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April 19th, 2022 | 11:43 CEST

Volkswagen, Phoenix Copper, Nordex - Act quickly

  • Copper
  • renewableenergies
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The German cabinet wants to minimize dependency on Russian oil and gas and, at the beginning of April, passed the so-called Easter Package at the suggestion of Vice-Chancellor and Federal Economics and Climate Protection Minister Robert Habeck. It has been the largest amendment to energy policy legislation in decades. The Easter package comprehensively amends various energy laws in order to accelerate and consistently drive forward the expansion of renewable energies. To put this amendment into practice, the demand for raw materials, which are already in short supply, will drastically increase, positively affecting producers.

time to read: 5 minutes | Author: Stefan Feulner

Table of contents:

    The accelerator for climate change

    Germany is stepping on the gas in its energy transition. Or rather, it is being forced to do so due to developments in the Ukraine conflict. According to the German Federal Ministry of Economics and Climate Protection, the Easter package aims to raise the expansion of renewable energies on land and at sea to a new level. By 2030, at least 80% of Germany's gross electricity consumption is to be sourced from alternative energies.

    Habeck made the following comments on the BMWI homepage: "The Easter package is the accelerator for the expansion of renewable energies. We will almost double the share of renewable energy in gross electricity consumption within less than a decade. We are tripling the speed of renewable expansion - on water, land, and roof. In the future, renewable energies will be in the public interest and serve public safety. This is crucial for picking up the pace. Overall, with the Easter package, we are creating the conditions for energy security and energy sovereignty in Germany. At the same time, it lays the foundations for Germany to become climate-neutral."

    Where will the raw materials come from?

    If it was already unclear how the ambitious targets could be achieved due to the high demand for raw materials, they are now being set even higher. Lithium, cobalt, nickel and especially copper have already been in short supply for years, and in the case of the red metal, there was a significant excess demand in 2019. In contrast, supply is finite, and new copper deposits can be counted on one hand due to low investments in the past decade, especially in North America.

    Phoenix Copper is an exception that should benefit from the acceleration of the transformation from fossil fuels to renewables. The Company is focused on the Alder Creek mining district in Idaho, where the Empire open pit copper oxide project is located. In 2013, 80% of the project was acquired, and the original acreage was significantly expanded to over 32 sq km through acquisitions in subsequent years.

    Phoenix Copper - Producer by 2023

    Phoenix Copper's broad diversification of its portfolio offers additional imagination. In addition to Alder Creek, the Company holds the historic Horseshoe, White Knob and Blue Bird mines, which have historically produced copper, gold, silver, zinc, lead and tungsten from underground mines. At Red Star, 330m northwest of the Empire Mine, the new discovery showed high-grade silver/lead sulfide ore. In light of the tight supply of climate change commodities, the two cobalt claims could lift Phoenix Copper's valuation in the future. These run along the most prolific trend of cobalt mineralization in the US and are adjacent to Electra Battery Metals' mine, formerly known as First Cobalt.

    Approximately 3000m is expected to be drilled at Alder Creek in 2022. With a cash balance of about CAD 15 million, the Company is well-financed. However, to achieve producer status in 2023, management intends to raise debt capital on the bond market. The independent analyst firm SISM sees a potential of around 150% in the share. A target price of GBP 1.44, equivalent to EUR 1.72, has been issued. Currently, the market capitalization of the copper hopeful is around EUR 85 million. High demand for the elemental metal for the energy transition could push Phoenix Copper's valuation up the closer the Company gets to producer status.

    Wind energy at the center of the Easter package

    The expansion of offshore wind energy is to be placed on two equal pillars in the future. In addition to the tendering of areas that have already been pre-surveyed, areas that have not yet been pre-surveyed will also be tendered in the future. The Hamburg-based company Nordex is likely to continue to benefit from the tenders. There was already no lack of orders last year; the problem was instead the low margin. Rising raw material and energy prices could also be the decisive factor in missing profitability targets this year.

    Just in time for Easter, one of the leading turbine manufacturers reported an order intake for the delivery of 30MW turbines for the Mörknässkogen onshore wind farm in Finland. In the process, Nordex will supply the site near Vaasa with five N163/5.X turbines. The order also includes a premium service contract for 30 years. Commercial operation of the project is scheduled to commence in 2023 and will then be Low Carbon's first wind farm in Finland.

    Due to the good average wind speeds at the site, the Delta4000 turbines with a hub height of 159 meters will provide clean energy that can power more than 30,600 Finnish households and avoid more than 24,700 tons of CO2 emissions, the Company reported. From a chart perspective, the signs are once again pointing to consolidation. After the price bounced off its resistance area at around EUR 17.20, it headed south again in recent days. The next support zone is at EUR 15.25.

    Transformation picks up speed

    Volkswagen's transformation from a combustion engine to a fully electronic vehicle is proceeding successfully. Compared to the first quarter of 2021, the Wolfsburg-based company increased deliveries of pure electric vehicles by a good 65%. Hildegard Wortmann, Group Board Member for Sales, commented: "Demand for our all-electric vehicles is very high worldwide, and our order books are thus well filled. The increase in BEV deliveries would have been significantly higher without supply bottlenecks. We expect further highly attractive models and a gradual improvement in the semiconductor situation to provide additional tailwind as the year progresses. For the full year, we continue to have our sights firmly set on a BEV share of 7 to 8%."

    US investment bank Goldman Sachs sees VW preferred shares as a buy candidate. Even without positive special effects from hedging transactions, the Wolfsburg-based company had slightly exceeded earnings expectations in the first quarter, analyst George Galliers wrote in an initial reaction to key data on Thursday. The analyst reiterated the price target of EUR 224.

    Due to the Ukraine conflict, the traffic light coalition is trying to switch from fossil fuels to alternative energies even faster than previously planned. Scarce copper is needed for this, and companies such as Phoenix Copper are benefiting. Nordex is also likely to win further orders but continues to struggle against low margins. Analysts see Volkswagen as a buy candidate.

    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

    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

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