April 1st, 2022 | 12:44 CEST
Glencore, Nevada Copper, BASF - Extreme fantasy in these shares
Table of contents:
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Nevada Copper - Waiting for the starting signal**
While the tonne of copper continues to trade at record levels, several exploration companies still have significant pent-up potential. This discrepancy is most visible at Nevada Copper, the Company that operates the Pumpkin Hollow copper mine and has now been able to extract red metal from the soil of the United States for more than 2 decades. The deposit is located in Nevada and has significant reserves and resources, including copper, gold and silver. The two fully-permitted projects include the high-grade underground mine and processing plant, which are now in the production phase, and a large-scale open pit project that is moving toward feasibility.
Especially in view of the blown-up supply chains, this project should be a top priority for the US government. Nevada Copper's stock market value is now only around EUR 237.88 million following problems in operations, with frequent delays and changes at the top management level in the past. In the past 5 years, the stock price has corrected from EUR 5.50 to the current EUR 0.51. The share price is now forming a bottom at the 2021 low.
Fundamentally, the bottom should already have been found since the management change last fall. Since then, the current President and Chief Executive Officer Randy Buffington has been restructuring everything, and the development is showing considerable success. Nevada Copper was able to improve its financial position significantly. With KfW, the credit line was stretched and expanded. Pala Investment secured additional financing and remains the largest shareholder with 38%. Operationally, Nevada Copper reported optimization of its operations. January development rates were 50% higher than November 2021 and as much as 100% higher than August of last year. "The Company continues to build on the operational improvements achieved over the last two quarters, further accelerating development and production ramp-up," Buffington said. If positive results continue to be achieved, it should only be a matter of time before the share price begins to rebound. When the underground mine is running at full capacity, it is expected to generate approximately EUR 65 million in free cash flow per year.
Glencore - Like clockwork
A correction in the share price of the world's largest commodities trader, Glencore, has been sought in vain for months, and the share price is rushing from high to high due to the sanctions in relation to the Ukraine crisis. Since the Corona low in March 2020, the share price has risen from USD 115 to currently over USD 500, which is a 10-year high.
Fundamentally, of course, this is well backed and was evident in the recently published annual figures. Sales increased by 43% in 2021 compared to 2020 to USD 203.7 billion. Adjusted EBITDA increased by 84% to USD 21.3 billion. The bottom line was left with USD 4.97 billion in net income, more than offsetting the previous year's loss of USD 1.9 billion. The surplus will be used to gradually pay down the Company's debt; the debt reduction in 2021 alone was around USD 10 billion and currently stands at just USD 6 billion.
BASF - It does not look good
Compared to Glencore, the chart picture for chemical giant BASF is clearly negative. After the sell-off on the broad market due to the Ukraine crisis, the share price of the Ludwigshafen-based company fell from around EUR 69 to a low of EUR 47.50. Since then, some ground has been made up to around EUR 52.40, but the share price is still extremely weak.
A cooperation agreement has now been concluded with Henkel for the conversion to renewable raw materials. Henkel, a manufacturer in the consumer goods industry with global brands and technologies in the three business areas of Laundry & Home Care, Beauty Care and Adhesive Technologies, wants to achieve the switch from fossil to renewable raw materials with the help of BASF. According to both companies, the cooperation will run for four years, with the goal of replacing fossil raw materials with renewable raw materials in around 110,000 metric tons of ingredients per year at Henkel with the help of BASF's so-called biomass balance process. As a result, Henkel brands such as Persil, Pril, Fa and Schauma are expected to reduce their carbon footprint and save around 200,000 metric tons of CO2 emissions.
The price of copper is once again reaching record levels and is expected to continue trending upward due to demand resulting from climate change. Exploration companies such as Nevada Copper or producers such as Glencore are benefiting from this. Chemical companies such as BASF are also in demand due to climate change, but investors should currently only observe the share.
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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