PUBLISHER’S NOTE: On this Boxing Day we disrupt normal scheduling to bring you the note below from our friends at Money Morning. If you’re looking to lock in a few last-minute stock speculations for the year ahead, you should find this of interest…
Hope your Christmas Day was a great one.
Here’s some food for thought as you lie on the couch before hitting the fridge for leftovers…
‘Technology first discovered at the University of NSW in the 1980s will be “coming home” on an industrial scale, with Australia’s Renewable Energy Agency backing construction of the country’s first utility-scale vanadium flow battery in outback South Australia.
‘The federal agency has granted the project nearly $6 million, saying the technology could “play a major role” in addressing Australia’s need for increased “heavy-duty” energy storage as renewable energy generation increases.
‘ARENA chief executive Darren Miller said flow batteries complemented “the role of more established technologies such as pumped hydro energy storage and lithium-ion batteries in the Australian market”.’
Our ‘Australia’s Clean Energy Second Order’ thesis is only gaining momentum as we hurtle into 2021.
Global electricity demand plummeted in 2020 thanks to the COVID-19 pandemic.
But someone forgot to tell investors in renewable stocks.
But if you’re looking for stocks that have the potential to outperform the market by significant margins next year, you should be focusing on left-field renewable plays.
Ones that have yet to get a groundswell of mainstream attention.
So, where should you be looking?
We’ve predicted for some time rare earths are due for a mighty resurgence.
Well, we seem to be on the precipice of it.
Electric Vehicle (EVs) require permanent magnets that rely on multiple rare earth metals.
A report from Brand Essence Research states the market will be worth $20.6 billion by 2025, stating:
‘Growing demand for magnets in automobiles, and energy generation will majorly contribute to the growth of global rare earth metals market over the forecast period.
‘The demand for rare earth magnets is majorly increasing by their consumption in electric and hybrid vehicles… Increasing focus on utilizing clean and renewable energy is giving a substantial pressure on the electricity providers, to generate energy through renewable sources, which in turn will show a positive impact on the growth of this market.’
OK, so that’s mainstream speak.
But what’s the angle for you here?
Right now, a bunch of small Australian companies are working on broadening Australia’s rare earth supply chain.
China has the stranglehold here.
But Aussie rare earth miners are trying very hard to loosen it.
The big gun, Lynas Corporation, recently renamed themselves Lynas Rare Earths. That’s a big hint where the wind is blowing — and where the money is likely to be made — in 2021.
As Argus Media reports:
‘Lynas is spending around A$400mn ($292mn) on a cracking and leaching plant at Kalgoorlie in Western Australia. This will process ore sourced from its Mt Weld mine before it is sent to Kuantan in Malaysia for further processing.
‘Lynas and its US partner Blue Line Corporation in July signed a contract with the US Department of Defense for the first phase of developing a heavy rare earths separation facility in the country.’
There are multiple other smaller companies trying to get a footprint here before demand skyrockets.
The next stocks to go to the Moon?
President-elect Joe Biden is most certainly not good news for those in the fossil fuel business.
For nuclear energy, however, it’s a green light.
The smaller stocks with exposure to this field deserve your immediate attention going into 2021.
These stocks have NOT, for the most part, been beneficiaries of the clean energy boom.
But there’s a good chance that’s about to change…
The Intergovernmental Panel on Climate Change (IPCC) says every pathway to zero emissions MUST include nuclear energy.
Few people realise a kilowatt hour of nuclear-generated electricity has pretty much the same carbon footprint as wind (four grams) and only slightly less than solar (six grams).
That’s compared to 109 grams for coal.
No wonder Biden’s $2 trillion climate plan has nuclear as a core component.
But what stocks should you be on the lookout for?
As you’ll see here, smart uranium plays are a good strategic option.
But you should also look at businesses trying to solve nuclear’s knotty problems.
For instance, the energy required to mine and refine the uranium and manufacture the nuclear power plants comes from fossil fuels.
Companies working on ways to ‘green up’ the nuclear process will come under the spotlight in the coming years.
NASA sparked and the US Department of Energy recently announced plans to build a nuclear power plant on the Moon and Mars to support its exploration plans.
The plan is for a ‘fission surface power system’, with a reactor ready to launch by 2026.
But the stock gains from nuclear will be found much closer to home — and likely in a much shorter time frame.
One play we’re targeting right now is on US uranium supply issues.
It’s working on ‘third generation’ uranium enrichment technology.
According to the company, this is more cost-effective than the older tech (centrifuges). With nuclear power, you want to create enriched uranium, and centrifuges basically spin it (the isotopes) around to do this.
This company claims to have the only known commercialisation project in the world that uses lasers to concentrate uranium. This laser technology is where its expertise lies.
It already has a foothold in the lucrative US market via a deal with the US Department of Energy (DOE).
In a nutshell, if these guys can prove the viability of their tech, huge things are in store in the next few years.
If you think the world’s ‘nuclear option’ is a foregone conclusion, you’ll want to consider this stock carefully.
It’s part of our ‘Clean Energy Second Order’ portfolio.
For Money Morning
Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.