Original-Research

Rock Tech Lithium Inc (von GBC AG): Managementinterview

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Original-Research: Rock Tech Lithium Inc - von GBC AG

Einstufung von GBC AG zu Rock Tech Lithium Inc

Unternehmen: Rock Tech Lithium Inc
ISIN: CA77273P2017

Anlass der Studie: Managementinterview
Empfehlung: Managementinterview
Letzte Ratingänderung:
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 the future?

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 expertise.

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 car industries?

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.

Die vollständige Analyse können Sie hier downloaden:
http://www.more-ir.de/d/17643.pdf

Kontakt für Rückfragen
Jörg Grunwald
Vorstand
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
[e-mail]
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,7,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter: http://www.gbc-ag.de/de/Offenlegung.htm
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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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Rating: Managementinterview
Analyst: GBC