20. August 2021 | 12:44 CET
Barrick Gold, Desert Gold, K+S - Dark clouds everywhere?
Since the publication of the July minutes of the FED meeting, the indices have been going down. Investors do not like that the minutes held out the prospect of a possible end to the financial stimulus at the end of the year. The inflation rate in the US was 5.4%, as in the previous month, and currently remains high. Following the port closure in China, it can be assumed that supply chains will continue to be disrupted. In addition, the Delta variant is causing rising incidences. Therefore, the market is currently nervous and anticipates a possible correction. Gold is still popular as an inflation hedge. We look at three companies today and see if dark clouds are gathering there too.
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ISIN: BARRICK GOLD CORP. | CA0679011084 , DESERT GOLD VENTURES | CA25039N4084 , K+S AG NA O.N. | DE000KSAG888
"[...] Troilus has the potential to be an entire gold belt. All of our work to date points to this, and each drill hole makes the picture we have of the Troilus project much clearer. [...]" Justin Reid, President and CEO, Troilus Gold Corp.
Barrick Gold - Currently in a downward trend
At Barrick Gold, light and dark alternate. The quarterly figures were decent, with a net income of USD 513 million compared to USD 415 million year-on-year. Very positive considering that production was down by more than 100,000 ounces due to a machine failure. So the high gold price more than compensated for this decline. On a less positive note, the cost per ounce increased by USD 56 year-on-year to USD 1,087.
The Company also owns large copper deposits, which puts it in a somewhat more diversified position for the future. In addition, Barrick is investing heavily in developing new gold deposits to build up its reserves for the coming decades. The results of the Brownfield project will more than compensate for the resources mined this year. The Company has also become more geographically diversified.
For shareholders, there is a special dividend of USD 0.42 this year in addition to the regular dividend of USD 0.36. Management has raised the dividend sharply in recent years. Nevertheless, it was recently announced that billionaire Druckenmiller sold over 3.6 million shares. Perhaps one of the reasons why the stock has not taken off, despite the recent rise in gold. Currently, one should wait until the share leaves the downward trend channel.
Desert Gold - Waiting for news
2020 was the year for Desert Gold and its shareholders. The stock marched from CAD 0.05 to CAD 0.35. A consolidation followed this to CAD 0.12 by the end of October 2020. Since then, a sideways phase has formed between CAD 0.12 and CAD 0.23. Currently, the share can be bought for about CAD 0.14. People are eagerly awaiting the completion of the drilling program, which was targeted for the end of July.
The Company has already located gold deposits with the SMSZ project in Mali with values of 6.28 g/t gold. At 410 sq km, the property is the only non-producing area. The project is surrounded by major mines and gold producers such as Barrick Gold and B2 Gold. With the completion of the drilling program, news can be expected, and if they turn out to be as good as last year in the approach, you know what potential lies in the stock.
The last news on June 22 reported the completion of more than 82% of the planned drill program with over 230 holes. Since then, investors have been waiting for more news. We expect completion in the coming weeks. Once all results are in, a NI 43-101 resource estimate will be made, which will allow the Company's potential to be quantified even more precisely.
K+S - Good figures and debt repayment
Since the price of potash has been higher than it has been for a long time, K+S has been developing very well. With the announcement of the half-year figures, even the annual forecast was adjusted upwards. No wonder because EBITDA was increased by 50% compared to the same half of the previous year, and costs were reduced at the same time. CEO Dr. Lohr expects EBITDA to be between EUR 700-800 million at the end of the year. Looking at the EBITDA of EUR 267 million in 2020, one can see how good the results will be this year.
The share recently came under pressure after BHP announced its intention to open a potash mine in Canada. However, production is not scheduled to start until 2027, so this news should not be taken too seriously. That is also the view of competitor Nutrien's CEO, who went on record saying, "It will take another decade for Jansen to have significant production." The industry expects growth of 2-3% per year through 2030.
The main problem with the group remains its debt mountain. The sale of the salt business in the US brought in EUR 2.6 billion, pushing the debt-to-earnings ratio down to a factor of 2, which is a big step towards more relaxation. The share has lost more than EUR 2 from its high of EUR 13.35 for the year. A double bottom seems to be forming at EUR 10.92, which is a bullish sign. Kepler Cheuvreux considers the fair value of the share at EUR 22.
The producers of commodities are doing well. As an investor, one should pay attention to the chart technique, as not all good figures result in a price gain at the same time. Barrick Gold looks undervalued at the current level. With Desert Gold, you have to keep an eye on the news to get in quickly if the results are promising. K+S is still in an uptrend; after the sell-on-good-news and the message of the competition, the rebound should succeed with a double bottom.