17. August 2021 | 13:01 CET
Barrick Gold, Blackrock Silver, Glencore - Inflation is coming and commodities are taking off!
In recent months, it has become clear to investors that the global economy will have to contend with price increases after the pandemic. The greatest inflationary pressure comes from scarce raw materials, especially for high-tech industrial goods. The trend toward climate protection is forcing the industry to adapt its manufacturing processes to conserve resources. It requires investment in new equipment, filter systems and more efficient energy use. Explorers and mature commodity companies face different challenges: they now have to invest intelligently in future projects without certainty of how high the demand will be in 5-10 years and at what prices they can sell then. It is all a question of foresight and the validity of mathematical models!
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ISIN: BARRICK GOLD CORP. | CA0679011084 , Blackrock Silver | CA09261Q1072 , GLENCORE PLC DL -_01 | JE00B4T3BW64
"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
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 - At the start for the big gold rally
Again a super quarter for Barrick Gold. In the second quarter of 2021, revenue was USD 2.89 billion (previous year: USD 3.06 billion), adjusted profit was USD 513 million (previous year: USD 415 million). Gold production at the world's second-largest gold producer was 1.04 million ounces (previous year: 1.35 million ounces), plus 96 million pounds of copper - the new gold is becoming an important portfolio component in the wake of commodity shortages.
In 2019, Barrick Gold and Randgold Resources merged. Currently, property consolidations are underway. In one to two years, an excellently positioned company should have emerged from the merger. Currently, the figures suffer somewhat from the 15% lower gold price compared to the beginning of the year. Despite high capital expenditures, the average production price (ASIC) of an ounce of gold is a low USD 1,087. So Barrick makes a margin of 39% or USD 700 operating profit on every ounce sold.
The gold producer currently has liquidity of USD 5 billion and will pay a dividend of USD 0.09 for the second quarter. For the year as a whole, a regular dividend of USD 0.32 will be paid out. The dividend yield is 1.75% at the current share price of USD 20.5. Barrick Gold also announced the second tranche of USD 250 million of an announced capital repayment totaling USD 750 million, which will also be distributed to shareholders on September 15.
Due to the gold price, the stock is down 9.75% on Wall Street since the beginning of the year, and the current market capitalization is an impressive USD 36.85 billion. With the standard stock Barrick, investors are well-positioned for the next gold rally.
Blackrock Silver Corp - New properties in Northern Nevada
Canadian explorer Blackrock Silver is focused on exploring and developing projects in the "Silver State of Nevada." Historically significant silver discoveries in the US state included the Comstock Lode and Tonopah Silver District in western Nevada within the so-called Walker Lane Trend. Blackrock Silver's larger "Tonopah West" project covers an extensive area west of the Tonopah Silver District. The Company has staked an additional 260 unpatented ore mining claims covering approximately 21 square kilometers, more than tripling its land position in this prolific mining district.
Blackrock's goal is to metrically grade the western extension of the district and restore the Tonopah Silver District to a significant producing area. The current claims cover the northwest extent of the Pittsburg-Monarch fault system, an area known to have the thickest veins in the Tonopah District and directly associated with this structural zone. Historic underground mining stopes along the Victor vein have been up to 24 meters, with silver grades identified to date varying from 295 to 1,791 g/t silver equivalent. This has a bonanza format!
A similar scenario occurred at the Ohio vein near the Pittsburg-Monarch fault system. The new claims secure the extension of one of the major structures within the district. They include a pediment area to the north of the district where an east-west structural zone has been identified and mapped that has similar geology to the Tonopah West project. After 80,000 meters of drilling, it is a great result. The initial resource estimate is now expected to be completed by November.
Blackrock Silver shares recently consolidated to CAD 0.75, but with the recent news, they could swing up to CAD 0.88. The capitalization of CAD 110 million more than does justice to the grand project. If silver turns, Blackrock Silver is going to be a golden investment.
Glencore - Leadership change with implications
The commodities giant from Baar is making headlines again. Since the beginning of July, Gary Nagle has been head of Glencore, following in the footsteps of his predecessor Ivan Glasenberg. "Big Ivan" had shaped the commodities group for almost 20 years, in good times and bad. Glencore is currently doing much better operationally, the losses of the previous year, which ran into the billions, have been overcome, and the Company is back in the black.
Thanks to the global economy, which picked up after the first wave of the pandemic, demand for raw materials has risen accordingly - and prices have exploded along with the short supply. Both are good for Glencore's margins. Nevertheless, a messy court case in New York involving a former Glencore manager scratches the group's image. Once again, corruption is at issue, and the new Company leader must now credibly and forcefully enforce the recently revised code of conduct internally.
The 46-year-old South African also has to find a way out of the coal business: Although this is still very lucrative at present, it is torpedoing the achievement of the CO2 targets the Company has set itself. Nagle is also expected to give Glencore a high-tech swagger and position the diversified group as a producer of the important raw materials for modern technologies. A huge task lies in transparency because the public is now looking very closely at the increasingly stringent rules and compliance. The pressure from politicians, potential employees and investors is great - accountability is, therefore, a must if you want to operate successfully and sustainably.
The Glencore share is one of the best performers in the commodities sector over the last 12 months. With a current price of EUR 3.85, it has gained 101%. The next chart target lies in the EUR 4.30 to EUR 4.60 zone. We will see whether the momentum continues to this high level.
The commodity stocks presented here benefit very differently from scarcity-related price jumps. Barrick Gold and Glencore are standard stocks that should continue to show strength in this environment. In the case of Blackrock Silver, a turn in the silver price could work wonders.