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December 9th, 2021 | 04:57 CET

Barrick Gold, Barsele Minerals, Merck KGaA - Much movement in the market

  • Gold
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Currently, there is little movement in the gold market. The gold price peaked at around USD 2,070 an ounce in the summer of last year, and it is now consolidating around USD 1,800. Investors prefer to invest in higher-yielding assets such as equities or cryptocurrencies despite the economic environment with high inflation and historically low-interest rates. Behind the scenes, however, a lot is going on in the gold market. Most recently, for example, Tembo Gold announced its entry by Barrick Gold, with further acquisitions to follow.

time to read: 3 minutes | Author: Carsten Mainitz
ISIN: BARRICK GOLD CORP. | CA0679011084 , BARSELE MINERALS | CA0688921083 , MERCK KGAA O.N. | DE0006599905

Table of contents:

    Barrick Gold - Will more acquisitions follow?

    The industry has been characterized by several decisive trends for years. Worldwide, the gold grades of projects are declining. In addition, there is an increasing lack of high-quality development projects. In addition, reserves, i.e. gold deposits that have not yet been mined, are declining.

    Major producers such as Barrick Gold are increasingly focusing on acquisitions and the further development of their own projects and exploration activities. In this area, experts expect a significant increase in M&A activity. In the course of the currently high gold prices and corporate profits and strongly increasing cash flow generation, in addition to a debt reduction, substantial funds are available for acquisitions.

    One transaction, relatively small for Barrick Gold but all the more historic for the Tembo Gold exploration company, is the strategic investment in the Tembo Gold Project in Tanzania. Barrick Gold operates the high-grade Bulyanhulu mine in the Lake Victoria goldfield in the East African country. In recent years, the old government, hostile to mining, caused standstills and a flight of capital. Only after the election of a new state president, who supports the industry with subsidies, is the sector making a comeback.

    Directly adjacent to the major's Bulyanhulu mine is the Tembo Gold Project, in which Barrick Gold has now taken a 5.5% stake. In addition, six licenses were acquired for USD 6 million. Going forward, Barrick Gold committed to investing at least USD 9 million in the newly acquired license area over four years following the transaction's closing, which would add another USD 45 million to Tembo Gold's coffers in a best-case scenario.

    Barsele Minerals - Top project in Northern Europe

    Another high-grade development project is located in northern Sweden. It is operated through a joint venture with the major Agnico Eagle. With 55% ownership, Agnico Eagle owns the majority, with Barsele holding 45%. This position is comfortable and low-risk for Barsele, as Agnico Eagle bears the costs as operator. Barsele itself does not have to spend any cash until a pre-feasibility study is completed. However, after completing the pre-feasibility study, the major can acquire another 15% in the project, bringing it up to 70%.

    In recent months, both joint venture partners presented a letter of intent under which Barsele Minerals could acquire the project outright. Although this expired at the end of October, a joint deal is to be further refined in the future.

    The eponymous Barsele project in the northern area of the Scandinavian country covers a size of 47,000 hectares. It stands for a potential of more than 5 million ounces of gold, according to the management of the Belcarra Group, which leads the fortunes at Barsele Minerals. Back in 2016, the Royal Bank of Canada (RBC) conducted a valuation of the Barsele Gold Project for Agnico Eagle. At a gold price of below USD 1,350 at the time, the experts calculated a project value of USD 375 million.

    The proposed transaction was worth USD 45 million. Agnico would have held around 15% of the shares in Barsele Minerals upon completion of the capital measure. Barsele Minerals is currently valued at a market capitalization of CAD 59 million. If the deal goes through despite the expiration of the LOI, the undervaluation would come to light.

    Merck KGaA - Forward-looking transaction

    DAX-listed Merck already entered the electronic materials business for the semiconductor industry in 2019 with the acquisition of Versum. The Darmstadt-based company plans to expand this with investments of more than EUR 3 billion by 2025.

    Because of the chip shortage, the Merck Group now wants to create a new platform called Athinia to improve data analysis in the semiconductor industry. For this reason, the cooperation with the US data specialist Palantir is to be expanded. The platform is intended to reveal better transparency in supply chains to combat the chip shortage that continues to loom.

    A press release said that both chip manufacturers and suppliers are to communicate on the platform to achieve efficiency gains. It will also provide industry players with a deeper understanding of the interactions between materials and processes in semiconductor production facilities.

    Although gold prices have been hovering around the USD 1,800 per ounce mark for months, the market for acquisitions is already underway. Barrick Gold bought an initial 5.5% stake in Tembo Gold. Barsele Minerals is also likely to see some action. If the deal with Agnico does go through, the stock is clearly undervalued. Merck is expanding for the future and countering the semiconductor crisis.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.

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    Der Autor

    Carsten Mainitz

    The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.

    About the author

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