April 15th, 2022 | 12:14 CEST
Barrick Gold, Barsele Minerals, BASF - Investing in scarcity: 3 B-shares with potential
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"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources 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.
Barrick Gold - The long-term breakout is on the horizon
Barrick finally made it in mid-February 2022. After a consolidation phase lasting a good 2 years, a technical chart cup and small handle formed. Chart analysts love this formation because it indicates a medium-term breakout and often an upcoming reassessment. The share is no longer far away from this point.
The last quarterly figures of the second-largest gold mining company were convincing. EPS amounted to CAD 0.444 per share, and sales reached CAD 4.20 billion. Analysts surveyed had forecast earnings per share of CAD 0.380 and revenue of CAD 4.04 billion for the fourth quarter. The dividend payout was raised to CAD 0.10. Furthermore, Barrick announced that it would pay an additional performance dividend depending on the amount of free cash flow. Finally, the announcement of another share buyback program fueled the share price.
With the positive newsflow, the share was able to break through several resistances to the upside. It is currently still trading 8% below the 3-year high at approx. EUR 25.85. The Annual General Meeting is now at the beginning of May, and on May 4, there will be new figures from the first quarter of 2022. Experts expect 4% higher sales than the previous year, with high profits. Therefore, the cash flow will again flush sufficient cash into the cash register, which Barrick likes to use for buybacks. And the gold price is also quietly stalking the USD 2,000 mark. Stay invested.
Barsele Minerals - It shouldn't be long now
For years, Sweden has been both a developer of climate-friendly technologies and an excellent location for mining companies. In the international race for critical metals, the Scandinavians are in a good position because the deposits of rare raw materials and energy sources are outstanding compared to Europe, which is otherwise relatively poor in raw materials. Due to a friendly jurisdiction, it is also possible for smaller mining companies to implement suitable exploration projects.
In the slipstream of an upward trend in precious metals, the Canadian company Barsele Minerals has been working on a promising project in the mining region of Västerbottens Län in northern Sweden for some time. Within the 34,000 hectares of indicated polymetallic deposits, there has been a recent discovery in the form of a high-grade mineralization boulder assaying 90.8 grams per tonne AU. The discovery occurred in 2021, and the fabled boulder is over one meter in diameter. Also striking about the deposit are the depositions in metals such as lead, zinc and nickel. These substances are in undiminished demand for e-mobility and high-tech industries and add value to the property.
A resource estimate from 2019 has already certified 2.4 million ounces of gold in the area, and mining giant Agnico-Eagle is also in the game with a 55% share. The Barsele management knows the business well and wants to set up another drilling program over 30,000 meters in the next 18 months. They are convinced that they will be able to increase the estimated resource to at least 3.5 million ounces of gold. For the planned exploration, it is essential to have a strong partner like Agnico-Eagle at their side. Against this background, a complete takeover of Barsele is also possible at any time.
The last financing of CAD 2 million took place at a price of CAD 0.50; currently, the stock has slipped to about CAD 0.43. In view of the expected progress together with Agnico-Eagle, we expect a high surprise potential for the following months. Should the gold price also rise above the course high of USD 2,050, the valuation of Barsele Minerals could go up very quickly.
BASF - First major write-off on Nord Stream 2
The Baden-based aniline and soda factories have taken a look at their cards for the first quarter. The chemical giant's sales rose by 19% to EUR 23.1 billion from EUR 19.4 billion. The key factors here were higher prices and favorable exchange rates, especially against the US dollar. Sales slightly exceeded experts' estimates, and operating profit was also well up on the previous year, increasing by 21%. Only earnings after taxes, at EUR 1.22 billion, were a full EUR 500 million lower than in the same quarter of the previous year.
The decline is attributable to impairment losses recognized by the subsidiary Wintershall Dea, in particular for loans to Nord Stream 2, which BASF has included in its net income from investments at a proportionate 72.7% or around EUR 1.1 billion. The Ukraine effect regarding Nord Stream 2 is already reflected in the first balance sheet of a DAX member. Many investors did not have such a scenario on their radar. In the first few hours, the share fell by over 3% and is already down by 22% in 2022.
Some analysts reacted promptly with downgrades because, in addition to the extraordinary write-offs, BASF is unlikely to be able to pass on all the additional costs, especially for expensive energy and precursors, to its customers. That puts heavy pressure on margins. It will be interesting to see the full quarterly report on Friday, April 29, 2022, when the Annual Shareholders' Meeting will be held, and management will provide more detailed information on the current situation. Away from the uncertainties regarding the near future, BASF nevertheless entices with a 2023 P/E ratio of 8.7 and a dividend yield of 6.7%. Prices below EUR 50 are attractive in the long term.
Against the backdrop of a fragile global economy, the industry is being hit in different ways. Barrick already has good cards, and cash flows are increasing. For BASF, things could now get rougher on the margin side. Barsele Minerals has a promising property and a major on its side.
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