August 23rd, 2021 | 12:00 CEST
BHP, Silver Viper Minerals, Yamana Gold - React now before it is too late!
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
BHP GROUP PLC - Good or bad?
At the beginning of the last trading week, the joy over the good half-year figures and the announcement that the Group intends to completely divest its oil and gas business was relatively short-lived. Interim gains were surrendered in full. What happened?
BHP wants to merge its oil and gas business with the Australian Company Woodside. It is a radical cut, as oil is one of the Group's most important commodity categories after iron ore and copper. But to a CEO, it is the logical consequence of a rapidly changing reality in which environmental, social and governance (ESG) considerations are more important than ever to investors. It was not too long ago that investors were giving thumbs down to coal projects. Now the Group wants to position itself with foresight and make the shakeout in a good market environment. From now on, BHP will focus on "promising" commodities such as potash, nickel and copper, as well as iron ore.
Woodside shareholders would own 52% of the merged Company, while BHP shareholders would own 48%. First, however, a majority of Woodside shareholders must approve the deal. Woodside would double production volumes and catapult the Company into the top 12 global oil and gas producers.
The question remains whether this is all positive for BHP shareholders. The equity story can undoubtedly be sharpened this way with the focus on commodities such as copper, nickel, potash and iron ore. Nevertheless, the stake in the oil and gas business remains. Is there anything to be gained from an ESG perspective? Listening to the former corporate chief of competitor Glencore, it seems more like a milk run. "Divesting fossil fuels and making it someone else's business is not a solution," former Glencore CEO Ivan Glasenberg said earlier this year. "It is not going to reduce absolute emissions," Glasenberg added. Still, with ESG criteria proliferating in investments, there seems to be no way around BHP divesting from its oil and gas business.
Silver Viper Minerals Corp - Waiting mode
Silver Viper Minerals is a Canadian-based junior explorer with a geographic focus in the northwestern Mexican state of Sonora and is currently focused on the La Virginia gold-silver project. Silver Viper owns 100% of the concessions acquired from previous operator Pan American Silver Corp. In addition, the Canadians hold an option to acquire a 100% interest in the Rubi-Esperanza claims group within those concessions.
During the summer, the Company released a NI 43-101 compliant resource estimate. This document indicated resources of 154,300 ounces of gold and 6,929,000 ounces of silver and inferred resources of 246,300 ounces of gold and 12.49 million ounces of silver. The La Virginia gold-silver project has a significant size, covering over 6,880 hectares. The Company's drilling to date builds on a substantial database of historical work, including 52,635 drill meters from 188 diamond drill holes obtained by previous operators between 2010 and 2013. For the resource estimate, 100 drill holes totaling 27,021 meters were completed. Continued focus is on exploring an "El Rubi" zone located 4 to 5km north of the historic mining area, for which exploration work indicates a substantial zone of significant resources.
Exploration companies such as Silver Viper Minerals provide leverage to silver and gold prices. A rise in precious metals prices and further project progress should boost the stock's market value, which currently stands at CAD 46 million.
YAMANA GOLD INC - Share buyback and reduction of the interest burden
The Company published several positive announcements recently. All of them were ignored by the market. The precious metals producer intends to buy back about 1.74 million of its outstanding common shares for about CAD 10 million. Further details are not yet known. In addition, the Canadians managed to achieve significant interest rate relief through changes on the debt side. Yamana issued 10-year unsecured senior notes in the volume of USD 500 million, replacing other debt. That means savings of USD 21.6 million per year as of now.
Good or bad, cheap or expensive? This assessment is always linked to the time perspective of an investment or trading position. Forward-looking investors should look at the stocks presented, as important information is not yet priced in. For more risk-averse investors, the Silver Viper Minerals share offers the best risk-reward ratio.
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