March 22nd, 2021 | 08:15 CET
Plug Power, Almonty Industries, Everfuel - What you need to know now!
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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
Monopoly in the Middle Kingdom
Whether lithium, rare earth metals or tungsten, China produces about 80% of the raw materials and has a quasi-monopoly. The rest of the world is dependent on the Middle Kingdom. Although tungsten has long been classified as a critical metal by Western governments, there is a lack of alternatives to counteract this demand bottleneck. The Canadian Company Almonty Industries specializes in mining and processing tungsten. In addition to mines in Los Santos in western Spain and Panasqueira in Portugal, the Company is developing another tin and tungsten project in Valtreixal in northwestern Spain. With the construction of the largest tungsten mine globally, Almonty Industries is now on the verge of a breakthrough. The world's largest tungsten mine is to be built in South Korea, more precisely in Sangdong. This mine will be responsible for 7-10% of the global supply in about 5 years when running at full production capacity.
Financing for the megaproject is in place, with final items expected to go through in the next few weeks. The project financing, which has a size of USD 75.1 million, is supported by KfW-IPEX Bank. The Austrian Plansee Group, which focuses on the powder metallurgical production of materials such as molybdenum and tungsten and their further processing into tools and molded parts, has guaranteed the purchase of the produced concentrates on a long-term basis and, in addition, has become the largest shareholder of Almonty Industries.
The strategic investor, German Rohstoff AG, remains one of the largest shareholders with 12.8%. Last week, the Company announced another important step before the financial closing of the Sangdong project. Thus, an agreement was reached with creditors to extend the long-term debt on equal terms well beyond the project's commissioning date until the end of the fourth quarter of 2023. On the one hand, this significantly strengthens Almonty's balance sheet and, on the other hand, dramatically improves its ability to plan for the future.
Hidden reserves in the ground
In addition to the enormous tungsten deposits, other treasures are slumbering in the ground in Sangdong that promise further leverage for the Canadians. A molybdenum project is scheduled to start in mid-April. The drilling program is expected to last 6 months and cover the 12.5 km of core drilling carried out by Korea Tungsten and KORES in the 1980s.
At that time, indications were shown of the preliminary high-grade ore reserve estimate with grades above 0.40% MoS2 at a tonnage of over 16.30 million tonnes. If confirmed, this would create one of the world's largest long-lived high-grade molybdenum projects. The molybdenum ore body is located just 150 meters below the tungsten deposit. Almonty's market capitalization is currently EUR 153.88 million. Almonty can become one of the most critical players in the tungsten and molybdenum market in the long term through the Sangdong projects. The Company should benefit highly from the price increases expected in the coming years.
The clock is ticking
Plug Power's shares were among the biggest losers last week. No wonder, with irregularities being discovered in the balance sheet. However, the Company absolves itself of any accusations of fraud. Instead, management determined that the Company's financial statements would need to be restated for the prior period due to accounting errors, primarily related to several non-cash items. This affects the financial statements for fiscal years 2018 and 2019 and the quarterly financial statements for 2019 and 2020.
Now the US fuel cell manufacturer received mail from Nasdaq. According to the letter, Plug Power does not currently meet the rules for continued listing on the US stock exchange because it has not yet filed its annual report on Form 10-K for the year ending December 31, 2020 (with the SEC). Nasdaq is now giving Plug Power until May 17, 2021, to file this form with the SEC. There could be another 180 calendar day extension for this deadline before the Company faces delisting in some circumstances. Although we still refrain from buying at current crash levels, investment bank Cowen sees a "unique buying opportunity". While a revision of results should never be taken as a positive sign, analyst Jeffrey Osborne believes there was a proper error in sales-leaseback accounting and does not assume fraudulent activity.
In free fall
Without fundamental reasons, Danish hydrogen specialist Everfuel fell from its all-time high of over EUR 18 to currently EUR 7.50. We had been pointing out the extremely high level of most hydrogen companies for quite some time. The Danes now still have a stock market value of EUR 580 million. From a chart perspective, there is further downside potential. The subsidiary of Nel ASA, which came onto the stock exchange from a spin-off last fall, has a pure free float of only around 5%.
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