20. August 2021 | 11:14 CET
Geely, GSP Resource, Nel ASA - Taking advantage of the correction
After a ten-year high of over USD 10,500 per ton, copper is correcting and is currently scratching the USD 9,000 mark. In the short term, there is a favorable entry opportunity to participate in the next supercycle. Copper is the base metal of the energy transition. The high demand due to the switch to renewable energy sources is already being offset by an extremely tight supply. The result is rising prices in the long term.
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ISIN: GEELY AUTO. HLDGS HD-_02 | KYG3777B1032 , GSP RESOURCE CORP. | CA36249G1090 , NEL ASA NK-_20 | NO0010081235
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Metals for the climate change
The future is to be green, and politicians and industry have already heralded the end of fossil energy. The forces from wind, water and sun are to help secure climate neutrality. However, the technological shift towards green mobility or renewable energies requires large quantities of metals such as copper, zinc and aluminum. An offshore wind farm needs seventeen times more metal than a gas-fired power plant of the same capacity, an onshore wind farm eight times more and a photovoltaic farm nine times more.
Of all the metals, copper is a key metal because of its conductivity. Again, examples show the enormous demand for this already scarce commodity. While a power plant running on natural gas needs 1t of copper to produce 1 MW of electricity, it takes twice as much to produce the same amount of energy with onshore wind and three times as much for photovoltaic panels according to the International Energy Agency (IEA). The high demand, which will continue to increase in the coming years due to the transformation of the energy system, is offset by an extremely tight supply. Due to low copper prices in the past decade, several copper mines were shut down, and new copper projects were hardly observed. Thus, Goldman Sachs recently opened a study with the headline: "The copper market is unprepared for this critical role!"
Project with potential
One of the few promising projects is owned by the exploration company GSP Resource. The Canadians secured two properties in extremely attractive locations in the province of British Columbia. An option for the complete acquisition was secured at the historically high-grade Alwin Mine. Between 1916 and 1981, this mine was operated as a copper mine with gold and silver components. Copper ore grades of 1.5% were identified.
Management's strategy here is probably aimed at a possible takeover by copper producer Teck Resources because directly on the western border is the Highland Valley mine, the most effective copper mine in Canada. This mine, which belongs to Teck Resources, is operated at a copper grade of less than 0.5%. With GSP Resource still scheduled to release its first results in August from the drilling program that started on May 19, 2021, the stock could be in for a potential price jump.
The second project, Olivine Mountain, is no less interesting. Here, too, there is great potential in the location of the exploration site. The 3,020-hectare property is located in the Interior Plateau area of south-central British Columbia, 25km northwest of Princeton. Again, the strategy was to drill close to already producing mines. Just 25km away is Copper Mountain's copper mine, just under 50km is Westhaven Ventures' Shovelnose project and Kodiak Copper's MPD project.
Overall, GSP is well positioned with its two projects; however, it is still in the exploration phase. Drilling results at Alwin, which are expected to be announced later this month, will be exciting.
Carmaker with a strong half year
Chinese electric carmaker Geely increased its first-half profit thanks to the recovery in the world's largest car market, China. The number of cars sold rose 19% to 630,237, while profit increased 4% to EUR 313 million compared to the same period last year. Sales climbed 22% to EUR 5.93 billion. For the full year, the Chinese company expects to sell 1.53 million units. In addition to the introduction of new models, global expansion is to be driven forward.
From a chart perspective, the EUR 2.80 mark was successfully recaptured after a brief test. The next target is the high for the year at EUR 3.19.
It was already little expected by analysts, but the Norwegian hydrogen specialist Nel ASA did not achieve even the downgraded forecasts of analysts. In the second quarter, Nel's sales increased by only 10%, but EBITDA deteriorated minus EUR 4.62 million to minus EUR 120.3 million. Following the publication of the figures, JP Morgan downgraded Nel ASA to "Underweight" and left the price target at EUR 1.42. The forecasts of the JP Morgan analysts were missed in terms of both sales and EBITDA.
Copper is the gold of the energy transition. Exciting copper projects are few and far between; however, GSP Resource has excellent development potential with its two projects. The carmaker Geely also continues to hold potential. Nel ASA was again unable to justify its high valuation of around EUR 2 billion in its quarterly figures.