20. May 2021 | 09:24 CET
XPeng, Kodiak Copper, NIO - Megatrend scarcity
Bitcoin, Etherum and the entire crypto family are rushing into the basement. The reason for this is once again the Middle Kingdom. After a statement by the Chinese central bank that one may not use digital currencies for payment purposes, they lost more than 20% in value yesterday. China's market power is even greater when it comes to raw materials for the energy transition. Due to the scarcity of the corresponding metals, prices will rise enormously in the long term. Producers who offer alternatives in the Western industrialized countries can profit significantly from this.
time to read: 3 minutes by Stefan Feulner
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Industrial gold as a weapon
The energy turnaround is to come; the faster, the better. With the amendment of the Climate Protection Act, the German government wants to tighten climate protection requirements and anchor greenhouse gas neutrality by 2045. The car manufacturers are overflowing with promises of quickly replacing gasoline and diesel engines with batteries. But they forget that the rapid shift from fossil fuels to a sustainable energy supply using renewable energy requires many metals that are scarce in the Western world. Lithium, nickel, cobalt and rare earth metals are needed for decarbonization. 80% of the production and refining takes place in China. Due to the further intensifying trade war and the increased demand at home, China is the world's largest electric car market. There will probably be less, and less of the cake of industrial gold left for the Western nations.
Copper the new oil
Copper is also critical to the continued development of green energy and is increasingly becoming a scarce commodity. The production of an electric car requires around four times as much copper as a car with an internal combustion engine. Currently, the construction industry is struggling with a lack of material supply. Due to strong demand, copper for cables and pipes is in short supply. According to industry insiders, there will be no normalization in the next few months, resulting in obstructions in construction site operations and significantly higher construction costs. The picture of excess demand shown is currently reflected in the copper chart, which has more than doubled since March of last year and is now reaching new highs almost daily. The shares of copper explorers have also risen in recent months, but there is still considerable potential to catch up with the copper price.
Kodiak Copper with the best prerequisites
The Canadian Company Kodiak Copper offers ideal conditions for a success story. The exploration Company owns 100% of the MPD copper-gold porphyry project in British Columbia, located in a productive copper-gold belt in a first-class location with excellent infrastructure. In 2020, the project's Gate Zone intersected significant copper-gold mineralization over a width of 350 m (east-west), a length of over 100 m (north-south), and a depth of 800 m, open in all directions. In the immediate vicinity are the producing mines of Copper Mountain, Highland Valley and New Afton. Kodiak Copper gained greater attention last October when industry giant Teck Resources took a 9.9% stake in the Company.
Steady positive news flow
With a cash cushion of CAD 14 million as of the end of December 2020, a total of 30,000 meters of drilling in several target areas are fully funded for this year. Thus, management promises a steady flow of news and an acceleration of the drilling pace. The Canadians also took action on the acquisition side. In exchange for 950,000 shares and additional payments, Kodiak Copper secured the Axe Copper-Gold Project. The acquired property hosts several significant historic copper-gold porphyry centers and has the potential for large-scale copper-gold porphyry mineralization. The Vancouver-based Company's stock also has potential. Following successful drill results last fall, the share price reached an all-time high of CAD 3.37. After bottoming out around CAD 1.50, the share is currently trading at CAD 2.16, still 50% below its high. The continued positive drilling programs are likely to put the old highs at risk in the long term.
With 50% discount
USD 66.99 was the previous high of the NIO share at the beginning of January. Since then, the Chinese electric carmaker has lost more than 50% in stock market value. In addition to the general market correction, the shortage of raw materials was also a decisive factor for the share price slide. Production was already suspended for a few days in individual plants in March. Due to problems with the procurement of batteries and the current global chip shortage, the e-car producer lowered its monthly production plan from 10,000 units to currently 7,500 units. Citigroup, which rates NIO as neutral, left the price target at USD 57.60 despite the current difficulties. The share price is presently quoted at USD 32.70. Therefore, there would be a turnaround opportunity of more than 70% here.
With currently 63%, the correction at the electric car startup XPeng was even stronger. The industry competitor has now announced its figures for the first quarter. Both sales and loss increased sharply. In total, XPeng delivered 13,340 vehicles from January to March, 487.4% more than in the same quarter last year and 2.9% more than in the fourth quarter of 2020. The loss in the first quarter of 2021 was EUR 98 million, compared to EUR 83 million in the same period of 2020. Chart-wise, XPeng's share price hangs below the prominent resistance level at USD 28. The chart would only brighten up at prices above USD 30.