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February 17th, 2022 | 11:20 CET

Nel ASA, Power Nickel, Varta - Positioning for the price explosion

  • Electromobility
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In the last two years of the pandemic, both private households and commercial enterprises felt the impact of blown supply chains, from chip shortages to lack of lumber, to packaging materials. Extreme consumption is also taking place due to the ambitious achievement of climate targets. Electromobility is gobbling up enormous resources of key raw materials such as copper, lithium and nickel. Due to the significantly increasing demand for batteries, the demand for nickel is expected to continue to rise strongly in the coming years.

time to read: 4 minutes | Author: Stefan Feulner
ISIN: NEL ASA NK-_20 | NO0010081235 , Power Nickel Inc. | CA7393011092 , VARTA AG O.N. | DE000A0TGJ55

Table of contents:

    Varta - Enormous research investments

    Lithium, nickel and cobalt - these raw materials are desperately needed to usher in the electromobility revolution. In particular, sufficient supplies of the metal nickel could become critical in the next few years. The German Raw Materials Agency (DERA) warns of this. "We assume that, depending on the scenario, global nickel demand will increase from around 2.4 million tons today to up to around 3.4 million tons in 2025," explains Dr. Michael Szurlies, nickel expert at the German Federal Institute for Geosciences and Natural Resources (BGR). "Overall, the nickel market is facing a turning point in terms of demand in the coming years, which will lead to a significant shift in market shares within the application areas."

    Varta, a battery company with a long tradition based in Ellwangen, Baden-Württemberg, is increasingly focusing on electromobility with its research and development of high-performance cells. With an enlarged research center scheduled to open in Graz, Austria, in 2023, the Company plans to continue its long tradition of battery research in Styria by establishing a high-end materials research center for lithium-ion cells and pioneering new battery technologies. Varta intends to invest a total of around EUR 33 million by 2030.

    In addition, a rumor, according to which Varta may have landed a major client for the supply of high-performance cells with Mercedes-Benz, also drove the share price up in the short term. However, during the course of the day, the gains were lost again. The share price closed at EUR 92.56. The approaching support at EUR 89.90 should not be undercut; otherwise, this would result in a further sell-off towards the EUR 80 mark.

    Power Nickel - Producer for the battery industry

    Last year, Power Nickel, formerly Chilean Metals, changed its name to better highlight its focus on developing its James Bay high-grade nickel-copper-cobalt-palladium project, NISK. The NISK property in Quebec, Canada, comprises a large land position with 20km of strike length and numerous high-grade intercepts. The Canadians are focused on confirming and expanding current high-grade nickel-copper-PGE mineralization as a historical resource through the preparation of a new NI 43-101 mineral resource estimate, the identification of additional high-grade mineralization, and the development of a process for potential nickel sulfates for batteries used in the electric vehicle industry.

    3DGS recommended an initial drill program of approximately 4000m, comprising 15 drill holes ranging in depth from 80m to 500m. Following the drilling program, 3DGS will prepare the NI 43-101 compliant mineral resource estimate and technical report.

    In addition to developing and exploring the high-grade NISK nickel project, Power Nickel also has significant assets that could add considerable momentum to the share price of currently EUR 0.13 with a market capitalization of EUR 14.74 million. The Company plans a spin-off of Consolidation Gold and Copper to an independent, listed company. Accordingly, in the future, 80% shall be owned by Power Nickel, and 20% shall then be distributed to the existing shareholders of Power Nickel. The separate Company will then contain the non-core assets, such as the 100% share in the Golden Ivan project in the Golden Triangle of British Columbia and concession rights in Chile and Canada.

    Encouraging assay results from the summer exploration program were recently received from the Golden Ivan concession area. A total of 17 of the 210 rock samples returned greater than 0.1 g/t Au, up to 16.2 g/t Au from the newly discovered Lone Goat deposit and 15.1 g/t Au over 0.75 meters from a channel sample in the newly discovered Molly B East deposit, in addition to significant silver and base metal values.

    Nel ASA - Record sales and growing loss

    The switch from fossil fuels to alternative energy sources in the transport sector is already a done deal, and the EU wants to push through electromobility with all its might. The first stage is to reduce emissions from passenger cars by at least 55% and from trucks by 30% by 2030 compared with 1990 levels. The automotive industry already relies on batteries for passenger cars, but the concept with rechargeable batteries is reaching its limits for heavy trucks and long transport distances. For the transportation sector, fuel cell technology offers significant advantages over electric vehicles. Hydrogen has a high energy density of 33.33 kWh/kg and thus has almost as much energy as 3kg of gasoline.

    One problem that still needs to be solved is the high price of the gas. The solution for a drastic medium-term price reduction lies in the production of green hydrogen. It is produced by electrolysis of water, using only electricity from renewable sources. One of the market leaders is the Norwegian hydrogen specialist Nel ASA, which came up with the figures for the fourth quarter. The Scandinavians posted record sales of EUR 24.5 million, slightly exceeding analysts' estimates of EUR 24.38 million.

    However, Nel ASA failed to meet expectations in terms of EBITDA. The loss amounted to EUR 16.59 million, whereas the analyst consensus was for a loss of "only" EUR 10.7 million. Order intake, in turn, was at a record level of EUR 41.3 million. US bank JPMorgan left Nel ASA at "Underweight" with a price target of 10 Norwegian kroner. The hydrogen producer had a "mixed quarter," wrote analyst Patrick Jones.

    The shortage of raw materials is likely to accompany society and the economy in the coming years. In particular, raw materials for the energy transition, such as nickel, are becoming increasingly scarce. Power Nickel has a high-grade concession area. Varta is investing heavily in battery research, but the success is not reflected in the share price any more than it is at Nel ASA.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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