November 11th, 2021 | 11:34 CET
Rock Tech Lithium, Noram Lithium, JinkoSolar: Investing in Tesla's neighbors
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Rock Tech Lithium: German-Canadian success story
When Rock Tech Lithium's share price first started to soar at the beginning of the year, only a few people in the know were aware of the value. The Company wants to mine lithium in Canada. The precious element will be extracted from the earth's surface rather than from brine. This procedure alone is considered much more environmentally friendly than the lithium competition from South America, whose production is at the expense of the water reserves there and is not without controversy. Rock Tech intends to process the lithium obtained in this way and is relying on German engineering skills. In Brandenburg, the Company is planning a processing plant just 60 km from Tesla's Gigafactory. When the Company announced this news at the beginning of October, the share price was unstoppable and doubled within a very short time. But what has happened since then?
The share has consolidated and reached a level below the EUR 5 mark that could be interesting again. However, the share is still highly volatile. But that is not surprising given the history. There are still many investors sitting on large book profits or latecomers who are losing patience with crumbling prices. If follow-up buyers are scarce in such phases, things can continue to go down. In the long term, however, Rock Tech appears promising, as the Company is already focusing on recycling lithium - from 2030 onwards, it should no longer be possible to operate mines. The Company has already forged collaborations around recycling and is showing innovation. Although this does not help the share price in the short term, it provides hope again in the medium term.
Noram Lithium: The following weeks will be decisive
One Company that must be considered a laggard compared to Rock Tech Lithium is Noram Lithium. The Company operates the Zeus lithium project in Nevada's Clayton Valley and aims for an initial production economic feasibility study (PEA) later this year. The project's current resource estimate includes 363 million tonnes of rock grading at 923 ppm as an indicated resource and 827 million tonnes at 994 ppm lithium as an inferred resource. Noram Lithium's long-term goal is to produce at low cost and sell its lithium within the US and to Europe and Asia.
The stock has recently benefited from US President Joe Biden's infrastructure plan, which includes renewable energy and sustainable propulsion support. There is speculation in the USA that around USD 7 billion could flow into electromobility. Securing domestic lithium deposits could be of additional strategic importance in this context. As the lithium price has risen sharply recently and supply is tight, there are great opportunities for prospective projects such as Noram Lithium. The conditions appear favorable with the Zeus Lithium project in Nevada being close to Tesla's Gigafactory and Albemarle's Silver Peak, a lithium mine producing for decades, also not far away. Noram Lithium also owns its project 100%, and there are no concessions for other parties, such as royalties. With a market capitalization of around EUR 39 million, the Company is also not expensive. The expected details on the economic feasibility could give new momentum to the Zeus Lithium project and attract further investors. The general conditions appear favorable.
JinkoSolar: China worries weigh on the Company
The situation is also favorable for JinkoSolar - renewable energy is in demand and is being promoted worldwide. JinkoSolar is also known for good quality and a high degree of efficiency. But what does the share do? On a one-year view, the value has lost about 11.4%. In recent months, China's worries have been an additional burden. When investors pull shares out of a region on a large scale, the good companies are also punished. Investors have to take this country risk into account. The flip side, however, is the opportunity for cheap entry - in the long term, however, investors cannot avoid a company with the market position of JinkoSolar. However, the share will no longer be a multiplier.
Where the journey with lithium shares can go, stocks like Rock Tech and others have shown. Noram Lithium is just getting ready to follow in their footsteps, benefiting from Biden's infrastructure program and facing important corporate news. JinkoSolar, on the other hand, is a conservative pick with a bit of China exposure. Both cautious and opportunity-oriented investors should not ignore shares around electromobility and renewable energies - the potential is too great.
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