Original-Research: Rock Tech Lithium Inc - von GBC AG
Einstufung von GBC AG zu Rock Tech Lithium Inc
Unternehmen: Rock Tech Lithium Inc
Anlass der Studie: Managementinterview
Analyst: Marcel Goldmann, Cosmin Filker
25/02/2019 - GBC Management Interview with Dirk Harbecke, Chairman of the
Supervisory Board of Rock Tech Lithium Inc.
'Significant steps have been taken to begin mining lithium in the near
future in order to benefit from the e-mobility megatrend.'
Rock Tech Lithium Inc. (Rock Tech) is a Canadian exploration company under
German management. The aim of its business is the development of commodity
assets. The company has focused specifically on commodity assets in the
lithium segment. With the core asset Georgia Lake area in Canada (Ontario),
Rock Tech has an area spanning approximately 93.0 km² in which lithium has
already been found and mined, and further explorations for lithium reserves
are being carried out. The company operates in an international market
environment, where the trend for several years has been increasingly
towards electric cars (e-mobility). Industry analysts predict that in 2025,
more than 25% of newly sold vehicles will be electric cars, which means a
large increase in the demand for batteries and therefore battery metals.
Following an eventful financial year 2018 that has just ended, we took the
opportunity to conduct a management interview with Mr Dirk Harbecke,
Chairman of the Supervisory Board of Rock Tech Lithium Inc., with a
particular focus on the current e-mobility sector and developments in the
lithium market, as well as financial year 2019 that has just begun.
GBC: Mr Harbecke, the e-mobility sector is beginning to pick up speed,
particularly as a result of increased regulation and the pioneering success
of Tesla. Following the sales successes of Tesla, as well as others such as
Renault/Nissan, leading car manufacturers such as Volkswagen are launching
product campaigns in the field of electric cars (beginning with the VW
I.D.). What developments do you expect to see for the electric car market
in the coming years?
Mr Harbecke: At the moment, we are seeing a pace of growth that no one
would have considered possible around two years ago. VW alone will bring
several electric cars to the market in 2019, with a wide range offered at
reasonable prices. E-models from Porsche, Jaguar and other providers are
already completely sold out until the end of the year. The new vehicles
will win over consumers through their driving experience and quality.
GBC: Against the backdrop of this increased demand for electric cars, is
demand for batteries and thus battery metals such as lithium also growing?
What does the current supply situation look like for car manufacturers in
terms of lithium-containing batteries and what changes do you anticipate in
Mr Harbecke: I think that car manufacturers are underestimating the risks
that will arise from an imminent shortage of lithium. There are currently
around 60 new gigafactories being planned and built that will each produce
at least 10 gigawatt hours (GWh) of battery capacity - for comparison, the
Tesla Gigafactory is the size of 60 football fields and currently produces
around 20 GWh per year. The producers of the battery cells almost all come
from Asia - Panasonic (Japan), LG Chem and Samsung (Korea), and above all
the new major Chinese producers such as CATL, who are also leading the way
by constructing a future battery factory in Thuringia, Germany. At the
moment, German car manufacturers are saying: we have our supply contracts
with Asian companies; we will get our battery cells. But what happens if
the Chinese cannot produce as many batteries as planned because they cannot
obtain enough raw materials, or for any other reason? I assume that in that
situation, priority would be given to supplying Chinese car manufacturers,
which are already leading the industry, causing German manufacturers to
suffer. Car manufacturers would do well to ensure that they have their own
supplies of raw materials and to develop their own battery production
GBC: In addition to electric vehicles, lithium-containing batteries can
also be used, for example, as power storage for buildings with solar
facilities or for power grids that store renewably-produced energy. How are
these alternative areas of application currently progressing and what
subsequent developments do you expect from these sectors going forward?
