The $3.1 billion Biden battery boom
5th May 2022 |
In many parts of the world, suppliers of electric vehicles (EVs) are enjoying tremendous growth.
In India, for instance, sales of EVs – including two- and three-wheeler vehicles as well as cars – rose by 257% in the March 2022 fiscal year.
You read that correctly: sales of EVs in the world’s second-most populous country more than trebled.
However, there is more to our EV future than cars.
EVs run on batteries – and the batteries are made from lithium.
This poses a problem.
Soaring demand for lithium is threatening to outpace growth in supply of that metal.
The impact of this has already been significant. According to Reuters, the cost of an EV battery cell has risen from $105 last year to $160 in the first quarter of 2022.
However, policymakers are rising to the challenge.
On 2 May 2022, US President Joe Biden announced $3.1 billion in funding will be given to US companies who produce and recycle lithium-ion batteries.
Some 30 companies should benefit from this. The money represents nearly half of the $7 billion approved under the US infrastructure law to improve the domestic EV battery supply chain.
President Biden’s plans could set a precedent for other policymakers to do the same, as the world grapples with EV battery shortages.
It may well spur the development of exciting new technologies.
It’s good news for the EV battery stocks in the Frontier Tech Investor portfolio.
These are companies that are already benefiting from higher volumes and higher prices for their products.
AMTE Power (LSE: AMTE), for example, is a developer of battery technology for the automotive, oil and gas, and energy storage industries.
AMTE is still largely pre-commercialisation. Its product range consists of four lithium or sodium-based batteries, which you can see here.
It develops them at its Thurso facility in Scotland.
It has plans to open a new 2GW Gigafactory in the UK, with an announcement due this year.
We believe the imminent opening of the Gigafactory will help AMTE to realise its growth potential.
Another EV battery play in the Frontier Tech Investor buy list is Ilika (LSE: IKA).
Ilika is a producer of solid-state battery technology, and a company which targets the industrial Internet of Things (IoT), medical, consumer electronics and EV industries.
The company is quickly advancing towards commercial production of its batteries.
Its specialist EV-based Goliath battery technology has been accepted by the Advanced Propulsion Centre (APC)’s Technology Developer Accelerator Programme (TDAP).
The programme is designed to assist companies that APC believes will help the UK automotive industry reach net zero emissions.
In the programme, Ilika could receive funding if its technology passes validation and testing phases.
We believe this could quicken the time it takes for Ilika to reach commercialisation.
Ilika’s other battery range called Stereax, optimised for the medical and IoT industries, is already in commercial production. The Stereax manufacturing facility was opened in December 2021.
We reiterate our BUY recommendations for AMTE and Ilika. You can find the respective, original recommendations here and here.
| EVs need batteries. The batteries don’t just need lithium. They also need charge points. And, here in the UK at least, the shortage of charge points is causing a lot of headaches.
We think that we have identified a company that will be a part of the solution to this problem. Watch out for our Stock Alert next week. |
Buy list update
Argo Blockchain (LSE: ARB)
Argo Blockchain is a miner of cryptocurrencies, namely bitcoin.
Like many other crypto-centric stocks, its share price has suffered thanks to the depressed sentiment currently in the crypto market.
Since 2 December, its share price has halved, going from 126GBp to 63GBp at the time of writing.
In our view, this is a gross undervaluation of the company, especially when you consider the potential of the crypto market and the Argo’s latest financial figures.
For the year ended 31 December 2021, Argo recorded revenues of £74.2 million. That’s a whopping 291% increase on the previous year.
In addition, Argo delivered a mining gross margin of 84% for 2021, which is more than double the 41% figure it delivered in 2020.
This is in spite of the fact that the number of bitcoins mined was 2,045, or 17% fewer than in 2020.
We can attribute this decline to the bitcoin halving event that took place in May 2020, which reduced the bitcoin mining reward from 12.5 to 6.25 bitcoin per block.
As of 31 March 2022, the company held 2,700 bitcoin and bitcoin equivalents, valued at $122.9 million (bitcoin’s price at this time was $45,518).
However, we believe a resumption in the positive upward trajectory of bitcoin is inevitable, given that the crypto is being much more widely used by players in the traditional financial system.
If our $1,000,000 price prediction of bitcoin is reached, it’s companies such as Argo who could be huge beneficiaries.
Even if bitcoin touches $500,000, the value of Argo’s assets will be in excess of $1 billion, which still promises massive upside potential for Argo given its current valuation.
What’s more, Argo is continuing to live up to its reputation is a crypto miner using energy from green and sustainable sources, which gives it a competitive edge over rivals in a world that is rapidly decarbonising.
For example, its Quebec mining facility is powered entirely by hydroelectricity.
In addition, 85% of the energy generation at its new Helios Project in Texas, US, is powered by wind power.
The Helios Project has 800MW of capacity and is expected to be operational this month.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes, it’s hard to decide which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section, showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: it’s just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Team17 (LSE: TM17) – Team17 is a video-game publisher. It has a large collection of games that contains some of the most popular products of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the 1990s gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of NFTs, an emerging trend that could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the easing of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
Aura Energy (LSE: AURA) – Aura Energy is an early-stage mining company focused on the exploration and production of uranium, a key ingredient in the generation of nuclear energy. The company is showing signs of a shift from uranium explorer to producer, after uncovering water deposits at its Tiris mining project in Mauritania. Water deposits are essential for a smooth mining process. Aura estimates that its Tiris project will produce 12.4 million lbs of uranium over the next 15 years. Aura should be a key player in the nuclear future. You can find the original recommendation here.
Yellow Cake (LSE: YCA) – Yellow Cake is a hoarder of uranium oxide, which is used to generate nuclear power. In this, it offers direct exposure to the spot price of uranium to investors, removing geopolitical and processing risks associated with mining. In fact, it currently has a bumper contract with the world’s largest uranium producer, Kazatomprom, which supplies it with $100 million worth of uranium every year (up until 2027). In total, Yellow Cake stores 8,527 tonnes of uranium oxide in storage facilities, meaning that the uranium is currently worth more than $1 billion. This is a lot more than the current market capitalisation. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Analyst, Frontier Tech Investor
