Gold at USD 5,200 – Are Mining Stocks Heading for New All-Time Highs? Barrick, Pan American Silver, Endeavour Silver, Newmont & Desert Gold

New All-Time Highs for Mining Stocks

While Morgan Stanley forecasts the gold price to reach USD 5,200 by year-end, expert Markus Bußler is bullish on more than just gold. He is predicting new all-time highs for mining stocks. Following the rapid rise from around USD 4,000 to about USD 4,400, he does consider a short-term consolidation possible. However, a pullback of several percentage points would not be a warning sign for him but rather a buying opportunity. He anticipates significantly higher prices as the year progresses and views the current movement more as the start of a new uptrend than as a short-term flash in the pan.

Bußler also expects further price increases for silver. The price had most recently risen from around USD 55 to USD 56 to USD 66 to USD 67—a percentage increase even greater than that of gold. He considers a correction back toward USD 60 entirely possible but would also use it as an entry point. In his view, the silver sector is on the verge of a renaissance. Even investors who are already buying at current levels could, in his estimation, see significantly higher prices in a few months.

Bußler is particularly optimistic about gold and silver mining companies. He views pullbacks as buying opportunities. Bußler expects numerous producers and exploration companies with promising projects to reach new all-time highs. Many stocks have lost about 50% from their previous highs and thus, if successful, theoretically have more than 100% upside potential. Operational problems at individual companies, such as Pan American Silver or Endeavour Silver, do nothing to alter his fundamentally positive view of the sector. In the case of Aya Gold & Silver, he even views the recent profit-taking as merely a breather following strong operational performance.

Desert Gold: Timing Is Right for a Price Rally

While gold is embarking on a new rally, Desert Gold is set to begin gold production soon. The timing could hardly be better for the stock to take off again. In May, the share was still trading at EUR 0.095. It is currently trading at around EUR 0.067.

Investors are eagerly awaiting the start of gold production in the Barani East sub-area of the massive SMSZ project in western Mali. Delivery of the gravity separation plant has been delayed by a few weeks. Given the global supply chain issues, this delay should not be overemphasized. Furthermore, industry sentiment has improved significantly in the meantime, so the announcement of production start is likely to have a more positive impact on the share in this environment.

A study by GBC Research highlights the stock's potential. From GBC's perspective, the investment thesis is no longer based solely on further exploration success, but increasingly on the monetization of existing resources and a relatively near-term start of production. The analysts therefore recommend buying the stock. For the Barani and Gourbassi deposits, the updated PEA assumes a 10-year oxide open-pit mining operation. At a gold price of USD 2,850 per ounce, this results in a post-tax NPV10 of USD 61 million and an IRR of 57%. At USD 4,070 per ounce, the NPV10 rises to USD 124 million and the IRR to 101%.

In its sum-of-the-parts valuation, GBC arrives at a total intrinsic value of USD 244.8 million. Of this amount, USD 89.6 million is attributable to the planned gravity plant at Barani East, USD 124 million to the Mali oxide project based on the PEA, USD 21.7 million to additional resources in Mali outside the scope of the PEA, and USD 9.5 million to the Tiegba Gold project in Côte d'Ivoire. With approximately 360.26 million outstanding shares, this results in an intrinsic value of USD 0.68, or CAD 0.93, or EUR 0.59 per share. As mentioned, the share is currently trading at around EUR 0.067.

Barrick Mining Reaches Agreement with Newmont

While Desert Gold is set to begin gold production shortly, Barrick Mining is taking an important step forward in its planned corporate restructuring. Together with Newmont, the gold giant has reached an agreement regarding assets in the Nevada Gold Mines joint venture that had previously been excluded. Among other things, Barrick is contributing Fourmile, while Newmont is contributing Fiberline and Mike. At the same time, all outstanding disputes surrounding the joint venture are being resolved. Crucial to Barrick's ongoing spin-off plans is Newmont's approval of the initial public offering (IPO) of the North American gold operations. As part of the agreement, Barrick will also receive USD 1.95 billion from Newmont in compensation for the assets contributed. This removes a major hurdle to positioning the North American business more independently.

At the same time, Barrick is also refining the leadership structure for its operations outside North America. Sebastiaan Bock has been appointed CEO of "Rest of World" effective immediately and will thus assume responsibility for the gold and copper operations in Africa, the Middle East, Latin America, and the Asia-Pacific region. This portfolio currently produces more than 2 million gold-equivalent ounces per year and is expected to grow by more than 20% over the next three years. Barrick places particular emphasis on collaboration with Chinese partners regarding mining joint ventures, investments, technology, equipment, and supply chains. The new leadership structure thus underscores the increasing organizational separation between the North American business and international operations. Incidentally, Desert Gold's SMSZ project in Mali is located in close proximity to Barrick. It is therefore a potential acquisition target if the gold giant seeks to expand its resource base.

Gold does indeed appear to be starting a new rally. Therefore, the timing for the start of production at Desert Gold could hardly be better. From GBC Research's perspective, there is potential for the share price to multiply. Barrick Mining is making progress with the reorganization of the group. However, the long-term strategy is not entirely clear. Does the company intend to focus more on copper?