16. July 2021 | 14:45 CET
Plug Power, Kodiak Copper, NIO - The shortage as an opportunity
Commodity markets are always subject to the forces of supply and demand. The energy transition and the achievement of climate targets pose new challenges for society. With the expansion of electromobility and renewable energies such as wind and hydropower, demand for some mineral raw materials will increase sharply. This is offset by an extremely tight supply and trade conflict with the leading producer China. There is a threat of further rising prices and, to be seen with the current chip shortage, even production losses.
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ISIN: PLUG POWER INC. DL-_01 | US72919P2020 , KODIAK COPPER CORP. | CA50012K1066 , NIO INC.A S.ADR DL-_00025 | US62914V1061
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Kodiak Copper - Well positioned
The regular cycle of rising and falling prices is a typical feature of mineral commodity markets. High prices trigger investments in raw material extraction and processing. If, on the other hand, commodity prices fall during periods of overcapacity and stagnating demand, investors shy away from market risks and hold back their capital to invest in new projects. As supply falls, commodity prices then rise again. The copper market currently exemplifies this phenomenon. In recent years, new projects could be counted on one hand due to the low copper price. As a result of the energy transition, copper is experiencing a renaissance due to its properties and high conductivity. The price of copper, which is essential as a base metal for electrification, reached a 10-year high in recent months, driven by a supply deficit that has already been growing for two years. At the same time, the electrification of transport is only at the beginning of its transformation and should ensure further high price levels in the coming years.
Major US investment houses are already calling for a new supercycle in the copper market. The sector is not prepared for rapid growth; there is simply a lack of new, promising projects. More than promising are the copper porphyry projects in Canada and the USA, which are fully owned by the exploration Company Kodiak Copper. Foremost among these is the MPD project, a consolidated land package covering 147 km² following the recent acquisition of the "Axe" property. The property is located in the high-yield Quesnel Trough in south-central British Columbia, Canada. In the immediate vicinity are the producing mines of Copper Mountain, Highland Valley and New Afton. Already last year, Kodiak Copper was able to report high-grade drilling results at MPD in the Gate zone.
For the current year, the planned 30 km drilling program is already fully funded. The goal for 2021 is to expand the Gate Zone. Last week, the first results ran across the news tickers, once again confirming the area's potential. The Gate zone discovery has been extended six times from its previous strike length of about 125m to about 800m in a north-south direction. In addition, the zone shows increasing similarities to other major copper porphyry systems in British Columbia by identifying variegated high-temperature copper gravel-rich copper mineralization. In particular, recent mineralization and alteration discoveries show similarities to the Red Chris deposit, in which Newcrest Mining Ltd. recently acquired a 70% interest, according to management.
The prediction that the MPD project hosts an extensive porphyry system is getting closer with the results obtained so far. While the program is ongoing with two drill rigs, further drilling is now planned along the 3km magnetic section underlying the Gate Zone, extending to the Man area. In addition, promising target areas such as Dillard are being explored.
To benefit from the super cycle of the copper market, Kodiak Copper is one of the most promising second-tier investments. The stock market value is currently only EUR 48.11 million.
NIO - Expansion is progressing
The electric car industry is booming. Sales of electric-powered vehicles doubled compared to the first half of last year. Despite the procurement of semiconductors and production stops, NIO posted a new sales record in June with 8,083 electric cars delivered.
Now the Chinese Company announced its global strategy through 2025, with plans to build a total of more than 4,000 battery swap stations, including 1,000 outside China. One of the ways in which NIO differs from its competitors is that it relies on battery swap stations. Thanks to this "power swap station," NIO wants to make itself independent of the charging infrastructure and eliminate the annoying wait for customers during charging.
Plug Power - Mega contract for the future
Plug Power is becoming increasingly important in the hydrogen economy sector. In partnership with Apex Clean Energy, one of the largest independent clean energy companies in the US, Plug Power plans to build the first green hydrogen production network in North America. To that end, the two companies announced a 345-MW wind power offtake agreement and a development services agreement for a green hydrogen production facility.
The hydrogen plant, which Apex and Plug Power will jointly develop, will be the first and largest wind-powered hydrogen project in the United States and the largest onshore wind project globally. Once operational, the plant will produce more than 30t of clean liquid hydrogen per day. Despite the positive news, we currently advise against investing in Plug Power. From a chart perspective, breaking the support could lead to a further setback to around EUR 20.
For the transformation in the procurement of new energies, the economy needs copper as a key metal. However, due to the investment restraint of the past years, there are few promising projects like Kodiak Copper's MPD project. The primary consumer of copper is the growing electric car sector and the fuel cell technology sector. Due to chart-technical aspects, we currently advise against a purchase of NIO as well as Plug Power.