April 19th, 2022 | 14:10 CEST
Hotter than crypto: K+S, Nevada Copper, Shell
Table of contents:
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
K+S: Fertilizer more in demand than Bitcoin
Fertilizer producer K+S is currently on the upswing. The war in Ukraine has led to wheat becoming increasingly scarce. Sunflower oil is also in demand as never before. Even if the distribution struggles in German discounters are more the result of panic and greed, the environment is brightening for all companies around fertilizer production. To prevent shortages, farmers need to increase yields. The best way to do this is with potent seeds and sufficient fertilizer. K+S was recently able to increase its profit forecast significantly. Instead of EUR 1.9 billion as before, K+S now expects EBITDA of EUR 2.3 to 2.6 billion. And the reason: Fertilizer has become even more expensive than the energy needed to produce it.
The K+S share has been taking off for months and is currently drawing a chart picture reminiscent of a crypto stock in 2020. Within just one year, the share price has risen by 322%. Currently, the share is trading at EUR 35 and is heading for long-term chart marks beyond EUR 40. At that time, inflation was significantly lower, and the euro crisis kept the world on tenterhooks. Despite the momentum around K+S, investors should keep in mind that the Group has prepared its updated earnings estimate, assuming there will be no gas shortage. However, investors must anticipate black swans in these times. K+S is a share that should already be held in a portfolio. An entry is only advisable for experienced investors.
Nevada Copper: Record production at the right time
Investors need a sense of timing and patience with Nevada Copper. The copper producer from the US state of the same name is ramping up its Pumpkin Hollow underground mine these months and expects to produce 77 million pounds of copper a year there in the future. Next door is the open pit project of the same name, which has already been approved and for which a preliminary feasibility study is available. Another 200 million pounds of copper are to follow here. On top of that, Nevada Copper has four exploration projects. The Company has set itself the goal of establishing a copper district and making the US industry less dependent on imports. In doing so, Nevada Copper is following a trend.
Also on board as financing partners are the German KfW Bank and the anchor shareholders Solway and Mercuria. They each hold 10.4% of the Company and decided to become involved only a few months ago. Just recently, Nevada Copper announced record production and looks to remain on track. "We are pleased with the progress being made at Pumpkin Hollow underground mine, the open pit project and exploration initiatives," said Nevada Copper CEO and President Randy Buffington. "The team has done a remarkable job of safely advancing the ramp-up in key areas of development, mining and processing. We look forward to continuing this progress toward stable production as planned over the course of this year." The stock has been bobbing sideways for months with a falling trend. Investors with a soft spot for such projects should not disregard the stock. Potential could quickly emerge here.
Shell: Prepared for all eventualities
Companies like Shell are currently doing well. Energy prices are exploding. In addition, governments are frantically trying to get renewable energy sources on the road as quickly as possible. Shell was an early adopter of wind farms and can now sit back and relax about what governments decide. Whether fossil energy from other sources or wind power - the Group is well-positioned. The share has gained more than 20% in the past three months and is on a long-term upward trend. At EUR 30, however, the rally could find its end for the time being. The share reached its interim high at this level before the pandemic.
However, the share is not uninteresting, as it currently offers a dividend yield of more than 3%. In the energy sector and the fertilizer and copper sectors, profits are likely to bubble up for all companies that can deliver. The junior producer Nevada Copper could offer particular growth potential - after all, the production quotas are increasing bit by bit and uncertainty is still priced in.
Conflict of interest
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