First Phosphate, Mercedes-Benz, BYD - 1,500 km range through battery revolution

First Phosphate - Pilot plant underway

Currently, the lithium iron phosphate battery is the most powerful and safest in the automotive industry. BYD, Mercedes-Benz, Ford, Tesla and others already rely on this type of battery or plan to use it in the future. Accordingly, demand will increase strongly in the future. The problem lies in the phosphate deposits, 95% of which are found in sedimentary rock containing heavy metals. Clean and battery-grade phosphoric acid is, therefore, difficult to produce. First Phosphate owns more than 1,500 sq km of properties where the cleanest phosphate rock can be found. This allows the Company to focus on the extraction and purification of phosphate for the production of active cathode material for the battery industry.

On June 5, the Company announced the latest results from its winter drilling program, which involved drilling 20 holes totalling 4,274 m. Two main zones were discovered, the northern zone being 375 m long and at least 60 m thick. The southern zone is approximately 1,500 m long and has a thickness of 100 m. Phosphate was detected in each borehole. The phosphate content ranged from 2.59% to 9.99%. In general, the deposits can be mined in low-cost open-pit mining. On June 19, the pilot plant for the production of phosphate concentrate was put into operation. Test results so far showed a 91.4% recovery rate. A total of 900 kg of concentrate with a phosphate content of 40.2% has already been produced.

The further processing of the material is done by the partners of First Phosphate. Prayon takes over the production of purified phosphoric acid in LFP quality. Hydro Quebec is responsible for the production of cathode-active material for the LFPs. The entire production runs according to ESG standards. In addition to phosphate, iron, iron sulphate, and titanium can also be recovered via secondary recovery. After the recent good results on the Bégin-Lamarche property, drilling will continue there in the next quarter. The share has been running sideways since the beginning of May and is currently trading at CAD 0.445. 70% of all shares are owned by management, insiders, partners, advisors, friends, and family.

Mercedes-Benz - Cost savings in the van division

Mercedes-Benz CEO Ola Källenius had already announced in 2021 that the group would rely on LFP batteries from 2024. Recently, at a presentation in the US, the electric CLA, set to be released in 2024, was showcased. The electric vehicle is expected to have a range of 640 km, and according to CTO Markus Schäfer, there will also be a battery version with a range of 850 km. The Company also wants to deliver every 2nd vehicle in the van segment as an electric vehicle by 2030. The first-quarter figures already demonstrated a strong performance in this area.

Nevertheless, costs are to be reduced here, said Mathias Geisen, head of the division. By 2025, the Company wants to save about 20% of its fixed costs, keeping the Company competitive in the long run. Otherwise, the Stuttgart-based company has increasingly concentrated on the premium segment. Among other things, this is due to the delivery problems with semiconductors. Margins are higher there. This could be clearly seen in the EBIT margin of the quarterly figures, which was 14.7%. By way of comparison, Volkswagen is currently only at 3%.

In the 1st quarter, the Stuttgart company sold 89% more electric cars than in the previous year. That means the segment is growing faster than the premium segment. It remains to be seen to what extent the economic slowdown in Germany will affect the carmaker. Analysts are unanimously enthusiastic about the share and have issued 8 buy recommendations since May. The price targets were between EUR 75.00 and EUR 115.00. The figures for the 2nd quarter are to be published on July 27.

BYD - Scandal around the figures?

BYD, the industry leader in electric cars, also relies on LFP batteries. However, the Company's Blade batteries are designed to be particularly space-saving and thus achieve a better energy density and a longer range. At the same time, the cells are safer and have even successfully passed the nail penetration test. One battery lasts for more than 5,000 charging cycles. Currently, they are considered the leading battery in electric cars. Even Tesla is said to buy and install the batteries in their models.

Currently, the Company has to deal with a video by a YouTuber who claims that BYD's sales could be fake. As proof, a video shows 1,000 BYD vehicles from 2021 standing in a field. The vehicles are registered but may never have found a buyer. In order to receive subsidies, companies in China need a certain number of vehicles sold. If the vehicles are registered, they are considered sold.

Experts argue about how to evaluate these registrations. What is clear is that it is a disaster from an environmental point of view. But the carmaker has also delivered 1,000s of vehicles to international customers. Was Warren Buffet aware of this when he decided to sell his shares? Berkshire has, in any case, significantly reduced its holdings. Nevertheless, the share has been soaring since mid-March and has hardly been affected by the video. Currently, one share costs EUR 31.02. Investors should keep a close eye on the share and set a stop-loss.

The battle for the best vehicle battery is in full swing. Toyota's new technology has yet to go into production. The fact is that LFP batteries are on the rise, so phosphate is desperately needed. This is where First Phosphate can score with its pure deposits. The entire production chain is covered by its partners. Mercedes Benz is making good progress with the sale of its electric vehicles. In the future, LFP batteries will also be installed. BYD, the industry leader with its Blade batteries, which are also LFP batteries, is facing a possible scandal. Investors should pay attention here.