December 28th, 2021 | 07:05 CET
Barrick Gold, Rock Tech Lithium, Alerio Gold: 2022 - Precious metals instead of lithium?
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"[...] We can make a big increase in value with little capital. [...]" David Mason, Managing Director, CEO, NewPeak Metals Ltd.
Alerio Gold: Will the share break out in 2022?
A series of important announcements are expected at Alerio Gold in the coming year. The Canadian gold explorer is active in Guyana in South America, where the Company owns two projects. The management team has over 12 years of mining experience in South America and has set big targets for 2022. The share is currently quoted at CAD 0.25, almost unchanged compared to the beginning of the year. However, the Tassawini project is quite advanced. On the 1,381 hectare site, CAD 34 million has already been invested in project development, and 1,279 drill holes with a total length of 47,509m have been drilled. Infrastructure, including a camp and access by air and water, is also in place.
Even first gold deposits amounting to 437,000 ounces have been indicated; inferred, another 33,000 ounces will be added. An increase in resources is expected in the coming year due to the ongoing exploration program. An environmental impact statement is also likely to be issued, and a preliminary economic analysis (PEA study) is planned to be released. Harpy is the name of Alerio Gold's second project. It is located in the region called Guyana Shield and is expected to contain over 110 million ounces of gold. Gold is already being mined successfully in the region. In the immediate vicinity is Guyana Goldfields, which produced over 124,000 ounces of gold in 2019.
So in 2022, investors can expect a flurry of newsflow at Alerio Gold. Should this be reasonably positive, higher prices are on the cards. After all, Alerio Gold's market capitalization is currently around CAD 17.5 million. As mentioned, CAD 34 million has already been invested, and if only the resources described so far are mined, then assuming a cost of USD 1,000 per ounce and the current sales price of USD 1,800, more than USD 340 million would be earned.
Barrick Gold becomes a cash machine
Investors had little joy with Barrick Gold's stock in 2021, with the industry heavyweight losing over 10% in value. Raiffeisen Bank International AG (RBI) sees a price opportunity of around 20%. They advise a price target of CAD 28.80 to buy the Barrick share. With a profit of USD 419 million or USD 0.24 per share adjusted for special effects, Barrick slightly exceeded market expectations of USD 0.23 per share on average in the third quarter. Free cash flow had even turned positive from minus USD 19 million to USD 481 million.
In the first nine months of the year, free cash flow totaled USD 1.2 billion. Accordingly, the dividend could be paid entirely from free cash flow. With higher production volumes, Barrick Gold had further reduced costs. All-inclusive costs averaged USD 1,034 per ounce in the third quarter. Debt, once a big issue at Barrick Gold, is now negligible. Barrick currently operates seven highly efficient Tier 1 gold mines with a production capacity of more than 500,000 ounces per year and low costs. The remaining mine life is over 10 years.
Rock Tech Lithium: In Tesla's neighborhood
Rock Tech Lithium was one of the big surprises in 2021. The Company wants to build Europe's first production plant for lithium hydroxide in Guben, Brandenburg. To do so, it is in the immediate vicinity of a potential major customer. Tesla's new gigafactory is just a few kilometers away. It is ready, and Elon Musk is impatiently waiting for the subsequent building permit from the authorities so that he can start production as soon as possible. At Rock Tech, it will still be a few years before production begins.
The first converter is scheduled to go into operation in 2024 and will then supply around half a million electric cars with lithium hydroxide. To achieve this, an initial investment of approximately EUR 470 million will have to be made in Guben. Once this battery factory is up and running, four more are to be built in Europe by 2029. Rock Tech could then supply around 30% of the European market. The analysts at Hamburg-based Montega Research recommend the share with a price target of CAD 9.50. It is currently quoted at CAD 6.80.
Gold mining stocks have lost significantly more in the current year than the commodity itself. Companies like Barrick are earning very well at current levels, and explorers like Alerio are further along than prices would suggest. This means upside potential for 2022. Lithium should continue to electrify the stock market in the coming year, and companies like Rock Tech should remain in the focus of investors.
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