This article first appeared on Trend Investing on Feb. 14, 2019; therefore all data is as of that date.
Two of the biggest trends for the next decade will the rise of electric vehicles (EVs) and energy storage (ES). Currently EVs are growing at ~70%pa, and ES at ~100%pa.
For investors wanting to buy companies with exposure to several key EV and ES metals such as lithium, cobalt, rare earths (neodymium), graphite, nickel, copper, and vanadium then the following companies are well suited as they each offer exposure to several key metals.
When selecting the top five EV and ES metal companies I have considered those with multiple metals production (or resources), and ideally with a focus on the metals that will be most impacted (see chart below). Rare Earths would include mostly neodymium (Nd) due to its role in the magnets of many EVs. Note vanadium may play a key role in large scale commercial energy storage, so it's also included.
The impact on demand for the various EV metals in a 100% EV world
Source: Visual Capitalist courtesy of UBS
Note: The above graph was based on the Chevy Bolt teardown. Future e-cars are more likely to have a bit more nickel and a bit less cobalt.
Top 5 EV or ES companies with several key metals exposure
1) Glencore [LSX:GLEN] [HK:805] (OTCPK:GLCNF) - Price = GBp 298
From the EV and ES metals, Glencore offers significant exposure to cobalt, nickel, copper and vanadium.
Glencore is by far the global No. 1 cobalt producer from their DRC mines. They are currently experiencing a set back with increased DRC royalties and taxes, as well as a sales issue for cobalt from Katanga Mining [TSX:KAT] (OTCPK:KATFF) (Glencore owns 86.33% Katanga Mining).
Glencore also is a very large copper producer, a nickel producer and a large vanadium producer. Large revenue drivers for Glencore include their trading division, copper (includes cobalt as a by-product) and coal. The chart below shows the distribution of Glencore's revenues, noting Glencore has a plan to expand their nickel production investing ~$1b to find more nickel below their Craig mine in Onaping, Sudbury Canada.
Glencore's 2017 revenue breakdown by sector
Current market cap is GBP 41.5b (~US$52b), with an end 2019 debt estimate of ~US$25b. 2019 PE is 9.0 and 2020 PE is 8.6, with a 2019 estimated 5.25% dividend yield. 2019 net profit margin is forecast at 2.48%.
Current consensus analyst price target is GBP 372, representing 25% upside. Risk lies with their DRC exposure, and upside from their large exposure to the key EV and ES metals.
2) AMG Advanced Metallurgical Group NV [NA:AMG] [GR:ADG] (OTCPK:AMVMF) - Price = Euro 30.68
From the EV and ES metals, AMG offers exposure to vanadium, lithium, and graphite.
AMG Critical Materials produces aluminum master alloys and powders, titanium alloys and coatings, ferrovanadium, natural graphite, chromium metal, antimony, lithium, tantalum, niobium and silicon metal.
- Vanadium - AMG has a vanadium recycling facility in Ohio, with plans to at least double production by early 2021. The chart below shows vanadium (in light green) has been a recent large revenue and gross profit driver.
- Lithium - AMG own the Mibra lithium spodumene mine in Brazil with plans for an initial 90ktpa of production (commenced in H2 2018), ramping up to 180ktpa. Beyond that the company is planning a conversion facility. Lithium revenues are new so not yet shown on the chart below.
- Graphite - Revenues are quite small.
AMG's revenue and gross profit compared Q3 2017 to Q3 2018
Current market cap is 930m Euro, with an end 2019 debt estimate of zero. 2019 PE is 8.6 and 2020 PE is 8.0, with a 2019 estimated 2.71% dividend yield. 2019 net profit margin is forecast at 9.34%.
Current consensus analyst price target is EUR 53.20, representing 73% upside. You can view the company's latest presentation here.
3) Cobalt27 Capital Corp. [TSXV:KBLT] [GR:27O][LN:OUPZ] (OTC:CBLLF) - Price = CAD 3.94
From the EV and ES metals, Cobalt27 offers exposure to cobalt metal, cobalt streams & royalties, nickel, and a new and small lithium royalty exposure:
- Cobalt metal - 2,905.7 tonnes of cobalt.
- 12 Cobalt and nickel streams and royalties + the friendly acquisition of Highlands Pacific [ASX:HIG] - Includes a 32.6% cobalt stream on Vale’s US$1.7b expansion of Voisey’s Bay Ni-Cu-Co mine. Royalties on two of the largest Ni-Co projects (Dumont and Turnagain).
- Nickel - As per above (income streams from royalties mostly on nickel-cobalt producers and near term producers).
- Small lithium exposure (recently announced) - A 1.5% lithium royalty on the producing Mt Marion Lithium mine in Australia.
Cobalt 27 also has exposure to royalties from silver, lead, zinc, copper, and scandium.
Note: Cobalt27 also recently announced a large buyback of 8.4m common shares, representing 9.9% of issued and outstanding shares.
