October 13th, 2022 | 11:01 CEST
Geely, Kodiak Copper, Aston Martin Lagonda - Copper with the next chance
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"[...] If we pursue our goals conscientiously, the market will adjust its valuation accordingly, I am sure. Often, all it takes is a trigger. [...]" Ryan McDermott, CEO, Phoenix Copper
Copper is essential for achieving climate goals
The Ukraine conflict accelerated the transformation from fossil fuels to renewables. But even before that, the goals of the Paris climate agreement to achieve net zero emissions by 2050 were more than ambitious. These are to be accomplished through the construction and use of electric cars, batteries for energy storage, and solar and wind energy. However, in order to implement this to the required extent, it requires enormous quantities of copper. In this context, demand already exceeded supply in 2019 for the scarce metal, which is characterized by its good electrical conductivity and low reactivity. It is therefore used for inverters, transistors and as a conductive material in cables.
According to the report "The Future of Copper. Will the looming supply gap short-circuit the energy transition?" by financial services provider S&P Global, global copper demand is expected to almost double to 50 million tons per year by 2035 and then remain at roughly this high level until 2050. According to the experts, this means greater copper consumption than in the period between 1900 and 2021.
The high demand, however, is matched by a very limited supply. Anglo American CEO Duncan Graham Wanblad said in an interview that he "can't see where all the copper needed for the electrification of mobility and the economy is going to come from at the moment." In addition, he said, the market underestimates how long it can take to bring a new copper mine into production. According to the International Energy Agency, it takes an average of 16 years to build a copper mine before it goes into operation.
Kodiak Copper - Well positioned
In addition to copper producers, the primary beneficiaries of this boom in demand over the next few years will be exploration companies such as Kodiak Copper. Following the sharp drop in the base price of the Canadian company, there is a promising opportunity for disproportionate price gains. Smaller companies react disproportionately to a longer-lasting trend, both in one direction and the other. For example, since the high in September 2020, when the stock was trading at CAD 3.23, the price of the Canadian company has lost more than 83% to a price now of CAD 0.57. Today, the stock market value of the promising junior stands at CAD 31.68 million.
Contrary to the correcting stock market price, the Company's development continues to go according to plan. The Canadians, who are part of the Discovery Group, own the copper-gold porphyry project MPD in the south-central part of the Canadian province of British Columbia. It is a promising property which should benefit significantly from the increasing copper demand in the coming years. MPD has all the characteristics of a large, multi-center porphyry system. Kodiak has discovered high-grade mineralization within a broad mineralized envelope at the Gate Zone, and MPD hosts several other targets with similar discovery potential.
For this year, the largest fully funded drilling program in the Company's history is underway for 25,000m, with 33 holes already drilled for 21,300m. The focus to date has been on the Gate Zone and adjacent targets, which have similar characteristics. The newly reported copper-gold-silver intercepts filled a 170m gap at the south end of Gate. In addition, drilling to test geophysical anomalies northeast of Gate identified a 400m long parallel mineralized trend in the nearby Prime Zone.
Kodiak Copper CEO and President Claudia Tornquist commented, "The Gate Zone continues to deliver impressive drill intercepts that extend the extent of mineralization, which now extends 1km north-south to a depth of 900m. We also began testing geophysical targets with coincident copper-in-soil signatures in the wider vicinity of the Gate Zone, and we are pleased to report that we have been able to delineate a parallel mineralized trend at the Prime Zone. This new mineralized trend crystalizes further size potential and validates our model of a large multi-centric porphyry system at MPD. The Company has now expanded its exploration efforts to other high-priority areas such as Dillard and Man. We look forward to this next promising phase of work which should lead to more discoveries like Gate and Prime across the 147 sq km MPD Project area."
Geely, Aston Martin Lagonda - Interesting constellation
According to the German Copper Institute, an electric vehicle contains almost three times as much copper as a vehicle with an internal combustion engine. Half of this copper is found in the accumulator. There is also a high demand for copper in the generation of electricity from renewable energies and the infrastructure required to charge electric vehicles. With the exponential increase in new registrations of electric vehicles, the demand for the red metal is naturally growing. In 2021 alone, the number of new registrations and the market share of battery-powered vehicles more than doubled. Sales growth was led by the People's Republic of China, which accounted for more than half, with 3.3 million vehicles.
Alongside BYD, Tesla and SAIC-GM-Wuling, electric car company Geely Automobile is No. 4 in the Asian market. The Daimler partner delivered 130,528 vehicles in September 2022, YOY growth of 26%. In terms of pure electric cars, Geely increased its sales by 322% compared to September 2021.
The acquisition of a 7.6% stake in British luxury sports car maker Aston Martin Lagonda caused a stir. In addition, Geely was joined by Saudi Arabia's Public Investment Fund and previous shareholder Mercedes-Benz. Geely already owns the British sports car maker Lotus and wants to transform the tradition-rich brand into a pure e-manufacturer. What plans Geely is pursuing with the Aston Martin investment has not yet been announced. In the announcement, Daniel Donghui Li, CEO of Geely Holding Group, only states that they want to "explore potential opportunities for cooperation with Aston Martin."
From a chart perspective, after the sell-off and a loss of almost 73% since the all-time high in January 2021, the share price is on the broad support line at USD 10.18, which has been defended several times so far. Another successful test would see short-term potential to the downtrend formed since January 2021 at USD 15.84.
Copper again lived up to its reputation as an economic indicator this year, correcting by more than 20% since the highs. In the long term, the demand for the red metal is enormous due to climate change. Beneficiaries should be copper producers as well as exploration companies like Kodiak Copper. Geely could see a stronger recovery rally in the short term.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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