October 7th, 2022 | 12:35 CEST
First Majestic, Manuka Resources, Barrick Gold - Has the bottom been reached?
Table of contents:
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Gold - Brightening chart picture
FED Chairman Jerome Powell is determined to fight already runaway inflation by any means necessary. While he would like to do so without pain to the global economy, "there is no such way," Powell said. In addition to the FED, most of the world's central banks are also committed to a tight monetary policy with higher interest rates. Until recently, the European Central Bank was able to avoid the lively interest rate hunt, but now it followed its big brother's strategy. However, the dangers of this action are enormous. On the one hand, the European economy is already battered, partly due to the escalated Ukraine conflict, and is in danger of sliding straight into recession. On the other hand, many euro countries, especially the southern states of the continent, are heavily indebted and would be put in a dramatic situation if interest rates were raised further. In the US, the midterm elections are coming in November. President Joe Biden's Democrats must defend their narrow majority in the House of Representatives and the Senate at all costs. The accusation of the Republican opponents against the incumbent president was that they ignored the high inflation in the USA.
Thus, the current administration will likely be willing to maintain the tight monetary policy until the mid-term elections. After that, an end to the interest rate spiral should become apparent. The first signals are already coming in that indicate a change of direction in the near future. Chicago Fed district central banker Charles Evans commented to TV station CNBC: "It is time for the Federal Reserve to slow the pace of interest rate increases. Monetary policy works with a lag, and we have been moving very quickly lately."
If further signals come regarding an end to the interest rate cycle, this should signal the start of a strong upward movement for precious metals after a correction that has been ongoing since August 2020. From a chart perspective, the chart picture has already brightened considerably with the recapture of the important USD 1,680 per ounce mark. The next important step would be to break above the upward trend at around USD 1,797.00, which has existed since May 2021.
Manuka Resources - Triple potential
Despite recent successes, the negative chart picture has not yet been completely cleared. However, another dip would offer long-term anticyclical entry opportunities for gold producers and exploration companies. These act like a lever in longer-term trend movements of the base price, both upwards and downwards, and are suitable for any precious metals portfolio for diversification.
One interesting player is Australia's newest precious metals producer, Manuka Resources. This Company owns two promising mining projects in the Cobar Basin with a total exploration zone of 1,150 sq km. With the Mt Boppy gold project, the Australians own one of the continent's historically richest gold mines, which mined 500,000 ounces of gold at an average grade of half an ounce per ton of ore in past production. After Manuka Resources went public in 2020, it was put back into production with a target of 24,000 ounces of gold. This target has already been exceeded by a factor of two. In addition, further insight has been gained into the exploration potential of the project. Experienced management expects the resource to have significant potential at depth. The Company expects to submit a new mine plan in the fourth quarter with a view to restarting production in early 2023.
The second project is the fully permitted Wonawinta Silver project, which also contains gold. With a mineral resource estimate of 51 million ounces, the property is one of Australia's largest silver producers. In addition, 200,000t of existing lead has been estimated. Another asset is the processing plant available at the deposit, which can treat both precious metals. The project is currently in production and is processing the 515,000t stockpile on the ROM pad adjacent to the plant. Mining of silver is expected to resume as soon as the base price moves back up.
The acquisition of the South Taranaki Bight (STB) project took the Australian company to a new level. The STB project, located off the west coast of New Zealand, is a VTM iron sands project with vanadium titanium and magnetite. The previous owners have invested more than USD 50 million, and a feasibility study has already been completed. The project has a granted mining license and an extensive JORC resource of 3.8 billion t. With a vanadium grade of 0.5%/t based on initial estimates of annual mining rates for the STB project, the estimated annual production of vanadium would be approximately GBP 55 million. That would make Manuka Resources the third largest vanadium producer after China and Russia and could produce 15% of the global supply annually.
The market capitalization of the promising producer, which is already generating ongoing cash flow, is AUD 41.47 million. You can read an in-depth interview with Manuka Resources CEO Dennis Karp here https://www.kapitalerhoehungen.de/interviews/manuka-resources-interview-wo-cash-flows-und-blue-sky-potenzial-zusammenkommen.
Barrick Gold, First Majestic - Has the bottom been reached?
The chart of the world's second-largest gold producer, Barrick Gold, has brightened considerably after the last sell-off. After the lows at the end of September at USD 13.97, the price was able to move away from the short-term downward trend that has existed since mid-August. The bottom formation would be completed when the price sustainably exceeds USD 16.68. The next target would then be the short-term 200-day line, which is currently at USD 19.52. On the downside, the positive formation would be broken with the break of the trend formed since 2015 at USD 14.40.
An end of the bottom formation could also be seen at silver producer First Majestic Silver. After the formation of a double bottom in the area of USD 6.31, the price could successfully break away. A fresh buy signal could be generated if the resistance at USD 9.28 is exceeded. A sustainable overcoming of the downward trend from January at USD 11.10 would offer a follow-up potential to USD 14. The trend-following indicator, which recently generated a buy signal on a weekly basis, is positive.
The precious metals markets suffered in recent months from the change in interest rate policy by the central banks. However, it is not unlikely that this will change after the mid-term elections in the US in November at the latest. This will likely give a solid boost to both the gold and silver markets. Barrick Gold and First Majestic Silver may have already found their bottom. Manuka Resources offers long-term potential with its three promising projects.
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.
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