Mr Harbecke: Growth in these areas is also rapid, albeit starting from a
smaller base. While the car industry will within a few short years need
more than 1,000 GWh of battery capacity per year, power storage for
networks and households is likely to reach only around a tenth of that. But
with the growth in the production of alternative energies, there is no
alternative - a great deal of power storage will be needed, as there is no
other way of ensuring the stability of the network. While coal-fired power
plants can increase or decrease output based on current energy
requirements, the sun and the wind cannot be managed in the same way.
GBC: Against the backdrop of the increasing demand for lithium,
particularly spurred on by the ambitious e-mobility sector, and the
challenging lithium supply situation, the current price of lithium (lithium
carbonate) is continuing to reach new highs at around USD 15,000/tonne.
What changes do you expect to see in the price of battery metal lithium in
the coming years?
Mr Harbecke: Although there has been a slight drop recently, we
nevertheless expect prices to continue to rise and reach new highs. The
supply situation is becoming more and more dramatic. The lithium brine
projects in Latin America are proving very slow to launch and are
considerably behind everyone's expectations, and the new producers in hard
rock projects in Australia are already reaching their limits. In the coming
years, only a small number of new producers will join the approximately 10
producers currently in operation. At the same time, demand is growing
enormously. At Rock Tech, we are making every effort to join the market as
a producer by the beginning of 2021 at the latest in order to benefit from
the increasing prices.
GBC: In view of the current structural changes in the global car industry
towards e-mobility, governments are increasingly becoming 'players'. What
role do governments play in terms of lithium supplies within their domestic
Mr Harbecke: This varies greatly. The Chinese are intervening very heavily
in their car and battery industries in order to provide support, which
explains why the Chinese are leading the global market in the field of e-
mobility. Just think about it - in Shenzhen, 16,000 buses are already
running fully electronically; in Berlin, there are only a handful! America
is undergoing a change of thinking - lithium has been added to the list of
critical materials, meaning it will soon receive massive state support.
Europe is currently experiencing the most challenging situation.
Admittedly, Germany has already promised 1 billion euros of subsidies for
the construction of a battery cell factory by German manufacturers, and
France has also promised 700 million euros. The industry, however, requires
more support, and that is certainly one of the reasons why the Chinese are
constructing battery factories in Germany, rather than VW or Bosch. This
has to change if we want to avoid a strategic dependency.
GBC: At Rock Tech, you were able to significantly increase the resource
base at your core asset, Georgia Lake, in 2018. Could you give us a summary
of the current status of available lithium-containing resources?
Mr Harbecke: We have expanded our resource base through additional drilling
and exploration work to the current amount of 13.3 million tonnes. And this
amount still represents only part of our site. We are very optimistic that
we will be able to expand the resource base further, but we are focussing
on launching production in 2021. The cash flow generated from product sales
will then allow us to finance further exploration work. In 2018, we
produced our preliminary economic assessment, which showed that we will
earn around USD 50 million per year as soon as we launch production! Per
year! Compare that with our current market capitalisation, which is around
USD 30 million. I believe this valuation to be absurdly low.
GBC: What targets have you set for your company for 2019? What can we
expect from Rock Tech in the current financial year?
Mr Harbecke: We assume that we will be able to prove to the market that we
will soon go into production and start generating the expected profits. We
currently have several processes operating in parallel, e.g. authorisation
procedures, which we hope to be completed by the end of the year. In 2020,
we will then begin constructing the production facilities. We also expect
that the share price will return to a fair level as we make progress. This
will result in a good year for all stakeholders of Rock Tech Lithium, for
shareholders, future customers and also for our team.
GBC: Mr Harbecke, thank you very much for talking to us.
GBC SUMMARY: At its core asset, Georgia Lake, Rock Tech possesses a rich
lithium deposit and with 13.3 million tonnes of lithium resources at
present, it also has the necessary scale to mine the battery metal lithium
economically. The company has already taken significant steps towards
launching production in the near future and thus benefitting significantly
from the e-mobility megatrend.
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Datum (Zeitpunkt)Fertigstellung: 07.03.19 (12:31 Uhr)
Datum (Zeitpunkt) erste Weitergabe: 07.03.19 (14:00 Uhr)
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