June 8th, 2022 | 10:45 CEST
BP, Desert Gold, Livent - Gold stocks from different sectors
Why are BP and Livent gold stocks, some readers may ask? The answer is simple, because the gold term is being used for more and more commodities, especially as prices have skyrocketed. Such is the case with oil, the black gold, and lithium, the white gold. "Real" gold, on the other hand, has fallen back to the USD 1850 range after its breakout with the onset of the Ukraine crisis. So which gold should you put your money in now? We take a look at one Company from each sector.
time to read: 5 minutes
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Author:
Armin Schulz
ISIN:
BP PLC DL-_25 | GB0007980591 , DESERT GOLD VENTURES | CA25039N4084 , LIVENT CORP. | US53814L1089
Table of contents:
"[...] 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
Author
Armin Schulz
Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.
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BP - The market environment is ideal
Even an expansion of OPEC oil production by 650,000 barrels per day cannot bring the oil price to its knees at the moment. Due to the partial embargo on Russian oil, demand is rising more strongly than supply. Saudi Arabia wanted to compensate for Russia's share, but a short time later, the sheikhs demanded higher prices for their oil, depending on the customer.
Only the US got away without a price increase. The International Energy Agency (IEA) warned of fuel shortages in the summer months, as demand is likely to climb further due to the vacation season. Ideal market conditions, therefore, for BP. Last year, the oil giants were already making big profits again, and since the Ukraine crisis and oil prices well above USD 100, these profits have shot up yet again.
Even negative reports cannot currently stop the stock from soaring from one high to the next. The German environmental organization Deutsche Umwelthilfe has filed a lawsuit against BP, among others, for deceiving consumers. The British government introduces a special tax for energy companies. Even the write-downs on Rosneft, which amounted to USD 25.5 billion and dragged the Group's first-quarter earnings well into the red, were unable to keep the share price from rising. According to experts, the special tax is not particularly significant, the lawsuit filed by the environmental aid organization will not cause any major financial damage, and the write-downs were expected.
After all, the Company continues to pay a quarterly dividend despite a net loss of around USD 20 billion. A share buyback program also provides a tailwind for the shares. The share is currently trading at EUR 5.19, a new high for the year. As long as the market environment does not change, oil can continue to be seen as black gold because, at these oil and gas prices, energy giants like BP continue to earn magnificently. The price-earnings ratio of 9 is still in the favorable range.
Desert Gold - First results from new drilling program
Desert Gold is a Canadian gold explorer whose 440sq km flagship SMSZ project is located in Mali. The area is one of the largest in West Africa. The advantage of Africa as a location is the relatively low costs combined with large deposits. More and more large gold explorers are operating in Africa, and the gold mines of B2Gold and Barrick Gold are also located around the SMSZ project. More than 20 gold zones have been discovered on the SMSZ property so far. In March, the Company submitted an initial NI 43-101 mineral resource estimate. Measured and indicated mineral resources are 310,300 ounces of gold. Inferred resources increase the figure to 769,200 ounces.
On April 11, the new Phase 2 drill program started to follow up on the gold discovery at the Gourbassi West North zone. CEO Jared Scharf believes this zone has the potential to expand the mineral resource estimate significantly. A total of 5,400 meters of drilling are planned, spread over a total of 53 holes. The CEO's expectations were confirmed on June 2 with the announcement of results from the first 3 core holes. Gold was encountered in all 3 holes, peaking at 1.08 g/t gold over 124 meters, including 1.85 g/t gold over 41.1 meters and 0.7 g/t gold over 30.6 meters. Mineralization is close to surface, indicating good economics.
Further results are expected in the coming weeks, which should provide a steady newsflow. If the drill results remain this good, it will help the share price soar. For more information on the Company, please visit researchanalyst.com. The share is currently trading at 0.11 Canadian dollars and has thus gained over 45% since mid-May. In the short term, the stock was under pressure after the last private placement at CAD 0.12, but the seller seems to be done. The stock was already trading at CAD 0.23 last year and now has some catch-up potential with the new drilling results.
Livent - Strong first quarter and good prospects
The lithium price began to rise when the automotive industry decided to turn its back on combustion engines and focus entirely on electric cars. Demand was suddenly much higher than supply, and so prices climbed to unimagined heights. That gave lithium the name white gold. Lithium is needed mainly for batteries and rechargeable batteries. It is no wonder the lithium producer Livent is on the up. The Company produces and sells high-performance lithium compounds primarily used in lithium batteries, specialty polymers, and chemical synthesis applications.
The figures for the first quarter published on May 3 are a good indication of this. Sales climbed 56% YOY to USD 143.5 million. Profit was USD 53.2 million, a whopping 609% increase over the same quarter last year. Adjusted earnings per share were USD 0.21, well above analyst expectations. The forecast for 2022 was subsequently raised. Sales are expected to double, and EBITDA could even increase fivefold compared to 2021. In addition, the Company is working on production expansion and wants to develop a high-performance lithium battery together with the German Company Lilium.
The demand for lithium is more likely to rise than fall in the coming years, and even if some suppliers want to produce lithium in the future, there is still a long way to go. Livent has a head start and intends to capitalize and expand on it. As long as the lithium price does not show any weakness, the Company will develop well. Currently, the share is trading at USD 30.23, still more than USD 4 below the annual high of 2022, which was marked at USD 34.61 on May 27. With a market cap of around USD 5 billion and a P/E ratio of about 23, the stock is not cheap.
We currently have excess demand in many areas. As long as this remains the case, commodities will remain expensive or even become more expensive. BP had a sensational quarter without the Rosneft write-offs. So long as the Ukraine crisis does not resolve itself, oil prices will remain high. Desert Gold is sitting on a gold treasure, and only a fraction of the entire project has been explored. Even at the current gold price, the Company will make good money because costs in Africa are low. Livent has long specialized in lithium. That is now paying off more and more. With the profits the Company is making, it can expand the business. The goal is to stay ahead of other companies.
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