October 18th, 2021 | 11:18 CEST
Rock Tech Lithium, Royal Helium, Gazprom - Commodities as a booster for the portfolio
Inflation is hitting with full force. Construction costs and energy prices are right at the forefront, which currently know only one direction: up. In the USA, the inflation rate was 5.4%, and in Germany, 4.1%. Winter is just around the corner and demand for heating oil, gas, and the like is rising, with no end in sight at the moment. If you want to hedge against rising prices, it is best to buy shares in producers that profit directly from price increases. Today we analyze three companies from the commodity sector.
time to read: 4 minutes
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Author:
Armin Schulz
ISIN:
ROCK TECH LITHIUM | CA77273P2017 , ROYAL HELIUM LTD. | CA78029U2056 , GAZPROM ADR SP./2 RL 5L 5 | US3682872078
Table of contents:
"[...] We expect the first three wells to be drilled, cased, completed and tested by the second week of March [...]" Andrew Davidson, CEO, Royal Helium Limited
Author
Armin Schulz
Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.
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Rock Tech Lithium - Converter announcement boosts the share price
The revolution in the automotive industry towards e-vehicles has caused the price of lithium to explode. Lithium is essential for the production of e-batteries. The Canadian Company Rock Tech Lithium owns its own lithium mine in Canada, producing the raw material. But the Company is thinking ahead and plans to map the entire value chain. The next step is to build a converter in Germany to convert the lithium into lithium hydroxide. As a third pillar, the raw material is to be obtained from the recycling of old batteries.
On October 11, the Company announced the construction of its first lithium hydroxide plant in Brandenburg, Germany, specifically in Guben. The plant is expected to produce 24,000 tons of lithium hydroxide per year, enough for 500,000 electric cars. The cost of the converter is put at EUR 470 million, and the plant is scheduled to start production in 2024. Tesla's Gigafactory is only about 100km away. BASF is also building a cathode factory, which supplies basic materials for battery production, in Brandenburg and is receiving EUR 175 million in funding from the state. It is not yet known how much funding Rock Tech will receive.
The Company plans to build five converters in Europe by 2029 and thus win 30% of the European market for itself. If you look behind the scenes, the company around CEO Dirk Harbecke has well-known heads. CFO is Stefan Krause, who has worked at BMW and Deutsche Bank. When billionaire Peter Thiel invested in the Company in January, the stock jumped from around CAD 2 to CAD 9. Subsequently, the share consolidated to CAD 3 and is on its way to reach new all-time highs after the converter announcement. Future developments remain exciting.
Royal Helium - Waiting for the results of Climax 4
Helium is irreplaceable in modern technology for science, medicine and many high-tech products. There is a growing demand for this noble gas in a wide variety of high-tech applications, so the price of helium has also increased. Canada offers abundant helium deposits and owns a 400,000-hectare area in Saskatchewan, already successfully proving economic helium deposits at the Climax 1, 2 and 3 projects in the spring.
The Climax 4 project was created as a spin-off from Climax 3, as a regolith zone was discovered during drilling. On September 15, the Company announced that the hole had been drilled to a depth of 2,701m. The core samples are currently being analyzed, and results are expected in 30-45 days. Thus, results should be announced within the next two weeks at the latest. Additional drill targets at Ogema and Bengough have been identified and are currently awaiting permitting.
The consolidation phase has ended with the announcement of the completion of drilling at Climax 4, which will now be referred to as Climax Nazare. The high for the year on April 06 was CAD 0.92. On September 14, the low of the consolidation was CAD 0.43. Production planning is underway and news is expected soon. If this is positive, the share should leave the sliding zone between CAD 0.43 and 0.55 to the upside. The next resistance then waits at CAD 0.78.
Gazprom - Gas price makes cash registers ring
The worldwide energy demand is rising rapidly. The price of coal, oil and gas is a good indicator of this. The gas price, in particular, has experienced a real rally. Gazprom, as the largest producer of natural gas, is benefiting most from this. In addition, many supply contracts are linked to the price of oil. Despite the increase in production volumes by OPEC, the oil price is rising. Especially in Germany, after the nuclear and coal phase-out, gas is considered one of the solutions if renewable energies do not produce enough electricity.
Nord Stream 2 is ready, but the floodgates have not yet been opened. Pressure is mounting on the German government to give the go-ahead, thereby stopping prices from rising further. Russia's President Putin has already noted that delivery via Nord Stream 2 would be more cost-effective because it would save 2,000km of distance and transit costs to Ukraine. At the same time, this would allow Russia to put pressure on Ukraine.
According to rumors, Gazprom itself could once again raise its forecast for export prices. Per 1,000 cubic meters, USD 60 more could be flushed into the coffers. If sales remain at 183 million cubic meters as expected, this would mean additional revenues of almost USD 11 billion. The share price recently rose to EUR 9.44 and is currently trading at EUR 8.89. Should Nord Stream 2 go into operation, this would undoubtedly boost the Gazprom share price further.
Anyone who invested in commodity companies early on can relax about the new highs in commodity prices. Rock Tech Lithium wants to cover the complete value chain in the lithium sector, and investors now seem to recognize the potential. Royal Helium is still before production, so the stock is still cheaply valued. Gazprom has been pleasing investors for several months. The next dividend should be something to behold.
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