September 1st, 2022 | 11:04 CEST
Varta, Kodiak Copper, Nordex, BYD: Copper rally 3.0 - showstoppers for climate change looming!
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
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.
Copper - Is a decline in production threatening due to high energy prices?
Copper as a traded commodity in London reached its high of around USD 10,720 in March 2022. With Russia's invasion of Ukraine, a consolidation began for the time being, which reached the USD 7,000 mark in several stages. The first countermovements are now taking place there, and the price is gradually rising again. However, in current studies on the copper market for the next few years, expert opinions diverge widely. **According to Wood Mackenzie, annual primary copper demand will increase by 30% to around 25 million tons by 2030, and ore is already in short supply. Michael Sander, Managing Director of the German Copper Association, comments: "The German semi-finished copper industry recorded a 6% drop in production in the 2nd quarter of 2022. And this despite the fact that more copper would actually be needed for the expansion of renewable energies - a trend that threatens to continue in the coming months."
Kodiak Copper - Great opportunities in British Columbia
The huge investments in infrastructure, digitization, energy transition and the increasing number of electric vehicles are seen as permanent drivers of copper demand. With too few recoverable mines to meet the coming demand, the market is turning its attention to interesting properties which are demonstrating new supply potential.
One project that is performing very well is owned by Kodiak Copper, an explorer from Canada. The sister company of the world-renowned Great Bear Resources was founded by Chris Taylor and is led by Claudia Tornquist (formerly Rio Tinto) as CEO. Kodiak's strategic focus is on copper porphyry exploration in North America. Of key importance is the fully owned MPD copper-gold project in the high-yield Quesnel Trough in south-central British Columbia, Canada. As early as 2020, there were the best drill results in the project's now 50-year history. In addition, Kodiak also owns the Mohave copper-molybdenum-silver porphyry project in Arizona.
In June 2022, there were new drill results for the MPD area from the first four holes of the fully funded 2022 drill program. The program totals over 25,000 drill meters and is now being worked through step by step. Initial drilling has focused on supplemental (infill) drilling within the significantly underexplored southern area of the Gate Zone. The new results confirm thick intervals of significant mineralization and strong continuity between the existing drill holes in this area. Ongoing drilling in 2022 focuses on potential extensions of the Gate Zone and adjacent geophysical targets with similar characteristics.
Claudia Tornquist, President and CEO of Kodiak, states: "Our 2022 drill program is progressing rapidly and we are pleased with our continued drilling success at the Gate Zone. It is promising to see the close correlation between drill results and geophysical signatures." Kodiak shares have not escaped the recent sell-off in explorer stocks. **The highly attractive share is now coming under investors' scrutiny, as its current market capitalization of CAD 44 million is well below the potential value of its properties. The next copper rally should bring the share price back up to speed.
Note: Kodiak CEO Claudia Tornquist will be presenting live via Zoom at the next International Investment Forum (IIF). The presentation with Q&A is scheduled for 05.00 pm CEST. Attendance is free - to register this way.
Varta or Nordex - Who will be the next BYD?
Varta and Nordex are two well-known representatives of the GreenTech industry from Germany. They primarily depend on critical metals, which has recently increased their products' manufacturing costs enormously. While Varta is always in the spotlight because of the next development steps towards a new super battery for e-mobility, the wind turbine manufacturer from Hamburg shines with huge incoming orders for new wind farms. **Unfortunately, both companies had to adjust their forecasts downward several times and came under strong selling pressure. By comparison, BYD, which originates from China, is vertically integrated and can manufacture important preliminary products in-house. Moreover, it is based in resource-rich China, which has favored domestic industry for years in the supply of critical metals.
Technically, BYD has the best chart, with the 12-month gain still 8% after the recent consolidation. We had last suggested a stop at EUR 33.80, so the position is considered closed. If the share price falls below the EUR 30 mark, there could be a major sell-off. After two profit warnings, there is no need for new investments in Varta as long as the overall situation does not improve, as the stock is still expensive with a 2022 P/S ratio of 3. Given the political climate change budgets of the EU and the US, Nordex appears to be a promising investment. Here, the lows around EUR 7 in the share should now be history. Technically, however, the stock must first clear the EUR 11 hurdle to attract new capital. All three stocks are thus analytically expensive and only attractive as trading stocks with positive upward momentum. If the knot in commodities and energy prices loosens, the attention of the "GreenTech community" should return very quickly.**
Commodity scarcity is now becoming the growth showstopper for many industrial companies as product manufacturing costs increase sharply. However, if copper prices can rebound after the crash, that will bring mining companies back into the picture. Here, Kodiak Copper is brilliantly positioned for the long term.
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