July 14th, 2022 | 12:43 CEST
Attention: BASF, Viva Gold, ThyssenKrupp - Stocks with good turnaround opportunities!
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"[...] We can make a big increase in value with little capital. [...]" David Mason, Managing Director, CEO, NewPeak Metals Ltd.
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Gold - A safe haven with high insurance costs
Following major market turbulence in the equity and bond sectors, growing uncertainty about the global economic situation has now also hit the precious metals sector. Major producers of gold and silver have had to watch as selling prices on the spot market have been gradually pushed down. Thus, the precious yellow metal fell from USD 2,080 to USD 1,720. Silver fared even worse with a discount of 28% from USD 26.20 to USD 18.95. For the producing mines, the calculation is one-dimensional; they have to sell their mined metals to be able to operate the mining plants, including the staff. At current prices, an estimated 85% of all operations are still operating in the green zone; exploration is naturally a high expense factor due to high energy prices.
One should expect precious metal prices to rise in tumbling markets. However, since high inflation and the holding costs of physical metals have a negative effect on the price, the forward prices for gold and silver are under permanent pressure. Should inflation gallop at some point, a significant rebound of precious metals would probably be expected, because the immanent idea of value protection would then prevail, which could also develop into a buying panic in an emergency. At the moment, however, this is not the case because the protagonists in the gold sector likely still have no real idea where the current central bank policy will take us.
Viva Gold - Dormant precious metals right on Walker Lane in Nevada
In uncertain times, there is also a particular demand for gold reserves in the ground. In 2017, the Canadian explorer Viva Gold secured a 4,250-hectare property in Nevada with a prospecting license. It lies within the historically well-known Walker Lane, where Kinross, Coeur Mining, Augusta and Centerra also operate. There have also been spectacular acquisitions in this district in recent years, for example, with the Bullfrog Mine.
At the depressed level for precious metals, good projects, in particular, provide an attractive long-term entry opportunity. Nevada has been rated third in the world by the Fraser Institute as a mining-friendly US state. That attracts large corporations such as Barrick and Newmont, as they are always on the lookout for new deposits to keep their production constant.
The Company's Tonopah Gold Project is located only 30 km from Kinross's Round Mountain mine, producing more than 250,000 ounces in a year. In the current market situation, a medium-sized project with an estimated and suspected 600,000 ounces can quickly become a desirable target, as North America offers not only good jurisdiction but also sufficient mining history to attract personnel. Furthermore, the location allows for open pit mining, which is the most favorable form of rock processing.
Viva Gold shares are traded in Canada and Frankfurt. With 91.6 million shares outstanding, the 5-year work on the project is valued at only CAD 7.5 million. 56% of the shares are held by institutional investors and management. At one point in 2021, the stock was twice as high. It could also quickly return here in the next gold rush.
BASF and ThyssenKrupp - Energy becomes the linchpin
Anyone looking to invest in stocks after the big sell-off should pay attention to balance sheet quality and long-term business prospects. In the case of Ludwigshafen-based BASF, both attributes are combined in one share because the 157-year-old company has already survived a number of crises and is currently realigning itself. On the one hand, the Board of Executive Directors is concerned about the Company's enormous dependence on energy. On the other hand, it wants to become a zero-emissions company by 2050 in accordance with the Paris Agreement. According to CEO Dr Martin Brudermüller, however, the two can be combined well: "Without sufficient quantities of electricity from renewable sources at competitive prices, the transformation ahead of us cannot succeed! This task can only be mastered through a new kind of intensive cooperation between politics and industry. And it needs cooperation across value chains."
As a formerly very energy-intensive company, ThyssenKrupp has several ideas for the energy transition: Store, convert and adapt consumption! One of ThyssenKrupp's goals is to make the use of renewables reliable. The fact that renewables still produce varying amounts of electricity depending on the weather is to be mastered by innovative storage technologies. Other key areas are projects such as Carbon2Chem and load management, i.e. adjusting consumption to the energy supply. Even though the stock market situation made an IPO of the hydrogen subsidiary Nucera impossible, the Duisburg-based company will leave a strong footprint in the German energy industry in the coming years. This focus fits very well into sustainable portfolios with a modern focus.
BASF and ThyssenKrupp have experienced a real sell-off in the last 3 months. Within a year, both stocks fell by 40%. The current prices of EUR 41.20 and EUR 5.10 respectively are already far below their book value. Rarely does one get future-oriented standard values so favorably offered. The date, July 21, 2022, is important: On this day, the pipeline of Nord Stream 1 is to supply gas to Germany again. You should probably wait until then, but if you think optimistically, keep your eyes open for a balanced long-term buy.
High volatility and falling share prices are testing the patience of the long-term investor. When to sell, when to buy, always the old game. We look for interesting stocks and describe the opportunities and risks. BASF, ThyssenKrupp and Viva Gold are well positioned for the long term and are already far from their highs.
Conflict of interest
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