29. December 2020 | 09:13 CET
Glencore, Almonty, Aurubis - Scarcity drives share price
If you have listened to the old master of the stock market André Kostolany, then you have thought about aluminum in the past, and that's a good thing. If you bet on companies that focus on industrial metals or strategic metals, you should see a good performance next year. Rising demand in the wake of electromobility is driving up the price of copper. But so-called strategic metals, such as tungsten, are also used in various ways and are difficult to substitute. The availability of strategic metals is more limited than that of industrial metals. At times, there can be a large gap between supply and demand. Investors then profit from scarcity prices. We reveal where opportunities are tempting.
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ISIN: CA0203981034 , JE00B4T3BW64 , DE0006766504
GLENCORE PLC - strongly diversified
Glencore is one of the world's largest and most diversified commodity companies. The Group's roots date back to the 1970s. Started as a trading Company, Glencore is now a major producer and marketer of commodities and employs 160,000 people. The Group owns 150 mining projects in more than 35 countries. With a stock market value of almost EUR 40 billion, the Company is a heavyweight.
Glencore's business activities are divided into two parts. As a producer, the Group distinguishes between "Metals & Minerals" with copper, zinc, nickel, cobalt, aluminum, etc. and "Energy Products" with coal and oil. As a marketer, Glencore physically procures raw materials and products from its global supplier base and sells the raw materials to its customers. This whole process includes processing, storage and transportation of raw materials.
By positioning itself as a producer and marketer, the Company differentiates itself from competitors. Investors can thus invest in an established player in terms of business activities and raw materials.
ALMONTY INDUSTRIES INC - on the way to becoming a significant tungsten producer
Almonty focuses its business on tungsten, which belongs to the group of strategic metals. Tungsten has an extremely high thermal toughness and density. It has the highest melting point of all metals, as well as the most remarkable mechanical strength. Tungsten is often used as an alloy.
Currently, Almonty's activities are predominantly in Europe with mining, processing and shipping of tungsten concentrate from its Los Santos mine in western Spain and its Panasqueira mine in Portugal. In addition, the Company is developing the tin and tungsten project at Valtreixal, in northwestern Spain.
However, central to Almonty's growth is the development of the Sangdong tungsten mine in Gangwon Province, South Korea. Here, the foundation was laid in December to provide financing to become the largest tungsten producer outside China. In the future, it aims to meet around 30% of demand outside China and approximately 7% to 10% of global demand. Plans call for ramping up production starting in 2021. The mine is expected to have an operating life of 30 years or more.
Given rising tungsten prices, extremely favourable financing, low-cost structure and long mine life, analysts at First Berlin confirm their buy recommendation with a price target of CAD 1.45. The share can thus easily double. Given the current market capitalization of around CAD 120 million, the potential of such a large mine of a critical commodity is still far from being priced in.
AURUBIS AG - the world's largest copper recycler
Aurubis produces copper from copper concentrates and recycling materials and processes them further into primary products. Copper scrap and many other recycling materials are therefore returned to the economic cycle. Precious metals such as gold and silver are produced as by-products of recycling. Aurubis has production sites in Europe and the USA and a global sales network.
The MDAX-listed Group is already the world's largest copper recycler and strengthened its position in recent months with the acquisition of the Belgian-Spanish metal recycler Metallo, significantly expanding Aurubis' ability to recycle metals from old electrical appliances. Also, the Group established a joint venture with TSR Recycling for cable recycling in November.
Aurubis presented its figures for the past fiscal year in December. Operating earnings before taxes (EBT) increased by 15% to EUR 221 million. An EBT of between EUR 210 and EUR 270 million is forecast for the current financial year.