May 28th, 2020 | 17:28 CEST
Agnico Eagle, Osino Resources, Scottie Resources - Preparing for the end of the euro
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"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.
Gold company stocks
The ownership of physical gold in the form of bars and coins gives a feeling of security. It's something you can touch and store at home. But who really wants to store their assets without interest or dividends, but with a security risk in their own private home? An alternative would be shares in companies from the gold industry. The shares of these companies are usually managed like all other shares as special assets through a bank or broker. If one of these managers or institutions should experience difficulties, the shares can simply be transferred.
Producers with dividends
Stocks of gold companies that pay dividends from current production and have gold reserves are again popular with investors. Confidence in paper currencies is declining simultaneously with the increasing volume. Purchasing power is falling and inflation is rising. The European Union with its economic disparities is facing a test of strength. Whether the euro of today will continue to exist in this constellation can now be seriously doubted. When it will tear the euro apart is an open question. It is not desirable, but when it comes, people and their wealth should be prepared for it.
Diversification around the globe
Ideally, a portfolio should include several shares of gold companies. Diversification should therefore not end with a company from the precious metals industry, because different areas of value creation and regions around the globe have different risk/reward ratios. Well-known gold producers include Agnico Eagle Mines, B2Gold, Barrick Gold, Kinross and Yamana. These companies are already worth several billion USD and the share price usually correlates with the gold price, as the profit margin depends on the sales proceeds.
Exploration has upside potential
Besides gold production, there is also the area of development and exploration. The exploration sector has a high risk/reward ratio. This is where a possible success story begins or ends. Companies that are positioned in this area and have already made discoveries include Desert Gold Ventures, Osino Resources, Scottie Resources and Triumph Gold. Investors in these companies are looking for a takeover by a producer. This usually requires larger quantities of mineable gold deposits.
Selection of Explorers
Desert Gold Ventures has projects in Mali, in the West of Africa. With a share price of CAD 0.15 the company is valued at CAD 16 million. Osino Resources is developing into a takeover candidate with its discoveries in Namibia. With a share price of 0.98 CAD, the market value is 84 million CAD.
Scottie Resources focuses on its areas in the Golden Triangle of British Columbia - in the western part of Canada. Scottie Resources' market value is currently CAD 22 million at a price of CAD 0.215 per share. Further north in the Canadian Yukon, Triumph Gold is exploring the company's own projects in order to further expand the discoveries made to date. The market value of Triumph Gold is currently CAD 26 million at a share price of CAD 0.24.
Crucial to the success of exploration companies is the quality of management and their ability to raise the necessary capital. In addition, the projects are crucial for success. It can be advantageous if the exploration companies are located with their projects close to companies that are already producing. These producers may have to replace depleted reserves with new acquisitions, in which case a takeover of a promising explorer in the region may be an option.
Conflict of interest
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