03. June 2021 | 09:53 CET
Barrick Gold, Scottie Resources, Yamana Gold - Joe Biden, Elon Musk, Janet Yellen and the five-month high in gold
Whether we like it or not, there are people whose statements fundamentally move the global stock markets. When Joe Biden announces economic stimulus programs worth billions, Elon Musk suddenly discovers his heart for the environment after months of hype and thus sends Bitcoin on a downward slide, or the current US Treasury Secretary and former head of the Federal Reserve Janet Yellen suddenly thinks out loud about rising interest rates, investors around the world listen closely. Fortunately, there is one asset class that is relatively unimpressed: Gold. Below are three investment ideas for the precious metal's new bull market!
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ISIN: CA0679011084 , CA81012R1064 , CA98462Y1007
"[...] 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 - Investors are happy about a special dividend
4.2% in April 2021 - Inflation in the US was last this high in 2008. And after bitcoin also suffered losses of more than 20% in recent days, investors are longing for investment alternatives with lower volatility. Traditionally, investors like to shift parts of their assets into gold in such cases, which has always proven to be a reasonably safe haven in the past. However, gold producers can also represent an exciting investment alternative in these waters. One of the most exciting companies is the Canadian Company Barrick Gold, which at the beginning of the Corona Crisis also served investor legend Warren Buffett as an emergency anchor for a short time. Even though the latter, with his well-known aversion to precious metals in light of rising global vaccination figures, has since unwound his position, it still shows that he assigned Barrick Gold the highest relevance of all mining companies.
And the Company continues to score with excellent newsflow. First-quarter 2021 net income was up a whopping 78% at USD 507 million, thanks to the recent surge in commodity prices, while revenue rose about 9% to USD 2.96 billion. In addition to the quarterly dividend of 9 US cents per share, which had already been set in advance, the Company was thus able to distribute an additional dividend of 14 US cents per share to its shareholders from the extra cash flow generated. Incidentally, this was all achieved in the face of a 12% decline in production. According to the Company, this is not expected to play any role in achieving the production targets for 2021.
The rest of the newsflow is very positive. On May 25, the Company provided an overview of its Nevada Gold Mines operations, a joint venture with Newmont, the current number two producer of gold globally, in which Barrick holds an interest of over 60% as operator. In addition to steady progress in its sustainability activities, as reflected in an increasing increase in the Company's ESG ratings, it has also plausibly set production targets for the next ten years, even with a very conservative gold price trend.
Given the emerging bull market for gold, Barrick thus remains one of our favorites for the portfolio, for which analysts currently forecast a price potential of around 20%.
Scottie Resources - Full coffers thanks to a private placement
The day before yesterday, Scottie Resources, a company operating in the resource-rich British Columbia Golden Triangle, completed a private placement of so-called flow-through shares at a price of CAD 0.27 for a total volume of around CAD 7 million. This unique feature created by Canadian tax law allows domestic investors to offset part of the Company's exploration costs, which must be incurred in the state of British Columbia, against their taxable income as a tax-deductible investment.
The debt-free company will receive approximately CAD 6 million from the acquisition of AUX Resources, which is now expected to be completed in June through a one-for-one share swap. Thus, the Company is ideally equipped to explore further its 100% owned properties in one of the best mining regions in the world. The merger of the companies will double the chances of success for shareholders in one fell swoop. Successful exploration of Scottie's two flagship projects, Scottie Gold Mine and Cambria, would pay off directly for AUX Resource shareholders. Conversely, the success of AUX's flagship Georgia Gold Mine project would also be profitable for Scottie shareholders.
We are encouraged by the high cash balance and the fact that the Company remains debt-free. Spectacular acquisitions near Scottie, such as GT Gold by Newmont or Ascot by Yamana, together with the current development of the gold price, indicate great potential.
Yamana Gold - Analyst favorite
Analysts agree, given the excellent key figures of the Canadian mining Company Yamana Gold, the share is much too cheap. On average, the price target of the experts is CAD 7.81, which, given the price currently paid for the Company's share certificates, corresponds to a price potential of a good 20%. Since July 2020, the opinion of the analysts and the price performance diverged for a long time. Now the share certificates are moving upwards in a targeted manner. For investors who want to expand their portfolio in the mining sector, Yamana is, therefore, an attractive investment for this reason alone.
Just how attractive becomes clear when one looks at the figures. The Company, which operates exclusively in the Americas, was able to report an 18% increase in revenue to USD 422 million for the opening quarter of 2021, with a 5% expansion in production volume compared to the same quarter of the previous year to around 232,000 tons of gold equivalent. The cash flow generated was approximately USD 80 million, with net income climbing about 20% to USD 54.7 million. In the process, net debt was reduced from USD 664.3 million to USD 105.3 million.
In total, Yamana Gold has about USD 1.4 billion available for its further business activities or acquisitions. The Company is looking at increasing production in the second half of the year with falling production costs. Anyone who does not build up a position with this mixture of business figures, market data, gold prices and high inflation should not complain afterward.