September 27th, 2022 | 11:01 CEST
Kodiak Copper, Nordex, BYD - Copper price indicates recovery of the economy!
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Kodiak Copper - Drill results expected soon
In addition to the energy transition in Europe, China also needs more copper to drive its decarbonization. According to Goldman Sachs, demand will significantly exceed supply starting in 2026. But building a copper mine takes time, and large copper mines have hardly been found in recent years. These are ideal conditions for Kodiak Copper, the Canadian copper explorer founded by Chris Taylor. Chris Taylor has already shown with Great Bear how to make a company great and sell it. Kodiak Copper is now successfully using the proven Great Bear approach on its copper-gold porphyry property. The flagship project, MPD, is 14,716 hectares in size and is located in British Columbia.
Since March, the 25,000m drill program has been underway on the MPD property. On September 13, the Company announced an update on the exploration program. A total of 29 drill holes were drilled for a total meterage of 19,150m. The focus was on the high-grade Gate Zone and adjacent targets with similar geophysical characteristics. The drill core has been shipped for assay, and the next batch of results is expected before the end of September. One drill rig has now been commissioned on the Dillard Zone. The exploration program will continue until the winter, testing identified 3D IP geophysical anomalies.
CEO Claudia Tornquist will present an update on September 27 at the 4th International Investment Forum. If further high-grade discoveries succeed, this should turn the share price around. Most recently, the share price fell to CAD 0.68 and has thus returned to the starting level before the high-grade Gate Zone discovery was made. In the meantime, the property has been enlarged, the Gate Zone discovery expanded to over a kilometre and additional targets are now being tested with similar discovery and value generating potential. There is currently no financing requirement either. Due to the developments in the copper price, the share should soon start to rebound.
Nordex - Order from Germany
Copper also plays a decisive role in renewable energies because if you want to expand the grids, you need corresponding raw materials. A wind turbine with an output of 1 megawatt contains around 8,000 kg of copper. Therefore, the rising cost of raw materials is a problem for wind turbine manufacturers. To some extent, Nordex is ahead of its competitors, but the German company is struggling with its low margins. If unforeseen cost increases come along, they eat into profits. Despite the difficulties, the order books are full, giving hope for better times ahead.
The Company's return to the SDAX is also positive. This wins back institutional buyers that had been lost due to the exclusion. In addition, the Company should benefit in the future from the energy policy in Europe, which wants to push the expansion of renewable energies. On September 20, the Company announced an order for 31.5 megawatts from Germany. It involves the delivery of a total of seven Delta4000 series turbines to the Kantow wind farm. In addition, a 15-year premium service contract was concluded with the option of extension for a further five years.
The development of improved wind turbines is also progressing. On September 15, the N175/6.X turbine was presented, which pays off, especially at medium and low wind sites. Overall, the new type brings an additional yield of 7-14% compared to its predecessor. The share could not escape the overall market but did not reach new lows since the beginning of July. Currently, one pays EUR 8.68 for a share certificate. The latest analyst opinion from Jeffries sees the share as a buy with a price target of EUR 13.
BYD - Positioning itself broadly
As described above, China has increased its copper imports. The goal is decarbonization. A major contribution to this is made by BYD, which is the market leader in China in the field of electric mobility. New electric cars consume significantly more copper than old cars with combustion engines. It is therefore not surprising that China has an increased demand for copper, despite Zero-COVID. As the original battery manufacturer, the Company relied on copper even before car production.
The Company is working toward being as self-sufficient as possible. It produces its own blade batteries, and its subsidiary manufactures its microchips. In order to secure the expansion of production, the Company has recently repeatedly invested, for example, in the Shenzhen Chengxin Lithium Group, Shanshan Lithium Battery Material Technology, Zhongrun Chemical and other future investments. These investments secure the Company's position along the value chain. And this is urgently needed because the growth is remarkable. Recently, a framework agreement was signed with Castrosua to produce electric buses in Spain.
E-car sales have continuously set new records in recent months. One can be curious about the figures for September. Equally attractive is the share price, which has recently been under significant pressure following sales by Warren Buffet. The share is currently at EUR 28.05 and is trying to form a bottom. The upward trend of the share is still intact, which could be said about few securities recently. Only below EUR 18.35 would the trend be broken.
Copper is a critical commodity when it comes to renewable energies and decarbonization. Both Europe and China have increased demand, and demand in the US could also pick up significantly due to the subsidy package. Kodiak Copper, therefore, has optimal conditions. If the drilling results bring further high-grade discoveries, the share will jump quickly. Nordex has full order books but too small margins. If the Company gets its profit margin widened, share price gains beckon. BYD is a leader in many areas and has made itself independent of many external factors, giving the group an edge over the competition.
Conflict of interest
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