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October 25th, 2023 | 07:35 CEST

Rheinmetall, Power Nickel, Nio - The situation is getting critical

  • Mining
  • Nickel
  • armaments
  • Electromobility
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The further escalating conflicts in Ukraine and Israel, as well as tensions in the economic relations of global powers, are placing enormous strain on global supply chains. China's dominance in product manufacturing is becoming increasingly apparent, which must be minimized in the future. Last week, for example, the Middle Kingdom said it will require export licenses for some graphite products to protect national security, surprising everyone with another attempt to control supplies of critical minerals.

time to read: 3 minutes | Author: Stefan Feulner
ISIN: RHEINMETALL AG | DE0007030009 , Power Nickel Inc. | CA7393011092 , NIO INC.A S.ADR DL-_00025 | US62914V1061

Table of contents:

    Jerre Foo, Corporate Development Executive, Silkroad Nickel
    "[...] China has become the manufacturing capital of the World, and because of its infrastructure, expertise and capabilities, Silkroad Nickel has strategically positioned itself to partner with Chinese companies in the Stainless Steel and EV industries [...]" Jerre Foo, Corporate Development Executive, Silkroad Nickel

    Full interview


    Power Nickel - Hope of the West

    In addition to lithium, cobalt and rare earth metals, nickel is increasingly playing a key role in electromobility. In addition, the critical metal is used in electrolysis for hydrogen production, in thin-film solar cells, and wind turbines for alloys. The German Raw Materials Agency estimates that global nickel demand is likely to increase from around 2.4 million tons today to up to 3.4 million tons by 2025.

    However, as with other critical raw materials, the largest deposits are not in Europe or North America, but in this case, in the Southeast Asian country of Indonesia. Here, too, Chinese companies have already acquired a stake in the largest production facilities, so if trade relations continue to tighten, Western nations could once again lose out on procurement.

    A hopeful alternative is currently being built by the Canadian company Power Nickel with its main project, Nisk, located in Quebec. The concession area covers a significant property with a 20 km strike length. Power Nickel is focused on expanding the historic high-grade nickel-copper platinum group metal mineralization with a series of drill programs aimed at testing the original Nisk discovery zone and exploring the property for adjacent potential nickel deposits.

    Currently, the Company holds a 50% interest in Nisk, with an option for an additional 30% available upon submission of a NI 43-101 technical report that includes a resource estimate. This is expected to be completed this year, according to the Company. To fund this and continue the exploration and drilling program into the first quarter of 2024, the Company issued a total of 4.5 million new shares at CAD 0.50 at the end of September 2023, raising gross proceeds of CAD 2.75 million for Power Nickel.

    Power Nickel's stock is consolidating in the CAD 0.20 range after a sharp rise earlier this year. With a positive presentation of the technical report and ongoing drilling results, the yearly high at CAD 0.35 could well be tackled.

    Rheinmetall - Further rise expected

    The integrated technology group from Düsseldorf, Germany, has risen like a phoenix from the ashes, especially since Russia invaded Ukraine. It is now considered one of the most important suppliers to NATO and its partners. Due to the planned further armament of the Western world, the order books should continue to be consistently filled in the coming years. One problem that could arise here is the shortage of critical raw materials such as rare earth metals, which could put pressure on Rheinmetall's margins due to the rising prices.

    As the most important supplier to the German armed forces, Rheinmetall received a further order to supply artillery ammunition. This is already the third call of a framework agreement concluded in July and has a term until 2029, with a potential order volume of around EUR 1.2 billion.

    With the further increase in order volume, analysts see further potential for the DAX company despite the enormous share price increases. In this context, the US investment bank Goldman Sachs raised its forecasts for 2023 and 2024 and its price target from EUR 319 to EUR 320 and reiterated its "Buy" vote.

    Nio - Dangerous situation

    In contrast to the flourishing defense group Rheinmetall, the chart picture of the electric car manufacturer Nio is clearly negative. At USD 7.58, the share is only marginally ahead of its yearly low at USD 7.00. A slide below the striking support zone would generate further downside potential to the area around the 2019 annual high at USD 5.65. Since the beginning of the year alone, the Nio share price has lost almost 30% in value.

    The analyst consensus on Reuters Refinitiv sees the average price target for Nio at USD 13.25, reflecting a potential upside to the current price of 75%.

    Strategically, according to local media, Nio plans to gain independent production to increase operations and efficiency in the long term. Thus, the electric carmaker plans to acquire both factories jointly operated with state-owned Jianghuai Automobile Group and apply for its own production license. It is already known that JAC wants to sell some of its factories. The sums involved are said to be in the region of EUR 600 million. Confirmation from Nio's management is still pending. They intend to comment on this move only "in due course", as "Car News China" published on its portal.

    Rheinmetall shares continue to benefit from orders from Western armed forces. Electric carmaker Nio is planning to obtain its own production license. At Power Nickel, the expected release of a positive NI 43-101 technical report should bring new impetus. In addition, the stock is set to benefit in the long term from increasing demand in the renewable energies sector.

    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.

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    Der Autor

    Stefan Feulner

    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.

    About the author

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