November 8th, 2022 | 11:18 CET
Barrick Gold, Manuka Resources, Newmont - Has the bottom been reached?
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"[...] Our SMSZ project is the largest contiguous land package of any exploration company in the region at 400km2 and overlays a 38km portion of the prolific Senegal Mali Shear Zone. [...]" Jared Scharf, CEO, Desert Gold Ventures Inc.
Barrick Gold - Positive reaction after quarterly figures
The world's second-largest gold producer showed a positive reaction after the publication of the weak figures for the third quarter. After the sell-off immediately after the report, the price fell to the critical support line at USD 12.67, which has been tested several times in recent years. This is also the Corona low from March 2020, but the zone was defended with high volumes. Currently, the Barrick price is quoted at USD 14.31. The next important step, which would significantly brighten the chart picture, would be the overcoming of the downward trend formed since April of this year at USD 16.03.
Barrick Gold reported a significant decline in its production figures in the third quarter. Thus, the Company failed to exceed the million-ounce wall in the months of June to September, producing 988,000 ounces of gold. The average price achieved was USD 1,722 per ounce, compared to USD 1,861 per ounce in the previous quarter. In the same period, net profit slumped by over 50% from USD 488.00 to USD 241 million. Free cash flow was clearly in negative territory at minus USD 34 million. The dividend, consisting of a base of USD 0.10 per share and a performance dividend of USD 0.05 per share, totals USD 0.15. That is a larger payout this quarter than Barrick took in at USD 0.14 per share.
Manuka Resources - Youngest gold producer with huge potential
Simply put, the market has yet to realize the potential of Australia's youngest precious metals producer. With a market capitalization of AUD 38.61 million, the stock, which trades on the ASX and in Frankfurt, is currently working on a bottom at AUD 0.14. A breakout above the resistance level at AUD 0.16 should generate follow-up potential to the downward trend at AUD 0.21 formed since February 2021.
The opportunities for long-term disproportionate price gains are spread over several shoulders. On the one hand, Manuka Resources owns two promising mining projects in the Cobar Basin with a total exploration zone of 1,150 sq km. With the Mt. Bobby gold project, the Australians own one of the continent's historically richest gold mines, which mined 500,000 ounces of gold at an average grade of half an ounce per ton of ore in past production. In 2020, this was put back into production with a target of producing 24,000 ounces of gold. This target was exceeded by a factor of 2. Company management believes the resource has further significant potential at depth. The Company expects to submit a new mine plan in the fourth quarter and then restart production in early 2023.
The Wonawinta Silver Project is the Company's second prospective asset. With a mineral resource estimate of 51 million ounces, the property is one of Australia's largest silver producers. In addition, 200,000t of lead has been estimated to be present. Another asset is the processing plant available at the deposit, which can treat both precious metals. The project is currently in production and is processing the 515,000t stockpile located on the ROM pad adjacent to the plant. Production is currently dormant but is expected to be activated quickly if the base price increases.
With the acquisition of the South Taranaki Bight (STB) project, the transaction is nearing completion. Manuka Resources is not only entering a new league but will become one of the more prominent players in the green economy in the future. The STB project, located off the west coast of New Zealand, is a VTM iron sands project with vanadium, titanium and magnetite. The critical mineral vanadium is crucial in improving energy storage and battery life through the vanadium redox flow battery.
The STB project has a granted mining license and a large JORC resource of 3.8 billion t. With a vanadium grade of 0.5%/t based on initial estimates of annual mining rates for the STB project, estimated annual vanadium production would be approximately GBP 55 million. This would make Manuka Resources the third largest vanadium producer after China and Russia and could produce 15% of the global supply annually. Manuka's vision is a project that would initially produce about 5 million tons of vanadium-bearing titanomagnetite iron ore concentrate per year over a 20-year mine life.
In early November, seller Trans-Tasman Resources Limited (TTRL) received a change of control approval from New Zealand Petroleum and Minerals, enabling Manuka's acquisition of TTR. Manuka and TTR had previously signed a binding letter of intent in August, under which Manuka would acquire 100% of TTR through the issuance of approximately 180 million shares in Manuka Resources Ltd. At closing, TTR will become a 100% subsidiary of Manuka Resources.
Newmont - Net profit plummeted
The gold mining leader suffered a similar fate to its industry colleague Barrick Gold. Production in the third quarter was 1.49 million ounces of gold and 299,000 attributable ounces of gold equivalent. In the first nine months, production totaled 4.33 million ounces. The full-year guidance is 5.90 million ounces, so the number one gold producer remains on track. Adjusted EBITDA for Q3 was USD 850 million, down significantly from USD 1.316 billion in Q3 2021.
Operating cash flow dropped significantly to USD 466 million from USD 1.133 billion in the previous quarter. Net income plummeted to USD 212 million, or USD 0.27 per share. That compares with USD 483 million, or USD 0.60 per diluted share, in the second quarter. Newmont also pays each shareholder a dividend of USD 0.55 per share, despite earnings per share of just USD 0.27.
Unlike Barrick, Newmont's stock has yet to test the 2020 low of USD 33.00 but is on a strong vertical support line at USD 41.00. To the upside, the next target would be the closing of a downside gap, resulting from July, at USD 51.39.
After the announcement to at least slow down the pace of interest rate hikes, the precious metals market started a strong countermovement. In the process, Barrick and Newmont were able to break away from their lows for the year and still have further potential. In the long term, Manuka's stock should benefit from the rising precious metals price simply because of its two gold-silver deposits. The completion of the acquisition of the vanadium deposit also puts the Australians in a new league.
Conflict of interest
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