Will BNC benefit from the EVs Story?
Governments and advocates of cleaner environments are pushing for it and platinum producers are having nightmares about it; “The shift towards New Energy Vehicles (EVs)”.
Some governments have also declared their intention to grow the share of EVs in their countries’ automobiles market.
The proportion of EV, PHV, and hybrids in global auto sales is estimated to reach between 50% to 60% by 2030.
The electric car market penetration into the global vehicle fleet (1.2 billon cars) will be the key demand driver.
The current market share of yearly EV sales in just under 1.0%.
Overall, a drastic change in the automobile industry and materials sector is expected as EVs (which use Lithium-ion-Battery) will take the place of the internal combustion engines (petrol and diesel).
The implication is certain kind of mineral resources are going to be in high demand.
A Lithium-ion-Battery requires Lithium, Cobalt, Nickel, and Graphite as significant materials.
Already, the demand for these resources is in a surprising uptrend.
Lithium requirement is likely to reach 36 times current demand by 2030.
The other materials are also expected to see a similar surge in demand.
While the EV story has been cited as one of the drivers of nickel prices going forward, nickel demand from the electric car market will largely be dependent on the selection of energy storage technology, which is still to be decided by the major PEV manufactures.
Nickel is likely to form part of the cathode of choice however this is then a function of how large the battery will be in the respective vehicles.
We note that nickel is generally the weakest of the so-called battery metals. Only 6.0% of output goes into batteries and nickel is still mainly a steel play (more than twothirds is used steel).
Nickel is more tied to outlook for China’s economy.
Overall, Nickel producers should still benefit from the growth in the demand for batteries used in electric vehicles (EVs).
EV production is expected to register double-digit growth rates as the clean energy revolution continues.
Bindura Nickel Corporation (BNC) is strategically positioned but will have to invest more so as to benefit fully from firmer prices.
We estimate the required capital injection to be in the region of USD30m – USD40m.
That said, while the counter looks very cheap compared to its international peers, we are still concerned about the value depreciation to shareholders emanating from the incomplete smelter project.
We have a SPECULATIVE BUY recommendation on BNC.
Batanai Matsika is the Head of Research at Morgan & Co. He can be contacted on +263 78 358 4745 or email: batanai@morganzim.