January 17th, 2022 | 13:22 CET
Barrick Gold, Barsele Minerals, BP - Commodities are a sleeping giant
Table of contents:
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Barrick Gold - Inflation protection for investors
The world's number 2 gold producer is Barrick Gold. In addition to gold, it also mines copper, which will become increasingly important in the future due to global electrification. While central banks reported that inflation was only temporary last year, it is now clear that inflation is here to stay. Recently, European Central Bank President Christine Lagarde had to admit that inflation had been miscalculated. Gold is still suitable as a protection against inflation, and as soon as the demand for jewelry picks up again, the gold price will also be able to increase again.
Barrick Gold offers investors the advantage that its mines are operated worldwide, so the risks are well distributed. The Company is now almost debt-free and has a high cash flow, increasing as the gold price rises. The margins are also impressive. Nevertheless, the share is not moving at the moment and is trading near its 52-week low. The management is accused of not having made any significant acquisitions last year. The war chest for this is bulging.
Investors will get a first glimpse of how the coming year will unfold on January 19, when the Company releases its preliminary production, sales and cost information. On the positive side, Chief Executive Officer Mark Bristow said in an interview, "I don't think there is a lot of risk on the downside; it is more likely to be on the upside." In 2021, the Company paid out a total of USD 0.78 to shareholders, USD 0.36 of which was expected dividends, and the rest was special payments. Detailed analysis of the Company can be found at researchanalyst.com. The share is currently trading at USD 18.68.
Barsele Minerals - New gold mineralization found
Barsele Minerals is a prime example of an undervalued resource company. The Company holds 45% in the Barsele Project, located in northern Sweden. Last year, it was supposed to acquire Agnico Eagle's 55%, its joint venture partner. But the deal did not close and is currently dormant. The 33,500-hectare area has 2.4 million ounces of NI 43-101-proven gold. Management believes that a 35,000m drill program can push the resource estimate up to 4 million ounces.
Royal Bank of Canada analyst Stephen Walker has estimated the project's value at 150 Canadian dollars (CAD) per ounce. At the time, however, the price of gold was USD 1,200. Currently, the gold price is around USD 1,800. If one calculates very conservatively with CAD 150, the project has a total value of CAD 360 million. Since the Company currently owns only 45%, this leaves CAD 162 million as the investment value. The current market capitalization is just CAD 63.5 million. Therefore, the conservatively calculated valuation gap is CAD 98.5 million.
The general conditions for the project are ideal. Sweden is considered one of the best mining regions globally and offers cheap hydroelectric power. In addition, the Swedish Geological Survey has designated part of the Barsele area as an area of national interest. CAD 2 million is currently being collected to set up an initial drilling program in 2022. While collecting rock samples, a boulder with a gold grade of 90.8 g/t gold was found. This discovery could indicate a new source of gold mineralization. The stock exited last Friday's trading session with a closing price of CAD 0.49.
BP - Share buyback program and still high dividend
Despite the bad image, the oil price could climb 10% again this year. As one of the major oil producers, BP is benefiting from this. Experts currently expect that more than 100 million barrels of oil per day will be needed in 2022. This figure significantly exceeds experts' expectations from previous years, and the International Energy Agency has also raised its consumption estimates for 2022. As supply is not increasing significantly simultaneously, the experts expect oil prices to rise above USD 100.
BP is aware that it will have to move away from being a pure oil producer in the future. With this in mind, the Group is investing in renewable energies, hydrogen, charging stations for electric vehicles and the like. Electric charging stations are still a loss-making business, but that should change by 2025 at the latest. The cash flow from the oil business will continue to bring in money for years to invest in the new technologies and thus slowly bring about the transformation of the Group. The Company aims to be carbon neutral by 2050.
Analysts at Barclays and Goldman Sachs see the Group as one of the winners in 2022, with Barclays raising its price target from GBX 500 to 700. Currently, the stock is trading at GBX 388.70 and has already gained GBX 48 since the beginning of the year. Nevertheless, the fundamentals still compare favorably with other sectors. Dividend hunters also get their money's worth with BP. The dividend yield is currently 4%. In addition, the Company announced on January 14 that it had repurchased 5.5 million shares.
An investment in the three companies is anti-cyclical. In return, high profits and dividends beckon. Barrick Gold is certainly one of the best-known gold producers. With larger takeovers, more fantasy can come back into the share. Barsele Minerals is clearly undervalued. If it succeeds in increasing its resources, there is much more room to the upside. BP is in the process of transforming itself into a sustainable group. The profits from oil production are helping immensely.
Conflict of interest
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