Steel Is Strategic Again: How Strategic Resources and thyssenkrupp Could Benefit—and What It Means for TKMS

Strategic Resources: Project Value Exceeds Market Capitalization by a Multiple

The core of the company's activities is the development of the BlackRock project in the Canadian province of Québec. The deposits contain several critical metals, such as iron, vanadium, and titanium. In particular, the high-quality and massive iron ore deposit of approximately 128 million metric tons stands out.

The use of high-quality iron ore with high iron content and low impurity levels is essential for the production of green steel. Vanadium is primarily used to produce strong and lightweight steel alloys, but it also plays an important role in certain batteries. Titanium is characterized by its low weight, high strength, and corrosion resistance.

The company pursues an integrated approach that encompasses ore mining, the production of high-quality intermediate products, and the end products of iron ore concentrate and pellets. The planned pellet plant at the deep-water port of Port Saguenay (Québec), with a potential annual capacity of 4 million metric tonnes, is a central component of this strategy. The site offers significant cost advantages due to its favourable infrastructure of hydropower, port connections, and pipeline access.

In addition, the Canadian company is working with Tyfast Energy to establish a North American supply chain for battery-grade vanadium oxide. Alongside its flagship project, the company is also expanding its activities in Europe. With Mustavaara, the company owns an exciting vanadium project in Finland. A major success was recently reported there. The proprietary vanadium-magnetite concentrate was selected for the FutSteel research project, which focuses on the climate-neutral steel production of the future.

Given the potential and progress, the Canadian company's tiny market capitalization of just under CAD 18 million at a share price of around CAD 0.30 stands out. The project value for BlackRock calculated in the feasibility study—nearly CAD 2 billion—is miles away from the current market valuation! A sustained flow of positive news and the achievement of further milestones could help bridge this gap.

IIF host Lyndsay Malchuk in conversation with CEO Sean Cleary.

https://youtu.be/ha8A2-FPIwk

thyssenkrupp: Patience Will Pay Off

Hardly any other German industrial group has undergone such a profound transformation in recent years as thyssenkrupp. The transformation from a broadly diversified steel and technology group into a financial holding company is moving forward. This structure enables the management of independent subsidiaries and the efficient allocation of capital, with the goal of reducing the conglomerate's valuation discount.

The process became visible with the IPO of the naval division under the name TKMS last year. TKMS is one of the world's leading suppliers of submarines and naval vessels and is benefiting from rising defence spending. The current TKMS share price is significantly above the offering price, making the IPO a success. The parent company remains the majority shareholder with a 51% stake.

With the planned spin-off of the Materials Services division—as TK Accelis—later this year, thyssenkrupp is taking the next step. TK Accelis is one of Europe's largest materials traders and is increasingly evolving into a digital supply chain service provider. Approval at the extraordinary general meeting on August 7 is expected to be merely a formality.

The steel division, on the other hand, remains the biggest challenge. High energy costs, weak demand from the automotive industry, and international competitive pressure are weighing on the division. At the same time, the company is investing heavily in the decarbonization of steel production, including through direct reduction plants and hydrogen technologies.

TKMS: Full Order Books

The construction of a modern submarine is one of the most demanding industrial manufacturing processes imaginable. The steels used must withstand enormous water pressure, be as magnetically inconspicuous as possible, and exhibit exceptionally high corrosion resistance. Special alloys, like titanium, and fibre-reinforced composites also play a crucial role. Material development, welding technology, and quality control are thus among TKMS's most important core competencies.

The company benefits from a strong European supplier base and deep industrial value creation. The news flow over the past weeks and months underscores the German company's strong market position. TKMS has recently received a major accolade on two separate occasions.

The group was selected as a preferred supplier for the Canadian submarine program and as the supplier of new frigates for the German federal government. The share is currently trading at around EUR 82, valuing the company at approximately EUR 5.2 billion. The order backlog exceeds EUR 20 billion. Analysts have set an average price target of EUR 100, while experts at Deutsche Bank are more optimistic at EUR 110.

The BlackRock project boasts high-quality and massive iron ore deposits that could play a key role in supplying the North American steel industry in the future. The value of the flagship BlackRock project indicates a significantly higher level than its current market capitalization of just under CAD 18 million is able to reflect. In addition, the vanadium and titanium deposits offer opportunities. TKMS is consistently expanding its market position and has a massive order backlog. thyssenkrupp shares could once again attract increased investor interest in the wake of the planned spin-off of the Materials division.