29. March 2021 | 10:30 CET
Xiaomi, SunMirror, Geely - An incalculable risk!
Electric vehicles currently account for around 10% of the cars sold in Germany. Since the "VW Power Day," the race to see who can jump on the electric car bandwagon the fastest, has officially begun. Whether Volkswagen, BMW or Daimler, the manufacturers, also driven by politics, are overflowing with promises of how quickly they will replace gasoline and diesel with the battery. However, it is still unclear where the lithium for the battery cells will come from. Other required raw materials such as copper or rare earth metals are also in short supply and are produced almost exclusively in China. There is a threat of scarcity and thus a price explosion that cannot be calculated. You, too, can participate in this development.
time to read:
ISIN: KYG9830T1067 , CH0396131929 , KYG3777B1032
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Energy turnaround as a trigger
The main thing is that our future should be low-carbon. Politicians are pumping billions into the economy for sustainable investments to produce wind power plants, electric cars and solar plants. The ethical disadvantages are large open-cast mines in the countryside where copper ores are mined, inhumane working conditions underground with heat and dust in silver mines and companies that extract cobalt in dictatorships are skilfully ignored. More worrying is that this carbon-free earth creates an extreme demand for metals that has never occurred in this form before.
Supercycle at the beginning
The investment house JP Morgan had recognized it months ago and had already proclaimed a multi-year supercycle for raw materials. Indeed, prices such as copper are rising to multi-year highs. Nickel and rare earth metals, also critical raw materials for renewable energies, are only at the beginning of long-term upward trends. According to one study regarding lithium, the essential raw material for powering batteries for electric cars, demand is expected to increase by 25% per year until 2028. To make matters worse, nearly 80% of all raw materials are produced in China.
The Middle Kingdom has virtually established a monopoly here. The dependency is enormous. The smoldering trade war between the US and China, which has been expanded since last week with the imposition of sanctions by Europe, is likely to lead to drastic price increases. For some time now, the Middle Kingdom has been restricting the supply for export. Now the Chinese want to go one step further concerning sanctions against the USA. The plan is to set up export controls for 17 rare earth metals, with the goal being to slow down the production of US fighter jets.
Desperate search for alternatives
Politicians and business leaders are alarmed. Alternatives are urgently sought outside China, which governments already subsidize. The goal must be to ensure a secure supply chain for rare earth metals outside China for the future. The approach of the Swiss SunMirror AG sounds logical as well as promising in this respect. Led by an experienced team that has worked in large, sustainable mining companies, it has created a multi-asset producer that focuses on the most robust long-term growth drivers through new technologies, such as the renewable energy sector and the electrification of transport.
As a result, the portfolio already includes 4 prospective properties with significant proven reserves of lithium, cobalt and nickel, as well as iron ore, in addition to the precious metal gold. The focus of the deposits is in Western Australia, in the mining centers of Kingston and Mount Keith, which have a long history of high-grade gold mining. Past high-grade discoveries have included over 18,900 ounces of gold, averaging 30 grams per tonne. In addition, high lithium grades have also been found there. Due to the substantial increase in tin and lithium prices, the Company plans to advance the Moolyella project this year. High anomalous lithium, tantalum and tin have already been detected in initial samples in the 96 sq km area.
The SunMirror AG share is currently traded in Düsseldorf and Vienna. In addition, trading in Frankfurt is to be made possible soon. A listing on the London Stock Exchange is also planned for the second quarter. The Company has an extremely interesting long-term approach. The rise in raw material prices is likely to intensify over the next few years due to extreme demand.
Geely, a Chinese electric carmaker focused on the luxury segment, fell short of analysts' estimates last week with its annual figures. Annual sales of 92.1 billion yuan were down 5% from the previous year. Net income for shareholders also fell year-on-year to 5.5 billion. The investment house nevertheless remains optimistic and left the buy rating. Only the price target was lowered from USD 50 to currently USD 46. Currently, Geely's share price, in which the Swedish car Company Volvo also has a stake, is quoted at USD 20.45, which is significantly below the price target issued by JP Morgan.
As previously reported, technology company Xiaomi is planning to enter the electric car business. The plans, which the Company initially denied, are becoming more concrete. To this end, the Group is cooperating with Chinese carmaker Great Wall Motor Company, according to a report by Reuters. The release could take place as early as this week. The number 3 of the world's largest smartphone manufacturers announced an online event for March 29.