16. March 2021 | 10:30 CET
Barrick Gold, Blackrock Gold, Berkshire Hathaway - is Warren Buffett always right?
Gold pays no interest and no dividends. The precious metal is in demand as a crisis currency and as an asset - for diversification and inflation protection. It can be assumed that with the increasing popularity of cryptocurrencies, there has also been a shift from gold to Bitcoin & Co. Physical demand is again coming from the jewelry industry. A rapid rise in the gold price, as seen last year, makes the profits of producers bubble and the prices of precious metal shares rise strongly across the board, especially in the explorer sector. The current consolidation of the gold price offers good entry opportunities because the next crisis is already on the doorstep.
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ISIN: CA0679011084 , CA09258M1014 , US0846701086
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
BARRICK GOLD CORPORATION - Gold plus
With the price of gold at around USD 1,700, a good way off the highs of last summer, it is hardly surprising that the share certificates of one of the world's largest gold producers are not rallying at the moment. The Toronto-based Company is currently valued on the market at CAD 46 billion. Analysts are still convinced of the prospects of the title and formulate a price target of CAD 38, which is a potential of almost 50% to the current price level. A few months ago, however, the experts were more optimistic with an average price target of CAD 42.
Barrick owns many of the world's most productive gold areas. In the past fiscal year, the Group produced 4.76 million ounces of gold and 457 million pounds of copper. Although gold production dropped noticeably by 15% compared to the previous year and copper production increased by only 5%, the Group increased sales by about one-third and more than doubled profits. This fact proves beyond doubt the significant impact of rising commodity prices, as we saw last year.
So investors who own the Barrick share primarily benefit from rising quotations of the precious metal. Since the Group is involved in several copper projects, the price development of the industrial metal is equally significant. Market experts expect the price of copper to rise in the wake of increasing demand from the electromobility sector. Those looking for a solid and diversified player in the commodities market have found it.
BLACKROCK GOLD CORP - Silver is the new gold
The exploration Company Blackrock Gold announced yesterday that it would rename itself, Blackrock Silver. With this, the Canadians consider the fact that the commodity focus and the real potential of the projects are to be seen in the field of silver. In addition, the two gold and silver projects on which Blackrock is focusing are also located in the "Silver State." Referring to the US state of Nevada, which bears its name because of famous silver discoveries in the late 19th and early 20th centuries. Nevada is one of the best mining jurisdictions globally and has a high production of gold and silver. Industry giant Barrick Gold, for example, produces just over half of the gold in the "Silver State".
Nevada's significant silver discoveries included the Comstock Lode and Tonopah Silver District in western Nevada within the so-called Walker Lane Trend. The Company's larger "Tonopah West" project covers a large area west of the Tonopah Silver District. Blackrock Gold's objective is to prove the district's western extension and restore the Tonopah Silver District to a significant producing area. To this end, 40,000 meters are being drilled as part of the current drilling program. The goal is to be able to produce a resource estimate by the end of 2021.
Historical production data from the Tonopah Silver District suggests an output of approximately 170 million ounces of silver and 1.8 million tonnes of gold from the entire district in the past. The ratio of almost 100:1 proves that this territory is a region with uncharacteristically large silver content, usually observed only in South American countries. And this provides another reason for the Company's name change. Yesterday, the share price reacted to the Company's announcement with gains. We are sure that the results of the drilling program will further boost the share. With a market capitalization of around CAD 95 million, the Company is still a flyweight.
BERKSHIRE HATHAWAY INC CL B - Only briefly invested in gold shares
"The market is always right" - or so goes a stock market saying. Is the Oracle of Omaha always right? The answer is: very often, but not always. The head of the investment Company Berkshire Hathaway is undisputedly an excellent, far-sighted investor. The list of bad investments of the 90-year-old Warren Buffett is not long. In recent years, the value investor surprised, among other things, with entry into Apple, but he has recently significantly reduced this position. Buffett is better known to the public for long-term investments such as Coca-Cola or the insurance giant Geico. The private equity firm also holds a 21.5% stake in China's BYD.
The value investor complained in recent years about a lack of lucrative investments. In part, he found them during the Corona Crisis. But not to the extent one might suspect. Uncharacteristically, he bought back his shares for about USD 25 billion last year - a clear indication of a lack of alternatives.
Equally atypical was Buffett's entry last year into Barrick Gold, albeit on a very small scale. This entry received a lot of media attention, as the value investor does not typically get involved in this sector. All those who saw this investment as an initial position are now disappointed. Because according to the Company, Berkshire has already sold the entire position again at the end of last year. So investors now have to make investment decisions in the gold sector without the wisdom of the Oracle of Omaha. However, with a market capitalization of USD 600 billion, the holding Company is now only a "hold" for most analysts. We will see who is right.