September 8th, 2022 | 14:10 CEST
Barrick Gold, Barsele Minerals, Nordex - This will now be important
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"[...] Our SMSZ project is the largest contiguous land package of any exploration company in the region at 400km2 and overlays a 38km portion of the prolific Senegal Mali Shear Zone. [...]" Jared Scharf, CEO, Desert Gold Ventures Inc.
Barrick Gold - Weakness continues
In the past, it was often possible to recognize from the largest gold producers that there could be a trend reversal in the gold market because these producers usually have the function of a precursor. But currently, companies like Barrick Gold are underperforming the base price. Thus, the world's largest gold producer, with an annual production of over 7 million ounces, which corresponds to about 200 tons of gold, recorded a new low for the year at USD 14.53. From a chart perspective, the path to the Corona low of March 2020 at USD 12.67 would be clear. However, strong support zones are located there, which could make a long-term entry possible.
From a fundamental perspective, one can already speak of an undervaluation of the major from Toronto. Even if exploration costs increase to USD 1,200 per ounce, Barrick Gold will still have a profit margin of around 30% or USD 500. The dividend yield at the current share price level is an attractive 3.20%. In addition, another share buyback program totaling USD 1 billion is currently underway, which should bring long-term stability to the share price. Anticyclically, there is currently an opportunity to invest in the value in a staggered manner. Because with an expected long-term positive gold price development, Barrick Gold belongs in every gold portfolio.
Barsele Minerals - The share with leverage effect
On the one hand, the strong USD and possible further interest rate hikes inhibit a positive development as of today. On the other hand, there are further threats from both a geopolitical and economic perspective. In addition to the trouble spots in Ukraine and Taiwan, enormously high national debts and rampant inflation speak in favor of gold in the long term. In addition to physical gold and gold producers, investors should invest at least a small part in selected exploration companies because these show a clear outperformance when the underlying value rises in the long term.
An interesting opportunity also presents itself due to the correction that has already occurred in Scandinavia, more precisely in northern Sweden. There, Agnico Eagle operates the Barsele project of the same name together with Barsele Minerals. With a share of 55%, Agnico Eagle owns the majority, and Barsele holds 45%. It is a comfortable and low-risk position for Barsele, as Agnico Eagle bears the costs as operator. The Barsele project is located in the mining region of Västerbottens Län in northern Sweden, 600 km north of Stockholm, and covers 34,500 hectares in the Fennoscandian Shield. In recent years, Agnico Eagle, as the operator, has advanced exploration and drilled some 158,000 meters with a total of 404 drill holes completed. In 2019, Barsele released a resource estimate of 2.41 million ounces of gold. The next target is to achieve a resource estimate of 3.5 million ounces through a further 30,000 m drill program. In order to fund its pro-rata obligations, Barsele Minerals recently sought to raise only CAD 1 million in the capital markets. Due to high demand from long-term investors, the last capital increase was closed by oversubscription at CAD 1.9 million.
The stock market value of Barsele Minerals amounts to CAD 36.67 million, which is significantly less than the proportional value of the Barsele project.
Nordex - Promotion to the TecDAX
The share price performance of companies related to renewable energies is similarly disappointing as the gold price. Despite government subsidies, most manufacturers are suffering from low margins on high order volumes. The situation at Hamburg-based wind turbine manufacturer Nordex SE is worrying. In the first 6 months of 2022, the Hamburg-based company posted a negative EBITDA margin of minus 8.1%. In the same period of the previous year, this figure was still +2.5%.
At the same time, the order books are full to bursting. In July alone, the Company received ten new orders for 102 MW. The Nordex Group delivered 19 turbines for various customers, including projects in Baden-Württemberg, North Rhine-Westphalia and Mecklenburg-Western Pomerania. In the first half of 2022, the Nordex Group installed a total of 95 turbines with 440 MW in Germany, although not all turbines were able to go into operation as planned.
Having only left the TecDAX in June, Nordex is once again one of Germany's selected tech stocks as of September 19. Whether this will have a positive effect on the performance of the share is somewhat questionable.
Gold stocks are currently still suffering from a strong US-Dollar and the fear of further interest rate increases. Barrick Gold still has room to move downwards from a chart perspective. The stock market valuation of Barsele Minerals is significantly below the pro rata project value of the Barsele project. Nordex continues to suffer from a weak margin.
Conflict of interest
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