30. December 2020 | 06:50 CET
NEL ASA, Nikola, Nevada Copper, BHP Group: Be part of the next trend from the start
Copper is considered a rather dull industrial metal. Yet copper is more than many investors think: analysts expect that more copper will be mined in the next thirty years than in the entire history of mankind. What sounds enormous is, in reality, so. Copper mines around the world are producing at the limit of their capacity. New projects are waiting in the wings and are urgently needed. One of the main drivers of the copper boom is electromobility. An electric car contains around three times as much copper as a conventional combustion engine. Hydrogen vehicles also contain copper. Reason enough to take a closer look at some interesting stocks around the trend.
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ISIN: CA64128F1099 , US6541101050 , GB00BH0P3Z91 , NO0010081235
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
NEL ASA: Nikola as a cautionary tale?
NEL is a hydrogen Company from Norway and focuses on the production, storage and distribution of hydrogen. If one imagines a mobile future with hydrogen vehicles, these three factors are crucial. Hydrogen must be produced efficiently and environmentally friendly from renewable sources, and it must arrive safely in the tank.
While companies like Nikola are fine-tuning how to get the technology on the road, NEL is taking a fundamental approach to the problem. On the stock market, this strategy is going down particularly well. Over the last twelve months, the share price has risen by around 200%. It has created desire and ensured that the stock is still on the buy list of many investors, even after its significant increase.
From a chart perspective, the share has overcome its resistance just above EUR 2 and even reached the EUR 2.50 mark. The share thus shows how strong a trend can be when it has built up momentum. The hydrogen rally is supported by numerous economic measures that are supposed to be "green" in the sign of the times.
As a result, Companies like NEL are benefiting in particular. But trees do not grow to the sky. It is not foreseeable when the hydrogen hype will end, or when there will be a lengthy consolidation on the stock exchange. Existing shareholders should keep a critical distance from stocks like NEL and not be afraid to profit when they are weak.
The example of Nikola shows that new technology is not a one-way street on the stock market - the shares of the hydrogen pioneer, which faced allegations of manipulation in the summer, lost around a third of their value in the last three months.
Nevada Copper: Junior producer as speculative opportunity
While classic hydrogen stocks are either very ambitiously valued or are already being eyed critically, copper producers are considered boring and anything but "hot". But copper is an important raw material for electromobility. The Canadian company Nevada Copper is the first new US copper producer in ten years. Not far from the production sites of Tesla or Switch, the company is developing an underground copper mine in the U.S. state of Nevada, whose production is expected to reach full capacity in 2021. In the immediate vicinity, there is also an already approved open pit mine of the company, whose production start has not yet been scheduled, however. A few kilometers to the east, Nevada Copper, is exploring another area.
The producer has found a potent financing partner in KfW IPEX Bank and some illustrious shareholders in companies such as Blackrock, Rothchild, Pala Investments and Capital Group. On the stock market, the company is currently valued at around USD 150 million. In view of the imminent comprehensive start of production and the robust key financial data of the projects, this valuation appears very low. The obstacle to a rising share price is likely to be the high debt ratio: Debt stood at just under USD 130 million in November, while at the same time the company had less than USD 1 million in cash.
Most recently, however, financing partner KfW IPEX put together a financing package in the double-digit million range, which should carry Nevada Copper until the underground mine is fully operational. In view of the high debt ratio, the share appears speculative. However, it is also currently worth less than a third than it was a year ago. If Nevada Copper goes into full production as planned, this should be reflected positively in the share price. The tight financing situation may even be an opportunity in times of low-interest rates
BHP Group: Boring, but also solid
The BHP Group share shows that good money can be earned with copper, among other things. The British Company primarily produces iron ore products, copper and coal with petroleum. Recently, sales and profits have weakened, but this is mostly due to the flagging coal business. The Corona pandemic has also caused some distortions. However, the iron ore business in China proved to be robust. While the stock is not a price rocket - it was around 10% in 2020 - it offers a substantial stake in the development of industrial metals as well as a hefty dividend.
Although the Company has cut its payout in 2020, a dividend yield of around 5% still beckons at the current price, making the stock suitable primarily for conservative investors. Those who like speculation are better off with smaller, early-stage companies.