NIO, Kodiak Copper, Siemens Energy - Will green policies end in disaster?

Copper as a base metal

Looking through rose-colored climate glasses, you see wind turbines, around which sheep and cows graze, brightly shimmering solar panels that generate electricity, and battery-powered cars that strongly resemble KITT from the 1980s cult series Knight Rider. The fact that this enormous transformation requires an incredible amount of industrial metals and rare earths is either unknown to some activists or is cleverly swept under the rug.

Yet it is written in black and white in the EU Commission's report "Megatrend Raw Materials and Rare Earths". Between 1900 and 2015, global raw material extraction increased 14-fold and is expected to more than double again between 2015 and 2050. The demand for some metals needed to transition to a low-carbon economy will increase at least twelvefold between now and 2050. These include the red metal copper, which is considered the base metal of the energy transition due to its nature and conductivity.

Extremely low supply

However, the high demand for copper is offset by an extremely limited supply. Due to the low copper price in the past decade, little investment capital flowed into exploring new projects, which are, however, now urgently needed. A long way behind has already been Kodiak Copper, a development company belonging to the Discovery Group, which is moving ever closer to copper producer status due to recent successful drilling programs.

Kodiak Copper's focus is on its wholly-owned copper porphyry projects in Canada and the USA. The MPD project in the Quesnel Trough in south-central British Columbia, where high-grade mineralization within a broad mineralized envelope was discovered last year, stands out. The prospect is highlighted by the fact that producing mines of Copper Mountain, Highland Valley and New Afton are located in close proximity.

Significant results

A total of 30,000m is to be drilled with two rigs in the current year, with management's focus on extending the gate zone. Results to date have shown impressive outcomes. The strike length has been extended by more than seven times from the original 125m to 950m in a north-south direction. In addition, significant copper-gold mineralization has been intersected with a thickness of 350m east-west and to a depth of 800m, open in all directions. As of September 1, 25 drill holes totaling 13,600m have already been completed. A total of 1,755 soil geochemical samples have been collected, predominantly within an area of five square kilometers connecting the southern end of the Gate Zone with the historic Man target.

The excellent discoveries on the Gate Zone suggest to management that MPD is a multicentric porphyry system like many others in British Columbia. The Gate Zone discoveries are likely to be just the beginning of the road to realizing MPD's potential, with other high priority targets such as Dillard, Man, Prime, Axe and new targets generated by this year's fieldwork through the successful exploration method.

The copper price is correcting after the highs in May, making it an excellent long-term entry opportunity. Kodiak Copper owns one of the most prospective copper projects. A takeover by a major would not be surprising before reaching producer status.

NIO insatiable

According to a Deutsche Bank report published Wednesday, the urgent need for more copper is confirmed by Chinese automaker NIO, which aims to expand production from the current 120,000 to 600,000 vehicles by December 2022. Work to expand capacity at the existing plant, and a new one is in full swing. To fund the expansion, the Company plans to sell USD 2 billion worth of new American Depositary Shares, which would amount to an increase of about 3% in the number of shares. The sale of the ADSs will take place step-by-step through ordinary broker transactions, the New York Stock Exchange, or other markets at NIO's discretion.

The news was followed by a share sell-off to USD 35.50; the loss was over 5%. Broad support lies at USD 35. NIO is more than promising in the long term.

Sell-off due to downgrade

Siemens Energy had to cope with an even more severe share price loss. The Siemens subsidiary Siemens Energy lost almost 8% to EUR 23. The reason for the sell-off was a downgrade by analyst firm JP Morgan. The "Overweight" rating was canceled, and the price target was lowered to EUR 29. The share price is currently quoted at EUR 23.10. If the EUR 23 mark is breached, there is a threat of further downward pressure.

Climate change is becoming the plaything of politics. Ever shorter targets for achieving climate neutrality are being named, although it is not guaranteed that essential metals such as copper will be available in the coming years. Kodiak Copper is a promising copper explorer that encourages buying at current levels. The verdict for NIO is also: thumbs up!