February 22nd, 2023 | 13:20 CET
K+S, Tocvan Ventures, Rock Tech Lithium - Shares with doubling potential
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"[...] 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
K+S - Well positioned for 2023
Potash and salt producer K+S is the largest European producer of potash- and magnesium-based products and the fourth largest worldwide. In recent years, it has focused on the production and marketing of special fertilizers and salt for chemical use. Last year, K+S secured 90% of its natural gas requirements in Europe at an average of EUR 0.05 per kilowatt hour. Analysts expect net income of about EUR 1.4 billion for 2022, corresponding to earnings per share of about EUR 5.40. The price-earnings ratio of K+S is thus only slightly above 4.
However, K+S has maintained its position in the market through its smart strategic direction and innovation capabilities. Indeed, in recent years, K+S has invested in technology and innovation to make its operations more sustainable and efficient. One example is the development of new processes for recovering nutrients from waste products. This not only helps to improve the environmental balance sheet but also offers new business opportunities for the Company.
The Group will present its annual figures on March 15. Last year, management repaid bonds ahead of schedule, bought CO2 certificates and presented plans for the Werra plant to make it fit for the future. As neither Russia nor Belarus will likely become active on the world market again in the coming years, good money will continue to be earned in the potash sector. Fundamentally, the share is too cheap. Currently, one share costs EUR 21.64. As a shareholder, it will be interesting to see whether the Company will raise its dividend.
Tocvan Ventures - On the way to becoming a gold producer
The Canadian Tocvan Ventures has two gold-silver projects in the Mexican state of Sonora. El Picacho is the newer project and covers 24 sq km. It is located just 18 km from the San Francisco Mine, which has over 3 million ounces of gold. In January, the Company released the first results from its drilling program. A total of 10 drill holes with a total length of 1,075 m were drilled on the San Ramon property. Up to 7.6 g/t gold and 9 g/t silver were discovered. The historical gold mineralization was confirmed. In addition, even better mineralization was uncovered at depth. The project has multimillion-ounce potential, according to the Company.
Much further along is the Pilar project, where more than 23,000 meters have been drilled since 2020. Here, 33.4 g/t gold and 1,090 g/t silver were found at peak. Much of the drilling has been in the "Main Zone," but parallel zones of mineralization have also been identified in step-out drilling. On January 24, the Company announced that up to 1,000 tonnes of oxide gold material will be sampled and heap leach tested at a private mining operation. Data from this bulk sample on the recovery rate and expected gold grade, which to date has been 90% for gold and 84% for silver, will then be used to initiate the permitting process for the development of the mine and processing plant.
On January 30, the first tranche of the private placement was completed. A portion went to a new strategic investor, but the investor was not named. A total of 441,713 shares of 625,000 were placed at CAD 0.52 per unit. In addition, subscribers received half a warrant per share with an exercise price of CAD 0.62 within 18 months. This raised approximately CAD 230,000, which will be used primarily to accelerate bulk sampling and metallurgical test work at Pilar. More detailed information can be found at researchanalyst.com. The stock is currently trading for CAD 0.50, below the private placement price. If the explorer becomes a gold and silver producer, the stock will have to be revalued.
Rock Tech Lithium - Construction in Guben can start soon
The lithium market is getting hotter and hotter. Car manufacturers are trying to prepare for the future. General Motors recently invested USD 650 million in Lithium Americas, receiving about 25% in return. According to one report, Tesla is looking into acquiring Sigma Lithium. Rock Tech Lithium has yet to be targeted by automakers, even though Mercedes-Benz has signed an offtake agreement. Yet the Company has everything needed for the future. Its own mining project, for which the pre-feasibility study has already been completed, and the plan for the first lithium converter in Europe.
Recently, the State Environmental Agency gave early approval for the construction in Guben. That means the Company can start with the first work on-site, and the construction permit is within reach. It should be granted around the middle of the year. The Company is also active in the zero-waste sector. Rock Tech, GP Papenburg and Schwenk have signed a memorandum of understanding to cooperate in marketing lithium production byproducts. The byproduct aluminosilicate is to be used in the cement industry, reducing carbon emissions. If successful, offtake agreements could be signed between the parties.
There is also positive news at the Georgia Lake mining project. Results from the 2022 drilling program are in, and 3 new deposits have been identified. Currently, exploration continues to expand the asset significantly. Despite the good news, the share has consolidated from CAD 3.60 to CAD 2.82, bringing the market capitalization to around CAD 263 million. Comparing Rock Tech Lithium to Lithium Americas, we see that Rock Tech has a planning edge. Production will start in Guben at the end of 2025 when construction is still underway in the USA. So in comparison, Rock Tech Lithium is clearly undervalued. Once the financing of the converter is in place, the share has a lot of catch-up potential.
Regardless of the interest rate decisions, there are exciting opportunities in the stock market. Just one piece of news can change everything. K+S will continue to earn well in the coming year and is currently undervalued. If Tocvan Ventures succeeds in becoming a gold producer, the stock must be revalued. Rock Tech Lithium is active in a hot market environment. Even without the entry of a strategic investor, the share should jump significantly as soon as the financing of the converter is in place.
Conflict of interest
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