Hensoldt, Defense Metals, RWE - Important milestones

Hensoldt AG - The federal government follows suit

The shares of the armaments company fell by more than 8% last week, but by the end of the week, the signs were pointing to a recovery. The reason for the fall in the share price was a capital increase of 10.5 million new shares at a price of EUR 22.94, which generated gross proceeds of EUR 241 million for the Taufkirchen-based company. Around EUR 60 million was subscribed by the German government, which after the measure continues to own around 25% of Hensoldt. The German government's participation in the armaments group is particularly important from a security policy perspective, as the Company is a supplier of important radar systems for the Eurofighter, among other things.

The Company, based near Munich, intends to use the proceeds from the capital increase plus new loans of around EUR 450 million to take over the security technology specialist ESG. The Company specializes in the development and operation of electronics and computer systems, some of which are security-critical, and also provides consulting services.

According to Hensoldt, the Company holds a significant position within the planned European combat air system FCAS and the stealth fighter aircraft F-35 by Lockheed Martin. This aircraft is intended to be used by the German Armed Forces in the future.

Defense Metals - Consistently positive news flow continues

The Canadian exploration company, which has an ace up its sleeve in terms of the energy transition with the 8,301-hectare Wicheeda project, is experiencing a flurry of events as the year draws to a close. The 100%-owned property, which is located around 80 km northeast of the city of Prince George in British Columbia, Canada, is expected to produce 25,000 tons of rare earth oxide per year, which is 10% of current global production. The conditions are outstanding.

In addition to world-class metallurgy, similar to the producing Mountain Pass mine in the United States, the project is close to infrastructure, including hydroelectric power lines and gas pipelines, and the nearby Canadian National Railway and major highways provide easy access to port facilities in Prince Rupert, the nearest major North American port to Asia.

In addition to the fact that Defense Metals, led by experienced CEO Craig Taylor, published the increase in the mineral resource estimate in the third quarter, the associated NI 43-101 report was submitted, which included data from approximately 10,350 m and 45 drill holes explored by the Canadians in 2021 and 2022. The previous estimate from 2021 was increased by 17% in terms of contained metal and 31% in terms of tonnage. The forecast for 2023 includes 6.4 million tons of measured mineral resources with an average total rare earth oxide content of 2.86%.

With the completion of the Phase 2 open pit geotechnical diamond core and sonic infrastructure drilling program, Taylor is also hopeful that these have intersected significant thicknesses of REE mineralized carbonatite within the western pit wall that were not previously known. Given the success of the previous ground radiometric surveys, the Company commissioned a 45 sq km airborne geophysical survey in the vicinity of the Wicheeda Rare Earth Deposit. The ongoing pre-feasibility study for the project is expected to be completed by the end of the second quarter of 2024.

RWE - Analysts enthusiastic

The utility company benefited greatly from the recent upward movement of Germany's leading index, the DAX. With a price increase of around 28% since the beginning of August, the RWE share is trading above the EUR 40 mark, close to its high for the year of EUR 43.96. According to JP Morgan analyst Vincent Ayral, reaching new highs is only a matter of time. The energy supplier is one of the biggest beneficiaries of the energy crisis. Thanks to the high level of investment in renewable energies - the Company plans to invest around EUR 55 billion in green energies by the end of the decade - the share price should rise significantly. The price target for the Essen-based group has been raised from EUR 58.00 to EUR 59.50, and the "Overweight" rating has been confirmed.

RWE will receive a cash injection of EUR 2.6 billion from the German government. As "Bloomberg" reports, the reason for the compensation payment is the accelerated phase-out of coal-fired power generation. The multi-billion euro package will be paid out over a period of 15 years and will cover the clean-up and closure costs of RWE's coal mines. According to individuals familiar with the matter, EU approval for the German support could be granted in the short term after a formal investigation was launched in 2021.

The German government had originally negotiated the agreement for 2020 to cushion the companies' coal phase-out by 2038. However, last year, RWE struck a new deal with the government, advancing the coal phase-out by eight years to 2030 and extending the runtime of two lignite units until March 2024 to mitigate Europe's worst energy crisis in decades. The Company stated that the deal would result in savings of around 280 million tons of carbon dioxide.

After the placement of a capital increase, the Hensoldt share is coming to rest. Analysts see further upside potential for the utility RWE. Defense Metals is progressing as planned with the completion of its pre-feasibility study.