July 23rd, 2021 | 14:37 CEST
Endeavour Silver, Aztec Minerals, ThyssenKrupp - Spoilt for choice: silver, gold or steel?
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"[...] 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
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.
Endeavour Silver - Entry opportunity with good risk-reward ratio
Like the silver giant First Majestic Silver from Canada, the mining Company Endeavour Silver has also undertaken a remarkable up and down journey in the past twelve months, which manifested in a steep downward trend from mid-June. However, the reasons for this are likely to be of a different nature. While the price movements at First Majestic were probably initially due to the limited remaining life of the operating mines of less than six years in total and to an empty project pipeline, at Endeavour, the latest production results were simply not convincing.
Leaving out the Corona year 2020 as a benchmark due to government shutdowns in Mexico, it is evident that Endeavour has not managed to significantly increase its production on a two-year comparison. On the contrary, after the El Cubo mine ceased operations in 2019, Endeavour did not compensate for the loss of production by other sites. But this is now set to change. And here again, a parallel with First Majestic emerges: just like its almost five times larger cousin, Endeavour also invested in a gold project in the US state of Nevada. In February, it was identified as the best mining location worldwide in a survey by the Fraser Institute.
The Bruner Gold Project, whose acquisition by Endeavour was announced just a few days ago, is located in Nye County, about 180km southeast of the city of Reno, and is part of the northwest-trending Walker Lane mineral belt. The first gold discoveries were recorded here as early as 1906, and a number of smaller mining projects were operated there until 1998. According to previous owner Canamex, a 2017 estimate suggests a resource of 342,000 ounces of gold at a gold grade of 0.61 g/t in the three zones of Paymaster, HRA and Penelas. However, Endeavour Silver has announced that it will not rely on this information and will conduct its own resource estimate as soon as possible. For us, this development is extremely interesting. While we have not seen a reason to buy into Endeavour so far, this new project could well compensate for the loss of production due to the closure of El Cubo and thus justify an increase in the share price. We think the share price should move upwards reasonably short term and therefore see the current share price level as a favorable entry opportunity.
Aztec Minerals - Five drill holes: Five times gold!
Also from Canada, but much smaller than Endeavour Silver in terms of market capitalization, is Aztec Minerals, a Vancouver-based exploration company dedicated to discovering large, polymetallic mineral deposits in the Americas. The Company's core asset is the prospective Cervantes porphyry gold-copper deposit in Sonora, Mexico, located near two operating mines of Alamos Gold and Agnico Eagle. The Company also has prospective gold-silver and silver-lead-zinc mineralization with a 75% interest in the historic Tombstone properties in Cochise County, Arizona.
The latter is the subject of an extensive two-phase drilling program currently underway. Of the 20 planned drill holes with a total drilling distance of 2,900m, 12 have already been completed. Laboratory results have already been announced for the first 5. Each of the 5 holes intersected gold-silver mineralization, with hole TR21-03 grading 5.71 grams of gold and 40.54 grams of silver per tonne of rock (equivalent to 6.28 grams per tonne of gold equivalent at a conversion factor of 70:1), the highest precious metal concentration. Over a 15.4m interval, the concentration was even higher: 11.89 g/t Au and 62.86 g/t Ag, corresponding to a gold equivalent of 12.79 g/t. Further laboratory results are expected shortly. Here investors can hope for positive surprises.
ThyssenKrupp - Analysts see current share price weakness as ideal entry scenario
From a share price perspective, things are not going well at German steel giant ThyssenKrupp at present. Problematic debt, the effects of the Corona pandemic and, most recently, difficulties in the supply chain due to the floods in western Germany have once again weighed heavily on the share price and pushed it below the critical support level of EUR 7.90. Even though this hurdle was recently overcome again, the question remains why the positive newsflow of recent months (Group restructuring with entry into green steel production, federal subsidy programs, entry into the construction of large-scale electrolyzers for hydrogen production, the establishment of hydrogen supply chains, development of low-emission coke oven stamp batteries, etc.) is fizzling out.
Perhaps the Q3 2020/2021 figures, which will be presented on Aug. 10, will help. Deutsche Bank analysts are very confident that the figures will be extremely good. Thus, the experts increased their EBIT estimates by 18% until 2023 and reiterated their price target of EUR 17. Although this is almost 23% above the consensus estimate of EUR 13.85, the buy recommendation is shared unanimously. We also assume that the price drama will not last much longer given solid business figures and only minor effects of the recent weather events on the quarterly results. At the current price level, this makes for an ideal entry scenario in a traditional German group.
In which shares should one invest now? Endeavour Silver should undoubtedly be attractive for more conservative investors. As an established producer, the business is subject to lower fluctuations and is mainly oriented to the gold and silver price. On the other hand, Aztec Minerals currently offers the greatest potential for investors with an affinity for risk. If the remaining drill results are as positive as the first five, prices are expected to rise. We also currently assess future prospects for ThyssenKrupp as positive.
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