July 13th, 2022 | 14:35 CEST
Barrick Gold, Desert Gold, First Majestic Silver - Is it worth buying precious metals shares now?
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
Barrick Gold - Strongly engaged in Africa
Barrick Gold, as the second-largest gold producer in the world, is naturally dependent on the gold price. From mid-December to the beginning of March, the Company's share price rose by an impressive 50%. If we take the gold price as a basis, which reached its annual high on April 18, we can see that the Barrick Gold share was unable to mark a new high. In the meantime, the share is below the price from which the rally started. Gold lost almost 14% in value from the high, while Barrick lost 35%. One of the reasons is the weaker quarterly figures, in which sales fell by 3.5%, and production fell by 10%.
In order to counter this trend, the group is currently very active, especially in Africa. Most recently, positive news was reported from Tanzania, Mali and the Democratic Republic of Congo (DRC). The Company is investing heavily in infrastructure there and creating jobs. By using renewable energy, many of the projects are not as affected by the price increases in the energy sector. In Tanzania, at least 500,000 ounces of gold will be produced annually over the next 10 years. Mines in Mali are expected to yield between 510,000 and 560,000 ounces of gold. In DRC, gold reserves grew, although more than 5.7 million ounces of gold were mined.
The stock is currently trying to hold support at USD 17.27. Closing prices below USD 16.78 would make a test of the next support at USD 12.65 likely. Currently, the stock is trading at USD 16.98. The dividend yield is now around 2.35%. Due to the performance dividend policy, the value could jump significantly if the gold price rises again. Much depends on the quarterly figures, which will be published on Thursday, July 14. We will then see in which direction the stock is headed.
Desert Gold - Good drill results, again
The Canadian gold explorer Desert Gold is active in Africa, more precisely in Mali. There, the Company owns one of the largest projects in West Africa, covering 440 sq km. The continent is rich in mineral resources, but for a long time investments in Africa were considered unsafe. In the meantime, conditions are improving, and investment is becoming increasingly attractive. In Mali, about 70% of exports consist of gold, and at the same time, about 30% of taxes are generated by gold mining. Accordingly, the government is eager to further develop the mining sector. The Desert Gold Project is called SMSZ and has proven 310,300 ounces of gold and 769,200 inferred ounces of gold.
On June 30, the Company announced further positive results from the Phase 2 drill program that started in April. 13 RC and 78 AC drill holes were evaluated, and peak values of 1.91 g/t gold were encountered over 32m. Drilling at the Gourbassi West North zone has modeled up to 5 lenses of gold mineralization that are 1.6 km long, approximately 130 m wide and defined to 175 m in depth. CEO Jared Scharf expressed his satisfaction, "This recently defined gold system, which is not part of our current resource, highlights the tremendous gold occurrence in the region and the potential for resource expansion and additional discoveries at the SMSZ project." Upcoming drilling is expected to increase the resource estimate.
The latest drill results confirmed the good drill results from early June when the 3 core holes all showed elevated gold mineralization up to 1.85 g/t gold. Major producers such as Barrick Gold have producing mines nearby. As such, Desert Gold may be bought out of parts of their project. Currently, the Company only has a market capitalization of about 13.8 million Canadian dollars (CAD). The stock is under pressure due to the weakening gold price and is currently trading at CAD 0.085. As soon as the gold price picks up again, the Desert Gold share price should also move upwards again.
First Majestic Silver - Costs rise sharply
While gold has lost 14% of its value in recent weeks, silver has lost almost 32%. This hits the silver and gold producer First Majestic Silver hard. At the moment, the silver future stands at USD 18.70. Looking at the last quarterly figures, one can see that the cost per ounce has skyrocketed. The Company has to spend USD 2.62 per ounce more than in the previous quarter. The All-In-Sustaining Cash Cost (AISC) now stands at USD 20.87 per ounce of silver equivalent. The increase in revenue in the quarterly figures is explained by the acquisition of the Jerritt Canyon gold mine last year. Nevertheless, the bottom line is a net loss of USD 0.02 per share.
Most recently, there was more positive news. At the annual general meeting, all resolutions presented were approved by shareholders. In addition, the Company was able to announce positive results from the drilling program at the Jerritt Canyon Gold Mine. More than 70,000m have been drilled since the acquisition. A total of 65,000m is expected to follow this year. At its peak, more than 8.39 g/t of gold was discovered. CEO Keith Neumeyer said, "We have identified high-grade underground mineralization near current mining operations. In addition, we have discovered numerous near-surface gold mineralizations that have the potential to develop into large, new gold deposits for open pit mining."
These discoveries have a positive impact on the future. Currently, however, the situation is complex. On the one hand, the cost of production is increasing, and at the same time, the price of silver is falling; on the other hand, more people will invest their money in physical silver to protect it from inflation. The next support in silver is at USD 17.01. First Majestic Silver's share is currently at USD 6.91, trying to push off from the support at USD 6.76. If it succeeds, a test of USD 9.28 is likely.
Currently, there is pressure on precious metal prices. However, this offers a good opportunity to build a first position. If it comes to the same scenario as in 2008, then the prices for gold and silver will shoot up again after the consolidation. Barrick Gold has been severely punished but can reverse the trend by increasing production in Africa. At Desert Gold, good drill results have been coming in continuously lately. It is only a matter of time before the mineral resource estimate is raised. Then the stock should also pick up. First Majestic Silver lost money in the last quarter, which could have worsened in Q2. One should wait for the numbers here.
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 hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.
Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.
The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.