Barrick Gold, Desert Gold, K+S - Inflation: Is fertilizer the new silver and gold?

Barrick Gold - The gold giant takes a look at its books

The just reported indications for the first quarter of 2022 give hope for the rest of the year. Barrick Gold reported preliminary sales of 1 million ounces of gold and 113 million pounds of copper in the first quarter of 2022. As predicted, these will be the lowest quarterly figures in 2022 because, traditionally, the subsequent quarters are much stronger.

With the numbers now pre-reported, the Company is on track to meet its gold and copper guidance for the full year. According to the Company, the average realized market price for gold produced in the first quarter was USD 1,877 per ounce and USD 4.53 per pound for copper. These prices are well above the cost of production and currently flush a lot of free cash flow into the books.

However, due to the high energy costs, the sustainable production costs (AISC) per ounce have also increased by about 20%. As expected, preliminary copper production is below fourth quarter 2021 levels, primarily at the Lumwana mine, mainly due to lower grades in the tailings. In the medium term, Barrick will return to significantly higher grade mining at the site. In addition to the potential for further exploration success, the Company is advancing its pipeline of major growth projects, including Donlin Gold, Pascua-Lama and Norte Abierto. The currently released numbers are clearly in line with expectations. The stock corrected 10% in April: Collect!

Desert Gold Ventures - Barrick's deal with Tembo Gold creates fantasy

Tembo Gold's recent deal with major Barrick Gold is refocusing investors' attention on prospective properties in Africa that could come into the sights of a major producer. Exploration company Desert Gold's flagship project is the 410 sq km SMSZ project in Mali, near the aforementioned Barrick Gold. Currently planned programs in 2022 include multiple drill passes totaling 20,000 meters.

In April, CAD 1.4 million in financing was secured for this purpose. The new approximately 11.74 million shares were offered at CAD 0.12. Included is a warrant based on CAD 0.18, which, if exercised, will add a further CAD 2 million to the Company's coffers. The Mogoyafara South and Gourbassi West North zones are the focus of the execution, as these two gold-bearing systems suggest the largest deposits in the concession area.

The new Phase 2 program will focus on Gourbassi West North, which had returned 1.94 grams per tonne (g/t) gold over 30 meters and 2.75 g/t gold over 12 meters in the first step. This open 1.6 kilometer long zone has been tested to a depth of only 35 meters, is open at depth and is up to 90 meters wide. The present gold zone appears to be one of the larger systems on the property and has been tested to a limited extent. We expect good results here during the year.

With approximately 161 million shares, the Company is currently valued at only CAD 16 million. In 2021, the share price rose above CAD 0.20 after good results, suggesting a potential of up to 100% at the current level. A strong gold price in the year could provide the trigger to the upside here.

K+S - Far run

Kali & Salz AG (K+S) developed into a shooting star in 2022. The reason was the food shortages caused by the Ukraine crisis, especially for agricultural products such as wheat. For some time now, the fertilizer producer has benefited from the distorted agricultural markets, which have caused potash prices to rise steadily. Additional price increases have recently resulted from the sanctions imposed by the West against Belarus and Russia.

Although fuel prices had a counterproductive effect, higher revenues more than offset the expected increase in energy, logistics, and materials costs. Group CEO Burkhard Lohr raised his forecasts and expects operating profit (EBITDA) to rise to EUR 2.3 to 2.6 billion in 2022. However, this had already been expected by experts on average. Previously, the Executive Board had targeted EUR 1.6 to 1.9 billion, compared with slightly less than EUR 1 billion the year before.

The K+S share price has climbed more than 200% in the last 12 months. Now the time has likely come for a profit to be realized. In just 6 trading days, the share price lost 15% to currently just under EUR 30. With a market capitalization of EUR 6 billion, the expected sales for 2022 are entirely paid for, but for the following years, the experts no longer have such confidence in the fertilizer producer. Sales are expected to fall below the EUR 4 billion mark as early as 2024. The Company intends to present more precise forecasts with its quarterly figures on May 11. Despite a current exceptional year, the nervousness of investors is likely to remain high because the continuous gas supply of the German sites is not yet secured. Set a safety stop at EUR 28.50; the value has run superbly.

In times of uncertainty, many stock price movements are difficult to interpret. In commodities, shortages are traded that have not been seen for years. From this perspective, Barrick and K+S remain very interesting. Desert Gold is well suited for admixture because of its excellent property and is additionally exposed as a takeover deal.