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June 17th, 2021 | 11:21 CEST

Volkswagen, Defense Metals, Salzgitter AG - Disastrous consequences!

  • RareEarths
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The NATO summit in Brussels last weekend once again showed the increasingly hardening relations between the USA on the one hand and China and Russia on the other. At the same time, the NATO powers seem to underestimate how dependent they are on the Middle Kingdom in terms of the energy transition. By capping access to rare minerals essential for electric vehicles, wind turbines and drones, the Western states are threatened with a bottleneck that will have a major impact on the development of new technologies.

time to read: 3 minutes | Author: Stefan Feulner
ISIN: DE0007664039 , CA2446331035 , DE0006202005

Table of contents:

    Biden feels the pressure

    Rare earths with names like neodymium, praseodymium and dysprosium are critical for making magnets used in future industries like wind turbines and electric cars. The metals are also found in consumer products such as smartphones, computer monitors and telescopic lenses. An electric vehicle requires six times as many minerals as a combustion engine, while an offshore wind turbine requires 13 times more than a gas-fired power plant with the same output.

    Experts say that to meet current climate targets, we will need at least four times as many rare earth metals for renewable energy sources in 2040 as we do today. The expected exponential growth in demand for minerals associated with clean energy increases pressure on the US and Europe to reduce dependence on China. In 2019, the United States imported 80% of its rare earth minerals from China, while the European Union sources as much as 98% of its needs from the Asian economic powerhouse.

    As a result of the resource problem, the US Senate last week passed a bill to improve American competitiveness that includes provisions to strengthen supply chains for critical minerals. Washington wants to boost the production and processing of rare earths and lithium, another key mineral component, while working with allies and partners to increase sustainable global supplies and reduce dependence on geopolitical competitors.

    Existing projects scarce

    Existing projects, such as the Mountain Pass mine, which has been back in operation since 2017, are expected to reduce the supply deficit. One of the few prospective projects outside China is maintained by Defense Metals. The Canadian exploration Company is focused on advancing the Wicheeda Rare Earth Project, which covers approximately 1,708 hectares in the state of British Columbia.

    Due to the first-class infrastructure, Defense Metals can calculate drilling costs far below the industry average. According to management, mineral resources are at 4.9 million tons at an average grade of 3.02% LREO (light rare earth metals) and inferred mineral resources of 12.1 million tons at an average grade of 2.90% LREO. Another 12 million tons are suspected in the area.

    CAD 5.0 million has been raised from the capital markets to expand the deposit. Defense Metals sees the potential here to discover additional near-surface resources. The Company plans to drill a minimum of 2,000m and up to 5,000m of diamond drilling to expand the deposit and further delineate the existing resources. The subsequent step is also to prepare a feasibility study. As a result of the corporate action, Defense Metals' shares lost about 50% in value and are currently trading at CAD 0.18 with a market value of only CAD 21 million. If one looks at the tight supply in the Western industrialized countries, the share is more than interesting at the current level.

    Car manufacturers feel the shortage

    We are currently experiencing a foretaste of the scarcity of goods in many raw materials. Whether wood, plastic or copper pipes, the shelves are empty and prices are rising exorbitantly. The shortage of chips is currently being felt above all by the automotive industry. The Chinese electric car manufacturer NIO already cut its production significantly in March. VW reported at the end of last year that it would have to cut production by up to 100,000 vehicles in the first quarter because it did not have sufficient quantities of semiconductor products, which play an increasingly important role in cars. Since then, the situation has become even more acute.

    Both Daimler and Volkswagen are now resorting to short-time work at some of their plants. According to a company spokesman, short-time work is being introduced in Tiguan, Touran and Tarraco production, and Golf production on late and night shifts. At Daimler, the factories in Bremen and Rastatt have been affected this week, he said.

    Profiteers of the price increase

    One man's joy is another man's sorrow. Steel manufacturer Salzgitter AG is forecasting a higher operating profit for the year as a whole due to rising steel prices. Thanks to the strong performance of the trading business, pre-tax profits of EUR 400 to 600 million are now being announced. Initially, the outlook was between EUR 300 and 400 million. The analysts of JP left the share at "overweight" with a price target of EUR 28.50. The investment bank Jefferies also maintained its "buy" rating and sees the stock unchanged at EUR 38.

    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 in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses 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

    Related comments:

    Commented by Carsten Mainitz on May 11th, 2022 | 11:29 CEST

    Defense Metals, ThyssenKrupp, Allkem - Raw materials for armaments

    • RareEarths
    • armaments

    Times of war have their own dynamics. Many sectors of the economy suffer from the uncertainties it brings. However, one sector can confidently be called a war winner because, without defense equipment, there is no war. The supplier industries are also among the profiteers, provided demand does not collapse elsewhere to a greater extent. In addition, the defense industry is increasingly being classified as sustainable, which opens up access to previously closed ESG portfolios.


    Commented by Stefan Feulner on April 25th, 2022 | 12:55 CEST

    Rheinmetall, Defense Metals, MP Materials - Until the next bubble bursts

    • RareEarths
    • armaments

    In every crisis there are winners and losers. Due to the numerous lockdowns of the past two years, shares such as Netflix, Delivery Hero and Peloton, in addition to vaccine manufacturers such as BioNTech and Moderna, are the winners. However, since Russia invaded Ukraine, defense shares, which were recently classified as "socially harmful", have become the new stars in the stock market sky. The call for rearmament by several countries is creating enormous valuation bubbles that are likely to burst again in the near future.


    Commented by André Will-Laudien on April 20th, 2022 | 14:01 CEST

    Rheinmetall, thyssenkrupp, Defense Metals: The scarce metals matter!

    • RareEarths
    • armaments

    Some companies have been in the international spotlight since the outbreak of the Ukraine crisis. This is primarily because they are seen as having an important role in resolving and ending the armed conflict. It is generally assumed that the Ukrainian people can only free themselves from Russia's grip with international support. Thus, it is perfectly legitimate to make investments where no need has been seen in recent years. The peace dividend that has been withheld for years is likely now coming back into circulation - the Ministry of Defense is now rearming after years of consolidation! Who can profit from these orders?