07. October 2020 | 09:19 CET
Tesla, Umicore, Almonty: Critical raw materials decide on yield
Raw materials are the key to CO2 neutrality. Whether electricity storage, solar plants, or wind turbines - without raw materials, such as nickel or cobalt, many future technologies cannot be implemented. Yet many raw materials are still extracted from the earth in China under dubious conditions, or come from other mining regions where ESG standards do not play an important role. But tomorrow's customers are already calling for better mining conditions today: Tesla boss, Elon Musk, has already publicly advocated that raw materials used by his company should come from good sources. Here could be an opportunity for mining companies operating in mining regions with high environmental standards.
time to read:
ISIN: CA0203981034 , BE0974320526 , US88160R1014
Tesla continues to surprise us
Although the supply of sustainably mined raw materials is becoming increasingly challenging for a company like Tesla, the share has not known how to hold for months: Over the year, the share price has risen by an incredible 756%. Although Tesla seems to have run hot, the company continues to deliver positive headlines. Recently, the price for the low-priced Model 3, were lowered in the major sales market of China. Analysts speculated whether Tesla had installed a new battery that is cheaper and uses less critical metals.
Saving or recycling raw materials
As late as the middle of the year, analysts were still calling for price reductions to keep up with the growing competition. It appears that the company has created room for price reductions with new batteries, and also made itself less dependent on suppliers. It remains to be seen to what extent the new batteries will last or whether the latest step is only temporary. Despite the high proportion of borrowed capital and the ambitious sales targets, even for optimists, Tesla can always surprise. Jack-of-all-trades Elon Musk always manages to conjure something new. However, after the price gains of the past year, the fall in the share price now appears to be very high.
One company that benefits indirectly from rising raw material prices is the Belgian group, Umicore. The company operates in the areas of materials technology, metallurgy, and recycling. The latter got off to a good start in the first half of the year and grew by 40%. One of the main reasons for this substantial growth was higher metal prices. Umicore recycles cobalt, germanium, nickel, zinc and precious metals, among others. Things are going well for Umicore as a whole - sales climbed by around thirty percent in the first six months of the financial year, and on a one-year horizon, Umicore's share price has increased by approximately 8%.
Tungsten as a critical metal
While companies like Tesla minimize the consumption of critical raw materials through new battery technology or, like Umicore, recycle already mined raw materials, the Canadian mining company Almonty is taking a different approach. Almonty mines the metal tungsten, which is considered critical by the European Union, and focuses on mining regions outside China. Almonty is currently working on the world's largest tungsten mine in South Korea and plans to complete the project and put it into production by 2022. The mine could represent 5% of the world's tungsten production and cover 30% of production outside China. Almonty started the construction of the mine in late September.
While many smaller commodity companies only have one major project, Almonty already has two producing mines in Portugal and Spain, making it an alternative in a market dominated by China. Almonty could soon profit from the demand for sustainably produced raw materials. Tungsten is extremely temperature resistant and helps to harden alloys. It is used extensively in the construction of industrial plants and machinery.
The market seems to misjudge opportunities
While Tesla and Umicore are companies worth billions, Almonty is still considered an insider tip - on the stock exchange the Company is currently valued at around EUR 88 million. Although the construction of a gigantic mine always involves uncertainty, the current market seems to underestimate the great opportunities of the project in South Korea. With its focus on the extraction of tungsten outside of China, Almonty is entering an attractive gap. As the securing of critical raw materials at sustainable conditions becomes more and more important, investors should take a closer look at the value.