July 16th, 2021 | 10:20 CEST
Gazprom, Desert Gold, Orocobre - Raw materials remain on course for growth
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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
Gazprom - Nord Stream 2 expected to be completed by the end of August, record dividend
As of last week, Gazprom is once again Russia's most valuable company. After the 40% slump in February 2020 as well as the further loss of almost 25% of the value in the further course, among other things due to the difficulties with the Nord Stream 2 project, the share has slowly but steadily fought its way back and last week replaced Sberbank as the most expensive Russian Company. The current weakness of Sberbank, which like almost all European bank stocks, is currently exposed to increased price pressure, helped, but Gazprom's rally is still quite impressive. Currently, the share price is only 13% below the highest price of the last five years. There are probably two main reasons for the current strength of the world's largest natural gas supplier: 1 - Excellent quarterly results and 2 - The reduced interference from the USA regarding the completion of the Nord Stream 2 pipeline.
There is not much to say about the quarterly figures for Q1/2021 presented in mid-May. The quarterly surplus of about 362.6 billion rubles was the highest in nine quarters, and gas production increased by about 15% (exports to non-CIS countries: +28%). Concerning the construction of Nord Stream 2, the USA seems to have changed course under the new Biden administration. The US is no longer trying to prevent construction but is urging Germany, in particular, to provide security guarantees for the Eastern European countries bordering the pipeline, such as Ukraine or the Baltic states. For Gazprom, these are rosy prospects. And it should also pay off for investors. The analysts at Bloomberg Dividend Forecast expect a sharp increase in the dividend now due in July to the equivalent of EUR 0.53 per ADR traded in Germany (comprising two regular Gazprom shares). The dividend yield would thus reach more than 8%. Analysts also expect a similarly high dividend for the next few years.
Desert Gold Ventures - Drilling program fully on track, completion imminent
Desert Gold Ventures is a Canadian gold exploration and development company focused on deposits in the West African nations of Mali, Ghana and Rwanda. Currently, the focus is on two exploration projects in Mali, the fourth-largest gold producer on the African continent. The smaller Djimbala project is located in southern Mali on the border with Guinea. There are several producing mines in the vicinity. Initial drilling has encountered gold grades of up to 12.65 g/t at 3m depth. The larger project is located in the west of the country on the border with Senegal. Named after the shear zone between Senegal and Mali, the SMSZ project (Senegal-Mali Shear Zone) covers 410 sq km. It is the largest contiguous non-producing land package in the region. It also has quite a few producing Tier 1 gold mines in close proximity.
Initial SMSZ sampling indicates a gold grade of 6.28 g/t over 13 meters. In addition, more than 100 magnetic and/or geological anomalies have been discovered in the area to date, which will be further investigated. To this end, Desert Gold has initiated a 20,000m drill program. The objective is to discover a Tier 1 gold deposit associated with the regional gold-bearing structural systems that run through the SMSZ project. As of mid-June, the Company has already reported 82% drilling progress. To date, more than 230 drill holes covering 16,400m have been completed. Results for the approximately 14,000 samples taken are expected in a timely manner. Completion of the program is scheduled for late July/early August. In Q4/2021, the Company aims to have prepared a NI 43-101 compliant resource estimate. By then, the share, which last year corrected to around 50% of its all-time high and has since been stuck in a sideways movement, should show more movement again.
Orocobre - And the rally continues
Orocobre Limited, based in Brisbane, Australia, is one of the most important suppliers of lithium, which is required in the production of rechargeable batteries. Lithium is thus one of the essential raw materials for electromobility. In April, Orocobre decided to merge with one of its main competitors, Galaxy Resources. After the merger, which has a volume of around AUD 4 billion and should be completed by August at the latest, Orocobre will have a share of around 13% in the global lithium market and become one of the top 5 lithium suppliers. The Company, which will then have an annual capacity of about 40,000t of lithium carbonate p.a., produces in Argentina, where the raw material is extracted from both rock ("rock") and leach ("brine"). Given the unbroken trend towards electric mobility, the price of lithium has risen sharply in recent months. Both this development and the general view of analysts that a merger will have a positive impact on the company's market power have strongly boosted Orocobre's share price. Recently, the shares hit another all-time high after analysts at Australian asset manager Ord Minnett raised their price target for the stock by 14% to USD 8.45 and recommended a buy.
In view of the declarations of the automobile manufacturers that the production of internal combustion engines will be discontinued in the foreseeable future and also the political guidelines that have now become known (the EU does not want to allow new internal combustion engines by 2035 at the latest), the price of lithium is not expected to fall any time soon. Although efforts are being made in many places to develop procurement alternatives, the production of battery-grade lithium carbonate is not trivial. Orocobre increased the share of battery-grade material in June from 33% to 66% compared to the same month last year and thus belongs to a class of producers that will certainly be relevant for a long time to come.
All three shares currently represent attractive investment alternatives. With its natural gas product, Gazprom stands for the transit period towards sustainable energy production, without which it will not be possible to achieve the climate protection goals. Therefore, the Company is currently still quite favorably valued. Desert Gold Ventures is certainly the riskiest of all securities and the one that offers the best opportunities. At the latest, with the NI 43-101 resource estimate, the price should move upwards again. Orocobre stands for the future. Electromobility without lithium will - probably - not exist in the foreseeable future.
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