In this edition of the Capital 10X Growth Navigator we examine the continuing global energy crisis and why we believe electric metals are one of the best ways to play the trend of energy scarcity. Vanadium producer and emerging clean energy storage provider Largo delivered strong Q2 2022 operational results. The psychedelic mental health movement gets a boast from the Netflix’s docuseries debut of ‘How to Change your Mind’.
The Global Energy Crisis
The Russia-Ukraine war has exposed how vulnerable Europe and the world is to a supply shock in energy. Joey Politano highlighted that natural gas exports to the EU has hit a low just as Europe plans to refill critical storage tanks in preparation for winter.
As a result of limited Russian supplies European natural gas prices have more than doubled in the last month.
In the last 2 years German electricity prices have spiked in excess of 10x – this is the definition of a energy crisis. The EU has called an emergency meeting of energy ministers in June to deal with challenges ahead, as households and business face an unmanageable fiscal situation.
This untenable situation will ultimately be born by European governments as the subside energy to bailout the population; Javier Blass estimates the energy bailout bill could top $200 billion. The foreign exchange markets have clearly sniffed out the trouble ahead, the Euro has fallen 12% vs. the US Dollar this year and was briefly below parity last week.
The top priority of governments all around the world will be to address the energy supply crisis we’re currently facing – they must incentivize all forms of energy production. Energy sector capex as a percentage of operating cash flow is currently sitting at a multi-decade low, there is significant investment required in the coming decades.
Electric Metals – One of the Best Ways to Play Energy Scarcity
On March 3rd Capital 10X highlighted the value of owning critical green energy metals as a result of the commodity squeeze triggered by the Russia-Ukraine war.
A recent report by IHS Markit states that global demand for copper is projected to double by 2035; and the amount of copper needed to meet projected demand from 2022 to 2050 is more than all the copper used from 1900-2021. A significant proportion of this growth is driven by renewable and EV energy transition demand.
We can see a similar parabolic rise in demand for lithium; in the US lithium-ion battery demand is 600% higher in the last 4 years.
Strong EV demand for lithium puts the market in a structural deficit till the end of the decade.
The same supply/demand dynamic can bee seen in the vanadium market, with demand for green applications and batteries resulting in a material supply deficit by 2030.
In our March 3rd report we highlighted the following companies that were best positioned within each respective green metal vertical:
- Copper: Sierra Metals (NYSE:SMTS TSX:SMT) & Hudbay (TSX:HBM)
- Lithium: SQM (NYSE:SQM) and Lithium Americas (NYSE:LAC)
- Vanadium: Largo (NASDAQ:LGO TSX:LGO)
Largo: Picking Up Steam – Strong Q2 2022 Sales & Operational Results
Largo Inc. (TSX: LGO) (NASDAQ: LGO) announced second quarter production and sales results that put the supply chain and weather-related issues from the first quarter in the rear-view mirror. Quarterly production of 3,084 tonnes was above 2021, but more importantly it was a 26% improvement over first quarter production.
With management reaffirming full year production guidance of 11,600-12,400 tonnes, they are telling the market that production should meet or exceed Q2’s strong levels for the rest of 2022, a very positive result.
With production returning to normal and expected future catalysts from the Largo Physical Vanadium listing (subject to applicable regulatory approval) and the ramp up of Largo’s vanadium battery technology, there is a lot to like about the Largo story in 2022 and 2023, despite macroeconomic uncertainty.
Netflix Documentary: How to Change your Mind
Psychedelics got a boost this week with psilocybin trending on Twitter as a result of the debut of Michael Pollan’s How to Change your Mind docuseries on Netflix. We believe this continues to add to the momentum behind accepting psychedelics as a foundational treatment for mental health.
In addition to psilocybin trending on Twitter there has also been a significant increase in google searches for psilocybin; the docuseries is in the top 10 on Netflix which provides a strong search feedback loop.
Mindset Pharma: Allowance for Patent Applications Covering its Psychedelics for CNS Disorders
Mindset Pharma receives allowance for patent application covering its short-duration novel psychedelic medications for the treatment of central nervous system disorders.
Mindset Pharma (CSE: MSET)(OTCQB: MSSTF) announced that the United States Patent and Trademark Office (USPTO) has granted allowance for Mindset’s patent application number 17/387,864, titled “3-Pyrrolidine-Indole Derivatives as Serotonergic Psychedelic Agents for the Treatment of CNS Disorders.” Included within this application are drug candidates that Mindset classifies as Family 2 – novel analogues of psilocybin exhibiting a range of pharmacokinetic and pharmacodynamic improvements in pre-clinical studies.
Sierra Metals is a market awareness client of Capital 10X.
Largo Inc. is a market awareness client of Capital 10X.
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