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August 16th, 2023 | 05:30 CEST

Covestro, Desert Gold Ventures, Barrick Gold - Waiting for the next push

  • Mining
  • Gold
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Although crash prophets have been raising their fingers for months and conjuring up a crash in the largest stock indices, such as the Dow Jones, Nasdaq and DAX, these continue to rush from high to high. On the other hand, precious metals such as gold and silver, which are suitable for crises and as inflation protection, are correcting. At the same time, the general conditions continue to improve, which should lead to sustainably rising prices in the long term.

time to read: 3 minutes | Author: Stefan Feulner

Table of contents:

    Justin Reid, President and CEO, Troilus Gold Corp.
    "[...] Troilus has the potential to be an entire gold belt. All of our work to date points to this, and each drill hole makes the picture we have of the Troilus project much clearer. [...]" Justin Reid, President and CEO, Troilus Gold Corp.

    Full interview


    Covestro AG - Short-term 20% opportunity

    The takeover of the plastics group Covestro by Abu Dhabi National Oil is not yet off the table, quite the opposite. As reported by the business news channel Bloomberg, citing insider information, the Arab energy giant Adnoc has submitted a verbal offer to increase the takeover price from EUR 57 to EUR 60, which would correspond to a total volume of EUR 11.6 billion.

    Currently, Covestro is trading in the EUR 48.20 range, well below Adnoc's presumed offer and not quite reaching the high from July, when the price climbed to EUR 50.72 following a previous increase in the offer by Adnoc. Despite the positive signals from the market, it is still unclear how Adnoc will proceed. Insider reports suggest a written offer of EUR 60 per share could follow. However, both companies have decided not to comment publicly on this matter.

    From a strategic standpoint, we consider a further increase in the offer not unlikely, as Adnoc is increasing its focus on the chemicals business. As a major player in the UAE oil supply, Adnoc is pursuing ambitious USD 150 billion investment plans to strengthen its global presence in the natural gas, chemicals and renewable energy sectors. Persian Gulf oil producers are generally looking to diversify their reliance on crude oil sales.

    Barrick Gold - In the wake of the base price

    Given the economic backdrop, the signs are actually green for rising precious metals prices. The bulk of the market expects the FED to at least pause the interest rate hikes in the next meeting. Beyond that, the interest rate hike may have already been reached. Nevertheless, gold and silver are showing weakness. With the slide below the psychologically important mark of USD 1,900 per troy ounce, another short-term downward movement could be initiated.

    Parallel to the base price, the largest gold producers, Newmont and Barrick Gold, are also finding it difficult to decouple themselves from the overall market despite good figures. Barrick Gold posted adjusted net income of USD 0.19 per share in the second quarter. Free cash flow was USD 63 million. Output was just over 1 million ounces, with all-in sustaining costs per ounce falling to USD 1,355 per ounce from USD 1,379 in the first quarter. Copper recoveries reached 107 million pounds, compared with 88 million pounds in the first quarter. In particular, the Lumwana mine contributed to the increase in copper production. Furthermore, Barrick Gold announced its intention to pay a dividend of USD 0.10 per share for the quarter.

    In terms of acquisitions, CEO Mark Bristow told Bloomberg that the Company is not under pressure despite an increase in M&A activity. Rather, Barrick wants to expand its existing partnerships, such as with the African state of Mali. Here, Bristow told the media that further investment will be made in Loulo-Gounkoto's future.

    Desert Gold Ventures - On the trail of the Majors

    Also positioned in Mali is exploration company Desert Gold Ventures, which despite a stock market value of only CAD 10 million, has a considerable presence. The 440 sq km SMSZ project, located in the eponymous Senegal-Mali shear zone, suggests excellent potential. Not far away are already producing mines of major players such as Barrick Gold, Endeavour Mining and B2Gold. In addition, Allied Gold's Sadioka mine is directly adjacent to the area explored by Desert Gold Ventures.

    To date, over 23 gold zones have been located in the region to be evaluated for economic viability. As early as February 2023, the Canadian company completed an impressive 445 drill holes totaling 2,067 m. Now Desert Gold plans to conduct an extensive drilling program of approximately 30,000 m. Following this, an updated resource assessment is planned. Current data indicates Indicated Mineral Resources of 310,300 ounces and Inferred Mineral Resources of 769,200 ounces of gold.

    Despite the positive company performance, Desert Gold shares have been trading sideways at CAD 0.05 for months. Since the highs reached in August 2020 at CAD 0.33, there is a loss of about 85%. Assuming positive drill results, a long-term buying opportunity with disproportionate profit potential could be hidden here.

    According to industry insiders, Adnoc is likely to increase its takeover bid for Covestro once again. Barrick Gold cannot escape the general correction in the gold sector. Desert Gold Ventures offers great long-term potential, but the stock is more suitable for speculative investors due to its size.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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