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February 1st, 2023 | 18:14 CET

Scholz on lithium trip in South America - Who benefits? BYD, Saturn Oil + Gas, American Lithium

  • Mining
  • Oil
  • Lithium
  • Electromobility
Photo credits:

China has been active in South America for years and has put out feelers for raw materials. But first movers are not always rewarded. German Chancellor Olaf Scholz has now been to Chile and made the country an extremely attractive offer. We take a detailed look at what it is all about and how investors can deal with the news.

time to read: 4 minutes | Author: Nico Popp
ISIN: BYD CO. LTD H YC 1 | CNE100000296 , Saturn Oil + Gas Inc. | CA80412L8832 , AMERICAN LITHIUM | CA0272592092

Table of contents:

    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] 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

    Full interview


    Is Olaf Scholz cutting off the water for companies like BYD in Chile?

    Chancellor Olaf Scholz tried to score points with a charm offensive during his foreign trip to Chile and even unpacked broken Spanish. However, the German delegation's solid arguments on their visit to South America were probably much more convincing for the hosts: Scholz wants to establish a partnership with Chile on an equal footing and with German technology. This also includes support for the refining of lithium and support for developing a sustainable copper industry. Such arguments could fall on fertile ground in Chile. Throughout South America, residents living near resource projects complain about the consequences of mining. A more sustainable orientation could make countries like Chile fit for the future on the one hand and preserve social peace on the other.

    In the past, Chinese representatives abroad were primarily interested in large production quotas. Once the raw materials are out of the ground, resource-rich countries have done their duty. But it is precisely countries rich in raw materials that want more of the pie. But only when raw materials are also processed, and possibly even turned into intermediate products, will value be added and prosperity is created. The German concept has a good chance of success. In order to profit from the German lithium strategy, investors should look very closely in the coming weeks and months and, above all, keep supplier companies with a good connection to the industry on their radar. One example could be the share of Rock Tech Lithium.

    Sustainability is decisive - for lithium and oil

    Top dogs like BYD, on the other hand, have to dress warmly. BYD is considered a first mover in the field of electromobility. However, origin and ESG assessment along the supply chain have long been important. This could become a burden for Chinese companies such as BYD in the medium term. While the Chinese can also do business "green," refining raw materials in producing countries, for example, could prove positive for ESG ratings, which are becoming increasingly important in corporate financing.

    One company that only benefits from the sustainable commitment of countries like Germany at a second glance is Saturn Oil & Gas. The Company produces oil in Canada. In view of the secure framework conditions and high environmental standards, the Company succeeded in entering into a partnership with a major US family office some time ago. Since then, Saturn Oil & Gas has become a growth machine, gradually acquiring projects. The Company recently increased its production rate by 140% and acquired Ridgeback Resources for CAD 525 million. That brings the daily production rate to around 30,000 barrels per day. All the new properties are located in regions where Saturn has long been active and has extensive pipeline infrastructure. The present value of the new reserves is CAD 1.8 billion.

    Saturn Oil & Gas: Own bonds for a rising share?

    The research portal views Saturn Oil & Gas as favourably valued after the transaction: "Fundamentally, Saturn is trading at an EV/adj EBITDA ratio of about 1.3 after the transaction. There is no cheaper company in the entire North American oil sector that has such strong growth metrics. Therefore, it is expected that the valuation GAP will close at a factor of 5 times EV/adj EBITDA in the medium term. From today's perspective, that would be a fair value per share of around CAD 10.00," say the experts. From Canada, it is also said that this acquisition should have been the last to be financed from equity and dilute the holdings of existing shareholders. Even the most recent deals have gradually improved the conditions for shareholders. In the future, Saturn Oil & Gas could get a rating to be able to issue bonds. Saturn now has the critical mass to achieve this goal. At a time when lithium company share prices have already rallied, Saturn Oil & Gas stands out with a low valuation and crystal clear ESG profile. Those looking for value should have the stock on their radar.

    How green are e-cars from BYD really? Photo: BYD

    American Lithium: A lot of speculation in the stock

    Many investors also currently have the stock of American Lithium on their radar. The Company offers access to two lithium projects. The TLC project in Nevada is said to offer up to 8.8 million tons of lithium carbonate. The Company recently bought back a success stake from a former partner. The market sees this move as a possible indication of an imminent takeover. What's in it? Unclear! The fact is that the Nasdaq company has long been in the focus of investors, and the share price has doubled in the past two months.

    Investors who think outside the box when it comes to the lithium hype and take into account that the bulk of the market prefers to focus on lithium instead of securing the sustainable supply of still urgently needed classic energy sources, should take a closer look at the shares of Saturn Oil & Gas. There, a stronger focus is to be placed on the shareholder value principle from now on - with management receiving bonuses at prices of CAD 4.60 and CAD 8.00 per share. Currently, the stock, which is valued at approximately the annual future cash flow, stands at CAD 2.40.

    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") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    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 also 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

    Nico Popp

    At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

    About the author

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