28. September 2021 | 12:56 CET
Standard Lithium, Defense Metals, Orocobre, Millennial Lithium: Separating the wheat from the chaff!
Lithium has become one of the most important metals in electromobility. Where all this lithium will come from is critical, as the logic behind electromobility is to generate more sustainable technologies. For more climate protection, mining companies must also fit into a sustainable concept. Lithium extraction should therefore follow high environmental standards and take place in an appropriate economic and social context. But beware: the overall market has recently stopped following every battle cry. Separating the wheat from the chaff is becoming a portfolio challenge!
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ISIN: STANDARD LITHIUM LTD | CA8536061010 , DEFENSE METALS CORP. | CA2446331035 , OROCOBRE LTD | AU000000ORE0 , MILLENN.LITHIUM CORP. | CA60040W1059
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.
Millennial Lithium Corp. - Ganfeng is outperformed
Investors are incredibly bullish on lithium development companies. For a good reason, lithium supplies are tight, and the current supply cannot keep up with demand. Good projects are in order if they are feasible. For months, lithium values were hyped and more and more lithium demand was proclaimed. It is driving the current spot price on the primary market in China to over CNY 165,000, still the highest level since 2018. The established mining companies have long since understood the message and are doing everything to meet expected demand. As a result, exploration activity is increasing, and mine expansion is accelerating.
Market leaders such as Ganfeng are keen to win the most promising development projects for themselves. However, in the current takeover battle for Millennial Lithium, Ganfeng now appears to be withdrawing its bid. Various news agencies are reporting that Ganfeng is not interested in an escalating bidding war. Ganfeng is in the market with an offer of CAD 353 million; most recently, Chinese battery manufacturer CATL had submitted a slightly higher bid of CAD 377 million. China Molybdenum Co. is also said to be at the party. It is not yet known if there will be another offer or only a co-bid. At CAD 3.80, Millennial's stock has a current market cap of CAD 369 million - there is probably not much left in it!
Standard Lithium - This share is unstoppable
Standard Lithium Ltd. is now conducting a pilot project in southern Arkansas to test a novel carbon capture technology. The pilot project is being carried out in collaboration with the technology owner, Aqualung Carbon Capture AS. The modules will be installed at a natural gas processing plant in southern Arkansas. Standard lithium was an early adopter of the idea of decarbonization and is, therefore, an industry leader in promoting sustainability and the circular economy.
With the funding of this project, Standard intends to build on its science-based strategy for sustainable development and continuous improvement at its lithium projects in Arkansas. The Company is focused on minimizing all carbon emissions generated by its future operations and related supply chain activities. The stock market likes to hear concrete CO2 reduction progress in the current environment, sending the share price further north. At the beginning of the year, the share price quadrupled to CAD 10.35 and currently knows no stopping at the top. For zero sales, the stock market is currently paying over CAD 1.5 billion.
Defense Metals - Now uranium is coming on the scene
Rare earths are needed for the production of high-tech devices. Currently, governments worldwide agree that these are strategic metals, and a supply-side dominated by China cannot be the egg of Columbus. So they are looking for new deposits that could close the successively emerging supply gaps in their development. Canadian explorer Defense Metals (DEFN) is one of the aspirants that could deliver here in a few years because it has an option to acquire 100% of the 1,708-hectare Wicheeda rare earth element property near Prince George, B.C., Canada.
That is not all, because another opportunity is currently opening up. In the recent uranium rally, companies like to think of existing properties that had simply been put aside in recent years because of low uranium prices. Defense Metals has already invested accordingly in 2018, acquiring 100% of the Geiger North and Klaproth projects. These projects are located approximately 35 kilometers northwest of the McClean Lake mill in a relatively underexplored area of the Athabasca Basin adjacent to the Wollaston-Mudjatik transition zone. It is a major crustal suture associated with most of the major uranium deposits in the eastern Athabasca Basin.
Both properties comprise a total of five mineral claims totaling 9,363 hectares; they are in good condition and are now undergoing technical upgrades. The sites are historically surrounded by several large mining companies, giving the Company a strategic foothold in a proven and productive uranium mining district. Defense Metals is now reviewing historical data from exploration work already conducted to identify potential underground anomalies. Aside from Germany, uranium has again moved sharply out of favor due to the enormous global demand for energy.
DEFN shares immediately jumped up from their consolidation formation with the recent news, marking a three-month high of CAD 0.28. Capitalization currently reaches CAD 22.4 million; this is certainly a good entry opportunity given the global uranium hype.
Orocobre - Merger with Galaxy makes sense
While Ganfeng and CATL have been at loggerheads recently over Millennial Lithium and its project in Argentina, Orocobre has inked another deal: The merger with Galaxy Resources. The Australian lithium producer was also expanding into Argentina, but with the merger, it acquired production that was already underway and, therefore, positive cash flow. A whole series of development projects have now been united within the group, and the Company is not dependent on acquisitions for better or worse when it comes to growth. With this deal, the new Orocobre moved directly into fifth place among the world's largest lithium producers. Analysts described the merger with Galaxy as "ideal", the similarities are great, and real synergies are created through meaningful additions.
At EUR 5.58, Orocobre shares have smoothly surpassed their old 2018 high and now reflect a capitalization of EUR 1.9 billion. Compared to the low in March 2020, this is a fourfold increase. In our opinion, many positives are already priced here; hedge your investment at EUR 5.25.
The global hype around electric mobility is directly reflected in the lithium price and the valuation of the related mining companies. If there should be any doubt about the speed or the required quantities, we should have already seen the highs. Another story is strategic metals, including uranium - these shortages have an explosive political component. Canadian Defense Metals is well-positioned here.