03. August 2020 | 07:53 CET
Ballard Power, NEL ASA, Desert Gold - why we will see panic
In the past two years, the shares of listed hydrogen companies have risen significantly due to a lack of alternatives. A new eco-system with hydrogen as an energy carrier is being created worldwide and, as part of the development process, suppliers from all parts of the world are positioning themselves - around the globe. Some of these companies already have a long history and can now enjoy state-subsidized success. Political measures and the increase in the money supply, by the central banks, are creating a boom in demand in another sector, which only a few investors have focused on so far - the discovery of gold reserves. The flight from money is driving the demand for physical gold to historic highs and an end is not in sight due to the threat of a second wave of corona contagion. The major producers have already seen their gold reserves shrink by 34% since 2012 and it is feared that the annual production volume will fall from 118 million ounces in 2020 to below 65 million ounces in 2029. A takeover wave in the exploration sector is a logical consequence.
time to read: 2 minutes by Mario Hose
"[...] We quickly learned that the tailings are high-grade, often as high as 20 grams of gold per tonne; because they are produced by artisanal miners, local miners who use outdated technology for gold production. [...]" Ryan Jackson, CEO, Newlox Gold Ventures Corp.
Takeover target in West Africa
Desert Gold Ventures is an explorer who has previously identified gold deposits in several locations on the company's 400 km2 projects in West Africa. The recent drilling program was designed to determine the size of this deposit and whether further discoveries are possible. The results of this drilling are pending and eagerly anticipated. The company's management is targeting up to six million ounces of gold in the areas. As the price of gold rises, it is expected that producers in the area have already set their sights on Desert Gold. From a quantity of one million ounces of gold, the company will become really interesting for a potential buyer.
In 2018, when the gold price was still trading below USD 1,270.00 per ounce on average, takeovers in Africa paid more than USD 200.00 per ounce in the ground. In the meantime, it is only a matter of time before the USD 2,000.00 per ounce gold mark will fall. Companies such as Desert Gold are excellent takeover targets for producers, especially if they are already active in the region and have the appropriate legal and labour market expertise. In this case, possible acquirers are B2Gold, Barrick Gold or Iamgold, because they already successfully operate gold mines in the area and the high gold price washes a lot of liquidity into the coffers. From their point of view, a takeover serves as a safeguard for the future. Desert Gold's share price has already been rising for several weeks, but the market value of around CAD 37.0 million is still low given the potential for producers. Bank of America believes it is possible that the gold price could rise to USD 3,000.00 in 2021. At the latest then, takeover panic will break out among the producers.
Mobile power supply with fuel cells
Ballard Power from Canada has been active in the research and development of fuel cells for several decades. Ballard's products enable the use of hydrogen as an energy carrier for power generation. Mobile solutions can be used in various areas of mobility. In addition, emergency power generators that use hydrogen as an energy storage medium and use fuel lines to generate electricity offer another growth market. Large companies that care about image and reputation are looking for solutions that reduce CO2 emissions. Ballard Power has already achieved a market capitalization of more than CAD 4.6 billion, so there is plenty of up-front praise in the price.
Plant constructor creates infrastructure
NEL ASA from Norway has experienced a rapid price development in recent years and currently has a stock market valuation of over EUR 2.4 billion. The plant manufacturer is focused on the production and sale of hydrogen. The company's customers require plants for the production of the energy carrier or operate filling stations. Due to government funding programs, NEL ASA is currently experiencing great interest in the products to enable the development of an infrastructure for hydrogen-based mobility. **In the coming years, however, competition will increase in this industry as well, and some investors may already see parallels to the solar hype around 13 years ago.