27. August 2021 | 12:35 CET
Orocobre, Kodiak Copper, Infineon Technologies - Good for the climate, even better for your portfolio
Heat records and droughts on the one hand and heavy rainfall and flooding on the other - climate change is no longer an abstract threat but a reality. Speculating about the causes is idle. It is more important to tackle the problem. Phasing out coal-fired power generation by 2038? Much too late, experts criticize. And politicians are also slowly realizing that it is already five to twelve. That is why they are really stepping on the gas! We need to say goodbye to the combustion engine, decarbonize industrial production, and expand renewable energy sources. But this requires certain raw materials. Here are three companies with a bright future ahead of them.
time to read:
ISIN: OROCOBRE LTD | AU000000ORE0 , KODIAK COPPER CORP. | CA50012K1066 , INFINEON TECH.AG NA O.N. | DE0006231004
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Orocobre - Among the TOP 5
Although new accumulator technologies such as solid-state cells are currently the talk of the town, experts say the technology will not be ready for mass production for several years. And until it has replaced the classic lithium battery, a lot of water will still flow down the Rhine. As a result, lithium remains one of the essential raw materials for the energy transition. Orocobre is one of the world's most important suppliers. Given the ever-increasing demand for electricity storage, experts predict a continuing supply shortage in the near future. Orocobre has merged with its similarly positioned main competitor Galaxy Resources to best position itself in this market.
The transaction in which Galaxy shareholders received 0.569 Orocobre shares for each share has now been completed. The new Company is to be named Allkem. As part of the completed merger, Orocobre also announced its financials for fiscal 2020/2021. Despite an expansion of lithium production by 6% and a reduction of production costs per ton by 12%, the Company ended up with a loss of CAD 80 million. Reasons were a lower lithium contract price in the first half of the fiscal year and - mainly - tax increases in Argentina and exchange rate effects. However, due to a high cash balance of around CAD 258 million and the strong lithium price development (up to +130% year-on-year), the Company expects a solid fiscal year 2021/2022.
Kodiak Copper - Forest fire risk interrupts drilling program
The second crucial raw material in the energy transition is copper. The automotive industry alone, which currently gobbles up around 8% to 9% of total copper production, needs around four times as much copper to produce a pure electric car as it does to produce a combustion engine. The construction of new power grids and smart grids for decentralized, sustainable electricity production also requires enormous quantities of the reddish shimmering metal. That is likely the main reason for the price rally that has been going on for some time. Although the price has corrected somewhat since its all-time high in May, it is still up around 40% for the year. As a result, the conditions are ideal for mining companies that have made copper their business, like the Canadian Company Kodiak Copper.
The explorer has two 100% owned copper projects: Man-Prime-Dillard (MPD, in southern British Columbia) and Mohave (in Arizona, USA). Last year, the entry of Canada's largest copper producer, Teck Resources, secured total funding for the current 30,000m drill program at the MPD project, which has already returned excellent results. The project is located close to the already producing Copper Mountain, Highland Valley and New Afton mines. However, the drilling project had to be paused and the property cleared due to an increased risk of forest fires caused by record heat and drought. The Company does not anticipate any sustained disruption to the program planned for the current year.
For us, Kodiak remains one of the most exciting exploration companies in the market. We expect the copper price to move upwards again after a short recovery phase. While recycling can cover a significant part of global demand, a supply shortage is virtually inevitable, given the quantities of the raw material required in the future.
Infineon Technologies AG - From semiconductor manufacturer to hydrogen producer
What is the semiconductor manufacturer Infineon Technologies doing in our listing of raw material companies for climate change? While the first two companies mentioned find or produce raw materials, the technology group is generally more of a buyer. Infineon requires high-purity hydrogen as a process gas in its semiconductor production. Until now, this has been delivered by truck from Germany to the Austrian production site in Villach. However, because this is not necessarily sustainable and expensive in the long term, Infineon has decided, in cooperation with Linde and the Austrian electricity provider VERBUND, to set up its own hydrogen production at the Villach site as part of the "H2Pioneer" research project using regeneratively generated electricity.
Linde is supplying the turnkey PEM electrolysis plant and a liquid gas supply system and taking care of the operation and the processing of the hydrogen produced; the regeneratively generated electricity comes from VERBUND. The plant can thus produce up to 800kg of green hydrogen per day. Will this production have a direct impact on the share price? Viewed in isolation, certainly not. But it does underline the general change in the industry. If the project proves successful, Infineon will undoubtedly be able to use the experience gained to gain cost advantages over other competitors in the future.
In our opinion, the most interesting of the companies presented is Kodiak Copper. It is here where the most significant opportunities lie. Given their results so far, the Canadians are certainly not too expensive at around CAD 66 million. Allkem, formerly Orocobre, is also likely to be one of the big winners from climate change. The safest investment at present is probably the DAX stock Infineon. The current chip crisis should continue to keep demand for the German semiconductor manufacturer's products high.