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December 13th, 2021 | 11:36 CET

Standard Lithium, Defense Metals, Nordex - The demand for metals goes through the roof!

  • RareEarths
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A possible explosion in raw material prices was already indicated in 2019. Due to low selling prices, some mining companies even reduced their mining output or stopped their exploration activities. Then came the pandemic, which put further pressure on both production and logistics, and many operations had to close for longer than expected due to adjustments in sanitation infrastructure. There is now also the supply chain problem in this already tight supply situation. Presumably, things will not get any easier in 2022 under these conditions. Which companies are making a name for themselves in this environment?

time to read: 4 minutes | Author: André Will-Laudien

Table of contents:

    Standard Lithium - The expected consolidation has occurred

    Even under the Biden administration, the constant bone of contention with China is US arms exports to Taiwan, considerably aggravating the economic-political climate. Today, conflicts are no longer settled militarily but through disruptions in trade agreements. Thus, for a certain time, there are punitive tariffs or, as in the case of China, various export bans on important metals and strategic raw materials. The high demand in the electromobility and IT industries leads to supply bottlenecks in important metals such as copper, nickel and lithium.

    Standard Lithium is in the process of building an important resource in Arkansas. The current valuation of over USD 1 billion shows the importance of current projects. The Company is making much faster progress in realization thanks to its collaboration with Lanxess and major financing through Koch Investment Group. In November, the stock came under pressure due to attacks by a short-seller, with the price plummeting from CAD 15.90 to CAD 10.25. However, the improper accusations were quickly cleared out of the way. The share was then able to complete a 30% spike, and the value remains in demand among investors.

    Nevertheless, the euphoria at Standard Lithium has subsided again after Koch's entry. The share failed for the first time at the beginning of December with its renewed attempt to break out above the CAD 14 line. At a price of CAD 11.30, the focus is now on the support zone at CAD 10-11. Fundamentally, the management is following a consistent path, but with an annual performance of over 300%, the stock is still highly susceptible to corrections. For investors, a stop-loss below the CAD 10 mark makes sense from a chart-technical point of view.

    Defense Metals - Another step closer to production

    The so-called rare earths are a special group of extremely rare metals. A distinction is made between light and heavy rare earths. On average, the four light rare earths cerium, lanthanum, neodymium and praseodymium account for more than 95% of rare earth deposits. China is the leading producer and exporter of the coveted metals, with over 80% market share.

    Canadian explorer Defense Metals (DEFN) has come to the attention of international commodity investors with its property in Wicheeda, British Columbia. The results of an X-ray study showed that the grades of the rare earth metal REE could be optimally extracted using low-cost front-end processing. The available neodymium-praseodymium is an important raw material for the production of magnetic components, e.g. in the production of nuclear magnetic resonance tomographs, micromotors, wind turbines but especially for electric mobility.

    Defense Metals Corp has released the results of its preliminary economic assessment (PEA) and an updated mineral resource estimate. According to the PEA, the project achieves an after-tax net present value (NPV) of CAD 512 million, with a payback period of 5 years from the start of production. The calculation assumes partial self-financing of the construction of the hydrometallurgical plant through concentrate sales. It assumes revenues of CAD 397 million per year on average from the sale of REE mineral concentrates. The project is located near good infrastructure, which allows for a gross margin of as much as 65%. The study envisions an open pit operation lasting 19 years after a three-year construction phase, with initial capital expenditures (CAPEX) of a low CAD 461 million.

    Wicheeda's 36% increased Mineral Resource Estimate (MRE) at a 0.5% cut-off grade includes an Indicated Mineral Resource of 5 million to an average grade of 2.95% TREO and an Inferred Mineral Resource of 29.5 million to an average grade of 1.83% TREO. In anticipation of a positive PEA result, Defense Metals completed a 29-hole diamond drilling program in 2021 to expand the resource to 5,349 meters, with drill results expected in the first quarter of 2022. DEFN shares have recently consolidated to CAD 0.20 after a solid start to the year in 2021. At around CAD 23 million, the market capitalization is now very attractive for the advanced project and invites an increase.

    Nordex - Strong order receipts provide encouragement

    The wind is blowing pretty hard at Nordex AG. After the recently reached low of EUR 12.73, the stock shot northwards and ended up almost 30% higher within two weeks. That was due to the lavish new orders which the wind turbine manufacturer was able to secure. Its regular customer, WPD, placed an order for 47 MW in Sweden. The Nordex Group is supplying eight N163/5.X turbines for the "Stöllsäterberget" wind farm. The order also includes a premium service contract for the turbines for 15 years with an extension option for a further five years.

    The "Stöllsäterberget" wind farm is being built between the provinces of Värmland and Dalarna in western Sweden near the Norwegian border and will be installed in the summer of 2023. The delivery and installation of 33 turbines in the 188 MW "Karhunnevankangas" project and 17 turbines in the 96.9 MW "Nuolivaara" wind farm are also scheduled for 2022. "With Nordex, we have a turbine manufacturer at our side with whom we can implement our goals for a far-reaching contribution to the energy transition," says Johanna Bohn, country manager for Sweden at WPD.

    With a total company value of EUR 2.85 billion, sales of just over EUR 5 billion are currently valued at a factor of 0.6 only. That is due to Nordex's lack of profitability, as a net profit for shareholders is not expected until 2023. Until then, it is a matter of being patient and making the first entry into the stock. In the volatile year-end business, this should also succeed below EUR 14.50.

    The high-tech industry needs access to strategic metals. However, the supply chains from the mine to the production sites have been severely impaired by the pandemic. This leads to delays despite a good order situation. Standard Lithium is highly valued as an explorer compared to the plant manufacturer Nordex. Those who want to invest in rare earths will find suitable entry parameters in Defense Metals.

    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 in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.

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    Der Autor

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author

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