December 3rd, 2021 | 13:41 CET
Desert Gold, Barrick, First Majestic - Countercyclical opportunities!
The drop of the gold price below USD 1,800 opens up first-class countercyclical investment opportunities for long-term investors. The high inflation worldwide and the low-interest rate policy speak for precious metals as inflation protection and crisis currency. High-quality gold shares have historically outperformed the underlying over longer periods. Who will be ahead in 2022?
time to read: 3 minutes
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Author:
Carsten Mainitz
ISIN:
DESERT GOLD VENTURES | CA25039N4084 , BARRICK GOLD CORP. | CA0679011084 , FIRST MAJESTIC SILVER | CA32076V1031
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
Author
Carsten Mainitz
The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.
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Desert Gold Ventures - Capital increase planned
Recently, the Canadians announced the plan to carry out a capital increase in the volume of CAD 3 million in the near future. The intention is to place around 21.4 million share certificates at a price of CAD 0.14. In addition, each subscriber will receive half a warrant with an exercise price of CAD 0.25 and a three-year term. Proceeds from the financing will be used primarily for drilling and exploration activities on the Company's flagship project, the Senegal Mali Shear Zone Project in western Mali.
The SMSZ project, named after the shear zone between Senegal and Mali (Senegal-Mali Shear Zone), covers 410 sq km, making it the largest contiguous non-producing land package in the region. Not only do good drill results add fantasy to the shares, but also the fact that the project is geographically close to several producing Tier 1 gold mines, as a detailled report is describing.
In 2021, the Company conducted an extensive drilling program. Exploration at the SMSZ project identified more than 22 gold zones. Exploration work will continue apace in the coming months. In 2022, the publication of a NI 43-101 compliant resource estimate can be expected. At the latest, then, this should lead to positive impulses for the share. The Company is currently valued at only around CAD 17 million.
Barrick Gold - The seventh large mine is on the way
The short-term weakness of the gold price is currently pushing the shares of the world's second-largest gold producer towards the low for the year. The Canadians own 6 Tier One mines with a long life. The geographic focus of production is the US state of Nevada. In total, Barrick produces just under 5 million ounces of gold per year. The group recently provided an exciting update on the Donlin project. The recently completed 2021 drill campaign, aimed at validating geological modeling concepts for the feasibility study, continued to yield high-grade intercepts and demonstrated grade continuity. A new feasibility study has now been scheduled for 2022.
The Donlin Gold Project is located in Alaska, the second-largest gold-producing state in the United States. With approximately 39 million ounces of gold grading 2.24 grams per tonne in measured and indicated mineral resource categories, Donlin Gold hosts one of the largest and highest grade undeveloped open pit gold deposits in the world. The project is operated as a 50/50 joint venture between Barrick and NovaGold. The expected production start-up of Donlin in the medium term will positively impact the key figures of the Canadians. More information and background on Barrick can be found in an article at researchanalyst.com.
First Majestic Silver - More favorable refinancing
The shares of the silver and gold producer First Majestic Silver are also weakening in the current environment. Recently, the Company announced a favorable refinancing. The Canadians are currently issuing a convertible bond with an annual interest payment of 0.375% due in 2027 in the volume of USD 200 million, which can increase to USD 230 million if an over-allotment option is exercised. The majority of the new funds, approximately USD 125 million, will be used by First Majestic to repurchase the outstanding 1.875% convertible debenture. The Company intends to use the remainder of the net proceeds for general corporate purposes, including strategic opportunities. That sounds like another acquisition to us next year!
All three companies will benefit from rising precious metal prices. Production increases provide positive momentum for Barrick Gold and First Majestic. At Desert Gold, investors participate in the success of project progress on the way to production start-up. The explorer's share has a favorable company valuation given the potential.
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