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June 15th, 2022 | 13:46 CEST

Deutsche Bank, Barsele Minerals, Commerzbank - Weak share prices offer opportunities!

  • Commodities
  • Gold
  • Investments
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The times of ultra-loose monetary policy by central banks are history. While the inflation rate in the US exploded to 8.6% in May, the FED is forced to ring in further interest rate steps. After raising the key interest rate by half a percentage point last month, experts expect additional steps between 0.5% and 0.75%. On the other hand, the stalling of the economic engine and the increased risk of a recession speak against further drastic interest rate steps. Due to this fact, gold stocks should benefit in the long term, even if they are dragged down in the current market weakness.

time to read: 3 minutes | Author: Carsten Mainitz

Table of contents:

    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] 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

    Full interview


    Deutsche Bank benefits from interest rate hikes

    One of the few positive effects of the announced interest rate hikes by the European Central Bank in July is the likely end of negative interest rates. Deutsche Bank has held out the prospect of this. The ECB's Governing Council decided last Thursday to raise key interest rates in the euro area by 0.25 percentage points at its next meeting on July 21. It said "a larger interest rate step" was possible in September. "The level of the custody fee is based on the so-called deposit facility of the European Central Bank," a Deutsche Bank spokesman said. "If the deposit facility rate is raised to zero or into positive territory in a second step, we will no longer charge a custody fee in retail banking," the institution said.

    During the sell-off, the share price of the Frankfurt-based company fell to the prominent resistance line at EUR 9.10, but the share successfully defended this level. The chart picture would brighten up entirely with a break of the downward trend at EUR 10.27, which has existed since February. Analysts at US bank JP Morgan are at least confident that this level will be broken quickly. In a recent study, the rating was reiterated by the responsible analyst Kian Abouhossein with the verdict "overweight" and a price target of EUR 15. The P/E ratio based on the consensus estimate has fallen above average since January 2020 before the Corona Crisis, they said. At the same time, the experts trust the Company to deliver higher results than the market in the coming year and do not identify credit and refinancing risks.

    Barsele Minerals is drilling again

    Not for the first time, we mention that the current circumstances of geopolitical uncertainties, historical debt levels and skyrocketing inflation rates are like water on gold investors' mills. But instead of climbing to new heights, the correction in the price of gold is not over yet. Technical analysis experts see a final setback to the USD 1,600-1,680 per troy ounce gold range before the long-term run to outstanding new all-time highs could occur. In order to protect one's portfolio against inflation and crises, the build-up of a gold share is recommended in any case.

    Anticyclically, there are already attractive entry opportunities in gold mining stocks at current levels, especially in smaller exploration companies such as Barsele Minerals, whose stock market value is far below the latest project valuations. In 2016, the Royal Bank of Canada valued the Barsele project at USD 375 million at a gold price of USD 1,350 per ounce. Barsele Minerals currently holds a 45% interest in the 34,533-hectare project, located in northern Sweden, with the remainder in the portfolio of the major Agnico Eagle. As a result, the value of Barsele's interest is USD 168.75 million. The current market capitalization of the Canadians is only CAD 34 million or USD 27 million.

    However, since the last valuation, an additional 158,439m and 422 holes have been drilled. In 2019, Barsele released a resource estimate of 2.41 million ounces of gold. Earlier this month, diamond drilling resumed with a total length of 3,000m and around 15 holes. The objective is to test drill targets for orogenic gold and volcanogenic massive sulphides. The exploration program is being carried out by joint venture partner Agnico Eagle, which can earn an additional 15% interest in the project by completing a preliminary feasibility study. In return, the latter assumes all costs.

    Commerzbank wants to become more profitable

    According to Chief Financial Officer Bettina Orlopp, an interest rate increase would also be good for Frankfurt's second major bank, Commerzbank, as the institution is very "interest-rate sensitive". At an industry conference, the CFO commented on the bank's strategic direction: "Our main goal is to return to a level of profitability that is competitive, then we can think about investment opportunities. Nonetheless, she said, Commerzbank already has extensive investment programs underway."

    Despite the positive outlook concerning an interest rate increase, the Commerzbank share corrected to EUR 7.60. The next important support is at EUR 7.20. After the specialist conference, Goldman Sachs reiterated its price target of EUR 9.70 and its "neutral" investment rating.

    Currently, there is great concern in the markets about rising inflation and further drastic interest rate steps by the central banks. This benefits financial institutions such as Deutsche Bank and Commerzbank. But also, gold and gold shares should profit in the long term. At the current level, there are promising exploration companies such as Barsele Minerals, whose stock market valuation is far below the project value.

    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") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    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 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

    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.

    About the author

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