Is this patent causing a rare earths quake? Nordex, Defense Metals, BYD

Nordex: TU Darmstadt gives hope

Wind turbine manufacturer Nordex is well-positioned to benefit from the energy transition. But things could be better for the German wind power pioneer. Margins are lacking. Supply chains and logistics costs for the huge wind turbines are also getting out of hand. Compared to its competitors, such as the Danes from Vestas, Nordex has fallen behind. An innovation from Darmstadt Technical University would come in handy: researchers at the university have patented a manufacturing process that can significantly reduce the proportion of rare earths in permanent magnets. Specifically, such magnets are produced by grinding the rare earths and then "baking" them into a solid. At this point, the TU researchers combine various rare earth granules and concentrate them in the magnet in such a way that, in the end, efficiency increases. Ultimately, there are fewer rare earths in the volume that is less relevant for the function.

For companies like Nordex, the process would mean cost savings. But it will be a while before industrial companies can reap the fruits that the researchers have sown: The project, funded by the German Federal Ministry of Education and Research, will run until at least 2025. Involved in the project is not only the TU Darmstadt but also the Fraunhofer Institute. It is no wonder that Nordex's share price has yet to react to the research results so far - it will still take a little time before it is ready for the market. Nevertheless, the Nordex share has recovered recently. On December 7, investors can determine first-hand what the future holds when Nordex presents online and free of charge at the 5th International Investment Forum.

Defense Metals: Taking a big step

One company that caused a stir and provided insight during past editions of the investment conference is Defense Metals. The Canadians have one of North America's most promising rare earth projects. The Wicheeda project is 100% owned by Defense Metals and is located near Prince George in the Canadian District of British Columbia. Recently, the Company impressed with spectacular drill results: Among others, a 122-meter drill hole with 2.56% rare earth oxides caused a sensation. "Resource infill drilling in 2022 at the Wicheeda deposit continues to yield high-grade REE intercepts from surface with greater than 3% TREO. The drill results are doubly important as they represent the deepest exploration to date at the Wicheeda deposit, returning a broad intercept of mixed lithology at an average grade of nearly twice the minimum ore cut-off value of the Mineral Resources, and ending 50 m below the current pit shell. The fact that we continue to see potentially economic REE grades at this depth is extremely encouraging," commented Craig Taylor, CEO and Director of Defense Metals.

For companies developing resource projects, it is important that the geological fundamentals are indicative of future profitable production. High grades mean that less rock has to be moved to get the desired raw materials. For The Wicheeda Project, key data on the possible economic feasibility of the project are already available. Although these are of a preliminary nature, they are nevertheless convincing. Among other things, Wicheeda impresses with a project value (NPV) of CAD 761 million and an internal rate of return of 22%. Operating margins were estimated at over 60% in the initial review. Investors looking to gain exposure to rare earths and appreciate Defense Metals' geopolitically secure location in Canada may want to take a closer look at the stock - the market cap is currently around CAD 40 million.

BYD: Uncertainty despite security of supply

Rare earths are relevant not only for generators of wind turbines but also in motors for e-cars. In addition, they are used in electronics - touch screens cannot do without the elements either. While carmakers from Europe have to worry about their security of supply, BYD has been able to sit back and relax. The central government in Beijing has been securing the most important raw materials for China's economy for many years, thus guaranteeing growth. But this power of China, coupled with geopolitical tensions, is causing a backlash from the West: While North America and Europe are becoming increasingly independent of China and Russia, the risk of trade barriers is also growing. It is not a foregone conclusion that China will be able to export to Western industrialized countries so easily in the future. BYD has just expanded into Europe and is offering its electric cars there. The models are technically convincing, but they are by no means available at a bargain price. Whether BYD will be successful in Europe and other new markets is not a foregone conclusion. The share has lost around 37% of its value in the past year.

While BYD's stock tends to encourage investors to wait on the sidelines, Nordex's share price performance is already showing slightly positive signals. The presentation on December 7 at the International Investment Forum may point the way forward for investors. It is very likely that the path to a sustainable future can only be taken with rare earths from safe regions - regardless of the latest research results. Stocks like Defense Metals, therefore, remain exciting. As soon as risks are rewarded again on the markets, developers of raw material projects with a future could take off.