August 1st, 2022 | 13:05 CEST
Barrick Gold, Tocvan Ventures, Newmont - Gold stocks facing a renaissance?
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"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Barrick Gold - Waiting for the final figures for the 2nd quarter
The good news for all investors of Barrick Gold, the strong downward trend has stopped for now. For weeks, every small recovery was sold off. For the first time since mid-May, there have been three new consecutive highs. Of course, this is partly due to the climbing gold price, but there were also days before when the stock ignored the upward trend in the gold price. The second largest gold producer also produces copper, and there, too, prices have recently fallen significantly. Added to this is inflation, which has driven up costs.
After Barrick's production in the 1st quarter remained below expectations, the preliminary figures for the 2nd quarter fare much better. Gold production increased by 5% compared to the previous quarter. Copper production was up 19%. In any case, the Group expects stronger production in the second half of the year. Therefore, the production forecasts are on track. However, total costs per ounce will be 3-5% higher than in the 1st quarter. Therefore, one can wait with excitement for the final figures for the 2nd quarter.
Competitor Newmont had clearly missed its forecasts and was punished for it. But like Newmont, Barrick will continue to earn money. This is also the assumption of the analysts, who expect a profit of USD 0.22 for the 2nd quarter and assume an average price target of USD 24.80. Currently, the share can be purchased for USD 15.74. If the dividend remains stable at USD 0.20 per quarter, the dividend yield is around 5%. There is still upside potential in the stock.
Tocvan Ventures - Continuous good news
Tocvan Ventures is a Canadian gold and silver explorer that owns two highly prospective projects in Mexico. The country is known for its high-grade gold and silver deposits and ranks #1 in exploration investment in Latin America. Both of the Company's projects are located in Sonora, which produces 37% of the country's gold, which is also tops among all Mexican states. The properties are both located near producing gold mines. The Company's flagship property is the Pilar project, which has found up to 33.4 g/t gold and 1,090 g/t silver. In September 2021, the Company acquired the El Picacho project, which has historical results of up to 28 g/t gold and 110 g/t silver.
On July 6, the Company announced surface results from El Picacho. These results identified an additional 450m zone that has not been drilled to date. Samples contained up to 7.19 g/t gold and 197 g/t silver. In addition, the samples assayed high grades of lead and tin. 4.8% lead and 7.1% zinc are significant mineralization. Drilling at the Pilar property was completed on July 21. A total of 7 holes were drilled for a total length of 1,382m. Results are expected in the coming weeks. Results from the initial metallurgical samples are encouraging. Gold recovery rates for the first 4 samples ranged from 88.9% to 96.9%. The Company's strategic partner Minera Castor, which operates a heap leach plant, is responsible. The results have yet to be validated.
Before the end of 2022, the Company plans to present an initial resource calculation, conduct technical studies and mine larger quantities of test material. The goal is to become a producer in the short term. Tocvan Ventures has the potential to do so, having closed a CAD 5.125 million private placement to Sorbie Bornholm LP on June 30. The British investor subscribed for 3.2 million shares at CAD 0.82 and accepted 2,501 convertible debentures with a par value of CAD 1,000 at an interest rate of 1%. The debentures are convertible into 1,220 common shares. The Company is thus funded for the next 2 years. All the good news has meant that the stock has performed comparatively well in the current market environment. As an investor, one currently has the opportunity to enter at CAD 0.68, significantly cheaper than the investor at CAD 0.82.
Newmont - Crash after quarterly figures
The world's largest gold producer, Newmont, produced about 7.3 million ounces of gold equivalent in 2021 at a total cost (all-in sustaining cash cost) of USD 1,062 per ounce. That generated USD 4.3 billion in cash. The bottom line was free cash flow of USD 2.6 billion. At that point, all was still right with the world. A lot has happened since then. Inflation is dragging up costs, and the largest gold producer is clearly feeling it. Already in Q1, total costs had shot up to USD 1,156.
With the announcement of the figures for the 2nd quarter, the share collapsed. Analysts had expected a profit of USD 0.61 per share. In reality, the Group was only able to report a profit of USD 0.46, despite production increasing to 1.83 million ounces of gold equivalent. Total costs continued to rise to USD 1,199 per ounce. In addition, management capped production guidance at 6 million ounces. Total costs are expected to stand at USD 1,150 at the end of the year. As a result, costs will have to be cut significantly in the second half of the year, as the first two quarters were above this target.
From the high for the year, it has meanwhile gone down almost 50%. The small support area at USD 44.59 has held for the time being. If this mark cannot be defended, a test of the USD 33.00 mark is likely. The share is in the oversold area and is suitable for a rebound. The current share price is USD 45.28. The Group continues to pay a dividend of USD 0.55, which corresponds to a dividend yield of 4.85%. Those betting on a rising gold price can build their first positions here.
Several factors have weighed on the gold price recently. Among other things, the sale of Ukrainian gold stocks for USD 12.4 billion. If things go as they did in 2008, the gold price should be able to rise significantly in the future. Barrick Gold seems to be well positioned for this. Tocvan Ventures is doing remarkably well in the falling market and was able to attract an investor to secure financing for the next two years. Newmont is the largest gold producer and will therefore benefit most from a rise in the price of gold.
Conflict of interest
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