08. July 2021 | 11:41 CET
K+S, Theta Gold Mines, Varta - Explosion in construction materials and raw materials!
The price rally in essential commodities continues. An acute shortage of building materials has caused some sharp price increases on construction sites. As reported by the Federal Statistical Office, in May 2021, solid structural timber increased in price by 83.3% year-on-year, roof battens by 45.7% and structural timber by 38.4%. The increased prices of wood and steel and industrial metal are driving up construction costs: reinforcing steel in bars was 44.3% more expensive in May 2021, and reinforcing steel mesh cost 30.4% more than a year ago. The main reasons for the rising lumber and steel prices are likely to be rising demand at home and abroad during the Corona pandemic and problems in the supply of raw materials. By comparison, the producer price index of industrial products rose 7.2% over the same period - the most significant monthly increase in 25 years. Who are the beneficiaries of the shortage rally?
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ISIN: K+S AG NA O.N. | DE000KSAG888 , THETA GOLD MINES | AU0000035701 , VARTA AG O.N. | DE000A0TGJ55
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
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.
K+S - Like a phoenix from the ashes
Kali & Salz was founded in 1889, making it one of the oldest commodity stocks with German roots. Today, the Company is one of the world's leading suppliers of potash and magnesium products for agricultural and industrial applications. The product range includes specialty and standard fertilizers, various plant care and salt products, and products for animal hygiene and several basic chemicals such as caustic soda, nitric acid and sodium carbonate.
From the perspective of the drastic increases in raw material prices, K+S is currently very well positioned. That is because the K+S Group occupies a market-leading position for potash products in Europe. In the case of fertilizers containing magnesium, the Company is even the global market leader. In 2012, construction work began on the new potash site in the Canadian province of Saskatchewan, in which K+S invested about EUR 3 billion. The expansion took place at a time of weak potash prices and led to a high level of debt; potash prices did not recover until the end of 2020, and so the K+S share price went downhill from 2015.
Currently, however, potash prices know no stopping. New 10-year highs have been marked in the USA, and the rally is even more pronounced in Brazil. While prices in North America are still below the USD 600 per ton mark, this mark has now been broken in the largest South American country. Thus, the price of potash and all fertilizers there has risen drastically within a few weeks; since the beginning of the year, it has now risen by more than 100%.
The K+S share has had an exciting journey since October 2020. The price has broken out to the upside with plus 100% in 9 months. After a short consolidation, this could be just the beginning, given the current inflation in commodities. Therefore, stay invested.
Theta Gold Mines Ltd. - Search for raw materials in South Africa
Now it is here, inflation. For a long time, central banks have been able to keep interest rates low, but will this still be possible in the future? Rarely has there been such an increase in the price of critical commodities and construction materials as in 2021, with disrupted supply chains resulting from mine shutdowns during the Corona pandemic. But where do things go from here?
Australia's Theta Gold owns over 62,000 hectares of gold mining claims in South Africa and a total of 43 historic properties, most of which are located within the Eastern Transvaal Gold Field northeast of Johannesburg. Exploration is directed at high-grade, near-surface gold reef deposits at the Pilgrims Rest and Sabie Gold Fields.
In July, the Company announced the continuation of development work recently commenced following the release of the first underground pre-feasibility study (PFS) at TGME, Pilgrims Rest. The Phase 1 underground project will be completed by Q1 2022. The objective is to upgrade the Rietfontein mine scoping study to a PFS as well. The gravity survey required for this has already been completed in May 2021. Current exploration for ore reserves at Theta Gold is focused on both underground and surface deposits.
Post-validation of historical tunnel samples is required to provide definitive confirmation of project progress. Clean-up work around the mine site has now commenced in preparation for decommissioning the old gold plant. Further metallurgical optimization work is still required before the process design can be finalized. A safety expert works on-site to develop a health, safety and environmental management system for future operations.
The Theta Gold share is actively traded in Frankfurt. As the resumption of gold production may be on the agenda as early as 2022, an initial position should be established.
Varta - New site in Nördlingen brings fantasy
Varta is also highly dependent on raw materials for its production because Varta is an expert for different battery systems such as wireless headphones, batteries for drills and robotic lawnmowers, power for insulin pumps, and measuring devices in the industry.
And batteries for electric cars are also soon to roll out of the factory. To this end, the Company has opened its new lithium-ion cell factory at the Nördlingen site. The new building with a production area of 15,000 square meters is an important step for Varta in its growth strategy. With the new factory, the Company now has a total production area of 60,000 square meters and thus the ideal infrastructure for further growth. Customer orders from German premium manufacturers have already been received, and development partnerships are now being launched.
Varta is in a tough technology competition. If you want to be at the forefront, you have to keep presenting new and better batteries. Of course, this also requires the political will and the vision to keep innovative power and technology in Europe, especially in Germany as an industrial location.
After its consolidation in May, the Varta share has picked up speed again and rose to a high of EUR 145. From a chart perspective, the all-time highs at EUR 160-180 are now on the agenda again. Currently, the share price has entered a holding pattern again. The market is probably expecting further battery news. Overall, the valuation of the Varta share is high - but the opportunities are also extraordinary.
An investment in commodity and industrial stocks is very cyclical and fraught with risk. Those who invest in dynamic stocks like K+S or Varta are exposed to high trend dynamics. Theta Gold Mines is still in the early stages of development, but their history makes the projects very promising.