Close menu




September 18th, 2020 | 09:00 CEST

BHP Group, Newcrest Mining, SolGold: Getting bogged down or putting all your eggs in one basket

  • Gold
Photo credits: pixabay.com

When it comes to investing in commodity companies, the BHP Group is a household name. The British company is active worldwide, mining coal, iron ore, copper and other commodities and has long been considered a solid dividend earner. But recently the company has disappointed: Special effects put pressure on profits, unrest in Chile made life difficult for BHP and the Corona pandemic also left its mark: the bottom line at the end of the financial year at the end of June was a profit of no less than EUR 6.75 billion. While the mood among investors was not particularly good, BHP cut its dividend by around ten percent, thus spoiling shareholders’ sentiment even further. On a year-on-year basis, the share price fell by around 1.4%. In view of the good performance of copper following the outbreak of the pandemic, this is too little for many investors.

time to read: 3 minutes | Author: Nico Popp
ISIN: GB00B0WD0R35 , AU000000NCM7 , GB00BH0P3Z91

Table of contents:


    Is the BHP Group buying into price fantasies?

    Nevertheless, there are also positive things to report about BHP. The company already successfully implemented cost-cutting measures during the past fiscal year and thus became even more profitable. It can also be assumed that the recent positive development of many raw material prices will not be felt until the current fiscal year. Even though BHP itself has a cautiously positive outlook for the future and expects economic activity to vary greatly from region to region, investors see no potential for surprises in the share price. It is possible that, as in the past, acquisitions will help BHP to get off to a good start.

    Newcrest profits from the gold bull market only to a limited extent

    When it comes to mergers and acquisitions, the name Newcrest Mining is always mentioned in the resource industry. The company is Australia's largest gold producer and increased its profits to USD 647 million in the past fiscal year. In recent months, it has been repeatedly rumoured that the company is on the radar of North American resource companies as a potential takeover target. Around 85% of Newcrest Mining’s production is gold, with copper being another important raw material. Although the dividend at Newcrest is traditionally lower than at BHP, the Australian company recently increased its dividend by 14%.

    Despite this positive signal to the market, the share price remains at a low level - on a twelve-month horizon, the share price even lost 4.6%. Tragic detail: Newcrest has sold forward parts of the production of its Telfer mine in Australia until 2022/23 and is not benefiting from rising gold prices there.

    SolGold: Net asset value of flagship project significantly exceeds market value

    In contrast, the SolGold share has profited from the development since March. The share has a price yield of more than twenty percent on a one-year horizon. In this context, it is interesting to note that both BHP Group and Newcrest Mining are involved in SolGold. The former company holds 13.5% and the latter 9.9%. The company is focused on the exploration for gold and copper in the Ecuadorian Andean Belt. SolGold has been active in this region since 2012 and has secured numerous mining concessions in recent years. The idea behind SolGold's strategy is that the geological characteristics are similar to those in Chile, where many international resource companies are already active.

    SolGold pursues a very concentrated strategy in Ecuador: While other companies focus on different locations, SolGold prefers to use the known characteristics of a region to its advantage and to develop projects quickly. In addition to the flagship Alpala project, for which a feasibility study is scheduled to be completed by mid 2021, the company has 13 other projects that are being explored with high priority. As Nick Mather, CEO of SolGold recently stated in an interview, the net present value of Alpala already amounts to USD 4.4 billion and clearly exceeds the market capitalization of SolGold - the company is currently valued at market cap at around EUR 600 million. Initial studies on the flagship project, which were prepared before the gold boom, envisage a possible mine life of more than fifty years and a payback period of four years.

    Investors have the choice: stability or growth

    Although SolGold is an exploration company and therefore speculative, the extensive portfolio in Ecuador offers promising opportunities for investors. The company regularly reports drilling results and keeps investors informed about new developments. The existing holdings of large companies in the industry, such as Newcrest or the BHP Group, also speak for themselves. Although the shares of the established companies offer stability and indirectly also a participation in the success of SolGold, speculative investors may well be interested in the emerging company.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and etc. on news.financial. These contents serve information for readers and does not constitute a call to action or recommendations, neither explicitly nor implicitly. implicitly, they are to be understood as an assurance of possible price be understood. The contents do not replace individual professional investment advice and do not constitute an offer to sell the share(s) offer to sell the share(s) or other financial instrument(s) in question, nor is it an nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but rather financial analysis, but rather journalistic or advertising texts. Readers or users who make investment decisions or carry out transactions on the basis decisions or transactions on the basis of the information provided here act completely at their own risk. There is no contractual relationship between between Apaton Finance GmbH and its readers or the users of its offers. users of its offers, as our information only refers to the company and not to the company, but not to the investment decision of the reader or user. or user.

    The acquisition of financial instruments entails high risks that can lead to the total loss of the capital invested. The information published by Apaton Finance GmbH and its authors are based on careful research on careful research, nevertheless no liability for financial losses financial losses or a content guarantee for topicality, correctness, adequacy and completeness of the contents offered here. contents offered here. Please also note our Terms of use.


    Der Autor

    Nico Popp

    At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

    About the author



    Related comments:

    Commented by Armin Schulz on February 21st, 2024 | 07:30 CET

    Barrick Gold, Desert Gold, Renk - Golden times everywhere?

    • Mining
    • Gold
    • Defense

    The world is full of economic uncertainty and geopolitical tensions. These are ideal conditions for gold, which is still considered a safe haven. There are now several factors that point to a sustained upswing in gold prices. One factor is the increased involvement of central banks, which are increasing their reserves to an extent not seen for decades. Another factor is the discussion within the BRICS nations about introducing a new currency backed by gold as a counterweight to the dominant US dollar. Therefore, today, we look at two gold companies and shed light on Renk, a representative of the defense industry, which is also experiencing golden times.

    Read

    Commented by Fabian Lorenz on February 21st, 2024 | 07:00 CET

    Top news: BYD, Bayer and Globex Mining

    • Mining
    • Gold
    • Commodities
    • Electromobility
    • chemicals

    Bayer shocked investors yesterday with the announcement of its dividend cut, which shouldn't have been much of a surprise. The Company is burdened with high debt, endless legal fines, and an empty pharmaceutical pipeline. In an initial reaction, analysts have lowered the share price target. BYD, on the other hand, is doing well operationally. Only the share price is not picking up. Will a share buyback turn the share price around? For those who want to profit from the commodity boom with reduced risk, then Globex Mining's stock is attractive. The news flow is strong, and those who act quickly can still register and follow the live presentation of the mining incubator at the 10th International Investment Forum, IIF, today.

    Read

    Commented by Stefan Feulner on February 19th, 2024 | 07:00 CET

    Renk, Manuka Resources, and Airbus with explosive news

    • Mining
    • Gold
    • Vanadium
    • Batteries
    • renewableenergies

    Germany's leading index, the DAX, managed to surpass the 17,000-point mark significantly this week, reaching a new all-time high at 17,198.50 points. After a weak IPO year in Germany in 2023, in which only three companies dared to go public, the Renk Group set an exclamation mark with a rocket launch. Whether the high level of the DAX can be maintained will also depend on Allianz, Fresenius and Heidelberg Materials, which will publish their figures for the past financial year in the coming week.

    Read