11. November 2021 | 11:36 CET
Nordex, Defense Metals, American Lithium: USA pushes lithium market - will rare earths follow?
The run on lithium has caused a furor on the stock market in recent weeks. Almost all companies with "lithium" in their names have made significant gains. The background to this is the governments' e-car offensive and a lot of government funding and subsidies for battery technology. The lithium required is held mainly in the ground by smaller companies. Investors who missed out on this wave may be wondering where the music will play next. To find out, one only has to spin the e-car story further: As Tesla, BYD or even VW's green runabouts are preferred to be charged with green electricity, rare earths could soon experience a similar hype. We present shares around the hype topics of e-mobility and the energy transition.
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ISIN: NORDEX SE O.N. | DE000A0D6554 , DEFENSE METALS CORP. | CA2446331035 , AMERICAN LITHIUM | CA0272592092
Nordex: Great demand, but ..
Nordex, the supplier of wind turbines, has had an eventful few months on the stock market in 2021: Around the turn of the year, the share was still driven close to its previous highs but then fell significantly. Nordex was hit by the general risk aversion on the markets. Operationally, things are looking good at Nordex. In the first half of the year, the Company installed 775 wind turbines with a total capacity of 3 GW. Above all, the new Delta4000 platform is paying off as it is more profitable and does not burden Nordex's margins.
Despite this progress, Nordex has to keep its eye on the ball: Rising prices for basic and raw materials already burden the Company. New processes are to dampen this negative impact. Nordex also wants to expand and has identified India as a target for this. The share of renewable energies is low there, but demand is rising steadily. Nevertheless, the stock is of rather mediocre interest. The reasons: The low profitability could fall again due to rising raw material prices - innovations or not.
Defense Metals: Do drilling results pave the way to North America's most important rare earth deposit?
The Defense Metals share, on the other hand, could benefit indirectly from the increased demand for renewable energies. The Company is developing one of the few rare earth projects in North America in the Canadian district of British Columbia. These rare earths are used in wind turbines, batteries for electric cars and in military applications. That is one of the reasons why rare earths are considered critical metals - instead of relying on the world market, more and more governments see it as their duty to ensure self-sufficiency. Defense Metals has already received signals to this effect. Since the Company can also benefit from the high environmental standards in Canada, as possible mining products from Defense Metals thus become more attractive for customers (keyword: ESG along the value chain), the starting position is also promising for investors.
The Defense Metals share has consolidated in recent months and is moving with a slight upward trend. Most recently, the Company completed a drilling program aimed at expanding its proprietary resources. The Wicheeda property currently has indicated resources of 4.89 million tonnes grading 3.02% light rare earth metals. Inferred resources are 12.1 tonnes grading 2.9%. With the drilling program completed, Defense Metals intends to expand the resources significantly and expects more market attention from the subsequent results. "We believe that the 2021 drill results, when released, will ensure that the Wicheeda SEM deposit will be one of the most significant rare earth deposits in North America," says CEO Craig Taylor. Currently, the stock is still trading below EUR 0.20. In the first quarter, the value reached EUR 0.49. Given this constellation and the diverse forms of application of rare earths, investors can keep the stock of Defense Metals in mind - just one piece of news can kiss the value awake.
American Lithium: The hype makes everything rise
The American Lithium share has long been kissed awake. At the beginning of October, the stock took off together with other lithium stocks. The background is the planned promotion of battery projects in the USA. In total, several billion USD in subsidies and additional support could flow to push the mobility turnaround in the USA. Here, too, the aim is to make the country independent of lithium exports. Another issue is that the element should be mined as gently as possible not to worsen the sustainability balance of end products made from it. In the long term, however, the trend for lithium is toward recycling. The German-Canadian lithium hopeful Rock Tech Lithium, for example, wants to completely stop mining the element as early as 2030. The extraction of lithium, whose prices have risen continuously in recent months, is not the last word in wisdom.
American Lithium's stock is hot, but it has already gotten a lot of attention from the market. Next, the run on commodity stocks around ESG issues could affect rare earths and even push the share of Defense Metals. Recycling is more difficult with rare earths, as they tend to be more small-scale. Wind turbine manufacturer Nordex should also benefit, although the Company's margins are likely to come under pressure due to rising raw material prices.