February 21st, 2024 | 07:30 CET
Barrick Gold, Desert Gold, Renk - Golden times everywhere?
The world is full of economic uncertainty and geopolitical tensions. These are ideal conditions for gold, which is still considered a safe haven. There are now several factors that point to a sustained upswing in gold prices. One factor is the increased involvement of central banks, which are increasing their reserves to an extent not seen for decades. Another factor is the discussion within the BRICS nations about introducing a new currency backed by gold as a counterweight to the dominant US dollar. Therefore, today, we look at two gold companies and shed light on Renk, a representative of the defense industry, which is also experiencing golden times.
time to read: 5 minutes
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Author:
Armin Schulz
ISIN:
BARRICK GOLD CORP. | CA0679011084 , DESERT GOLD VENTURES | CA25039N4084 , RENK Group AG | DE000RENK730
Table of contents:
"[...] We quickly learned that the tailings are high-grade, often as high as 20 grams of gold per tonne; because they are produced by artisanal miners, local miners who use outdated technology for gold production. [...]" Ryan Jackson, CEO, Newlox Gold Ventures Corp.
Author
Armin Schulz
Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.
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Barrick Gold - Decent quarterly figures
The gold mining sector, represented by the GDX, has fallen significantly since the beginning of the year, even though the price of gold is over USD 2,000 per ounce. Barrick Gold was also unable to escape this trend, partly due to the failed Pascua-Lama project, where the Company will have to invest a further USD 136 million to shut down the mine for good. Despite this gloomy chapter, the Company was able to report quarterly production of around 1.05 million ounces of gold and 420 million pounds of copper. Quarterly sales rose to around USD 3.06 billion, an increase of 10% compared to the previous year, and annual sales reached around USD 11.4 billion, representing an increase of 3%.
Operating cash flow grew even more strongly, increasing by 25% to around USD 1 billion in the 4th quarter and by 7% annually to around USD 3.73 billion. Quarterly earnings per share also improved to USD 0.84, compared to USD 0.75 in the previous year. Although free cash flow increased YOY to around USD 646 million, this is still well below the highs of over USD 3 billion in 2020. For 2024, Barrick Gold expects gold production of between 3.9 and 4.3 million ounces and forecasts all-in-sustaining costs (AISC) of between USD 1,320 and USD 1,420 per ounce.
The Company, which trades at a current share price of USD 14.65 with a market value of around USD 25.7 billion, offers an attractive valuation compared to its estimated net asset value of around USD 37 billion. The announced share buyback program is expected to buy up to USD 1 billion worth of shares over the next 12 months. This should support the share price, as should the high gold price, which experts expect to rise further. Copper production is another potential growth driver.
Desert Gold - Aiming to become a gold producer
Desert Gold Ventures is an exploration and resource development company focused on the 440 sq km Senegal Mali Shear Zone (SMSZ) gold project in West Mali. Mali is Africa's fourth largest gold producer, and the Company's property offers significant exploration potential, although over 23 gold zones have already been identified. The current mineral resource estimate is over 1 million ounces of gold and relates to only 5 of these gold zones. What makes the project even more exciting is its proximity to well-known gold producers such as B2Gold, Barrick Gold, Endeavour Mining, and Allied Gold.
The Company is planning an extensive drilling program of 30,000m to expand the resource. At the same time, a Preliminary Economic Assessment (PEA) of the Barani East and Gourbassi West gold zones is being carried out. This assessment will determine the profitability of gold extraction through heap leaching. Due to the near-surface mineralization, gold could be extracted using a mobile infrastructure. If the study yields positive results, the next goal is to start gold production to finance further exploration of the property from gold mining. This would be a significant milestone. As soon as the Company can finance itself, it is only a matter of time before the mineral resources can be adjusted upwards.
An increase in mineral resources could fuel takeover fantasies. After all, the big players are all scattered around the property. The Company is currently planning a private placement of up to 10,000,000 units at a price of CAD 0.07 per unit to raise up to CAD 700,000. The funds will be used to finance the Preliminary Economic Assessment mentioned above. More information is available at researchanalyst.com/en/updates/share-news-desert-gold-all-signs-point-to-a-storm. CEO Jared Scharf will present live at the 10th International Investment Forum today, February 21, at 18.30 CET. The share is currently trading at CAD 0.06 and thus has a market capitalization of just CAD 11.7 million. This means that one ounce of gold is valued at just CAD 11.70.
Renk - Successful stock market debut
There is a gold-rush mood among defence companies in a world characterized by increasing geopolitical tensions and escalating conflicts. The heightened global need for security is driving demand for defense technology and equipment to unprecedented heights. Countries worldwide are upgrading to strengthen their defense capabilities and respond to the uncertain international situation. This development has led to a significant increase in defense spending budgets, giving defense companies an unexpected boost. The Renk Group, which made its stock market debut in its second attempt on February 7, is also benefiting from this.
The Renk Group is a company that specializes in technologies for drive and transmission solutions. RENK's business model covers the areas of defense and energy, with the Company offering products for both sectors. Around 70% of sales are generated with gear units for the defense industry. It is therefore not surprising that KNDS, a merger of the defense companies Krauss-Maffei Wegmann and Nexter, secured shares in the Company for EUR 100 million at the IPO and was also given a seat on the Supervisory Board.
In addition to the defense industry, the Company produces for the renewable energy sector, such as providing propulsion systems for wind turbines or hydrogen technology. Renk CEO Susanne Wiegand plans sales growth of around 10% per year. With a current order backlog of around EUR 4.5 billion, this should be achievable with capacity expansion, as turnover in the first nine months amounted to EUR 653 million. The share, which was issued at EUR 17.50, rose to EUR 29.84 in the following days and is currently trading at EUR 28.36.
As long as the gold price remains above USD 2,000, gold companies are profitable. The recent pullback for all companies in the sector represents a good entry opportunity. Barrick Gold is actively buying back shares on a large scale and paying dividends. The undervaluation of Desert Gold is evident, as one ounce is currently valued at only CAD 11.70. In addition, there is takeover fantasy. Once the Company starts producing gold, these price levels will likely not be seen again. Renk will have much to do in the coming years because its order books are full. There is currently no sign of a downturn in the defense industry.
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.
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