16. February 2021 | 12:53 CET
Nevada Copper, BYD, Varta: Now it's getting hot!
According to 2020 research from IDTechEx, the introduction of electric traction motors in road vehicles will lead to a significant increase in copper demand over the next 10 years. The study, commissioned by the International Copper Association (ICA), shows that by 2030, more than 250,000 tons of copper per year will be used as part of the windings in on-road electric traction motors. The current increase in copper demand follows the development of the global automotive market. Pure battery-electric cars are expected to gain the most market share at the expense of internal combustion engines and hybrid vehicles. Copper investments, therefore, remain the first choice!
time to read: 4 minutes by André Will-Laudien
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Nevada Copper - Fresh financing completed successfully
Already 70% of the world's copper production is used in electrical products, with the remainder ending up in the construction and industrial sectors, not to mention in the mint. In recent years, many government coin producers have reduced the high copper content in coinage and used nickel alloys instead. However, this has been a rather fading measure against the copper shortage. In some countries, even major substations are now guarded around the clock to curb copper theft. You can tell - this raw material is in short supply!
The significant demand driver for copper comes from e-mobility. By 2030, electric and plug-in hybrid cars will account for about 19% of the total market, rising to 72% by 2040, according to IDTechEx. Whether it will happen that fast may be doubted today, but the trend is unstoppable.
Nevada Copper sits on an extensive resource with underground and open pit potential nearby. Both prospects are located in Nevada and have an added mine life of more than 30 years, with commercial start-up expected in the 50 million pound underground mine as early as 2021.
There has been no new production facility in North America in the last 10 years, so international attention to Nevada Copper's Pumpkin-Hollow project is very high. The target is a production price of approximately USD 2 per pound, and the market price is currently trending towards USD 4 - a good margin situation.
The Company recently announced another successful financing step. A syndicate of Canadian banks underwrote 230 million shares with a placement price of CAD 0.165. Total proceeds are CAD 38 million. After the good news, the NCU share is again moving towards CAD 0.20. Before Christmas, one could still acquire the value at CAD 0.09. We are still in the project stage, and the increase should continue immediately when the last financing for the mine is in place.
BYD - Expansion to Australia and New Zealand
Again good news from "Build Your Dreams" (BYD). The Chinese Group BYD was able to significantly increase sales of its electric vehicles in China in January. BYD sold 20,178 electric vehicles and plug-in hybrids, 183% more than in the same month last year. This included 14,463 e-cars (+181%) and 5,408 plug-in hybrids (+188%) in the passenger car segment. In addition, there were 307 e-commercial vehicles (+172%). While the whole thing looks good, it is sequentially below December sales. However, this is not a bad thing as December is traditionally a strong month for consumer activity in China. On average, the declines were between 25% and 34%. But sales of internal combustion models also fell more sharply than December and were also up compared to January 2020.
BYD is in the process of diversifying its automotive sales geographically. It announced a long-term agreement with Nexport to collaborate on developing and distributing BYD's next-generation electric cars in Australia and New Zealand. This is the first time the Chinese Company has ventured outside of China. The launch of electric vehicles in Europe, starting in Norway, has also been expected for some time.
In Australia and New Zealand, pre-sales of BYD electric cars will begin in July 2021. A total of four models are envisioned, all of which will be powered by LFP battery technology: Han, Song, Qin and Tang. BYD cannot yet rely on a dealer network, which means they will go into direct sales. Currently, the EV market in Australia accounts for less than 1% of new car sales. When the Company will enter the North American market is likely to remain a power-play between Elon Musk and the governments involved for the time being. The BYD share continues to trade at a high near EUR 28.
Varta - Shortseller attack is over
It was a roller coaster ride in February. After the Varta share moved strongly upwards right at the beginning of the year, this called short sellers onto the scene. Varta AG temporarily reached a price of EUR 180, but then the share price fell below EUR 140. After the short-sellers withdrew, the Varta share has been calm again since mid-February. The environment is still likely to remain volatile. On February 18, CEO Herbert Schein will provide a detailed insight into the recent business development and is also expected to give an updated outlook for the current year. The market has high expectations.
In particular, market participants are likely to be eager to hear the Board of Management's arguments following the good 9-month figures. After all, in late summer, he knew nothing about an upcoming lockdown at the turn of the year. We expect that the Company can still meet the recently raised sales forecast of EUR 840 to 860 million (previous year: EUR 362.7 million) for 2020, but presumably, the outlook for 2021 is slightly lower. Adjusted EBITDA could reach between EUR 230 million and EUR 235 million, and the battery manufacturer will also continue to grow in the current fiscal year, provided the general conditions play along.
In the future, Varta wants to transfer its lithium-ion technology to new, larger batteries and continue to score in the energy storage sector. Innovative battery cells for powering e-cars would be the crowning achievement in the long term, and here the stock market has been speculating for months on a major coup. In recent days, the share has recovered from the previous week's sell-offs and stabilized above the EUR 150 mark, which means that a factor of 7.3 is paid on the planned sales in the capitalization. Quite expensive for an industrial stock but a good deal for an e-mobility company.