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January 18th, 2023 | 10:46 CET

K+S, Alerio Gold, American Lithium - Which commodity stocks offer the most potential in the supercycle?

  • Mining
  • Gold
  • Commodities
  • Lithium
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Commodities will outperform the other major asset classes, equities, bonds and currencies, in the new year. Goldman Sachs has been predicting a commodities supercycle for some time. Of course, not all commodities will perform equally well. There is a supply problem in some areas. In the US, for example, experts are critical of corn or soybean inventories. Therefore, we look at three companies and shed light on whether the commodity produced could experience a boom in 2023.

time to read: 4 minutes | Author: Armin Schulz
ISIN: K+S AG NA O.N. | DE000KSAG888 , Alerio Gold Corp. | CA01450V1040 , AMERICAN LITHIUM | CA0272592092

Table of contents:

    Bill Guy, Chairman, Theta Gold Mines Limited
    "[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited

    Full interview


    K+S - No help needed from the government

    The fertilizer market shot up in 2021. In 2022, there was no fertilizer from Russia and Ukraine, both of which are among the top 4 producers in the world, due to the Ukraine conflict. Most recently, nitrogen and phosphorus fertilizer prices have fallen significantly, partly due to falling gas prices. The price of potash, on the other hand, has remained relatively stable, which is good for K+S. The Company is not affected by rising energy prices, at least in 2023, as it announced on December 19 that it would not make use of the energy price brake.

    Overall, the group has secured 90% of its natural gas requirements in Europe at an average of EUR 0.05 per kilowatt hour. K+S Chairman of the Board, Dr Burkhard Lohr, said: "This means that the full ability to pay dividends will be maintained. The Company plans to present its 2022 financial statements on March 15. Analysts expect a net income of about EUR 1.4 billion, corresponding to around EUR 5.40 per share. This is only slightly above a price-earnings ratio of 4. 2023 is also expected to be a good year for K+S due to capped energy costs.

    The share has gained more than 20% since the beginning of the year and is currently available for EUR 22.16. That is above the EUR 22 price target of UBS, which upgraded the stock to hold in mid-December. JPMorgan's Chetan Udeshi maintained his Overweight rating on K+S, saying the Chinese government's earlier-than-expected lifting of corona restrictions was offset by a resurgence of infections that could slow economic activity later in 2022 and early 2023. However, China's opening up in the long term should be viewed as positive.

    Alerio Gold - Fieldwork in preparation

    While gold was not a good investment in 2022, there are increasing signs that this may change this year. The USD dollar has weakened, and US inflation is slowly coming down. In addition, central banks are buying more gold than they have in a long time. Rumor has it that Russia may sell 2 barrels of oil at a gram of gold. That would send the price of gold towards USD 3,600. The rising gold price is helping gold explorers like Alerio Gold. The Company has 3 gold projects in Guyana, South America, called Tassawinni, Harpy and Puruni. The focus is on Tassawinni, as it has already invested CAD 34 million to create infrastructure such as a camp, airstrip, and barge dock.

    A 2010 mineral resource estimate indicates that the property has 499,000 ounces of gold. The area has further exploration potential as well as a license to mine. On December 8, the Company announced it had contracted Auracle Geospatial Science Inc. to prepare an updated topographic map and structural interpretation of the property. The results of this work identified several high-priority targets outside the historic Tassawini resource area. Using the newly acquired data, a new exploration program will be designed to advance the targets. Fieldwork is expected to commence next.

    Allan Fabbro, who became the Company's new CEO on December 16, commented, "The survey builds on the solid understanding of the structural and stratigraphic controls on gold mineralization at Tassawini, with results leading to high-priority targets that include untested extensions of historic resource zones and new areas interpreted to be highly prospective for previously unrecognized gold mineralization." Alerio Gold's shares have been running sideways since September but have recently formed a slight uptrend. Currently, one share certificate pays CAD 0.065. With a closing price above CAD 0.09, the sideways phase could successfully be exited to the upside.

    American Lithium - Waiting for the PEA

    There will be shortages of lithium in the future. In 2030, at least 60% of all vehicles are expected to be electric. That means high demand for lithium. According to S&P Global, there is a supply deficit of between 220,000 tons and 2 million tons by 2030, even if all existing projects go into production by then. Good prospects for American Lithium, which owns one of the 5 largest sedimentary lithium deposits in the world with the Tonopah Lithium Claims Project in Nevada. In addition, there is the Falchani project, which is further advanced and is considered the sixth-largest hard rock lithium deposit in the world.

    In addition to the two lithium projects, the Company has one of the world's largest and lowest-cost uranium deposits. The Macusani Uranium Project, like the Falchani Lithium Project, is located in Peru. There are 51.9 million pounds of uranium oxide indicated and 72.1 million pounds of inferred resources on the property. According to the preliminary economic assessment (PEA), about 6 million pounds could be produced annually at a cost of USD 17 per pound. In early December, the Company announced a spin-off of the uranium project. Shareholders would then have a stake in 2 exciting companies at once.

    More news is in the pipeline for January. The Tonopah Lithium Claims Project PEA is scheduled to be released. It has been announced in advance that lithium leach tests have achieved a 97.7% lithium extraction. A PEA is planned for the Falchani project in the first half of 2023. American Lithium's stock has also been trading on the Nasdaq since January 10. Since the beginning of the year, the value has increased by almost 55% and is trading at CAD 4.28. If the rumors are true that the net present value of the PEA of Tonopah Lithium Claims should be at USD 3 billion, the share has further potential.

    There is increased demand in all three areas. Due to the war in Ukraine, large producers are dropping out. K+S is benefiting from this. In addition, energy demand has been hedged favorably. Gold is increasingly demanded by central banks. If Russia accepts gold as payment for oil, the price could rise further. Good for Alerio Gold, who wants to expand its exploration work. American Lithium is benefiting from massive demand from the automotive industry. At the same time, they are planning a spin-off of the uranium project.

    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

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author

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