02. July 2021 | 13:04 CET
Barrick Gold, Desert Gold, Steinhoff: Knowledge instead of hope and fear
Gold has recently gone under the wheels, but that does not necessarily mean anything. The experts at Commerzbank are still sticking to their gold price forecast of USD 2,000 by the end of the year. Given the recent correction, the potential for price gains is therefore even greater. We outline how investors can invest based on two companies from the gold sector. We then distinguish speculative gold investments from gambler stocks.
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ISIN: BARRICK GOLD CORP. | CA0679011084 , DESERT GOLD VENTURES | CA25039N4084 , STEINHOFF INT.HLDG.EO-_50 | NL0011375019
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Barrick Gold: Where is the liberation blow?
Barrick Gold's stock is considered the gold standard by many retail investors. If you ask people about typical gold stocks, they usually always mention Barrick, even though the Company is "only" number 2 worldwide behind Newmont. Barrick Gold operates numerous mines in all the major mining regions of the world. It means that Barrick is well-positioned to compensate for regional problems, such as natural disasters or even strikes. The downside of this solid positioning is that Barrick's stock has little imagination. The share generally moves in lockstep with the price of gold. Last year, Barrick was flush with cash and had strong free cash flow. However, because of the pandemic, it was challenging to identify takeover targets and make moves. Investors resented Barrick's efforts and only sullenly accepted the special dividend paid out in the fall. Investors would have preferred a takeover.
Barrick Gold is still looking for potential takeover targets. The copper sector also remains interesting for the Company, but at the moment, almost everything revolves around gold. With the industrial metal copper, the Company would be more broadly positioned and benefit from future trends, such as e-cars. However, the extent to which Barrick Gold is serious about copper remains to be seen. Other acquisitions would also have to be of a specific size to impact the share price positively. With rising gold prices, Barrick will also gain again, but the potential of the share is somewhat limited.
Desert Gold: Making progress
Desert Gold, on the other hand, is of a completely different caliber. Unlike the world's second-largest gold producer, Desert Gold's resources are valued much lower. The reason: Desert Gold is not yet in production and is developing its SMSZ project in Mali step by step. The project is located in the same geological regions as neighboring producing mines of Barrick Gold and B2Gold. Recently, auger drill results north of Gourbassi West showed promising indications of gold deposits. The results are expected to be confirmed by further drilling. In the event, the results of the exploration work could more than double the strike length of the existing deposit. In total, Desert Gold is drilling more than 20,000 meters in 2021 to advance the project.
Last year, the Company made a name for itself thanks to outstanding gold grades and caused a steep rise in share prices. In the meantime, the share has remained at its current level for several months. Last summer, the share price was more than twice as high. Given further promising drill results, as well as illustrious anchor shareholders, such as Merck, Leede Jones or Ross Beaty, gold investors should keep the shares of Desert Gold on their radar. Smaller stocks that have yet to develop projects offer leverage to the gold price, especially during rising gold prices.
Steinhoff: A never-ending story?
Shareholders of Steinhoff are also hoping for exorbitant profits. The furniture group was rocked by an accounting scandal years ago. Since then, the Company has been facing lawsuits. The claims, amounting to billions, could endanger the existence of the entire Company. There have been repeated references to possible settlements and a resolution of the legal disputes. That would also help the stock, which has been a penny stock for a long time, get back on its feet. But the mills of justice grind one thing above all - slowly. And that is why the speculation surrounding the Steinhoff share is also characterized by many delays and disappointed hopes. Instead of betting on the outcome of complex legal proceedings, investors who are convinced of rising prices for gold can also invest speculatively with Desert Gold, but in a much more predictable way. Given the circumstances, Steinhoff's stock is nothing more than a gamble. Even if the legal disputes end positively, Steinhoff remains a highly indebted furniture group. The potential for the share is limited in any case.