Significant upside potential - Varta, Manuka Resources, BASF

Varta - A new broom sweeps clean

Hope dies last. The same applies to the battery company based in Ellwangen, Baden-Württemberg, which got into trouble last year. Several sales and profit warnings sent the once-celebrated company's share price plummeting by around 87% from EUR 165 in August 2021 to a low of EUR 21.60. At a current price of EUR 24.59, the share has managed to pull back somewhat from the low and is gradually approaching the downward trend that has been in place since August 2021. A break of this trend would open up an initial follow-up potential of at least EUR 30.30, the high from March of the current stock market year.

Following the agreement with the banks on the new restructuring programme, investors' hopes are now pinned on the new CFO, Marc Hundsdorf. He has many years of restructuring experience and will succeed Armin Hessenberger as CFO on May 15. In addition to Hundsdorf, the board will consist of Dr. Markus Hackstein as spokesperson and Rainer Hald as CTO. Hundsdorf looks back on board and management experience in the private equity and capital market sectors. He also has many years of experience in restructuring. Most recently, the 54-year-old graduate engineer and industrial engineer was CFO at caravan manufacturer Knaus Tabbert AG.

Manuka Resources - Broadly positioned

The Company, which has a market capitalization of CAD 41.80 million, is broadly diversified and, in addition to a high-grade gold and silver project, has an ace up its sleeve with the recently acquired South Taranaki Bight project, which could catapult the Company to become one of the most important vanadium producers in the western world in the future. While lithium is preferred for electric cars, vanadium is used in large-scale industrial applications. Vanadium-based batteries lose significantly less energy than lithium-ion batteries, which is why vanadium redox flow batteries are used in solar and wind power plants. The project already has a mining licence for 5 million tonnes per year, with an initial mine life of 20 years. At an assumed BFS 1 production rate of 5Mt of VTM concentrate per year, annual concentrate production would include 25,000t of V2O5.

In addition to the vanadium project, Manuka Resources has two prospective mining projects in the Cobar Basin with a total exploration zone of 1,150 sq km. With the Mt Bobby gold project, the Australians own one of the continent's historically richest gold mines, which mined 500,000 ounces of gold at an average grade of half an ounce per tonne of ore in past production. From June, production at Mt Bobby is expected to restart long-term, aiming to produce about 25,000 ounces of gold per year over the next 3 years.

Bulk sampling to assess the gold grade in the waste dumps has commenced and is returning positive results from metallurgical testing. This will make cyanidation possible at the Wonawinta plant from April. To extend the life of the mine, the Company plans further exploration to develop new open pit deposits. The Mt Boppy open pit mine is scheduled to resume later in the year, and drilling will be carried out at Mt Boppy Deeps in the second half of the year to see if an underground mine is viable. In addition, there are plans to recover 3,000-4,000 ounces of gold from crushed ore at the pit floor.

Despite the rising gold and silver prices, Manuka Resources' share price has yet to benefit much. However, this should change quickly with a successful start of production or success at the promising vanadium project.

BASF - Better than expected

After the publication of the figures for the first quarter, the US investment bank JP Morgan confirmed its price target for the chemical giant BASF at EUR 55. Adjusted EBIT exceeded consensus estimates by 21%. As a result, the strong key figures should lead to significantly higher consensus forecasts for the full year 2023. After initial gains, the stock slipped about 2% to EUR 48.61 despite the better-than-forecast results.

The chemical giant's first-quarter revenue fell 13.4% to EUR 19.99 billion, below analysts' consensus of EUR 21.82 billion. EBIT before special items, on the other hand, did better than expected, falling from EUR 2.818 billion to EUR 1.931 billion, down 31.5% from the same period last year. Analysts even expected a decline to EUR 1.599 billion. After taxes and non-controlling interests, BASF earned EUR 1.562 billion. The forecast was EUR 1.081 billion.

Varta could make a break from the downtrend. BASF's preliminary first-quarter figures were better than analysts' forecasts. Manuka Resources is broadly positioned and benefits from the rising price of precious metals and demand from the renewable energy sector.