December 23rd, 2022 | 07:55 CET
Is the e-mobility gold rush coming to an end? Volkswagen, BYD, Alerio Gold, Deutsche Bank - What is going on with Tesla?
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"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
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.
Volkswagen, BYD and Co. - Battery-powered under pressure
It can happen that quickly. Gone is the steep growth of e-mobility. According to Statista, there were around 356,000 new registrations of e-cars in 2021. In the current year, the number from January to November is only 366,200 vehicles. That means that by the end of the year, just under 400,000 new electric vehicles will be on the road. A huge blow for the new wonder mobility. Because now, the subsidies are also gradually declining, which is perfectly acceptable given the questionable additional burden on taxpayers. The intrinsic conviction of buyers of an e-mobile is largely tax-motivated, and once the subsidies are reduced, the true demand for this form of drive becomes apparent. Overall, a further decline in acceptance in 2023 must be assumed due to the growth rate of 12% in 2022, a figure that is to be ridiculed. The euphoric calculations of the climate protection protagonists from Berlin are, therefore, far from being correct. After all, there is also no publicly available evidence that the overall eco-balance of electric vehicles is ahead of internal combustion engines. Only measures to reduce individual transport, i.e. in favor of public transport, would be truly climate-friendly.
Shares such as BYD, Volkswagen and Tesla are therefore also among the biggest losers in the investment year 2022 because while the German DAX share index ends up just under 10% lower, the vehicle stocks mentioned are collapsing by between 20% and 50% despite ongoing record reports in e-car sales. Is this just a correction of the previous euphoria or a clear signal that with electricity prices beyond 35 cents per kilowatt hour and ranges of just under 500 km, the incentive for a less subsidized e-car is simply lacking? This shows that the forces of the free market economy can only be temporarily neutralized by politics. After a valuation of USD 1.4 trillion at its peak, first-mover Tesla has probably not yet reached its bottom at USD 430 billion. With similarly gloomy prospects, mass producers BYD and Volkswagen can be had for around USD 75 billion. At least the VW Group can still fall back on its previously successful range of burners if future electricity prices eventually outstrip fuel costs.
Gold & Silver - The year 2023 casts its shadow ahead
The commodities market also surprised in 2022. While energy and metals became increasingly expensive and contributed noticeably to the increase in inflation, gold and silver ultimately only developed sideways. In the meantime, both precious metals had launched an upward attack, reaching highs of USD 2,050 and USD 26, respectively. The course of the year for mining stocks was also characterized by ups and downs; at the end of the year, the widely known mining index NYSE Arca Gold Miners Index, fell by 8% to 232 points. The high was reached at 338 points in April.
There is much to suggest that 2023 could be another year for precious metals. On the one hand, gold is being bought by many asset managers as a hedge against inflation. On the other hand, the physical demand for precious metals has been rising noticeably since the middle of 2022. The latest inflation data shows plus 10.8% for Europe, 7.7% for the US, 6.8% for India and Brazil, and only 2.1% for China. Such a strong devaluation of the currencies would have to mean a rise for gold and silver because similar periods also occurred, for example, from 1999 to 2004. At that time, inflation was preceded by a huge tech bubble, which then also corrected strongly.
Alerio Gold Corp. - Guyana with the largest growth in the world
When discussing resources, one ends up with the South American continent as a zone with vast deposits of energy and raw metal materials. In the northeast lies the country of Guyana, which until now has been mainly characterized by agriculture and mining. Recently, however, huge oil fields with an estimated total volume of 8 to 13 billion barrels of oil were discovered off the coast of Guyana. These quantities are the world's largest newly discovered oil reserves for over 25 years. Since 2020, Venezuela's neighbor has now been exporting oil at steadily increasing volumes. With a GDP increase of nearly 50% in 2020 and another 20% in 2021, it is clear how much of an impact the oil dynamic is having in Guyana.
Gold has accounted for a significant 35% of the country's exports in the recent past, with production already exceeding 700,000 ounces in 2021. Well-known players such as Reunion, Goldsource, Omai Gold and G2 Goldfields have long since developed the country. The best known is likely the Aurora Mine, with resources of over 6.9 million ounces. The northeast coast of South America is tectonically similar to the West African gold zone from Mali to the Ivory Coast due to historical continental drift. Similarly, good conditions for high ore grades exist for northern Brazil and adjacent states, including Guyana.
Alerio Gold Corp (ALE) is a Canadian exploration company that has secured several licenses in Guyana for gold projects called Tassawini, Harpy and Puruini. The Company is starting work with a historical resource estimate of 499,000 ounces and aims to expand this to between 1.0 and 2.0 million ounces over the next 3 years. The gold project, totalling 1,381 hectares, has historically had CAD 34 million invested in it, and a mining license has been in place since 2021. A nearby river can be used to transport ore, and access to the Atlantic Ocean is only 100 km away. Alerio Gold will start exploration after financing in 2023.
Currently, 73.2 million shares are issued, and active trading venues are Canada and Frankfurt. The share price was caught at CAD 0.03 after the tax sales ("tax-loss selling") and recovered to CAD 0.08 in December. The market capitalization is currently only a low CAD 5.8 million. Alerio Gold could become one of the shooting stars in 2023 due to the attractive investment environment in Guyana.
Deutsche Bank - Chart breakout gives wings
Finally, a chart-technical look at the Deutsche Bank share. The long consolidation of the value between EUR 7 and EUR 10 should finally be over with the breakout above the EUR 10.45 mark. Currently, the share price has floated somewhat free at EUR 10.78; the fundamental data from Frankfurt also manifest an already completed turnaround in the business figures. On the profit side, after 2022, the best year since 2007, operating surpluses of EUR 6.9 to 9.5 billion should be achievable in the next 3 years. With a 2023 P/E ratio of 5.9, the Frankfurt bank is currently trading at only 5.9. A dividend of EUR 0.30 is also expected to be paid again. Current estimates of 9 analysts result in a median price target of EUR 13.46 over 12 months. JPMorgan and Goldman Sachs recommend Buy with price targets of EUR 13 and 16, respectively. Further upgrades are expected, provided 2023 does not go down in the history books as an economic crisis year for the midmarket.
The development of e-mobility is now entering an exciting phase. After billions are invested, can commercial success be achieved on a broad scale? Gold should have a good chance of price increases due to high inflation, just like good properties like Alerio Gold in South America.
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