November 8th, 2023 | 07:30 CET
Deutsche Bank, Globex Mining, Barrick Gold - Enthusiasm for gold is back
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"[...] 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.
Deutsche Bank - Strong 3rd quarter
Deutsche Bank is also optimistic about the development of the gold price. They anticipate a gold price of USD 2,150 per troy ounce by September 2024. The analysts also assume that gold will continue to be seen as a safe haven by investors. More important than the gold price is the rise in interest rates for Deutsche Bank. Since interest rates have been rising, banks are once again making billions in profits. Deutsche Bank currently pays 3.3% for fixed-term deposits, while the prime rate is 4.5%. The figures for the third quarter show how well business is going again.
The bank achieved a pre-tax profit of EUR 1.7 billion, which corresponds to an increase of 7% compared to the previous year. The pre-tax profit for the first 9 months was thus increased to EUR 5 billion. The main reasons for this are revenue growth and cost discipline. Income rose 6% to EUR 22.2 billion by the end of September, while non-interest expenses increased by 7% to EUR 16.2 billion, including EUR 943 million in non-operating costs. Despite higher inflation, adjusted costs climbed by just 2% to EUR 15.3 billion. However, the cost-cutting program continues. Up to 250 Postbank branches will be closed over the next two years.
The acquisition of Numis was completed on October 13. As Deutsche Numis, the subsidiary aims to become a leader in British investment banking. A total of 170 corporate broking customers will be looked after and advised on all aspects of the corporate finance business. Despite the good figures, the share is stuck in its sideways phase between EUR 9.44 and EUR 10.71 and is currently trading at EUR 10.48. Following the reports, 5 analyst firms issued a Buy recommendation for the share with price targets between EUR 14.00 and EUR 17.50. Only Barclays recommends Hold with a price target of EUR 12.
Globex Mining - 232 commodity projects under one roof
Investors looking to invest in precious metals should be familiar with Globex Mining. The Company owns 118 precious metal projects with gold, silver, platinum and palladium deposits. As a bonus, you get 62 base and polymetals, as well as 52 properties with specialty metals and minerals, such as lithium, uranium, cobalt and many more. With shares in Globex Mining, investors get a broadly diversified commodity portfolio and currently benefit from the Company's significant undervaluation. The business model is practically risk-free. The Company buys promising projects and then options the properties to other companies, which take over the exploration work. In return, Globex receives cash, shares, options and license fees. In rare cases, a project may be sold outright.
Due to the large number of projects, there is a constant stream of news about the optioned projects. The most recent announcement on October 23 is promising. Cerrado Gold, which has secured the Mont Sorcier property, is currently in the project financing phase. The project has a large vanadium-iron deposit. If the project goes into production, Globex will receive a 1% gross metal royalty on all iron production. The project has a net present value of USD 1.6 billion, but this only relates to the indicated resource, which in turn only accounts for 25% of the total resources. The true value here could be significantly higher. According to the study, the project is expected to generate USD 235 million in free cash flow over 21 years. This would mean USD 2.35 million per year for Globex.
Globex also has an indirect stake in vanadium production through a large share position held by Electric Royalties, which receives 1% gross metal royalties on vanadium production. The development of the number of projects shows how well business is going. In 2009, there were just 80 projects; 14 years later, there are 232 projects. Furthermore, the Company is entirely debt-free, and it owns all its offices and office equipment. Although 13 new properties were acquired from cash flow in the last year alone, the share price has fallen by over 50%. The current price per share is CAD 0.80, giving a market capitalization of around CAD 45 million, which is significantly undervalued.
Barrick Gold - Good prospects for the future
The higher gold price naturally plays into the hands of one of the largest gold producers, Barrick Gold, even if the effect will only become apparent with the figures for the fourth quarter. On November 2, the Company presented its figures for the third quarter. The results show lower production than planned, at around 1.04 million ounces of gold, which is slightly below the planned figures. The realized gold price of USD 1,928 per ounce was more than USD 200 above the gold price of the previous year. This resulted in a net profit of USD 368 million. Adjusted net profit was even higher at USD 418 million. This exceeded analyst expectations, who had anticipated USD 0.20 and not the USD 0.24 per ounce achieved.
Total costs per ounce of gold fell by USD 14 compared to Q3 2022 but by a whopping USD 100 compared to Q2 2023. A further margin expansion can be expected for the coming quarter, and the future prospects are also positive, as the Company should significantly increase its production in the coming years. The Pueblo Viejo mine experienced some difficulties during the ramp-up. Countermeasures have been taken, and the mine is expected to deliver 800,000 ounces of gold per year in the coming year. The resumption of production at Porgera should provide a further 700,000 ounces per year.
On November 6, Barrick participated in a private placement of Hercules Silver, acquiring a 12.33% stake in the Company. In return, Barrick receives a right of first refusal for the Hercules project, as well as a right to protection against dilution. The Company will pay a dividend of USD 0.10 per share for the third quarter on December 15, corresponding to a dividend yield of around 2.5% at a current share price of USD 16.10. More could come from the distribution of the performance dividend. Most analysts have a positive view of the share. On average, a price target of USD 21.48 is issued, with the lowest price target at USD 15 and the highest at USD 27.
The major central banks are buying gold. The geopolitical tensions mean that more private individuals will also invest in gold, and the Fed is supporting the gold price with an interest rate pause. The outlook for gold is good. This is also the view of Deutsche Bank, which posted its best result in over 10 years in the third quarter. Globex Mining should be a familiar name to every commodity enthusiast. The debt-free company has consistently expanded its assets. The rewards will follow. The Company is currently undervalued. Barrick Gold also has a positive future ahead of it. Rising gold prices ensure a jump in earnings** for one of the world's largest producers.
Conflict of interest
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