September 21st, 2023 | 07:00 CEST
Turnaround cancelled? Where 100% is possible: Varta, BYD, Manuka Resources
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
Varta: What is next operationally?
Currently, Varta is implementing a restructuring and investment plan. On the stock market, the news from Varta was well received in recent months - the share recovered. Slowly but surely, however, observers see too much of a good thing in the share's rebound - on a four-week horizon, the share slipped by around 8.5%. This skepticism seems appropriate when one considers the sobering facts surrounding Varta. Although the Company expanded into the field of batteries for e-cars, it has yet to make significant progress. In addition, partner Porsche is considered very ambitious and a perfectionist. While the button cell business represents great quality and equally great customer confidence, costs are a burden.
The latest turnaround plan is to cut production, procurement and personnel costs. Critical observers can easily combine that this undertaking is likely to be doubly difficult in times of inflation and will most likely not be without consequences. Whether the operational turnaround will follow after the failed price comeback remains uncertain. Varta is a traditional company facing significant challenges.
BYD: Top dog with big risks
BYD is incomparably larger than Varta. The Chinese battery pioneer has long been manufacturing quality automobiles, and it is the leading brand in China. They also produce home energy storage systems, which, despite some authoritarian warnings in manuals and apps, function well and offer competitive prices. As the market leader in the Chinese automotive industry, BYD has everything it needs to trump other markets with economies of scale. However, a major assault on European markets has yet to materialize, likely due to increasing trade barriers like tariffs and other trade obstacles. After the share price rose sharply for years, calm has now returned. The value remains reasonable, but BYD will not be a high-flyer in the near future.
Manuka Resources: The dwarf with the magic potion
The share of Manuka Resources has the potential to become a real high-flyer. The Australian company has two mainstays: precious metals and vanadium. In Australia, the Company operates a gold mine, a silver mine, and an associated rock mill. Manuka alternately mines precious metals and generates cash flows there. The special thing about the constellation of the two mines, Mt Boppy and Wonawinta, is that the resource that Manuka can show increases with progressive production. This is partly due to giant tailings that only need to be trucked to the rock mill and the fact that Manuka is getting to know the two projects better as they work on them.
While the precious metals leg is the solid foundation for Manuka Resources, the STB project in New Zealand represents blue-sky potential. Manuka Resources succeeded in acquiring the project, in which USD 50 million had already been invested at the time, just over a year ago. Executive Chairman Dennis Karp was enthusiastic about the project in an interview a year ago, stating: "*The project has a granted mining license and an exceptionally large JORC resource of 3.8 billion tons. It has the potential to set several benchmarks on its way to becoming one of the world's most environmentally friendly and sustainable mining projects. Current projections place it in the lowest cost quartile for iron ore production and in the lowest quartile for carbon emissions per ton of ore produced. In addition, the STB concentrate contains a significant vanadium content of 0.5%/t, expressed as vanadium pentoxide or V2O5. At this grade, and based on initial estimates of annual mining rates for the STB project, the estimated annual vanadium production would be approximately 55 million pounds. *This would make us the third-largest vanadium producer after China and Russia and would allow us to produce 15% of the world's supply annually - all under the secure jurisdiction of New Zealand."**
Vanadium as the battery metal of the energy transition?
During the past months, the shareholder structure changed, and the share price came under pressure. At the same time, however, it also expanded resources at Mt Boppy by 360%. While Manuka Resources is at an early stage, the combination of a solid precious metals business with potential cash flows and the opportunity for vanadium appears promising. Vanadium plays a crucial role in large-scale energy storage devices, specifically vanadium redox batteries. Moreover, the market has so far been dominated by Russia and China. Experienced investors with staying power may see an anticyclical opportunity in Manuka Resources. The Company will present at the 8. International Investment Forum (IIF) on October 10. Registration is free.
While Varta shareholders must hope for a turnaround and BYD could suffer greatly from geopolitical developments in the future, the risk for Manuka Resources lies at the corporate level - no doubt the projects are stuck in the early stages. However, the outlook is extremely exciting, particularly around the STB vanadium project. This project alone is capable of turning a dwarf into a giant.
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.
Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.
The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.