Barrick Gold, MAS Gold, BASF - Turnaround in sight?

Barrick Gold - Course at pre-rally level

One of the world's largest gold producers started an impressive price rally in the first quarter of 2022: the price rose from around CAD 22 to just under CAD 33 in the first three months. But then came the turnaround. Contrary to general expectations, a weakening gold price ensured that the second quarter was characterized by price losses. The share has now returned to its original level, which is all the more surprising as the Company was able to present solid figures, most recently for its Loulo-Gounkoto project in Mali, where Barrick has been active for 25 years.

Here, the Company was recently able to announce that, as things stand, all production targets of the 2022 guidance would be achieved. Invested investors are therefore eyeing the announcement by the G7 countries to stop the purchase of Russian gold in the future in order to cut Russia off from earning foreign currency to finance the war in Ukraine. Because as a side effect, the supply of gold on the world market is likely to tighten and ensure rising prices.

MAS Gold - Good drill results and new financing tranche

Another company that could benefit from a tightening of the gold supply is Canadian junior explorer MAS Gold. The Company is active in the historic La Ronge Gold Belt mining district in the province of Saskatchewan. Here, the Company, led by mining veteran Jim Engdahl as CEO, has four properties covering an area of around 34,000 hectares. The North Lake Deposit, among others, is located in this region, which is well developed in terms of infrastructure and has very mining-friendly legislation.

Recently, MAS published the first results from its winter drilling program. The first 12 of 36 drill holes showed gold mineralization ranging from 0.49g/t up to 3.06g/t. The Company expects the remaining results from the winter drill program in the coming weeks. Currently, the 2022 summer drill program is being prepared. The Company was also recently able to close the first tranche of the financing required for this.

Approximately CAD 1.73 million was raised at a placement price of CAD 0.08. The majority was raised by management and insiders. For all shareholders, this is a good signal and a sign of confidence. Currently, the Company, valued at only about CAD 10 million, offers good entry opportunities. According to management estimates, MAS has a resource of more than half a million ounces of gold.

BASF - Restricted gas supply depresses share price

The Western sanctions are not leaving Russia cold. The country is reacting with countermeasures, even if they are not officially called that. As a result, less natural gas is flowing to Germany than ever before. Meanwhile, no one believes the official explanation of problems with the maintenance of Nord Stream 1 due to Western sanctions. The gas shortage is causing the first black clouds for companies that rely heavily on natural gas for steam production, such as in the chemical industry. BASF in Ludwigshafen is no exception.

Since the outbreak of the Ukraine war, the share price has only known one direction: south. The reasons are manifold. For example, BASF had to take write-downs of around EUR 1.7 billion on its oil and gas subsidiary DEA Wintershall, which as a German-Russian joint venture (BASF share: 73%), is suffering in the current environment. The subsidiary's planned IPO is also off the table. In addition, the Group can no longer supply its Russian partner with technology for oil and gas production, for which it was able to purchase gas at preferential terms in the past. All in all, the outlook is not rosy.

Analysts also tend to rate the share as a hold. But the Group is trying to counteract this. BASF recently announced its intention to build a large-scale heat pump at its Ludwigshafen site with MAN Energy to generate steam and thus at least partially compensate for the loss of gas supplies. The plant is to have a thermal output of around 120 MW. That will enable around 150 metric tons of steam to be generated per hour, corresponding to an annual output of about 1.3 million metric tons. However, the Ludwigshafen site requires around 20 million metric tons. At least the heat pump will save around 400,000 metric tons of CO2 per year.

The Ukraine war is undoubtedly having a strong impact on the stock market. In the case of gold producers, however, the indicators are currently positive. The shortage of gold and the threat of stagflation should at least support prices in the longer term. MAS Gold appears promising due to its low valuation. The chemical industry, on the other hand, will continue to navigate in difficult waters for some time to come.