October 28th, 2021 | 12:52 CEST
Nordex, Standard Lithium, Central African Gold: Raw materials for the energy transition
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Central African Gold: Cobalt demand about to increase tenfold?
The numbers are impressive: The annual demand for cobalt is expected to increase more than tenfold to 34 tons by 2030 - in the EU alone and for the production of electric car batteries alone (source: Statista). The Democratic Republic of Congo accounts for 59% of global cobalt production. China accounts for 7% of the global output, and Canada for 6%. Cobalt is a transition metal that is mainly extracted as a by-product from nickel and copper ores. For Central African Gold, cobalt is the main product. Therefore, the stock should react soon.
The Canadian explorer focuses on promising copper, cobalt and nickel projects in the Democratic Republic of Congo. These are not only to be developed but also subsequently operated. The Company benefits from an experienced local management team led by CEO Yves Kabongo. The Company owns a total of six mineral concessions with a total area of 176 sq km. Of interest to ESG investors: the areas also include forests and farmland. In the case of the King Luba properties, Central African owns 100% of the concessions. In addition, there is an option to participate in the state-controlled Musefu Gold Project. This project has historical grades of 2.5m at 28.4 g/t gold and 11m at 8.1 g/t gold. Thus, the Company is not dependent on the development of one commodity but is well diversified. To be able to advance the development consistently, Central African carried out a financing round in September.
Standard Lithium: Strong market and takeover fantasy
Similar to Cobalt, demand is expected to grow strongly in the coming years. According to a study by consulting firm Roskill, lithium is likely to remain in short supply until 2031. The main reason is the use of lithium-ion (Li-ion) batteries in automobiles and energy storage applications (ESS). To counter the increasing supply deficit, lithium production would have to scale up significantly. In addition, new production sources would be required. Therefore, prices must continue to rise, if only to incentivize investment in research and exploration. Lithium stocks such as Orocobre, Livent and Standard Lithium should benefit from this. In addition to the fundamental reasons, takeover fantasy also plays a role in Standard Lithium. Speculation persists that a group like Albemarle or even one of the large battery manufacturers will make a takeover bid - sooner rather than later.
Nordex is suffering from high raw material prices and problems with global supply chains. The share of the German supplier of wind turbines has started a countermovement in recent days and is attempting to break out of the downward trend. A report from RWE comes at the right time. The energy giant has commissioned the wind farm Les Pierrots in France with a capacity of 26.4 MW. Around EUR 33 million was invested. The eleven turbines are type N117 2400 TS98 from Nordex. Although it is not a current order, it brings Nordex positive PR. Jefferies has also recently expressed a positive view. The investment bank analysts recommend Nordex stock as a buy with a target price of EUR 25. Nordex was able to present a solid order situation in the Q3 report.
It is becoming increasingly clear that the energy transition is leading to massive distortions in the commodity markets. Standard Lithium is benefiting from this. If positive exploration data continues to be published by Central African Gold, it should only be a matter of time before the share reacts. Nordex will likely continue to have a hard time, even though wind energy is fundamental to the energy transition.
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