May 17th, 2023 | 07:40 CEST
Plug Power, Almonty Industries, Rock Tech Lithium - Exploiting shortages
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"[...] While tungsten has always played an important role in the chip industry, it is now being added to batteries for e-cars. [...]" Lewis Black, CEO, Almonty Industries
Plug Power - Quarterly figures disappointing, again
Plug Power, a leading supplier of hydrogen fuel cell systems, reported disappointing quarterly results last week. While revenues of USD 210.3 million exceeded expectations, margin performance remained lacklustre. Sales of fuel cell systems declined significantly, while electrolyzer sales increased. Plug Power's weak gross margins in the product segment are primarily due to start-up and warranty costs. Service margins remain far from break-even, and the segment's gross margin deteriorated.
Analysts had expected a loss of USD 0.26 per share, but it turned out to be USD 0.09 higher. In addition, the Company is facing a lawsuit for alleged misappropriation of trade secrets. Some projects are also showing delays. Liquidity has continued to deteriorate. Plug Power is exploring various financing options but is unlikely to obtain short-term financing. To achieve its forecast for the current year, the Company needs to make gains in all areas.
And one should not forget that the targeted goals could not be achieved last year, despite forecast reductions. So there is a dangerous mix of loss of confidence, weak margins and steadily declining cash balances that could put the Company in trouble by the end of the year. Yet the prospects for hydrogen companies in the coming years are excellent. But the outlook is not helping the stock at the moment. A multi-year low of USD 7.39 has been reached. Currently, the share is trading at USD 7.85, and one should wait for financing before investing.
Almonty Industries - Mine in Spain goes into production
Almonty Industries specializes in tungsten. In addition to the well-known application areas in the defence industry or the chip market, tungsten oxide has recently come into focus, as it could herald a new stage of development in battery applications. Currently, Almonty has a producing tungsten mine called Panasqueira in Portugal. In total, the portfolio includes four projects. On May 15, the Company announced its plans to restart the Los Santos mine in Spain using its flotation technology developed for the Sangdong tungsten mine. Production is expected to start in the 3rd quarter provided the flotation equipment is delivered on time. It expects to produce 800,000 metric tonnes of tungsten oxide per year. This should have a significant impact on revenues and earnings.
The Company's flagship remains the Sangdong mine in South Korea, which is expected to supply 30% of the global tungsten supply. At the 7th International Investment Forum in early May, CEO Lewis Black provided information on the ongoing construction work. These are proceeding according to plan, and commissioning is scheduled for the second quarter of 2024. In the meantime, all the necessary parts are either on-site or already on their way. In parallel, work is underway on Phase 2 of the project, which will see production expanded to 1.2 million tonnes and the construction of a tungsten oxide plant. This is due to increasing demand, especially in the defence sector and from semiconductors in Korea. The tungsten oxide plant is scheduled to come on stream in 2026.
Almonty plans to raise additional capital in the near future to accelerate work on tungsten oxide. The demand will be huge if the material becomes widely used in the cathode and anode of batteries. The tungsten price has been rising since 2020 and is well above the already negotiated purchase agreements, which provide a minimum price of USD 235 with no upper price limit. The stock has carved out a support area at CAD 0.60 to CAD 0.54, which has already been tested eight times on a weekly basis. Currently, the share price stands at CAD 0.62 and the stock will need to be reassessed once the Sangdong mine starts operations.
Rock Tech Lithium - Converter profitability higher than expected
Since the automobile industry decided to phase out the internal combustion engine and rely on electric cars, a run on lithium has begun. But lithium only becomes battery-compatible through refinement. Rock Tech Lithium recognized this early on and is in the process of building the first lithium hydroxide converter in Europe in Guben, Germany. The groundbreaking ceremony took place at the end of March and was attended by all kinds of VIPs, first and foremost Brandenburg's Prime Minister Dietmar Woidke. On May 15, the Company completed the final technical study for the construction.
This front-end loading study stage 3 shows that the economic efficiency of the converter has increased by a whopping 43% compared to the last Bankable Project Study. The net present value after taxes at a discount of 8% is EUR 1,194 million. Annual EBITDA of EUR 293 million and after-tax cash flow of EUR 188 million are expected at an average price of USD 31,771 per tonne of lithium hydroxide. Production is scheduled to start in Q1 2026. Deutsche Bank has now been mandated to finalize the financing. This is currently the last missing piece of the puzzle.
In parallel, the Company wants to expand the resource potential of its own Georgia Lake project. To this end, a diamond drill rig was mobilized in March to drill a total of 3,500 metres. Results are not yet available. Since mid-October, the share price has been in the range of CAD 1.99 and CAD 3.73. Currently, one share is priced at CAD 2.33. The low at CAD 1.99 is due to the tax-loss season. Since then, the market has been waiting for the redeeming impulse that the financing has been secured.
Energy is scarce, there is dependence on China for several raw materials, and the supply of refined lithium is far from assured. The Western world needs alternatives if the BRICS countries are to become more independent. Plug Power is one of the biggest players in the hydrogen sector, but the horsepower is not getting on the road, so the money is slowly running out. Almonty Industries is in the middle of building the largest tungsten mine outside China. With tungsten oxide, an expansion of the project is already in the starting blocks, and the financing of Phase 1 has already been secured. Rock Tech Lithium is still struggling with financing. As soon as there is some security here, the share will ignite.
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