Mercedes-Benz, Manuka Resources, Nordex - How vanadium is advancing the energy transition

Mercedes-Benz - Targeting the premium segment

Ola Källenius said at the presentation of the Vision EQXX concept car, "We will build the most attractive e-cars in the world." With that, the bar is set high. And the words were followed by actions. The vehicle covered over 1,000 km on a single battery charge from Sindelfingen to the Côte d'Azur. Research is being carried out worldwide, particularly in the area of batteries, to significantly reduce the problems of electromobility. One key to this could be vanadium. The raw material is increasingly finding its way into rechargeable batteries or as energy storage in vanadium redox flow batteries.

So Mercedes is on the right track, even if the concept car's progress is not yet in series production. Operationally, things are going well nonetheless. In Q2 2023, Mercedes-Benz EBIT rose 8% to EUR 5.0 billion compared to EUR 4.6 billion in the year-ago quarter. Sales increased 5% to EUR 38.2 billion compared to EUR 36.4 billion in Q2 2022. This growth was mainly driven by sales of passenger cars and premium vans, as well as efficient cost control. Sales of electric vehicles increased by 96% year-on-year.

The focus on the premium segment is paying off for the Group so far. The International Motor Show, held in Munich until September 10, failed to generate new momentum in the stock this year. Since the formation of the double top in June at around EUR 76, the share has been on a downward trend and is currently trading at EUR 66.69. The low of EUR 64.51 from May should provide support. Analysts at JPMorgan, Berenberg and Bernstein Research issued buy recommendations for the share in September with price targets between EUR 83 and EUR 90.

Manuka Resources - Gold resource updated

Since Manuka Resources resumed gold production from Mt Boppy in mid-June, a lot has happened. On August 7, the Company announced its 3rd payable gold shipment to the ABC refinery. Deliveries have been scheduled weekly since then, stockpiled with material from its gold project that Manuka processes at its own facility. The processing of the material yields gold at a rate of more than 77%. By the end of July, a total of 96,060 tonnes of waste and ROM material had been screened and is expected to meet the project targets of producing 350 to 450 ounces of gold per week.

As of August 24, total gold resources at Mt Boppy have increased by 360%, including a 79% increase in proven and indicated resources. This brings the mineral resource to 160,100 ounces of gold at a grade of 2.01 g/t. The increase is the result of bulk sampling and screening evaluation of rock dumps. There is also potential for further resource growth through depth extensions of Mt Boppy. With gold revenues underway, the Company has set the stage to further develop its Wonawinta Silver and Base Metals Project and the offshore Taranaki VTM Iron Sands Project.

The latter, in particular, is highly exciting as the release of the vanadium resource shows that it is one of the largest drilled vanadium projects in the world. The project has a granted mining license and is in the lowest quartile of iron ore production costs. The Company is awaiting the reissuance of its environmental permit before completing its bankable feasibility study. On September 8, the Company extended its existing credit facility with TransAsia Private Capital. The stock is currently priced at AUD 0.05, down more than 50% from its high of AUD 0.11 this year.

Nordex - Recently secured 3 major orders

Vanadium can be used in the wind power industry for the production of steel alloys and redox flow batteries. The steel alloys are resistant to fatigue and corrosion and can reduce the weight of wind turbines, leading to higher efficiency and lower costs. Vanadium redox flow batteries can store excess energy generated during calm or low-wind conditions. The use of vanadium in the wind power industry could help integrate renewable energy into the power grid. Nordex is assured of support from politicians.

The Company has struggled with weak margins in the past. Things are slowly looking up in this area, as can be seen from the Q2 figures. 1.6 gigawatts of orders came in during the 3 months. Gross margin was 12.1%, and after a negative EBITDA margin, break-even was reached in Q2. The order books are full, with EUR 6.4 billion for turbines and EUR 3.8 billion for services. The Group generated most of its orders in Europe. In the 1st half, sales growth was 30%, or EUR 2.8 billion. There was also growth in installations, reaching 3.1 gigawatts in the first 6 months.

Since the figures, there have been 3 major orders. The largest, at 280 megawatts, came from Canada, followed by Turkey at 189 megawatts. The latest order is from Germany and is for 180 megawatts. It is safe to assume that the newer projects will have higher margins than the old ones. In general, times are tough for wind power. Most recently, Ørsted had announced significant write-downs on its US portfolio. This also dragged down Nordex's stock. On the positive side, however, the support at EUR 10 has held. From there, it went up to currently, EUR 10.73.

The energy turnaround will create a great demand for raw materials. Old raw materials will suddenly take on a new significance, and demand will rise faster than supply. This is likely also the case for vanadium, as it is increasingly used in electric vehicle batteries. Mercedes-Benz is currently leading the way in the area of range in electric cars, even if the technology is not yet ready for series production. Manuka Resources produces gold and has a great silver asset. But the pearl is the vanadium iron sands project. This could be a major vanadium producer in the future. Nordex continues to struggle with its margins. However, there are first signs that the group could achieve the turnaround here.