June 1st, 2021 | 11:26 CEST
Nordex, GSP Resource, Intel - Attention: it is not too late!
Table of contents:
"[...] 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 oil of the energy transition
The current price of a ton of copper is over USD 10,200, almost double the price 12 months ago. One reason for this is that due to the economy's recovery after the Corona pandemic. Demand for the light metal has increased enormously, especially in China and the United States. More crucial, however, is the fact that copper's electrical conductivity and good workability make it one of the most important building blocks for the accelerated global energy transition. Without copper, the electrification of transport and the expansion of infrastructure and renewable energies will come to nothing. The production of a wind turbine consumes 30 tons of copper per turbine. In 2020, 420 turbines were installed in Germany alone, and the German government's plan sees the expansion of wind power as a key to climate neutrality by 2045 at the latest.
An extremely tight supply counters strongly rising demand. Already in 2019, there was a shortage of 383,000 tons on the market. In 2020, the supply deficit rose to 559,000 tons, the highest level in more than 10 years. In the past decade, there were hardly any new projects due to the weak copper price and thus profitability for mining companies. Currently, the global demand is satisfied by only 10 large and 20 smaller mines. Bank of America calls for a price target of USD 13,000 for the copper price; the commodity analysts at Goldman Sachs are going even further out on a limb - in addition to a possible target of USD 15,000 per ton, they proclaim the new "copper age." Thanks to the global green revolution, "copper is the new oil."
Shares with leverage
The shares of the largest copper producers have jumped significantly since last spring. Industry leaders such as Freeport McMoRan, Glencore and Co. have already multiplied. However, due to the weak price of copper, these are still far from their historic highs. On the other hand, securities of smaller mineral exploration companies have participated less vigorously in the price trend. They, therefore, have leverage for disproportionate price gains with a continuing strike price. A more than promising Company is GSP Resource, a mineral exploration and development company focused on projects in southwestern British Columbia.
The experienced management, with a historical track record in resource development and financing, secured an option to acquire a 100% interest in the Alwin Mine, a copper-gold-silver project located in the Kamloops Mining Division, 18 km west of Logan Lake in British Columbia. The interesting part is the location. The Alwin mine borders the Highland Valley mine of industry giant Teck Resources to the west.
Successful Drilling Programs
Last year's Phase 1 drill program has already demonstrated the potential of the Alwin Mine. Several shallow intercepts met or exceeded the average grade of the reported mineral resources at the adjacent Highland Valley Mine. Deeper drilling also encountered high-grade intercepts with grades of 1.29% copper equivalent over a distance of 14.1m. In the summer of 2021, the Company plans a drill program with five deeper targets.
In addition to the Alwin mine, GSP Resource owns another high potential asset, the Olivine Mountain project. The 3020-hectare property is located in the Interior Plateau area of south-central British Columbia, 25 km northwest of Princeton. Again, the strategy was to drill close to already producing mines. Only 25 km away is Copper Mountain's copper mine, just under 50 km away is Westhaven Ventures' Shovelnose project and Kodiak Copper's MPD project.
GSP is a potential Teck Resources takeover candidate simply because of its proximity if drilling programs continue to be successful. The Company currently has a market capitalization of only EUR 3.5 million and is traded in Toronto and Frankfurt. In addition to existing projects, management plans to expand the portfolio through further acquisitions focusing on British Columbia.
Long-term chip shortage
Intel's chief executive, Paul Gelsinger, anticipates a longer-term trend of chip shortages. Currently, the shortage has led to short-time work and production stoppages, particularly in the auto industry. In a Reuters interview, the Intel CEO cited the home office and learning at home in the wake of the Corona pandemic as a trigger. He said this, in turn, led to "explosive growth in semiconductors" and, as a result, extreme excess demand.
"Although the industry has taken steps to address the near-term bottlenecks, it could take several more years for the ecosystem to address the shortage of foundry capacity, substrates and components."
Nordex on a knife-edge
The weak quarterly numbers are still reverberating. News of two more orders from Finland and the Netherlands fizzled out, as did Nord LB's confirmation of a buy recommendation with a price target of EUR 30. The analyst emphasized above all the order development, which should be positive due to the expansion of wind energy. The chart-technical picture would brighten up somewhat after the last interim high at EUR 19.62 was overcome. On the downside, there is a risk of a significant sell-off at prices below EUR 18.20.
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