Current market cap is CAD 336m, with an end 2019 debt estimate of CAD 62m. 2019 PE is still negative but 2020 PE is 12.8, with no dividend yield. 2020 net profit margin is forecast at 46.31%.
From the EV and ES metals, Norilsk Nickel offers exposure to nickel, cobalt, and copper.
- Nickel - Norilsk is the global number 2 nickel producer with the world's largest nickel reserves. Even better their nickel ore is nickel sulphide ore, with great by-products, making them the global number 1 low cost nickel producer.
- Cobalt - Norilsk produces ~4-5,000 tpa of cobalt as a by-product.
- Copper - Norilsk is a significant copper producer.
Note: A lot of Norilsk's revenue comes from other areas as shown below. Palladium is a key ingredient in catalytic converters. Cobalt is not shown as it's a by-product of nickel production.
Nornickel revenue breakdown - Palladium, nickel and copper the key three drivers
Current consensus analyst price target is USD 21.37 representing 4% upside. Investors can view the latest company presentation here.
From the EV and ES metals, Neometals offers exposure to lithium processing/recycling (in planning/development), some lithium, nickel and vanadium (also titanium):
- Lithium - Off-take agreements at Mt Marion (after selling their 13.8% share in the project). This means they will now need to buy the spodumene and make money from processing spodumene. Neometals also has exposure to Mt Holland via a 36% share holding in Hannans [ASX:HNR], which has a 20% free carry interest in a potential Lithium spodumene project next door to Kidman Resources [ASX:KDR]/SQM (SQM) in Western Australia.
- Lithium recycling (50% share of the IP) - Neometals are currently advancing their lithium-ion battery recycling plans in Canada, with a pilot plant already completed and production just commenced. The recycling will produce cobalt as the key product, as well as potential for nickel and lithium. Their scoping study resulted in operating costs of only US$4.45/lb cobalt.
- Lithium processing - Neometals is currently completing a Feasibility Study on their lithium conversion production facility planned to be near Kalgoorlie Western Australia.
- Nickel - Neometals owns 100% of a historical nickel mine at Mt Edwards, also in Western Australia. Mt Edwards nickel Mineral Resource is estimated at 7.4Mt at 1.7% nickel for 123,340t of contained nickel. There is also some lithium spodumene.
- Vanadium - Neometals 100% own the massive high grade (@ 21% TiO2) Barrambie titanium vanadium project in Western Australia, currently in the early development stage. The project has contained 25mt TiO2 and 1.2mt V2O5.
Note: Neometals also has some great intellectual property in processing technologies, such as their ELi process. One possible use is for producing zeolite from spodumene leach residue. The 2017 global market for synthetic zeolites (molecular sieves for adsorbents and catalysts) was valued at US$13.7B.
Current market cap is AUD 114m, with no debt. PE ratios are no longer applicable with the halting of lithium revenues once the final share of their Mt Marion mine sale completes; however the company expects to then have around AUD110-130m in cash. Future revenues are planned to come from the lithium hydroxide facility, Li-ion battery recycling, and perhaps the Barrambie vanadium project.
Other EV and ES metals producers to consider
- Vale SA [BZ: VALE3](NYSE:VALE) - Top three global iron ore minor (~75% revenues are from iron ore), global No. 1 nickel producer with large expansion plans, some cobalt by-products, and manganese. Iron ore mines in Brazil, nickel mostly in Canada.
BHP Group (BHP) - Top 3 global iron ore minor (~35% revenues), large copper producer (~31% revenues), coal, and nickel (with a nickel expansion plan at Nickel West, Australia).
Jinchuan International Group Resources Co. Ltd [HK:2362] - Large copper and nickel producer with large DRC operations.
- Syrah Resources - Top graphite producer with vanadium resource in Mozambique.
- First Quantum Minerals [TSX:FM] (OTCPK:FQVLF) - Copper, gold, zinc, and nickel. Several mines in Namibia.
- China Molybdenum [HKSE:3993] [SHE:603993] (OTC:CMCLF) - Copper and cobalt from the DRC. Also molybdenum.
- Largo Resources [TSX:LGO] (OTC:OTCQX:LGORF) - A pure play expanding vanadium producer with their mine in Brazil.
- Lynas Corporation [ASX:LYC] (OTCPK:LYSCF) - A rare earths producer with an Australian rare earths mine and a Malaysian processing facility.
Some juniors with several EV and ES metals
- RNC Minerals [TSX:RNX] (OTCQX:RNKLF) - 28% share in Dumont (a massive low grade nickel and cobalt project in Canada).
- Ardea Resources [ASX:ARL] (OTC:ARRRF) - Largest non-DRC cobalt resource globally (405kt of contained cobalt), large nickel resource (5.46mt of contained nickel) in Australia. Also some gold,zinc and other nickel projects.
- Australian Mines [ASX:AUZ] (OTCQB:AMSLF) - Three nickel and cobalt projects in Australia.
- Clean TeQ [ASX:CLQ] [TSX:CLQ] (OTCQX:CTEQF) - Nickel and cobalt, in Australia.
