February 13th, 2023 | 20:09 CET
Rheinmetall, Almonty Industries, Lynas - Rearmament, now!
Table of contents:
"[...] 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
The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
He is passionate about analyzing a wide variety of business models and investigating new trends.
Almonty Industries - Breaking dependence
China has market power in the global tungsten market, controlling supply and consumption. Increased regulations and restrictions by the Chinese government on the export of tungsten ore and increased domestic demand continue to drive China's net importer status. High growth in the automotive, aerospace, mining and electronics industries are additional factors for this market position. Demand for tungsten is expected to grow between 3% and 7% per year. Fueled by increasing demand in the aerospace industry and growing demand for electrodes, filaments, and contacts concerning renewable energy, a supply shortage of the critical metal is bound to occur. Hard metals will also continue to account for the largest share of processed tungsten consumption.
To limit dependency, not just in the tungsten market, Western nations are desperately seeking production sites outside the world's second-largest economy and promoting them with multi-billion dollar programs. Woulfe Mining, a 100% subsidiary of the Canadian company Almonty Industries, is building the largest tungsten production facility in the western hemisphere. The Almonty Korea Tungsten project is expected to be responsible for 30% of global supply outside China at full capacity. A 15-year offtake agreement is already in place with the Austrian Plansee Group, which provides Almonty with a cash flow of USD 590 million. Construction is progressing on schedule, with production scheduled to start in 2024. The Company is also within budget in terms of costs, despite rising raw material and energy costs. The mine life is indicated at 90 years.
In their latest report, analysts at Sphene Capital assigned a "buy" rating with a price target of CAD 1.66, representing a potential upside of nearly 130% at the current share price.
Rheinmetall - The Leopard and the Panther
There is no question that Rheinmetall CEO Armin Papperger is business savvy and is using the momentum to generate more orders. Now that the debate over the delivery of Leopard tanks to Ukraine has been rubber-stamped by the new Minister of Defence, Boris Pistorius, the corporate ruler of the Düsseldorf-based armaments group is already bringing other heavy weapons into play. Logically, these are developments from Rheinmetall.
In an interview with the Handelsblatt newspaper, Armin Papperger spoke about possible deliveries of the Panther super tank. Ukraine has already expressed interest in purchasing the Panther and the Lynx infantry fighting vehicle.
According to the Company's leader, the advantage of the Panther is that it provides better protection and offers more powerful weapon systems. In addition, no state would have to give up anything from its inventory because the Panther would be built from scratch. The Panther is a Rheinmetall main battle tank equipped with a 130 mm gun. It offers more than 50% higher firepower and increased range compared to other tanks, such as the Leopard 2 or Challenger 2. The Panther is also equipped with a coaxial machine gun for even more firepower and protection.
The current positive news led the Rheinmetall share to a new all-time high of EUR 231.70. The next hurdle is the upward trend formed since 2018 at EUR 247.20.
Lynas Rare Earths - Increased demand
Rheinmetall is also likely to have inquired whether the supply of rare earth metals for the construction of heavy guns is guaranteed. That is because China has the upper hand in rare earth metals, which are vital for climate change and the armaments industry, and holds a dominant market position of over 90% in the entire value chain involving the mining and processing of a rare earth concentrate, the smelting and separation of rare earth oxides, and the refining for the production of rare earth metals.
One of the few production sites in the Western world is owned by Lynas Rare Earths. The Australian mining company is focused on the extraction of rare earths. Their Mount Weld mine is in Western Australia, and their processing plant is in Kuantan, Malaysia. This enables them to produce high-quality rare earths for export to Asia, Europe and the Americas.
Due to strong demand related to climate change, decarbonization, and defense industries, the Company's sales increased by 14.8% in the second quarter. Demand for neodymium and praseodymium continued to grow as they are needed to produce permanent magnets that power electric motors. Sales totaled AUD 232.7 million compared to AUD 202.7 million in the same period last year, with an average selling price of AUD 62.5 per kg compared to AUD 54 per kg last year.
Rare earth oxide tonnage production increased to 1,508 from 1,359 last year, and mine production improved after technical issues were resolved. Lynas is thus the largest rare metal producer outside China.
Rearmament due to the Russia-Ukraine conflict, as well as the expansion of renewable energy, has increased the need for critical metals such as tungsten and rare earth metals. Lynas and Almonty Industries are leaders in their segments outside of China. Rheinmetall is currently exploiting the momentum.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.
Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.
The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.