07. January 2021 | 10:06 CET
Nevada Copper, Glencore, Tesla: E-mobility seeks copper!
Almost unnoticed, the copper price recently climbed to a 7-year high. No wonder, because the political efforts favoring e-mobility are intensified nearly every week! The complete changeover to the "electric car" is seemingly a done deal in Brussels. Regardless of the never-ending discussions about the lopsided eco-balance concerning battery production & disposal, the political will is spreading among the population. With tax incentives, the topic of "solar energy" could also be pushed forward, so why shouldn't company fleets and company cars be promoted appropriately. The consumer often feels good about the income tax, and we can recite a 7-verse poem about this topic in Germany.
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ISIN: CA64128F1099 , JE00B4T3BW64 , US88160R1014
"[...] 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 - 25,000 tons in the pipeline
For many market participants, the Nevada Copper project almost has a beard! The stock has been known since 2007 when it went public at around EUR 1.50. Just as the financial crisis began the price even tripled to EUR 4.50. Then, though, the copper price slumped, and the Nevada project became quiet. A lot has happened on the market in recent months: on the one hand, copper demand has skyrocketed due to the many e-mobility projects. On the other hand, hardly any more mining capacity has been created in recent years. A classic supply market, there is excess demand and the few producers have a firm grip on the price structure.
Using a financing package from KfW IPEX-Bank and existing shareholders willing to pay, Nevada Copper created sufficient liquidity and will now revive its project in the Nevada desert in 2021. The project will start with an underground mine that will go into production in the first quarter. The material handling systems for this have just been installed. The entire plant is located near the capital Reno, where Tesla, Google and Switch also conduct their mobility research. Nevada has been a mining state for two centuries, and the legal conditions could not be better.
In the second stage of development, an open-pit mine will be launched, but several financing rounds are still planned for this. The debt is still as high as the market capitalization, but the first cash flows will be used consistently to bring the mine forward and reduce the debt capital in parallel. Nevada Copper's share price has already reacted positively to this news, rising from CAD 0.09 to CAD 0.17 in 6 weeks. If the project progresses as presented by the management, the share price will certainly soon be somewhere else - currently, of course, the entry is still speculative.
Glencore - on the way up again
With the just-completed Brexit, some British shares are in high demand. This is also the case for Glencore PLC, which has become world-famous as a commodity producer and trader. The Company manages its commodities operations out of Switzerland (Baar), but its shares have been domiciled in Jersey under British law. Glencore employs over 160,000 people and is one of the largest commodity traders in the world. Its revenue in 2019 was over USD 215 billion, and its market capitalization is already very mature at USD 36 billion.
The Company holds substantial stakes in listed mining groups Minara Resources (Australia; nickel; 70%) and Century Aluminum (United States; aluminium; 44%). In Africa, the Company holds just under 75% of Katanga Mining Limited, located in the Congo. In the Peruvian mining Company Volcan Compañía Minera, Glencore has been the majority shareholder since 2017 as a holder of 55% of the shares. In Asia, Glencore has held a 69.7% stake in Kazzinc since 1997. With these holdings, Glencore is doing very well in the industrial metals sector, especially the properties in Africa, Peru, and China, accounting for about 20% of world production in copper.
For Glencore, a new chapter in the Company's history begins with the resignation of long-time chairman Ivan Glasenberg. He is succeeded by the South African Gary Nagle, who has been with the Company since 2000 and has been responsible for the coal trade division where Glasenberg once made his career at Glencore. So Nagle understands the raw material deposits - which is an advantage for the job as CEO.
The Group is increasingly becoming a mining group and has long since ceased to be a pure commodities trader as it was in its early days. Apart from a few minor scandals, this is also where the shares charm lies. After overcoming the EUR 3 mark, the chart should continue to rise.
Tesla Motors - Is this a Volkswagen 2.0?
If you've been following Tesla Motors for a few months, you've seen a stock that flies and flies and then flies some more. Despite two capital increases and a stock split, the Tesla stock jumps to new highs every day with the market capitalization reaching the USD 730 billion mark yesterday. That means Tesla is now worth 1.3 times what all global auto manufacturers and suppliers combined are worth. The recent price jumps of about 5% per day can be compared to an entire Ford Motors. Ford itself employs 190,000 people and generates USD 156 billion - Tesla Motors only manages USD 40 billion in sales and isn't even profitable in car production.
The Tesla story is reminiscent of Porsche's failed takeover of Volkswagen AG in 2008, where Porsche, controlled by Ferdinand Piech, had bought up all the call options on VW's common stock. It then saw its share price rise over 1,000% due to its inability to deliver, and a capitalization that was half of Tesla's current valuation. It was a coup that the legendary Porsche boss Wendelin Wiedeking attempted, but everything turned out quite differently in the end. The case is still occupying the courts in Stuttgart and Wolfsburg today and is not yet off the table, as many small investors were involved in the sales.
At the time, investors had speculated with borrowed shares; there was a technical delivery problem. How the story with Tesla will end remains to be seen. There is a presumption that some shares will have to be bought through inclusion in the S&P 500 index. On the other hand, Elon Musk owns a few million options on shares, which have to be regularly covered on the market to deliver them to the founder and visionary. Elon Musk does not draw a salary, but only profits from the share price's success - regardless of the Company's operational success. The result of this rally will undoubtedly go down in history.
Meanwhile, Morgan Stanley is heating up the party a bit more and sets a price target of USD 810 - but that's only 5% upside. Our bold prediction is: in 6 months, well above USD 1,000 or below USD 350. Please do not laugh.