October 25th, 2021 | 13:25 CEST
Desert Gold, Barrick Gold, K+S - Now or never?
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"[...] 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
DESERT GOLD VENTURES INC - Promising drill results
Desert Gold Ventures' stock is an exciting investment. The Company focuses on gold deposits in West Africa, particularly Mali. The country is the fourth-largest gold producer on the continent. The most important asset is the SMSZ project, named after the shear zone between Senegal and Mali (Senegal-Mali Shear Zone). Covering a massive area of 410 sq km, the property is the largest contiguous non-producing land package in the region. Not only do good drill results add fantasy to the shares, but so does the fact that the SMSZ project is geographically close to several producing Tier 1 gold mines. Also, with a market capitalization of just CAD 20 million, the Canadian-listed company sails under the radar of investors.
Most recently, the Canadians released initial results from the recently completed 257-hole 18,161m drill program. With this figure reached, the majority of the 20,000m campaign has been completed. Exploration at the SMSZ project has identified more than 22 gold zones, with exploration data from 2021 suggesting that more may be discovered. Full results are now available on drilling at the Manakoto and Barani East / Barani Gap zones.
On both zones, the data confirmed several near-surface gold mineralizations of large thickness but also isolated high-grade zones of small thickness. "Initial exploration results from Manakato show several thick zones of gold enrichment indicating the potential for a large gold deposit with the help of further work. Gold mineralization in the Barani East zone is traceable for more than 2.5 kilometers. Further drilling is needed to truly understand the exploration potential of these extensive areas," said President & CEO Jared Scharf on the latest developments. The share barely reacted to the news. Perhaps investors are just squinting for more facts. In the next few months, the Canadians should publish a NI 43-101 compliant resource estimate. That should then lead to positive impulses for the share.
BARRICK GOLD CORPORATION - Favorable valuation
The second-largest gold producer owns 6 Tier 1 mines with a long life. Thus, the fundamentally favorably valued stock with net debt of almost zero is a good idea to benefit from rising gold prices in the medium term - if you believe numerous experts. It is also exciting that the Company additionally has several copper mines in its portfolio. The price of the industrial metal has risen significantly over the months. The demand trend from the electromobility sector should lead to permanently high price levels of copper.
The latest quarterly data and the confirmed earnings outlook make the shares attractive with an adjusted EBITDA multiple of around 5 and a P/E ratio of 10 based on adjusted net income, together with the solid financial position and the positive medium-term prospects. In addition, one can speculate that Barrick will continue with the payment of special dividends started in Q2, which should result in an annual dividend yield of 4% for shareholders. Analysts consider the title, valued at CAD 43 billion, to be undervalued and recommend a buy with a price potential of 47%.
K+S - Does the group have to row back?
The K+S share is a good example of how good underlying conditions in the form of rising commodity prices can work together with the proper strategic positioning and a significant debt reduction. The share price has almost tripled in the last 12 months. However, analysts believe that the stock is now exhausted. Perhaps this also has something to do with the latest corporate news.
The planned formation of the Reks joint venture by K+S and Remondis subsidiary Remex has not yet been waved through by EU antitrust watchdogs, as this could potentially lead to too much market power in the disposal of toxic fly ash. Now the German Federal Cartel Office will decide on the case.
"We continue to assume that clearance of the transaction can be granted. We have no indications to the contrary," said a K+S spokesman on the state of play. The group expects the transaction to be completed this year. However, if it takes longer, this would also harm the figures for the current financial year. That is because the guidance of an EBITDA of EUR 700 to 800 million includes a one-time gain of around EUR 200 million from the Reks formation.
With the shares of Barrick Gold and Desert Gold, investors participate in higher precious metal prices at a favorable company valuation. Project progress and a resource estimate should give a positive impetus to the shares of Desert Gold. In the case of K+S, setbacks offer a good entry opportunity, as the big picture speaks in favor of the share.
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