January 14th, 2021 | 18:43 CET
Blackrock Gold, Barrick Gold, Sibanye Stillwater: In gold, we trust!
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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
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Blackrock Gold - On the jump
Blackrock Gold had a prolonged consolidation down to CAD 0.63 in December 2020. The price had previously jumped very sharply to over CAD 1.50 in the summer of 2020 because of the excellent properties in Tonopah West. That is a good indication of where it will go again in the next push. What else can fuel a positive sentiment?
There were new findings from the exploration site in mid-December. The latest drilling along the Tonopah West project's eastern boundary shows that Victor's vein extends a full 480 meters to the east. Core drilling along the vein adjacent to Blackrock's eastern edge returned a peak of 1,079 grams per tonne (g/t) silver equivalent (AgEq) and an astonishing 5.19 g/t gold (Au). Further assays returned grades of 212 g/t and 582g/t over 6.8 meters, including a large intercept of 0.8 meters with 727 g/t AgEq and 3.56 g/t gold. This news led to an ad hoc 60% price premium to over CAD 1.00. The price remains in this range.
Now, Silver Cloud is another project close to Hecla Mining's Hollister Mine. Hecla itself, with USD 3.2 billion, would be big enough to take over the properties from Blackrock Gold. However, Blackrock probably will not know what treasure they are still harbouring underground until after completing the planned 3,500-meter drill programs. The planned spin-off of Silver Cloud also brings enormous potential. The Blackrock share currently costs around CAD 0.95 and is in a waiting position on the chart until either the precious metals pick up or further exploration results are available. Time enough to wade-in into the market.
Barrick Gold - The standard in gold mining
Anyone who trades in gold is undoubtedly familiar with the standard stock Barrick Gold, based in Toronto. The gold prospector represents an annual production of over 7 million ounces, placing it at the top of the global gold mining companies along with Newmont Mining. The Company was founded in 1978 by Peter Munk as Barrick Petroleum and went public as Barrick Gold in 1983. In addition to gold, the Company also mines silver and copper.
For the third quarter of 2020, Barrick reported an operating cash flow of USD 1.9 billion, which pushed net debt to a low USD 400 million. Five years ago, Barrick was more than USD 5 billion in debt during the crisis; they had overbought in the acquisition frenzy. The balance sheet has consolidated well, and the Company is now earning USD 0.50 per share per quarter. That makes about USD 2 a year, and at USD 23.50, that's a P/E ratio of 13.8. That's not too expensive, considering that the median analyst estimate for the gold price is about USD 2150 for 2021. Barrick is producing at an average cost (AISC) of USD 984 - I guess that is what you call a "dream margin".
What applies to the stock market's blue chips, we must also apply to the explorers like Blackrock. The higher the ounce price climbs, the more the ground's assets are valued, significantly since demand increases when spot prices rise substantially, and the mines are at the edge of their production capacity. Therefore, Barrick will have to retake the market if it wants to remain at the forefront.
Sibanye-Stillwater Ltd - Long restructuring, now moving forward
Sibanye-Stillwater Limited is a South African mining company that is the largest gold producer in the country and one of the world's ten largest gold producers. Other interests for the Company are platinum and palladium, where it is also in the top ranks. Sibanye Gold operated five gold mines in the Witwatersrand in 2017, historically producing a total of 43.6 tonnes of gold. PGM properties are located in South Africa (Rustenburg) and the USA (Stillwater). An extensive recycling plant for the recovery of PGM metals is also maintained there.
The current group was formed in November 2012 as a subsidiary of Gold Fields. It was then listed on the stock exchange in 2013. In September 2015, Anglo American sold three of its South African platinum mines to Sibanye Gold. Stillwater, in the US, has three years of restructuring behind them. The merger devoured a considerable amount of equity, which had to be increased a whole three times to get the debt mountain back under control.
Since March 2020, Sibanye-Stillwater stock has been one of the best performers among precious metals standard stocks. The share price ran from around EUR 1.00 to EUR 3.45 yesterday. The value is attractive mainly because of the assets in rhodium, ruthenium and iridium. In Q3, EBITDA reached USD 922 million, and dividend payments resumed. Leverage has now been consistently reduced since 2017, and there is currently USD 1.7 billion in cash again. 2021 should be a decisive year for Sibanya-Stillwater, the Company could become a significant player in the M&A scene.
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