July 28th, 2021 | 13:42 CEST
Commerzbank, Aztec Minerals, MorphoSys - Save yourself!
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Gold mines with leverage
The bottom line is that central banks have no choice. For years, the ultra-loose monetary policy has created giant speculative bubbles in the stock and bond markets and real estate. In addition, the countries are historically highly indebted, once again fueled by the stimulus packages. In the event of major interest rate hikes, a crisis with corporate bankruptcies and sovereign defaults would be pre-programmed. The best way to hedge against this looming scenario is to invest in gold. The precious metal has always been considered a protection against inflation and a crisis currency. Invest at least part of your assets; the old banker's rule is 10% in gold or gold mining shares. Securities of mining companies have the advantage of performing better in the event of a permanently rising base price, and investors can thus profit disproportionately.
The exploration Company Aztec Minerals, led by experienced management with a proven track record, has made a promising start. The geologist Allen David v. Heyl, responsible for discovering and evaluating more than 30 million ounces of gold and 25 million tons of copper at companies such as Barrick Gold and Zijin Mining, deserves special mention.
Aztec Minerals' focus is on properties in North, Central and South America. In the main asset, which is bundled in a joint venture, the junior explorer holds 65%. It is the prospective Cervantes porphyry gold-copper deposit in Sonora, Mexico. In addition, there is a 75% interest in the historic Tombstone properties in Cochise County in Arizona, where high-grade mineralization with silver, lead, zinc and gold is suspected.
Initial results from the two-phase drill program, with 20 holes and 2,900m planned for the full year 2021 at the Tombstone project, were released back in early July and far exceeded expectations. Additional results crossed the tickers yesterday afternoon, confirming and extending the high-grade oxidized gold-silver mineralization near surface.
The five holes were completed on two drill grids as infill drilling between the earlier two holes and as a step-out to the holes reported on July 7, 2021, in the north-central portion of the Contention open pit. Each of the five holes intersected near-surface oxidized gold-silver mineralization, and all five holes ended in mineralization at depth. The next steps include step-out and twin drilling of three historical holes to verify the old data for use in a future resource estimate.
Aztec Minerals is well ahead of schedule on this year's drill program. The attractiveness of the projects should quickly put the Canadians in the focus of a takeover by major players. Currently, the stock market value is only EUR 15 million. This investment is promising in the long term and serves as a speculative portfolio addition.
Thumbs down for Coba
A hail of bad analyst opinions weighed on the Commerzbank share price. With a minus of over 2%, the financial institution is approaching the critical support at EUR 5.0. In the run-up to the figures for the second quarter, analyst houses are losing faith in the profitability of the Frankfurt-based company. The Swiss bank UBS left the rating at "sell" with a price target of EUR 4.80. According to the experts, special charges are likely to have determined the second quarter.
British Barclays also left its rating for Commerzbank at "underweight" with a price target of EUR 5.0 before figures. Commerzbank's fee income should have normalized in the second quarter, along with trading profit, and net interest income should also have been stable. Likewise, analyst Jun Yang reckons that loan provisions were lower than in the first quarter. Currently, there is no reason to invest in Commerzbank; instead, we are eagerly awaiting the figures that will be presented.
MorphoSys in free fall
The analysts of Commerzbank are also skeptical, however not for their shares, but for the biotechnology Company MorphoSys. Commerzbank analyst Daniel Wendorff calls the more cautious sales target a "negative surprise". However, even more serious is the reduction of the balance sheet item "Financial liabilities from collaborations, excluding current portion" by around EUR 102 million. This figure includes the expectations for the drug Monjuvi. As a result, according to the analyst, skepticism is likely to increase concerning the profitability of the drug. As a result, the buy recommendation has been removed, and the rating is now "hold".
Fears of inflation are not diminishing and are being fueled by central banks' continued loose monetary policy. The growth and labor market preferences and the underestimation of inflation are optimal conditions to invest in gold mining stocks such as Aztec Minerals. In contrast, we currently refrain from entering MorphoSys and Commerzbank.
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