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May 9th, 2023 | 09:25 CEST

The trend continues - BYD, Defense Metals, Hensoldt

  • Mining
  • RareEarths
  • defense
  • Electromobility
  • armaments
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In order to achieve the climate targets, both politics and business are taking a high risk. Fossil fuels are to be replaced by alternative energy sources as quickly as possible. In turn, the consumption of metallic raw materials is increasing in order to build renewable, energy-efficient systems. In addition to copper, cobalt and nickel, the demand for rare earth metals, which have to be imported almost entirely from China, is increasing dramatically. Since the start of the Ukraine war, there has also been growing demand from the defence industry. The producers of critical metals ex-China are likely to profit from this.

time to read: 3 minutes | Author: Stefan Feulner
ISIN: BYD CO. LTD H YC 1 | CNE100000296 , DEFENSE METALS CORP. | CA2446331035 , HENSOLDT AG INH O.N. | DE000HAG0005

Table of contents:

    Hensoldt AG - Coming under pressure

    Through no fault of its own, the arms manufacturer from Taufkirchen near Munich came under pressure last week. The reason for the crash and the generation of a sell signal were rather disappointing quarterly figures of the Düsseldorf competitor Rheinmetall, whose operating result and cash inflow fell short of forecasts. Thus, the price of the Hensoldt share sank below the vertical support at EUR 32.18 with high volume.

    In the process, the sell-off was stopped with a low at EUR 30.24 shortly before the next important support, the February high at EUR 29.90. A drop below this zone would offer downward potential to the 200-day line at EUR 27.23. On the upside, however, the chart picture should brighten considerably if the level of EUR 33.60 is exceeded. The quarterly figures expected today should provide impetus.

    Analysts are relatively optimistic. Deutsche Bank Research raised the price target from EUR 29 to EUR 35. Analyst Christophe Menard pointed out that the first quarter should be better than stable. Hensoldt should confirm its targets for the current financial year.

    Defense Metals - The Mine of the West

    Due to the turn of the times and the armament of the NATO countries, the demand for rare earth metals is increasing noticeably again. The need is enormous since neodymium-iron-boron magnets are considered the strongest permanent magnets in the world and are contained in many military weapons systems, for example, in precision-guided weapons and satellite and stealth technologies. They are strategically important to the functionality of modern and increasingly networked armed forces, which is why many countries see securing access to these critical elements as essential for future economic and military stability. In times of growing geopolitical tensions, NATO countries are striving to significantly reduce the enormous dependencies on a single supplier, namely China. The world's second-largest economy controls not only the production of 70% of rare earth metals but also the entire value chain up to the construction of permanent magnets, batteries or even computers.

    Since the beginning of the Ukraine war, politicians, primarily in North America, have been trying to promote projects. In addition to the Mountain Pass mine, Defense Metals is developing the 100%-owned Wicheeda project, a producer that would be responsible for 25,000t of rare earth oxide in the future, which is 10% of current global production. In addition, the splitting and processing are also to take place in Canada, while the metals extracted at the comparable US mine are still shipped to China.

    The 4,244-ha Wicheeda project has first-class infrastructure; the mine is located about 80 km northeast of Prince George, a mining hub in British Columbia, Canada, and is strategically located on a major forest road connecting to a highway. Another advantage is that the property being explored by Defense Metals has the same metallurgy as the Mountain Pass mine. When the Mountain Pass mine was discovered in 1950, coarse crystalline bastnäsite and parisite were discovered and were easily exposed, making it the preferred rare earth metal. The Wicheeda deposit also has the same coarsely crystalline metals, which can be processed cheaply using conventional methods.

    To reach the next targets, the completion of the pre-feasibility study being the top priority, a private placement totalling CAD 12.5 million has been announced. The subscription period runs until May 18. A lead order from RCF Opportunities Fund II LP for CAD 6.6 million has already been received. Defense Metals has a market capitalization of CAD 54 million.

    BYD - Further sell-off

    Warren Buffett continues to gold-plate his gains in the Chinese market leader for electric cars. By selling another 1.96 million H-shares traded in Hong Kong, the oracle from Omaha raised USD 58.9 million. The share of his investment vehicle Berkshire Hathaway in BYD thus fell below the 10% hurdle with 9.87%.

    In terms of expansion, the Shenzhen-based company plans to build an electrical components plant in Vietnam. In doing so, BYD hopes for the support of the government. On May 5, the Chairman and Founder of the Chinese electric carmaker, Wang Chuanfu, met with Vietnam's deputy prime minister Tran Hong Ha to discuss the way forward, Bloomberg reported.

    In this regard, Wang said he expected the Southeast Asian nation to pave the way for easy completion of investment procedures so BYD can start producing electric vehicles as soon as possible. The plan is to establish a local supply chain to sell the produced electric vehicles locally and to other parts of Southeast Asia.

    Hensoldt's stock has been saddled with disappointing numbers from industry peer Rheinmetall. Warren Buffett continues to sell shares in BYD. With strong demand from the defence industry and the renewable energy sector, Defense Metals, one of the few Western producers of rare earth metals, should benefit in the future.

    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 hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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