June 28th, 2023 | 07:20 CEST
Barrick Gold, Desert Gold, Lanxess - After setbacks, is now a good time to buy?
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"[...] 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 - Undervalued
At its peak, the Barrick Gold share has lost over 23% since the beginning of May, while the gold price has only lost around 8%. The stock has also underperformed compared to ETFs in the gold mining sector. The weaker Q1 figures may also have played a role in this. Despite the lower gold production, the group expects to reach its targets. Especially in the second half of the year, production is expected to increase significantly. In addition, copper is a metal in the portfolio that should benefit from the energy transition.
Copper currently accounts for only about 18% of sales, but this share could double over the next 10 years. The Wall Street Journal's report that Barrick has approached First Quantum to expand its copper production also fits in with this. First Quantum owns Cobre Panama, a large copper mine in Central America. So far, management has rejected the move. A merger could make Barrick one of the largest copper producers in the world.
The approach confirms what CEO Mark Bristow told the Financial Times in an interview: the group is looking for takeover targets. Currently, the stock seems undervalued, especially if you look at the price-earnings ratio of the last few years and the share price. Management has launched a USD 1 billion share buyback program for a reason. In addition, the Company pays a USD 0.10 dividend per quarter plus a potential performance premium. The share is currently available for USD 16.57.
Desert Gold - With highly interesting personnel
A new era may have begun at Desert Gold. This is due to the appointment of Doug Engdahl to the Board of Directors, which was announced on June 15. He is a geologist with more than 15 years of experience with small and large exploration companies. He is also the President and CEO of Axiom Exploration Group. This Company is made up of geoscientists who use the best tools and latest industry knowledge to help their clients get reliable data. CEO Jared Scharf said, "I look forward to working with Mr Engdahl to advance the development of our Senegal-Mali Shear Zone project."
For Desert Gold, such expertise is ideal, as its flagship 440 sq km Senegal-Mali Shear Zone (SMSZ) project still holds some potential. The property hosts Measured and Inferred Mineral Resources totalling 310,300 ounces and Inferred Mineral Resources totalling 769,200 ounces of gold. The large property is surrounded by several major gold producers, and recent acquisitions have also occurred in the area. Desert Gold is also a possible target, as the Sadioka Mine is adjacent to the SMSZ property. This mine is owned by Allied Gold, which should have enough financial resources through its IPO on the London Stock Exchange.
It is not there yet, and the Company is in the process of setting up a 30,000 m drill program. Once completed, an updated resource estimate is expected. Full funding is currently lacking. Therefore, a heap leach operation in the Barani East Zone is currently under consideration, which would allow for gold production. This could then be used to finance further exploration activities. Those who want an up-to-date picture of the Company should watch the Company's presentation from the International Investment Forum, available on YouTube. The share has not yet been able to profit from the new personnel and is currently quoted at CAD 0.065.
Lanxess - Exaggeration?
The profit warning and the forecast adjustment of June 19 by Lanxess hit like a bomb. The share price fell by more than 17% in some cases. Already the figures for the first quarter were not exhilarating. Sales fell by only 2%, but EBITDA slumped to EUR 189 million, a minus of 28% compared to the previous year. The second quarter is expected to be even worse. Management expects an EBITDA of EUR 100 million. CEO Matthias Zachert commented, "This is hitting us particularly hard in Germany: here we suffer massively from adverse conditions such as high energy prices and excessive bureaucracy."
The group, which calls a unique speciality chemicals portfolio its own, has a high energy demand. These increased costs, and restrained demand are causing poor figures and thus falling margins. Lanxess is considered a pioneer in sustainability, but there are no more orders for it at the moment. The Company is well-positioned and involved in the lithium business with its partner Standard Lithium.
At its peak, the share has lost more than 46% of its value since the beginning of February. From its low at EUR 25.75, it could only recover more than 6%. One share currently costs EUR 27.53. This crash might have been exaggerated. On June 26, various corporate bodies reported insider purchases. The CEO bought shares for EUR 500,000, while other board members bought shares for about EUR 50,000, EUR 75,000 and EUR 275,000. When the management buys collectively, it can be seen as a positive sign.
There are always exaggerations on the stock market. Be it out of greed or panic. As an interested investor, you should wait for such exaggerations. Even good news fizzles out or is only sufficiently appreciated by the market later. Then one should already be on board. Barrick Gold is looking for takeover candidates and will perform significantly better in the second half of the year. Here, the discount might be too high. Desert Gold is in a mining area where many takeovers are currently taking place, has a lot of exploration potential and has brought a geological expert on board. If gold production starts, the share should take off. Lanxess has been hit hard. Now that the management is buying, one can build up a first position.
Conflict of interest
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