10. September 2020 | 07:06 CET
AngloGold Ashanti, Newmont, Velocity Minerals: Where does price potential slumber?
While the German government is thinking about softening the insolvency law even longer than expected and thus keeping many ailing companies alive, central banks make no secret of continuing the path of cheap money they embarked on immediately after the outbreak of the Corona pandemic. As a first reaction, the prices of gold and companies related to the mining of gold climbed significantly. Currently the prices have come back somewhat. Since the basic fundamental situation around the precious metal is still intact, the current phase should be seen in retrospect as a pause for breath. Reason enough to take a closer look at three companies from the gold sector.
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ISIN: ZAE000043485 , US6516391066 , CA92258F3007
"[...] I wouldn't be surprised if the project ends up showing more than 5 million ounces. [...]" Gary Cope, President and CEO, Barsele Minerals
AngloGold Ashanti does not yet convince the market
AngloGold Ashanti's stock generated a return of 26.6% on a one-year horizon. **The company decided to implement a comprehensive restructuring program even before the outbreak of the pandemic, and although this had a negative impact on the quarterly figures, analysts are convinced that the measures will pay off in the long term. Also in view of the increased gold price, the planned sales of projects should proceed slightly and also have a positive effect on AngloGold Ashanti's cash position.
It is also a fortunate coincidence that the company will be able to expand production in 2020, which should allow the company to benefit directly from rising prices. However, the stock is not really getting off the ground on the stock markets. Investors are worried that AngloGold Ashanti may no longer have a broad enough base following the sale of further projects.
Newmont: Vision through exploration
The mood among investors in Newmont is more optimistic. Higher gold prices have had a direct impact on margins and have brought the company high profits. The company that emerged from the merger of Newmont Mining and Goldcorp has accumulated a number of promising projects over the past few years and is therefore considered to be well positioned for the gold boom. The stock market agrees: Shares of Newmont Goldcorp increased on view of one year by nearly 60%. The announcement of a USD 1 billion share buyback program may also have contributed to creating greater imagination.
When it comes to vision, Velocity Minerals' shareholders have a clear picture in mind: ideally, the company will bring its gold projects in Bulgaria gradually into production. But the reality is different: Although the company recently released a Preliminary Feasibility Study for its flagship Rozino project, in which the company has a 70% interest, the other projects are still in the exploration stage. For the three satellite projects, Velocity Minerals has options to increase stakes in the event of positive exploration results. **All projects are within truck range of an existing processing plant with a potential of 200,000 ounces of gold annually.
Velocity Minerals: Production planned for end of 2022
Although at first glance Velocity Minerals may not appear to have much in common with the likes of Newmont or AngloGold Ashanti - after all, their market capitalization is only around EUR 45 million - at second glance, parallels are apparent. Like Newmont, Velocity has further exploration potential and plans to increase it over the coming months and years. The flagship Rozino project is already further along the road, with Velocity's goal of producing gold by the end of 2022. This clearly communicated company perspective has not yet made the rounds on the stock exchange - the share price is now trading at more or less the same level as a year ago.