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June 27th, 2022 | 11:08 CEST

The solution is here: BASF, Nordex, Barsele Minerals - Energy disaster across Europe

  • renewableenergies
  • Gold
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Europe's energy supply cannot be managed from its own resources; many components of the energy mix have been imported for years. However, Germany is one of the leaders in the field of alternative energies. In the first four months of 2022, 174 TWh of electricity was generated here in Germany. The share of renewable energies in electricity generation was a high 52%. With 90 TWh produced, solar, wind & co. are the most important sources. The picture is rather gloomy in the case of fossil primary energy sources, which are important for industry. After the end of hard coal mining in 2019, Germany as an industrial location is 95% dependent on imports of crude oil and natural gas from abroad, 40% of which have so far come from Russia. A disaster from the current perspective. Which shares are worth watching out for now?

time to read: 4 minutes | Author: André Will-Laudien

Table of contents:

    Nordex - Bad news again and again

    One solution for the upcoming energy shortage is the further expansion of alternative energy production. Wind power is one of the favoured manifestations in Europe, along with hydropower and photovoltaics. Nordex is one of the major wind turbine manufacturers, but the group is in deep trouble. Disrupted supply chains, construction delays, high raw material prices and an inflationary cost explosion have caused margins to collapse. Recent quarters have seen one profit warning after another. The rotor blade production in Rostock is to be abandoned due to the high-cost burden; this shutdown and subsequent relocation will also cost a lot of money.

    Whether Nordex can turn the tide in the medium term must slowly be doubted in view of a true sell-off in the share. After all, when could the political environment in favour of renewable energies be better than now? Faster approval procedures, selective site planning and speed are required because the security of supply for Germany as a location will have to be demonstrated in the next 2 years.

    Meanwhile, the order situation is currently outstanding. Nordex recently landed a major order for 63 megawatts for a wind farm in Poland. According to the Company, it is to supply 11 turbines for the "Wysoka" wind farm. The deal with Swedish wind farm developer OX2 includes premium service of the turbines over 35 years. The Nordex share has more than halved from EUR 18 to below EUR 8.50 since March. When investors will return is nevertheless questionable. Goldman Sachs votes "Neutral" and lowers its price target from EUR 15.0 to EUR 13.7. Pay close attention to the market technique: If it turns upward with high volume, it could quickly go in the direction of EUR 11 to 14. But then the first resistances lurk in the chart.

    Barsele Minerals - A deal is brewing here

    If you are looking for raw material deposits in Europe, you can find them in Scandinavia. Sweden is one of the friendly jurisdictions in the north and promotes the exploitation of critical strategic metals. The country has been a developer of climate-friendly technologies for years, and even smaller mining companies can expect to receive appropriate licenses if they implement interesting exploration projects.

    The Canadian Company Barsele Minerals has been working on a promising property of 34,000 hectares in the mining region of Västerbottens Län in northern Sweden for some time. Now there is news on the exploration activities there in the volcanogenic massive sulphide project area (VMS). The ongoing drill program has been underway for some time by joint venture partner Agnico Eagle Mines Ltd., and now an additional 3,000 meters have been started. Testing will take place in the Norra and Bastutrask target areas.

    The Barsele Project is 55% owned by Agnico Eagle and 45% owned by Barsele. Agnico Eagle may earn an additional 15% interest in the Barsele project by completing a pre-feasibility study. Barsele is not required to expend any cash until a pre-feasibility study is completed. Within the deposit, in addition to an indicated 2.4 million ounces of gold, are deposits in metals such as lead, zinc and nickel. These materials are in high demand for use in e-mobility and the high-tech industry and add value to the property. Through further work, it is hoped that the resource will be upgraded to about 3.5 million ounces of gold.

    The constellation of the 55% majority for Agnico and further options of the major remains interesting. Against this background, a complete takeover of Barsele is possible if the exploration results are suitable. Currently, the value is again above CAD 0.35; in the last sell-off, it had slipped to CAD 0.22. Due to the import ban on Russian gold, the forward prices could increase strongly again. That makes junior projects with good potential highly interesting again. Collect speculatively!

    BASF - The loss of Russian gas is preprogrammed

    Perhaps the panic around the Baden Aniline and Soda Factory (BASF) is exaggerated? Investors are currently apprehensive about what is probably Germany's largest gas consumer. In the last 3 weeks, the share price has plummeted by a massive 25%, reaching EUR 42.5, close to the Corona low of March 2020.

    However, one should not be quite so negative because BASF seems to have already made provisions for the emergency case of a 100% gas stop from Russia. At least, the Company told the media that shutdowns or similar effects would only be expected when the supply is less than 50%. Currently, however, the supply is still fully intact, and so is production. As a result, the upcoming figures for the 2nd quarter are likely to be above expectations. The Ludwigshafen-based company will report on July 27, and analysts, on average, expect an EBIT of EUR 1.86 billion, which would be a drop of more than 15% from the previous year.

    However, the Group's forward-looking statements are likely to be exciting. Many factors are currently weighing on earnings, be it the lockdowns in China, the war in Ukraine, supply chain problems or rising raw material and energy prices. Apart from the uncertainties regarding the near future, BASF nevertheless entices with a 2023 P/E ratio of 7.4 and a dividend yield of over 7%. Entry prices in the EUR 38 to EUR 43 corridor have historically been good starting points. Unfortunately, no one knows how great the burdens will ultimately be and how the upcoming economic downturn will affect the books.

    Against the backdrop of a fragile global economy, the industry is being hit in different ways. There is chaos in supply chains and an uncertain supply situation for primary energy sources, which will further fuel the price structure. Nordex and BASF are directly affected, while Barsele is setting out to become a future multi-metal supplier.

    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.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author

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