EMN’s strategic advantage in Europe’s EV Hub, Tesla & Apple stock split and ... what will the market do next?

By Jonathan Jackson. Published at Sep 4, 2020, in Features

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The most notable trend related to the transition to electric vehicles over the last 12 months is the acceleration in electric car sales in Europe.

EV car sales in Europe now outstrip China and other Asian countries that have been active in developing lithium-ion batteries.

In a recent article published by The Driven, European auto market analyst Matthias Schmidt was referenced in relation to his European Electric Car Report for the seven months to July 2020.

Schmidt noted that during this period there were more plug-in electric car sales in Western Europe than in China, a country that in previous years had been considered the world’s largest electric car market by volume.

It should be noted China's electric vehicle market is still strong. EV sales in China grew for the first time in 13 months in July 2020, due to a government extension of financial incentives and Tesla's local production.

The China Association of Automobile Manufacturers reported sales of EVs last month jumped 19.3% on the year to 98,000 units.

However, sales of EVs in Europe are projected to exceed one million units in 2020 and to grow rapidly in the years to come. Europe has increased its market share to 26%, growing by 44% since 2019.

Part of this growth can be attributed to Europe’s policy initiatives that have the overarching aim of making Europe climate neutral by 2050.

Government, corporates and consumers are all on board and focused on making the switch. Euro governments have introduced stimulus plans to provide momentum for electric vehicle adoption. This means tightening emissions standards and subsidies to drive consumer demand.

Over €24BN (AU$39.1BN) in investments in European EV and battery supply chains are underway right now, and the continent has emerged as a major electric vehicle production hub.

Furthermore, the likes of Shell has called on the UK to “make a bold move to ban petrol and diesel vehicles by 2030. Even Australia is being urged to follow in the UK’s footsteps to ban fossil fuel cars by 2035.

While we know lithium is a major driver of EV growth, high purity manganese is another battery metal that will play a key role in the transition.

EuroManganese Ltd. (ASX | TSX.V EMN), a $15M capped company is capturing investor attention by developing a waste recycling operation to extract high purity manganese (HPM) products for the manufacture of lithium ion batteries.

These batteries are being produced in increasing quantities in Europe and EMN could be the only primary producer of these materials in this region.

Effectively, EMN will be waste recycling from historic mines, delivering high purity manganese to EU battery makers, whilst at the same time cleaning up what is currently a polluted site for the local community.

Put simply, EMN will be recycling waste to produce highly refined manganese metal and salts. These are the finished products that producers of lithium-ion battery cathodes require.

The company recently raised C$4.1M (AU$4.2M) and will be investing this to advance permitting and to continue advancing the project.

It also plans to get its Demonstration Plant (DP) up and running, which will showcase the quality of EMN’s manganese to customers. This is expected to cost ~ US$2.5M (AU$3.4M), plus US$1.5M installation and commissioning costs.

Most of the output for the first year of production has already been allocated to several Tier-1 customers, as a prelude to potential offtake agreements.

Of further note, the preliminary economic assessment of its Chvaletice Manganese Project (CMP) indicates the net present value after-tax of nearly $600 million.

EMN ideally located

The European location of the Chvaletice Manganese Project is of high importance.

EMN noted that 30 battery and battery precursor and cathode factories, with no fewer than 25 electric car factories are already operating, under construction or have been announced in Europe recently. Europe currently imports 100% of its manganese requirements.

Europe is expected to become the second most important centre (after China) of the global electric car and battery industries.

At least six large battery factories that will consume manganese inputs are located between 200 kilometres and 500 kilometres of the Chvaletice Manganese Project. Others are being built across Europe.

Several prospective customers have expressed interest in procuring high-purity manganese products from the Chvaletice Manganese Project, and in conducting supply-chain qualification of the products of the proposed Chvaletice demonstration plant.

Euro Manganese has already signed five memorandums of understanding with major customers, which are intended to evolve into long-term offtake agreements.

EMN has reported that these customers are attracted by the strategic European position of Chvaletice, by the incomparable environmental footprint of the project (no mining or new solid waste generation) and by the exceptional purity of the products that Euro Manganese has produced in previous pilot plant trials.

EMN sees the Chvaletice Manganese Project as becoming an important and environmentally-sustainable part of the international and European lithium-ion battery supply chain.

The company expects to become the only primary producer of high-purity manganese in the European Union, where 100% of manganese requirements are currently imported.

That would be a significant achievement as investors begin to focus on the growth of the electric vehicle manufacturing and related battery industry, especially as countries such as France and Germany become central to a multi-billion post-COVID Euro economic recovery based on sustainable action.

We will look at EMN and its project in far more detail on Monday.

On the International stock front

We reported last week, that Tesla and Apple were about to stock split.

The split occurred on Tuesday this week, with both companies enjoying major stock splits.

“Investors piled in, in anticipation that single shares being available at a lower entry point will encourage more people to invest – although fractional share trading is now widely available in the US and Europe,” said eToro’s Adam Vettese.

Tesla finished the day 12.6% higher.

Apple was up 3.4%.

On the tech stock front, Zoom’s share price closed 8.6% higher on Monday, but then jumped by more than 20% in out-of-hours trading following a blockbuster earnings release in which it reported revenue had more than quadrupled from last year.

Which is understandable as every man, woman and their dog is now using the platform to connect with friends and business colleagues.

One ASX small cap stocks to watch

EuroManganese Ltd. (ASX | TSX.V EMN)

We have banged on a lot about EMN in this issue of the Weekend Newsletter. And for good reason.

On Friday, the company was given a speeding ticket by the ASX and put into halt.

It seems investors really are now taking notice of the story.

The company was up 58.33% on Friday before it stopped trading around lunch time.

EMN defied the odds on Friday.

“We’ve taken a hit,” said CommSec market analyst Steven Daghlian. “It’s a messy performance this week,” he said of the falls on the ASX.

We will now wait to see what happens when EMN resumes trading, presumably on Monday.

The best and worst performing sectors this week

It hasn’t all been bad news this week. Industrials was up over 3 per cent, Utilities was up over 2 per cent, Consumer Discretionary and Communications Services were up over 1 per cent.

On the flipside, Information Technology was down over 1 per cent and Consumer Staples and Financials were both down under 1 per cent so far for the week.

Of the ASX top 100 stocks, Evolution Mining, Reliance Worldwide Corporation and Resmed, were up nearly 3 per cent, whilst Janus Henderson, Newcrest Mining, National Bank, Suncorp Group and Iluka Resources, were down around 0.20 per cent.

So what’s next for the Australian share market?

According to Wealth Within’s Dale Gillham, “This week the All Ordinaries Index fell earlier in the week before rising in the latter half, which is the opposite of what the market has been doing over the past few months. This pattern of spending roughly half the time rising and the other half falling, means that the Australian market continues to go nowhere. That said, it is trading above 6,369 points and a high close above this level may mean there is still some life in the current bull run.

“When the market is in a state of heightened uncertainty, it is very hard to pick when a top or bottom will occur. That said, I still believe the market will pick a direction very soon, which is likely to be down. For now, I recommend you continue to ride the upward move while it lasts and be careful adding stocks to your portfolio in the event the market falls away.”

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