09. August 2021 | 13:29 CET
Varta, Carnavale Resources, Airbus - High tech in a bind - Metals are scarce!
Currently, metal prices are not calming down! That puts pressure on the supply chains. Many companies are struggling with their inventories at the moment. If too much is ordered, the shelves could overflow due to delays in completion and cause extreme costs later on because high working capital is a margin killer for the industry. But the problem is also more topical in nature. There are many orders on hand, but essential components such as chips are unavailable, causing sales to decline, despite full order books. Conversely: When everything returns to normal, prices for metals will probably have to correct sharply again because no one will order more because of full warehouses - a real dilemma for mines and industrial customers alike.
time to read:
ISIN: VARTA AG O.N. | DE000A0TGJ55 , CARNAVALE RESOURCES LTD | AU000000CAV5 , AIRBUS | NL0000235190
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
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.
Varta - The breakout has been achieved for the time being
The fact that prices are mainly due to a psychological component can be seen in current market events. The market is currently prepared to pay high premiums for urgently needed components, even though delivery will not occur until years later. In the same way, the stock market is already processing fantasies that will only be reflected in the balance sheet in a few years. This applies above all to battery and hydrogen technologies.
Varta AG is a prime example of such hopeful hype. In the first wave of euphoria in January-February 2021, it was hyped up to over EUR 180 until the reality shock of much lower growth rates and high development expenses hit. As early as the beginning of March, the value was back at EUR 105. The share has now broken out of the long sideways trend once again because the new battery factory for e-mobility is again creating emotionally charged buying arguments.
Last week then a double reversal! Up to 160, down to 142, and finally back above EUR 160. The shorties in the stock probably got cold feet and covered everything previously sold short by Friday. All in all, however, an impressive price increase of 50% in only 5 months remains for Varta. However, the fundamental framework for this does not fit at all. Stocks should be stopped if consistently below EUR 154!
Carnavale Resources - Many metals in one fell swoop
If you are looking for an answer to the tight commodity situation, you should turn your attention to Australia. The resource-rich continent is home to everything the high-tech industry needs. Such is the case with the still young Australian explorer Carnavale Resources. Its experienced management team led by CEO Humphrey Hale has access to several high-grade projects in the gold, copper, nickel and platinum group elements sectors. All properties are located in Western Australia and show great promise after initial drilling.
So far, the focus has been on industrial and precious metals. Currently, the industrial sector is the primary driver, as demand in this sector is capricious. The energy, renewables and e-mobility sectors, in particular, are pulling on scarce resources. That is pushing up prices and prompting some projects to come on stream, even in remote areas.
At Carnavale, in addition to the Grey Dam nickel project, the Barracuda project stands out; it includes mineralizations of nickel, copper and platinum group metals. Meanwhile, the latest news is from the Kookynie precious metals project with initial evidence of outstanding gold grades. The third drill program returned high-grade intercepts of two meters with ore grades ranging from 3.34 to 16.25 g/t AU.
Carnavale Resources has now exercised its option to purchase 80% of the Kookynie Gold Project, issuing AUD 250,000 as well as 50 million new ordinary shares. The vendor Western Resources Pty Ltd has agreed to a voluntary 3 month escrow on the shares issued. The subsequent work program at Kookynie now includes RC drilling to test at depth and along near surface high-grade gold mineralization predefined by recent drilling.
With 2.38 billion shares in issue, there is currently a market capitalization of AUD 18.2 million. The Company is 50% owned, with significant management participation as well. The sum of the projects and the good diversification at Carnavale Resources makes sense and should lead to significantly higher share prices in the medium term.
Airbus - First H2O aircraft to arrive in 14 years
Another industrial giant with an urgent need for complex metals is aerospace expert Airbus SE. The European technology holding company is currently converting the various orders received after the first wave of the pandemic into a strategic plan. Strangely enough, the airlines have expressed very different needs, depending on whether they were already highly equipped before the crisis or have postponed their fleet renewal needs for the time being due to the crisis. Not an easy undertaking for the planning team in Toulouse because the Group generates over EUR 50 billion in sales and employs over 80,000 people worldwide.
In July, the aircraft manufacturer again delivered significantly fewer jets to its customers. At 47 aircraft, the number of deliveries was well below the 77 of June before. Despite the Corona Crisis, the Group received orders for two new commercial aircraft, but orders for seven jets were canceled. Airbus CEO Guillaume Faury aims to deliver about 600 commercial aircraft to customers this year, 6% more than the 566 aircraft delivered in the Corona year 2020, but the figure of 863 jets delivered in the record year 2019 remains far away.
A new hope could be the development of the first hydrogen passenger jet. By last December, Airbus had unveiled four concepts for H2O-powered aircraft. At least one operational commercial aircraft is expected to emerge from these ideas by 2035. According to Airbus, two centers of competence for the Zero E project will be operational in Nantes and Bremen by 2023 to build hydrogen tanks. A first flight test is then planned for 2025, with Airbus also targeting tests with the A380, which is itself being discarded. Customer interest was heard from Lufthansa, one of Airbus' largest customers.
The Airbus share has now gained 70% on a one-year horizon and, at EUR 117, is only about 20% below its pre-crisis level. Who would have thought that a year ago. Hold your stocks with a tight stop at EUR 111.
Scarce metals are causing problems for the high-tech sector. These will tend to impact margins at Varta and Airbus. The smiling third is Carnavale Resources; they own a lot of the sought-after multi-metals in the ground.