August 24th, 2022 | 13:17 CEST
Lithium circular economy and new deposits: Mercedes-Benz Group, Edison Lithium, Varta
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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
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Mercedes-Benz Group: Keeping an eye on progress
As early as 2020, Mercedes-Benz Group announced that it would only use battery raw materials from certified sources. The Swabians recognized early on that sustainable announcements must be followed by sustainable actions in order to convince customers. Starting in 2023, a pilot plant for recycling e-car batteries will be built in Kuppenheim, Baden, not far from the Mercedes-Benz and Daimler Truck locations in Rastatt and Gaggenau. The makers behind the pilot plant, which include the Karlsruhe Institute of Technology (KIT), have recycling rates of up to 96% in mind. Initially, an annual capacity of 2,500 t is planned. In a next step, the knowledge gained is to be used to roll out the processes on a large scale at a low cost.
It usually takes a while from a pilot plant to series production. But Mercedes-Benz is doing well to do everything it can today to close the supply gap for lithium, which will open up, above all, for demanding customers with ESG profiles. Market experts assume that European demand for "white gold" alone could increase 18-fold by 2030. Against this background, the circular economy planned by Mercedes makes sense but will not solve all the problems. Lithium from sustainable sources will be urgently needed in the coming years. Since the Mercedes-Benz Group is also experimenting with innovative battery technology in addition to investments in recycling in order to significantly increase the efficiency of the batteries, as in the EQXX prototype, the Company appears to be well positioned in the long term. However, there is no reason for panic buying in the short term.
Edison Lithium: Speculative bet on lithium
Investors should instead keep an eye on the Edison Lithium share. Although little has happened here in terms of news in recent weeks, the share is considered "illiquid". If the mood around lithium stocks turns in the early stages, investors are better off already positioned. Chasing the price usually makes little sense with small stocks. Edison Lithium has two exploration licenses in Argentina and operates there not far from Livent, Argentina's largest lithium producer. Since the Company paid only about USD 1.85 million for its licenses and the stock is also valued at only single digits, opportunities can arise from this key data alone.
Since the entire region around the Antofalla Basin has attracted numerous companies in the past, such as Albemarle, Lake Resources and even Posco and Allkem, the region offers a good infrastructure for companies like Edison Lithium. The stock is a small cap, and the Company is in its infancy. However, the location of the properties and the prices paid for them suggest potential. The stock is in a shallow downtrend but has recently stabilized on declining volumes. The stock is interesting for anti-cyclical investors and makes a good addition to any watchlist.
Varta: Is it finally starting now?
The Varta share has been on every watchlist in recent years. The specialist for batteries and rechargeable batteries was considered to be the German e-car share. But Varta had only announced its intention to enter the business. After that, nothing happened for a long time.
Then, in February of this year, Varta founded its own e-car subsidiary. The Company, called Pertrix V, is to build up investments in all aspects of e-mobility. According to initial details, Varta's business could revolve around lithium-ion batteries, which can be charged particularly quickly. However, Varta has not yet provided any further details. The share is currently trading at its low. Here, too, there are few reasons to buy today.
Of the major companies involved in e-mobility, Mercedes-Benz is preferable to Varta's battery forging company. The reason: The Swabians are already selling cars like hot cakes and are aggressively moving forward when it comes to innovations. Varta, on the other hand, is relatively silent. Great details have also been lacking with the lithium seeker, Edison Lithium. However, this is not unusual for an early-stage company and is what makes it so attractive to many speculative and anti-cyclical investors. Those who put their foot in the door with such shares when they are in comparatively low demand on the market have often already made the first step in the right direction.
Conflict of interest
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