December 30th, 2021 | 11:30 CET
Nevada Copper, Nordex E.ON - What is next in 2022?
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"[...] If we pursue our goals conscientiously, the market will adjust its valuation accordingly, I am sure. Often, all it takes is a trigger. [...]" Ryan McDermott, CEO, Phoenix Copper
The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.
Nevada Copper - Production expansion within reach
A few days ago, Nevada Copper gave a positive outlook on the further development of the Pumpkin Hollow copper project. But not only on an operational level are the signs pointing to growth; the general conditions for the copper producer also remain positive given a strong increase in demand for raw materials.
"The Company continues to build on the operational improvements made over the last two quarters, accelerating the development and production ramp-up," said Randy Buffington, president and chief executive officer." According to the Company, the deployment of additional equipment, more manpower, and more efficient operational processes resulted in the highest development rates achieved this year. "We are on track to complete 1,100 feet of lateral development this month, which will position the Company to mine the first layer of the high-grade Sugar Cube as planned next month," the Company leader said.
The Pumpkin Hollow copper project in the US state of Nevada has significant reserves and resources of copper, gold and silver. In addition to ongoing high-grade production at the underground mine, an open pit project is in the development stage and moving toward a feasibility study. In recent months, there have been several unplanned shutdowns of underground production, which put the share price under pressure. Nevertheless, the Canadians were recently able to secure a considerable CAD 114 million through a capital increase and further financing commitments. The Company is currently valued at around CAD 300 million. The majority of analysts classify the title as a doubler. Drilling data from the high-grade zone should boost the share price significantly in 2022.
Nordex - 2022 will also be a challenging year
It was not a good year for Nordex shareholders. The share certificates are again approaching the course lows of the year. The northern German manufacturer of innovative onshore wind turbines is still suffering from the effects of the Corona pandemic. These are problems with supply chains, logistics and sharply increased raw material prices.
The Group also lowered its operating profit expectations for the full year for these reasons. Nordex recently quoted a target EBITDA margin of 1.0%, down sharply from 4.0 to 5.5%. In plain language: the Group will make a loss on the bottom line in 2021. A company statement says: "It should be noted that the further development of the pandemic consequences will continue to affect business development unpredictably and that the assumptions underlying this forecast are therefore subject to greater uncertainty than under normal circumstances."
There is also disruption on the demand side. Joe Biden's billion-dollar social and climate package is wobbling. Democratic Senator Joe Manchin recently announced that he could not approve it, drawing enormous criticism from his own party. The House of Representatives had already passed the package in November with a slim Democratic majority. The other chamber of Congress, the Senate, has yet to give its approval, and here, every vote counts. It remains to be seen whether Manchin can be swayed. The climate package provides more than USD 500 billion to fight the climate crisis, including investments in renewable energy and tax incentives for purchasing electric cars.
E.ON - Outperforming the DAX
With a price increase of more than 30% in 2021, the DAX stock has left the German benchmark index behind. However, analysts now consider the stock exhausted with a 2022 P/E ratio of 14. Current developments such as the scheduled shutdown of three nuclear power plants in Germany at the end of 2021 and 2022 have long since been priced in. At the end of 2021, the Gundremmingen C (Bavaria), Grohnde (Lower Saxony), and Brokdorf (Schleswig-Holstein) reactors with a total capacity of more than 4000 megawatts will be shut down. The Grohnde and Brokdorf nuclear power plants are owned by E.ON. According to the Working Group on Energy Balances, nuclear power accounted for just under 12% of the electricity generated in Germany in 2021.
The big picture with energy transition and electromobility opens up numerous investment opportunities. However, the devil is in the details. Nordex will continue to suffer from the difficult conditions next year. After a very good performance in 2021, the E.ON share should develop more in line with the overall market in 2022. We rate Nevada Copper as the most promising. The rising copper price and the expansion of production should boost the share price.
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