13. April 2021 | 08:45 CET
Barrick, BP, Scottie Resources - Commodities cannot be printed
Last week was dominated by FED Chairman Jerome Powell's speech at the IMF. Powell reiterated that inflation, which had been a concern for some investors in the short term, was under control and not a cause for concern. He attributed inflationary pressures primarily to higher commodity prices. After all, you cannot print commodities - unlike paper money. For this reason, we will take a look at commodity stocks today.
time to read:
ISIN: CA0679011084 , GB0007980591 , CA81012R1064
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Barrick Gold - Share on the way up?
Barrick Gold has a bulging war chest at its disposal for acquisitions. There was also a notable interview with CEO Mark Bristow, who announced that the quarterly dividend is safe, even if the gold price should fall to USD 1,200.
Along with the first quarter 2021 results, a sustainability report was released showing significant progress in implementing ESG performance. The Company believes it is well on its way there.
Then, on April 9, the Company announced that the Porgera mine could be restarted, as it was able to reach an agreement with the government of Papua New Guinea on a framework agreement. It can be considered a success, as the government refused to renew the lease since April 2020.
If we look at the share price performance, we notice that it has outperformed the gold price, despite Warren Buffett's exit, who sold 100% of his Barrick Gold shares in February. We see this as a sign of strength.
Scottie Resources - Promising potential
By now, it should be known how promising the "golden triangle" is in British Columbia, Canada. This is not just a figure of speech but is proven by the competition that owns lands 16 km from the Blueberry Zone of Scottie Resources. Ascot Resources was only able to secure fresh capital of CAD 55 million at the end of March 2021.
Scottie Resources should not need fresh capital at this time, as approximately CAD 2.8 million of cash is available and the Company is debt free. Exploration drilling of 7,000 m was carried out in 2020, which is to be expanded by almost 80% to 12,500m in the summer. If the results are as good as in the previous drillings, a positive newsflow can boost the share.
After the annual high of CAD 0.53 on July 28, 2020, driven by the gold price, the share also fell again with the gold price. Currently, the fall of the share has stopped since March 25 and a sideways phase between CAD 0.18 and CAD 0.21 has formed. The gold price has built a double bottom at USD 1,680, and from there, it broke out of the W formation to the upside on April 8, 2021. Scottie Resources' stock has not yet followed this upward movement. Those who expect a rising gold price should put Scottie Resources on their watchlist.
BP - Turnaround underway
2020 was a year to forget for BP. A massive loss of USD 20 billion was incurred, primarily due to the crash in the oil price in April. At that point, the oil price was negative. Since then, the value of black gold has moved up quite steadily and was over USD 62 on Friday.
Last week Tuesday, CEO Bernard Looney announced that the business had developed positively in the first quarter. In addition, the target of reducing net debt to USD 35 billion was achieved ahead of schedule. It is remarkable that the first quarter already went well, as the economies of the USA and England are only just beginning to improve in connection with the ongoing vaccinations. In Germany and many other countries, oil consumption is still significantly lower than before the Corona period. When life returns to normal in the course of the year due to the vaccinations, the aviation industry will also be able to welcome more customers again and oil consumption should continue to rise.
The stock has been in an intact uptrend since November 2 and still has a dividend yield of about 5% at current price levels (about EUR 3.44). Analysts from UBS, Goldman Sachs and Credit Suisse have issued price targets between EUR 3.86 and EUR 5.41.