- Critical Elements [TSXV:CRE] (OTCQX:CRECF) - Lithium spodumene, nickel, copper, cobalt, rare earths in Canada.
- Havilah Resources [ASX:HAV] - Copper, cobalt, iron ore.
- Aeon Metals [ASX:AML](OTC:AEOMF) - Copper, cobalt, zinc, lead, silver.
- First Vanadium Corp.[TSXV:FVAN] (FVANF) - Vanadium, copper, and zinc developer and explorer.
Top 5 global Li-ion battery manufacturers
- LG Chem [KS:051910] (OTCPK:LGCLF)
- Contemporary Amperex Technology Co Ltd (CATL)[ SHE:300750]
- BYD Co [HK:1211] (OTCPK:BYDDY) (OTCPK:BYDDF)
- Panasonic [TSE:6752] (OTCPK:PCRFY)
- Tesla (TSLA)
Of the above CATL is probably expanding the fastest, with LG Chem and Tesla/Panasonic, and BYD all expanding rapidly. Note also the Benchmark Minerals megafactory tracker is now at 68 (68 new or expanded lithium ion battery factories).
Source: Benchmark Minerals
Top cathode manufacturers
- Umicore SA [Brussels:UMI] (OTCPK:UMICY) - Umicore is tripling their cathode production capacity, is a leader in lithium-ion battery recycling, a nickel producer, and producers about 6,000-8,000 tonnes of cobalt pa.
- Sumitomo Metal Mining Co. (TYO:5713) (OTCPK:SMMYY) - Sumitomo is the Japanese cathode producer supplying Panasonic. Sumitomo also supply the nickel and cobalt.
Note: BASF [GR:BAS] (OTCQX:BASFY) and Johnson Matthey [LSE:JMAT] have plans to aggressively move into the cathode market. Also Tesla/Panasonic may be a large future player.
Source: Bloomberg courtesy of Liberum
Top 5 global electric vehicle manufacturers in 2018
- Tesla (TSLA)
- BYD Co [HK:1211] (BYDDY), (BYDDF)
- Beijing Automotive Group Co. [HK:1958] (BCCMY)
- BMW (OTCPK:BMWYY)
- Nissan (OTCPK:NSANY)
- Kraneshares Electric Vehicles & Future Mobility Index ETF (KARS)
- Global X Autonomous & Electric Vehicles (DRIV)
EV metal ETFs
- Amplify Advanced Battery Metals and Materials ETF (BATT)
- Global X Lithium and Battery Tech ETF (LIT)
You read more detail on the above ETFs here.
- The electric vehicle and energy storage booms may not continue.
- Technology risk - New metals may be developed to use in batteries, or new types of batteries. Unlikely to see significant changes in the next decade as the supply chain is already gearing up. NMC 6:2:2 with more nickel and less cobalt will probably be the winner along with NCA.
- Falling metals prices usually caused by oversupply. Always a risk but the demand pull will be unprecedented assuming EVs and ES grow rapidly.
- Mining risks - Production risks, exploration risks, funding risks, permitting risks, project delays.
- Management and currency risks.
- Sovereign risk - Highest in poorer corrupt countries (DRC, Namibia, Africa).
- Stock market risks - Dilution, lack of liquidity (best to buy on local exchange), market sentiment (the trade war has negatively impacted most all metal markets over the past eight months).
The EV boom is now not a mater of will it happen, but how fast will it grow. Added to this is the energy storage boom involving lithium-ion batteries (homes, some commercial) and vanadium flow batteries (large scale utility VRFBs).
Glencore gives exposure to cobalt, copper, nickel, and vanadium, but does have to deal with all their DRC problems.
AMG gives exposure to vanadium, lithium, and graphite.
Cobalt27 gives exposure to mostly cobalt, plenty of nickel, and a very small amount of lithium.
Norilsk Nickel gives exposure to nickel, copper and cobalt; with palladium a play on catalytic converters.
Neometals gives exposure to future lithium processing (via Mt Marion off-take), some small lithium spodumene exposure, some nickel, vanadium (and titanium), also with Li-ion battery recycling potential.
The top two cathode producers Umicore and Sumitomo Metal Mining are also excellent ways to indirectly gain exposure to the EV and ES boom.
Overall I like all the companies above given their broader exposure to the EV and ES metals. My only issue is it's rare to find a lithium producer that also has other EV metals, which is one reason why Neometals and AMG made the list. Cobalt27 is also moving slightly into lithium now and already have a dominant cobalt and nickel position.
As a final note the battery metal ETFs also offer a broader exposure with BATT being the most diversified.
I would be happy to hear of any other names that have broad EV and ES metal exposure.
As usual all comments are welcome.
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Disclosure: I am/we are long GLENCORE (LSE:GLEN), COBALT27 [TSXV:KBLT], NEOMETALS [ASX:NMT], NORILISK NICKEL [LSE:MNOD]. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.