30. July 2021 | 11:21 CET
First Majestic Silver, Kodiak Copper, Orocobre - Metals for e-mobility offer great growth potential
Tesla, NIO and Polestar, the pioneers of e-mobility. But the global climate crisis and the realization that it can only be combated with the help of a consistent reduction in greenhouse gases has also led traditional car manufacturers to realize that alternative drive concepts are necessary, not least as a result of legal requirements. Electromobility has currently established itself as the most promising option. Manufacturers are now hastily trying to steer their product development in this direction and are making announcements about the end of the internal combustion engine: Jaguar wants to phase out the engine by 2025. Fiat, Volvo and Ford have announced the end of the engine by 2030. VW has set the period between 2033 and 2035 as its target, at least for Europe, and Audi wants to phase out entirely by then. Mercedes also has a similar date in mind. However, all e-cars have one thing in common: they are very hungry for raw materials. An e-car requires about four times as much copper as a combustion engine. Consumption of gold and silver (onboard electronics) and lithium (batteries) will also increase significantly.
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ISIN: FIRST MAJESTIC SILVER | CA32076V1031 , KODIAK COPPER CORP. | CA50012K1066 , OROCOBRE LTD | AU000000ORE0
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
First Majestic Silver - Good production figures and low share price offer an attractive entry opportunity
One of the companies that should benefit from the rising demand for gold and silver is the Canadian producer First Majestic Silver. Its share price has consolidated since the February high of over CAD 28 to currently around CAD 16. Still, with the acquisition of the Jerritt Canyon Mine gold project in Nevada and the entry into the exploration Company Blackrock Silver, which also operates in Nevada, the reasons for the downward trend (limited mine life, weak project pipeline) should have been eliminated. Especially since the recently published production figures are quite respectable.
Perhaps investors needed some time to digest the strategy shift towards gold production, which was deemed necessary given the lack of attractive silver projects, as the price has been moving tentatively but steadily upwards again for a week now. Some investors seem to be increasingly confident that the 84% increase in production over the same quarter last year, measured in silver equivalent, will eventually be reflected in the quarterly figures due to be published on August 6. In addition, the announcement to drive an aggressive exploration program for the new American gold projects in the next six to twelve months should also have been positively received. Analysts currently give the stock an average upside potential of more than 20%.
Kodiak Copper - Ambitious drill program shows very encouraging interim results
Kodiak Copper, another Canadian Company, is engaged in the precious metal copper. Based in Vancouver, British Columbia, the explorer has an excellently located copper-gold Pophyr project, the MPD project (Man, Prime, Dillard). It is located in the south of its home province, covering an area of approximately 147.2ha, which is 100% owned, as are the Company's other projects in Canada (Kahuna, in Nunavut) and the USA (Mohave, in Arizona). After the entry of the largest Canadian copper producer Teck Resources last year, the fresh capital (current status of the war chest: approx. CAD 14 million in cash) could now be used to start an ambitious, 30,000m drilling program in 2021, which has already brought very promising results to light.
The objective was to systematically evaluate the copper-gold mineralization of a kilometer-long copper-in-soil anomaly through trenching. Results from the first 15 holes indicate that the original copper-in-soil target is underlain by massive copper-gold Pophyr mineralization. Further drilling is also expected to clarify whether there is a connection between Gate and the Man area three kilometers away. The Company also plans to turn its attention to the Dillard area by deploying a second drill rig. In addition to the drilling results to date, there is other positive news from Kodiak Copper. The requested extension of the exploration permit until 2026 was granted. For us, these are all reasons that point to a share price recovery in the near future. Of course, Kodiak Copper is also heavily dependent on the copper price, which had recently consolidated significantly. However, we expect only a short breather due to the cyclical nature of the commodity markets.
Orocobre - Share price reaches new all-time high in the wake of rising lithium prices
The Australian Orocobre Limited, headquartered in Brisbane, is one of the world's most important suppliers of the alkali metal lithium required in accumulator production. Given the ever-increasing demand for electricity storage - in addition to e-mobility also as stationary energy storage for the intermediate storage of electrical energy, e.g. as part of solar power production - this has led to a sharp rise in the price of the raw material. Experts even believe that a permanent supply bottleneck could develop. Orocobre has announced a merger with one of its main competitors, Galaxy Resources, to best position itself in this market. The merger, which is expected to be completed by August at the latest, will create a lithium giant that will have a market share of around 13%, with an annual capacity of 40,000t of lithium carbonate. Currently, both companies operate lithium production in Argentina from both rock ("rock") and brine ("brine"). Thus, the companies are also an excellent strategic fit. The market seems to honor this: the price of the Orocobre share has been moving continuously upwards for quite some time. In the process, the Company recently left behind its previous all-time high from January 2018.
However, analysts are divided given Orocobre's recent share price performance. While one half assumes that consolidation is imminent because of the rally that has taken place, the other half continues to advise buying with reference to the constraints of the energy transition. Kodiak Copper is a much more speculative stock. However, the potential return is also much higher. The next drilling results will be important. Investors who want to bet on a fundamentally undervalued stock should hold on to First Majestic. We expect the share price to recover in the not too distant future.