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March 15th, 2022 | 13:21 CET

Volkswagen, Edison Lithium, BYD - Important and expensive raw materials

  • Electromobility
  • Lithium
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The electromobility industry is growing rapidly, and automakers are accelerating their electric strategy. However, this requires the necessary resources such as cobalt, copper, lithium and nickel. Increased demand is meeting a more than scarce supply. The result is sharply rising prices. The primary beneficiaries are the producers, who can expect growing sales and profits in the coming years.

time to read: 3 minutes | Author: Carsten Mainitz
ISIN: VOLKSWAGEN AG VZO O.N. | DE0007664039 , Edison Lithium Corp | CA28103Q1090 , BYD CO. LTD H YC 1 | CNE100000296

Table of contents:

    Terry Lynch, CEO, Power Nickel
    "[...] Nickel, therefore, benefits twice: firstly from its growing importance within batteries and secondly from the generally growing demand for such storage. [...]" Terry Lynch, CEO, Power Nickel

    Full interview


    Edison Lithium - New player in Argentina

    Alongside cobalt and manganese, lithium is a fundamentally important raw material for climate change in the transport sector. Geographically, the lithium market is concentrated in Australia, Argentina and Chile with about 85%. While Australian lithium is extracted from spodumene ore, which comes from mining mines, lithium in South America is extracted from the brine of huge salt lakes. It is estimated that Chile, Argentina and Bolivia hold up to 60% of global lithium reserves. Argentina's leadership, in particular, is betting heavily on the extraction of this vital battery material and is thus succeeding in getting major corporations such as Posco, Ganfeng, Tianqi, as well as Livent or Allkem to set up shop in the Andes.

    Edison Lithium, a fledgling exploration company that operated under the name Edison Battery Metals until its name change is also focused on sourcing, exploring and developing cobalt, lithium and other energy metal properties in Argentina. In June of last year, the definitive purchase and sale agreement to acquire Resource Ventures SA, an Argentine company that owns or controls the rights to over 148,000 hectares of prospective lithium brine claims in Catamarca Province, Argentina, was completed.

    The claims are located in the famous "Lithium Triangle" of South America. The purchase price from Resources Ventures, including the 100% interest in its properties, was USD 1.85 million, which was paid through the issuance of 10 million common shares of the Company at a price of USD 0.185 per share.

    In addition, Edison Lithium owns another cobalt project located near the town of Cobalt in northeastern Ontario, Canada, which hosts the historic Thomas Edison, Shakt-Davis and Cobalt-Kittson mines and numerous historic pits. Reports from the Shakt-Davis mine indicate values of 1.5% cobalt over 1.37m and selected grab samples with up to 4% cobalt and 93.3 g/t gold. Nickel, copper and to a lesser extent, lead, zinc and bismuth also occur in the quartz-carbonate veins. The stock market value of Edison Lithium is currently only CAD 13 million but has long-term potential due to demand from the electric mobility sector.

    VW - Higher profits despite chip crisis

    Volkswagen was still able to defy the shortage of semiconductors last year, with a significantly higher bottom-line profit for the full year 2021. However, new challenges lurk with the Ukraine crisis, the risk of uncertain supply chains, and sharply rising energy and raw material prices, which could weigh on the Wolfsburg company's earnings in the current fiscal year.

    Volkswagen reported that operating profit doubled to EUR 19.3 billion. Profit climbed by around 75% to EUR 15.4 billion, while sales grew by 12.3% to EUR 250.2 billion. Following the jump in profits, the Group intends to significantly increase its dividend, with EUR 7.56 per share to be paid out to shareholders.

    US investment bank Morgan Stanley confirmed its rating for Volkswagen at "Equal weight" with a price target of EUR 185 after the figures. It said the automaker's outlook for 2022 was surprisingly good, with the outlook for unit sales and selling prices outweighing headwinds from increased costs.

    BYD - At an important mark

    The general market correction hit Chinese electric carmaker BYD hard. After peaking at EUR 36.70 as recently as November last year, 'Build Your Dream' is currently struggling to test the critical support area at EUR 20. Should this be broken, a further test of the low from 2021 at EUR 14 could follow.

    The possible partnership between Russia and China is cited as the main reason for the substantial price declines of Chinese shares. The Putin government is said to have asked China for help in the Ukraine crisis. If Beijing were to respond, this could, in turn, put a massive strain on relations with the West. In the meantime, however, the Middle Kingdom has denied the report from the United States. Even though many Chinese stocks are heavily oversold and are good for a technical countermovement at any time, caution is advised due to the geopolitical risks.

    The electromobility turnaround is driving up the prices of elementary raw materials such as lithium, and carmakers such as Volkswagen and BYD are suffering as a result and achieving lower margins. In contrast, lithium producers and exploration companies such as Edison Lithium benefit. The Canadians could be among the producers in the near future.

    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.

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    Der Autor

    Carsten Mainitz

    The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.

    About the author

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