April 27th, 2023 | 09:15 CEST
Plug Power stops sell-off? BYD is grabbing lithium, and Defense Metals is doing well
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"[...] In 2020, the die is finally cast in the automotive industry towards electromobility. [...]" Dirk Harbecke, Executive Chairman, Rock Tech Lithium Inc.
BYD: China grabs lithium in Chile
The transition to renewable energy and electromobility requires vast quantities of raw materials. Lithium and rare earths, in particular, are in short supply. Moreover, deposits are often located in "difficult" countries like China and Russia. That is why Chile, for example, was the great hope for Western countries in the lithium sector. Chile has one of the largest lithium reserves in the world and was second only to Australia in terms of production last year. In January of this year, Chancellor Olaf Scholz personally promoted cooperation between Germany and Chile in the capital of the South American country. Germany wants to help Chile create value locally and has an eye on the environment and working conditions. But whether German carmakers like Volkswagen, BMW and Mercedes can rely on supplies from South America is at least open to doubt.
First, Chilean President Gabriel Boric presented a National Lithium Strategy. According to this strategy, the state will have greater access to lithium deposits in the future. That would mean that all private companies that wanted to mine lithium in the country would have to cooperate with the state. The state would have to hold at least 50.1% of the shares in the projects and, thus, the majority. The government is serious about this: SQM and Albemarle already have active mining areas in Chile with contracts for 2030 and 2043, but the government wants to renegotiate and take control of the mining. This spooks Western companies.
It seems that this is an opportunity for China to expand its influence in Chile and gain access to the "white gold". BYD has announced that it has entered into a strategic partnership with the state development agency CORFO for the production of lithium battery materials in Chile. In the first step, BYD will set up local production facilities for the production of cathode material for lithium ferro-phosphate batteries. This gives China at least one foot in the door with the government of the all-important lithium country.
Defense Metals: Rare earths project legally secure and promising
The development in Chile shows what an advantage it is when such important raw material projects are located in legally secure countries. This is likely even more true for rare earths than for lithium. Rare earths are essential for modern technologies - e.g. electric cars, solar and wind energy, and smartphones. At the same time, China dominates the global market. Investors should therefore take a closer look at Defense Metals. The Company is currently developing the Wicheeda project in the Canadian province of British Columbia, covering a total of 4,244 ha. It is already equipped with first-class infrastructure. In 2021, a PEA showed a net present value of CAD 517 million. In 2022, drilling revealed that not only rare earths but also a diamond resource is on site. There has also been positive news already this year. High-grade mineral flotation concentrate (73% dolomite carbonatite, 24% xenolithic carbonatite, and syenite) was detected. According to Defence Metals, that makes Wicheeda one of the most prospective projects in North America. And not only that: the Canadian explorer could offer around 10% of the current global production in the future.
A pilot plant for extracting the rare earths has already been built and tested in a Phase I trial. The Company reported: "Phase I of the hydrometallurgical pilot plant went very well and allowed us to investigate areas of the flowsheet where we could further improve the efficiency of the hydrometallurgical process. The importance of pilot plants like the one we operate cannot be overstated. It provides the opportunity to test whether the processes are stable and can be effectively controlled, to determine the effects of recycling solutions and solids within the plant, to measure recovery and reagent requirements, and to generate significant amounts of material that can be used for engineering design and environmental testing. Data from the pilot plant will feed into the pre-feasibility study."
Defense Metals began Phase II a few days ago. More news may come as early as May 10, 2023, when the Company will present at the IIF virtual investor conference. Registration is free (link https://ii-forum.com).
Plug Power: What analysts expect from Q1
While lithium and rare earths are in hot demand, hydrogen shares are being dropped like hot potatoes - this applies to the former high-flyers Nel ASA, ITM Power and Plug Power. The Plug Power share continued its sell-off yesterday and is now trading well below USD 9, meaning it has lost more than 60% of its value since the interim high in October 2022. Since the all-time high, the loss even amounts to around 90%. Can the upcoming quarterly figures herald a turnaround? Unlikely. When Plug Power opens the books in Q1 at the beginning of May, there will be a lot of red figures again. Analysts, on average, expect revenues of USD 206.7 million. Earnings per share are expected to be USD -0.25 (source: Yahoo Finance). That would be a slight improvement on the USD -0.27 reported in Q1 2022. But beware: last year, each of Plug Power's four reported quarterly results came in below analysts' estimates. If the loss exceeds expectations, a capital increase could be imminent. The experts at researchanalyst.com speculated on this in their last update on Plug Power. Click here (https://researchanalyst.com/de/updates/aktien-news-plug-power-sammelklage-eingereicht) for the full analysis. The report also includes details of a class action lawsuit against Plug Power.
The battle for raw materials for the energy transition and electric mobility is in full swing. While BYD - on behalf of the domestic government - is grabbing the huge lithium deposits in Chile, Defense Metals has its sights set on becoming one of the world's largest producers of rare earths. And with a project in a legally secure country. At Plug Power, there is still no sign of a trend reversal. The Company is investing heavily, and its operating figures are deep in the red.
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