Raw materials revolution from Africa: K+S, Globex Mining, Freyr Battery

K+S: A good connection to Africa can pay off

As Handelsblatt impressively shows, China's power in Africa is still great: 15 of the 19 cobalt mines in the DRC are in Chinese hands. 101 of the world's 136 battery factories for electric cars are in China. African countries now want a bigger piece of the pie and, in turn, want to refine raw materials. In Zimbabwe, for example, a ban on the export of unprocessed lithium came into force at the beginning of 2023. Nigeria turned down an investment by Tesla because Elon Musk's company only wanted to mine lithium. For German automakers, this could be a great opportunity. That is, if, unlike China, they allow more value creation within Africa and receive long-term supply contracts in return. Potential candidates for partnerships in Africa include Gabon, Guinea, Nigeria and Zimbabwe.

K+S is not affected by the plans of African countries. The fertilizer producer has sales locations in Uganda and South Africa, among others. Companies with existing business relations in Africa could be a kind of door opener for German industry and pave the way for future ties for both continents. While Chinese suppliers have so far preferred to exploit raw materials in the truest sense of the word, German partners could ensure greater value creation and sustainability and thus turn the tide in the hitherto unequal battle with China for production resources.

Globex Mining: Values lie dormant here

Globex Mining can enjoy the discussion about Africa from the sidelines. While the industry in Europe is likely to focus more on Africa in the future, North America has the most important raw materials on its doorstep. Globex Mining alone counts more than 200 raw material projects, all of which are located in North America. These include projects involving lithium, other industrial metals, and precious metals. The range of commodity projects under the Globex Mining umbrella extends from early-stage projects to completed preliminary feasibility studies. Resource estimates are also already available for several projects.

The market capitalization in the mid double-digit million range is both an opportunity and a burden for Globex Mining: when companies own so many projects, they almost always trade below "book value". Although this "book value" is less clearly defined at Globex than, for example, at listed real estate companies, it is obvious that more than 200 projects could develop a greater value on the stock exchange than under the Globex umbrella. In order to leverage these values, several options are possible. First, Globex could sell projects. The resulting market prices would clarify how large the Company's balance sheet values really are. Cooperations or profit sharing are also options to leverage the dormant values in the respective projects. As a third option, generally higher commodity prices should shine a spotlight on Globex Mining's portfolio. The stock is in a promising long-term position. Globex recently announced several news items around its commodity projects and generated revenues. Globex Mining is an exciting commodity investment for experienced investors.

Freyr Battery: Margin in danger?

Investments of this kind become all the more plausible when one considers how many growth companies worldwide are dependent on raw materials related to future technologies. Only recently, battery stock Freyr Battery caused a sensation on the stock market thanks to good quarterly figures. However, the extent to which economic success depends on the supply of important raw materials at acceptable prices is demonstrated not least by the weak margins of manufacturers of wind turbines: rising prices have often ruined the figures for companies such as Nordex in the past. Instead of taking on this risk as an investor, investors can consider investments that offer solutions.

New opportunities are likely to arise around new collaborations in Africa in the coming months. Fortunately, in addition to Chinese companies, there are also representatives from Europe and North America that operate in Africa and are even investable through shares. Stocks operating in other safe commodity regions like Globex Mining should also be attractive. Here, however, it is crucial that external events lift the values that undoubtedly lie dormant in the Company's balance sheet.