12. January 2021 | 07:46 CET
Plug Power, Almonty, Alibaba - Watch out, a breakthrough!
Electric motors, hydrogen, fuel cells, new trends are coming to the capital markets all the time. But it is not only the latest technologies that will multiply in the coming years. Essential is the extraction of the raw materials needed for these technologies. The scarcity that we are sure to face in the next few years is likely to be seen by the stock market in the near future. At the moment, there is no sign of hype around scarce commodities.
time to read: 3 minutes by Stefan Feulner
Shortly before the breakthrough
It all began relatively quietly and calmly in Europe. Almonty Industries, a junior explorer from Canada, specializes in the mining and processing of tungsten. In addition to mines is Los Santos in western Spain and Panasqueira in Portugal; the Company is developing the Valtreixal tin and tungsten project in northwestern Spain. According to the European Union governments and the Congress of the United States of America, tungsten is a critical industrial metal whose existence should be secured for Western industrialized nations. 80% of global production still occurs in China, but Almonty Industries is set to change that.
Project causes reassessment
The Canadians have a clear goal in mind. The largest tungsten mine in the world is to be built in Sangdong in South Korea. When Sangdong reaches full capacity in 2026, it will account for about 30% of non-Chinese supply and 7-10% of global supply. Preliminary work on financing is already well advanced. The final contract with KfW IPEX-Bank was signed in mid-December. The project financing has a volume of USD 75.1 million. A customer for the tungsten concentrates, which are to be produced in Sangdong from 2022, has also been landed. It is the Austrian Plansee Group. The Group is also providing EUR 30 million in bank guarantees to cover possible cost overruns.
Great confidence and rosy prospects
Plansee has strategic and longer-term plans for cooperation. The Group is acquiring shares from the CEO of Almonty Industries, making it the largest shareholder. The German Rohstoff AG also remains on board with 12.8%. For the analysts of First Equity Research, Almonty is a clear buy. The price target is CAD 1.45. The Company would still have to take a small step to make the breakthrough. The last significant condition precedent is an equity raise of USD 14.1 million. Experts see the Sangdong deal as the best financing for a junior miner they have ever seen because of KfW's involvement and the low-interest rate. Yesterday, the price of Almonty Industries rose to CAD 0.75 with a substantial increase in trading volume. If the last minor hurdle is cleared, First Equity Research's price target should wobble.
It is regulated
Alibaba's subsidiary is not the only one caught in the Chinese government's crossfire. The other Chinese Big Techs are also ordered to report. In addition to Ant Group, Tencent and JD.com must also disclose information about consumer loans made. According to Reuters, the data will be shared with credit reporting agencies. The data will then be shared with other banks and lenders to analyze risks better and prevent over-indebtedness. Alibaba's finance subsidiary made about one-fifth of all short-term consumer loans in China. Concerns about overly loose lending and growing defaults have been growing in China for some time. There continues to be no sign of Alibaba CEO Jack Ma. Instead, several analysts spoke out today. UBS Global Research continued to rate the stock as "buy" but lowered the price target from HKD 340 to HKD 310. Jefferies Research took a similar stance. The buy rating was left unchanged, but the price target was lowered from HKD 363 to HKD 318. We are also bullish on the stock in the long term.
Too much of a good thing
The situation is different for the leading manufacturer of fuel cell technology, Plug Power. Although the deal with SK Group, which intends to acquire 51 million Plug Power shares at USD 29.29 per share, is extremely positive, the Company's stock price is still too low. With a stock market valuation of USD 13.0 billion, Plug Power made just USD 230.0 million in sales in 2020. Admittedly, the synergy effects due to the joint venture are enormous. Nevertheless, we see correction potential to at least USD 34, also from a chart perspective.