, more than 80% had been forecast. For example, major projects would have been delayed from 2022 to 2023 due to customer timing and general supply chain issues. Also, the launch of new products was delayed in the fourth quarter, according to the Company. For fiscal 2023, Plug Power forecasts sales of USD 1.4 billion. That figure is expected to reach USD 5 billion by 2026 and as much as USD 20 billion by 2026.
Plug shares reacted negatively to the renewed disappointment only briefly. In the current year, the security has gained over 20%. Investors seem to be ticking off 2022 and hoping things will improve in 2023. Whether this will be the case remains to be seen.
The start to the new year was encouraging for many shares. If the analysts at Hallgarten have their way, the Auxico share still has much potential. Operationally, the Company is already generating cash flows, and the current resource estimates hold additional potential. Things will remain exciting at American Lithium. However, high expectations also harbor the potential for setbacks. Plug Power must finally convince operationally.
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