January 27th, 2022 | 13:10 CET
Varta, JinkoSolar, Barsele Minerals - Green tech: After the sell-off is before the rally!
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"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
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 AG - An old acquaintance comes to the market
At Varta AG, precisely what the market technique had indicated occurred. With breaking through the support at EUR 105, it went vehemently down. Investors probably had massive stop orders in the market to protect themselves from further losses. There is no news from Varta. But even that helps little now in a volatile environment.
Meanwhile, it became known that a competitor of Varta, or let's better say one of the market leaders for batteries for electric vehicles, now strives for a stock exchange listing. It is the South Korean electronics group LG, which has been reorganized and realigned for some time. Now the Company is completing the IPO of the battery unit. The spun-off unit LG Energy Solution Ltd. is one of the world's largest manufacturers of batteries for electric vehicles. The Company has now begun placing its shares.
LG expects the IPO to raise up to USD 10.8 billion. By comparison, MDAX-listed Varta is valued at just under EUR 4 billion on the stock market. The LG subsidiary is a supplier to General Motors, Hyundai Motor and Tesla, and it would be Seoul's largest IPO to date. LG Energy Solution was founded in 2020 and competes with BYD, CATL, Northvolt, Panasonic, Tesla, and Varta. The South Korean company says it is a supplier to 13 of the world's top 20 automotive brands.
The note from LG Energy is not a disaster for Varta because the developers from Ellwangen have taken until 2024 to develop a competitive battery. Technically, the share could slip further to EUR 75 if an immediate recovery of the EUR 100 mark is not achieved. Analytically, the lower Varta share price is an expected move away from the long-lasting overvaluation of the share. A bit of normality is returning.
Barsele Minerals - Bonanza discovery in Sweden
For years, Sweden has been a developer of climate-friendly technologies and an excellent location for mining companies. This supposed contradiction need no longer be one in modern terms, as even the formerly dirty mining industry has positioned itself more sustainably for the future through the use of green technologies.
The Scandinavians are in a good position in the international race for critical metals because the deposits of rare raw materials and energy sources are outstanding compared to Europe, which is otherwise relatively poor in raw materials. Because of a friendly jurisdiction, it is also possible for smaller mining companies to implement suitable exploration projects.
Barsele Minerals has been working with the heavyweight Agnico Eagle in the mining region of Västerbottens Län in northern Sweden through a joint venture. Within the widespread polymetallic deposits, further discoveries have now been made. A mineralized boulder path already discovered in 2016, located southeast of the Avan-Central-Skirasen zone trend, was further investigated by additional work in late 2021. It revealed a Bonanza discovery in the form of high-grade mineralization of 90.8 grams per tonne AU in ice. This new boulder is over one meter in diameter and is believed to be similar to other boulders found in the area. The high-grade sample contained no significant grades other than iron and sulfur.
According to initial estimates, the project has a potential of over 5 million ounces of gold. In addition, recoverable metals such as silver, lead, zinc and nickel are encountered in the deposit. Barsele's president, Gary Cope, states, "This high-grade boulder discovery could indicate a new source of gold mineralization at Barsele or a southern, fault-related shift in the Skirasen zone. Further prospecting, sampling, geophysics and drilling will be required in 2022."
Currently, the interests are 45% held by Barsele Minerals and 55% by Agnico-Eagle. In early January 2022, an additional CAD 2 million was placed on a CAD 0.50 basis. Thus, the cash box is filled for further operational steps. With a stock market value of CAD 58 million, the Swedish metal project is clearly undervalued. Watch out for the next gold cycle with a breakout above USD 1,850, do not miss the trend.
JinkoSolar - Strong profit-taking despite upcoming IPO
Another green tech stock is taking a beating in the current environment. Like all other growth stocks, the Chinese solar specialist suffers from rising interest rates, making refinancing more expensive. Therefore, the Company is also resorting to self-financing and placing shares of spun-off parts of the group.
Jinko's management expects the mega IPO of its subsidiary Jiangxi Jinko to increase the group's transparency and boost its value. The Company is to be listed on the STAR market of the Shanghai Stock Exchange, thus giving the Group access to the Chinese capital market. Two billion shares will be issued via a capital increase, representing approximately 20% of the total share capital. The parent company Jinko will remain the majority shareholder after the listing with just under 60%.
600 million shares are to go to investors close to the state, including the China Insurance Investment Fund and the China Energy Investment Corporation. The proposed price for the IPO is five yuan or the equivalent of EUR 0.70 per share. Converted, the total gross proceeds would thus amount to around EUR 1.4 billion.
The called valuation of the investment shows the relative undervaluation of JinkoSolar to NASDAQ. However, it is also clear that the China risk remains and the high volatility in the growth sector is likely to continue. Because of the increased attractiveness of green tech stocks, one should keep a close eye on both parent and subsidiary. We stay on the ball and would collect JinkoSolar in the range of EUR 30 to 34. The stock has lost almost 40% since November 2021.
The green tech stock sector has not been spared the correction of NASDAQ stocks. The rally in 2021 had run too far, dream returns that are now prone to correction. However, the risk-reward profile improves significantly after the current sell-off, and standard stocks like Varta and JinkoSolar are back on the buy list. Barsele Minerals is sitting on a super project and could soon benefit from a new gold rally.
Conflict of interest
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