23. September 2021 | 11:21 CET
China Evergrande, MAS Gold, Barrick Gold: How to find crisis insurance
The disaster surrounding the Chinese real estate developer China Evergrande is spreading far and wide - even the Deutsche Bank share took a beating at the start of the week. The concerns are obvious: if the Chinese real estate market has to put on the brakes, companies here in Germany could also suffer indirectly. No matter what happens with China Evergrande, the case shows that it pays for investors to hedge against black swans. We explain how this works.
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ISIN: CHINA EVERGRANDE GROUP | KYG2119W1069 , MAS Gold Corp. | CA57457A1057 , BARRICK GOLD CORP. | CA0679011084
"[...] Our SMSZ project is the largest contiguous land package of any exploration company in the region at 400km2 and overlays a 38km portion of the prolific Senegal Mali Shear Zone. [...]" Jared Scharf, CEO, Desert Gold Ventures Inc.
China Evergrande: Doubts remain
China Evergrande's share price has fallen even more steeply in recent weeks and days than before. The reason lies in the insolvency of the Company. In the meantime, the Chinese are even paying creditors and investors in kind. Instead of money, they sometimes get a garage or an apartment. Although the Company has announced that it wants to find a way out of its crisis, such slogans of perseverance are also known from other companies in recent history. How often and, above all, how aggressively did Wirecard stand up to its critics? Even if no case on the stock exchange is exactly like the previous one, investors should nevertheless draw conclusions from the China Evergrande disaster.
One of the obvious consequences is an investment in gold. Investors should not believe that gold disciples wait from morning till night for the apocalypse, just to be prepared in case of the worst. Instead, investors should see gold as crisis insurance. On Monday, the precious metal was almost the only asset class to resist the rampant crash mood on the markets. Reason enough to take a closer look at some promising gold stocks.
MAS Gold: Small company with great potential
A relatively unknown company from the gold sector is MAS Gold. But this is not so much due to the projects, but to other general conditions. Until some time ago, the Company was in a clinch with a joint venture partner. The share price did not move during the legal dispute, and the Company did not invest in public relations. However, the dispute has since been settled, and the Company, led by CEO and commodities veteran Jim Engdahl, is increasingly pushing into the public eye. MAS Gold is pursuing a hub-and-spoke model, operating several projects in the La Ronge Gold Belt in Canada's Saskatchewan District. The geology there is said to closely resemble promising regions in West Africa. In contrast, the factors of political stability and exploration conditions are significantly better.
Processing plants could be built around North Lake, which could be decisive for several smaller projects in the region. MAS Gold already holds several promising properties in the vicinity with Contact Lake, Elizabeth Lake, Henry Lake and Greywacke. Past drill results read promising, ranging up to 31.62 g/t gold over a distance of 0.5 meters. But MAS Gold's geologists are also targeting copper and silver. The first goal, however, is to show 1 million ounces of gold. Since the Company is currently valued at only about EUR 11 million, MAS Gold could be suitable as crisis insurance. If gold jumps up, many investors might take notice of promising small companies. In addition, MAS can also grow on its own through its successes.
Barrick Gold: Big name, big problems
The latter is becoming increasingly difficult for gold giant Barrick Gold. Last year, the Company was virtually swimming in money - and finally paid out a special dividend. A dividend like that actually sounds like music to the ears of many investors, but at second glance, such a move is cause for reflection: if a company does not know what to invest in, that is a rather alarming sign for the future.
And so, the Barrick Gold share has been dragging sideways for months. Sometimes it rises because of the tailwind from the overall market, and sometimes the prices crumble away again. Around EUR 16, the share could even threaten to slip below a critical chart support zone. Although Barrick Gold keeps going up, the share remains dull from the bottom up. The lack of growth prospects and the somewhat sluggish share price development also speak against Barrick as crisis insurance.
While China Evergrande is instead the cause than the profiteer of the recent crisis, the price of Barrick Gold could benefit at least temporarily. However, in its classic form, only a small dynamic stock like MAS Gold has the quality of an insurance policy, which can offer significant protection against losses in value even with a small investment.