12. October 2021 | 11:55 CET
NIO, Defense Metals, Plug Power - It is getting critical
Today we are faced with ever-tighter climate targets on the one hand and the availability of critical minerals for a safe and fast energy transition on the other. The disparity between scarce supply and steadily increasing demand is widening. There has been a threat of extreme scarcity and a crashing failure of the widely announced climate change for many years. The few producers of strategic materials are likely to have a bright future.
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ISIN: NIO INC.A S.ADR DL-_00025 | US62914V1061 , DEFENSE METALS CORP. | CA2446331035 , PLUG POWER INC. DL-_01 | US72919P2020
NIO - Enormous growth
The electric car industry is growing rapidly, and so is the demand for minerals such as copper, lithium, nickel, cobalt and rare earths. Rare earths are globally abundant, but the concentration level in the ground is low, and separation from other elements requires special and expensive technologies. These are needed, among other things, in the production of permanent magnets, which are then used in electric motors.
The strong growth in demand for critical elements can be seen, for example, in the sales figures of the Chinese electric car manufacturer NIO. In September alone, China's highest-producing mobility startup brought 10,628 electric vehicles to customers, a 126% increase over September 2020. Looking at the quarter, NIO doubled its deliveries compared to the third quarter of last year.
It is not for nothing that the US investment bank Goldman Sachs sees rosy times ahead for the Chinese company. The analysts' verdict was raised from "neutral" to "buy", and the experts see the price target at USD 56. Based on the current price level of USD 36.40, this offers an opportunity of over 50%.
Defense Metals - Option against scarcity
The United States imports around 80% of its requirements for rare earths from China, while European industry orders 98% of its needs from the Middle Kingdom. The dependence is enormous. In addition, the still ongoing trade conflict threatens further supply chains. In contrast, pure rare earth projects outside are rare. Already this called the governments of the western industrial nations into action to boost production ex-China through subsidies and tax breaks. However, it takes between 5 and 10 years to get a new project into production.
Defense Metals in British Columbia has a project well advanced. The 1708-hectare Wicheeda concession, in which the Canadians have an option to acquire for 100% of the deposit in their pocket, has indicated mineral resources of 4,890,000t of light rare earth elements and inferred mineral resources of 12,100,000t averaging 2.90% light rare earth elements.
It was recently announced that 1,500 meters in eight diamond drill holes had already been completed during this year's drilling campaign in mid-September. A second diamond drill rig has now been brought in to further accelerate the completion of the program to expand and delineate the SEE resource. As a result, exploration targets for the annual program are expected to be achieved sooner than previously forecast. Originally, finalization was anticipated by the end of November.
Investors were impressed by the positive progress. As a result, the share price of Defense Metals rose to just under EUR 0.20 in Frankfurt in recent weeks. Should the resistance at the current level be sustainably broken, the next chart-technical obstacle is to be found in the area around EUR 0.25. However, despite the increase, the stock market value of the rare earth play is still a manageable EUR 15.23 million.
Plug Power - Important step
A beacon of hope for the energy turnaround is the US fuel cell producer, Plug Power. The analysts of the British Barclays Bank take a somewhat more skeptical view and have upgraded their rating for the stock from "underweight" to "equal weight". However, the experts only see a target price of USD 27; Plug Power is currently trading marginally above this at USD 27.18.
Strategically, the US could score by establishing a joint venture to build a hydrogen economy in Asia. Accordingly, a partnership was announced with SK E&S, part of the South Korean SK Group, according to which the two parties want to accelerate the development on the Asian markets. Through the joint venture, hydrogen fuel cell systems, hydrogen fueling stations, electrolyzers and green hydrogen will be offered in the Korean and other Asian markets.
At the current level, consolidation is taking place. A breakout above the USD 28.20 mark would brighten the chart picture considerably.
Without strategic raw materials, the ambitious goals of politics concerning climate change can hardly be met. Rare earth metals come 80% from China, and demand already exceeds supply. The Canadian Company Defense Metals is at an advanced stage and should benefit from the shortage in the long term. Also attractive at current levels are NIO and Plug Power.