June 2nd, 2022 | 14:36 CEST
Gold comes back: B2Gold, Desert Gold, Barrick Gold - The year of acquisitions!
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"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Gold chart-technically before price breakout
In a crisis-laden overall market, gold reached an 11-year high of USD 2,070 a good two months ago. As steeply as the rise occurred, it fell back to USD 1,780 due to profit-taking and margin pressure from futures speculators. In the meantime, however, the spot price is fighting its way up day by day, and at the beginning of June, the USD 1,850 mark was reached again. Technically, this area is the last stop for a further movement towards USD 2,000, which could now actually be imminent.
B2Gold - Takeover in Mali
The African nation of Mali is three times the size of Germany but is home to only 19.7 million inhabitants. The main economic sectors are agriculture, fishing and, increasingly, mining. Among the most important mineral resources is gold, where Mali has become Africa's third-largest producer in recent years.
Canadian gold producer B2Gold already has a local presence in precious metals production and recently acquired Australian explorer Oklo Resources. In total, the deal was worth 90 million Australian dollars, or the equivalent of 17.25 cents per share. In addition to a cash component, payment was made primarily in B2Gold shares. B2Gold's acquisition strengthens its presence in Mali, West Africa, by docking an additional 1,405sq km in a known prospect area just 30km east of B2Gold's existing Fekola mine, which has gold deposits of about 7.1 million ounces.
B2Gold's shares consolidated from their 2022 high of around EUR 4.50 to EUR 3.50. Last week, Gold Fields acquired Canadian Yamana Gold for over USD 6 billion. **With a capitalization of around EUR 4 billion, B2Gold is a clear buy in the current environment.
Desert Gold - Good drill results and interesting location
Canadian gold explorer Desert Gold has also been active on its Senegal-Mali Shear Zone (SMSZ) project in Mali for a couple of years.The operations are in close proximity to B2Gold's Fekola mine and two other mining operations of Barrick Gold. Today, there were results to report from three core holes drilled to test the depth extent of the Gourbassi West North zone at its SMSZ project. All holes intersected significant amounts of gold mineralization with a peak intercept of 124m at 1.08 g/t gold, including 1.85 g/t gold over 41.1m and 0.7 g/t gold over 30.6m. Results return thick intercepts with good gold grades and indicate intersection to a depth of 175m.
CEO Jared Scharf comments: "This is a fantastic start to our 2022 drill program, intersecting thick zones of gold mineralization starting at or near surface, indicating real potential to delineate a significant gold deposit with good economics. Hole DD009 returned approximately 160m of near-continuous gold mineralization. These initial results are particularly encouraging as the Gourbassi West North zone is a new discovery in a previously unexplored part of the concession area. Gourbassi West North has the potential to significantly expand the existing resource at SMSZ."
In recent weeks, the Desert share (DAU) has already been able to make some gains after a prolonged correction, and recently there was also another capital increase at CAD 0.12. Calculated, the share is actually trading below the level of the last measure. In view of the good situation, the latest drilling results and the M&A activities in the immediate vicinity, one should now take a closer look at the value again. **The Market cap is just shy of EUR 11 million, and B2Gold has spent USD 90 million on a much less interesting project.
Barrick Gold - In the immediate vicinity
Major Barrick Gold has many operations in Africa, including Mali and Tanzania. In East Africa, the Company is now strengthening its ESG profile by investing additional shares of sales proceeds in social projects. For every ounce of gold sold from its two mines in the country, USD 6 will be spent on improving healthcare, education, infrastructure and access to drinking water in surrounding communities. At the same time, the Company has committed up to USD 70 million to invest in value-added national projects, including mining-related training, skills development and scientific facilities at Tanzanian universities, and road infrastructure.
Barrick has taken over the Tanzanian mines from its previous operator in 2019, reestablished relations with the government, and renewed the prospecting license for the Mara and Bulyanhulu operations. Combined, Barrick is expected to produce more than 500,000 ounces of gold per year at lower costs. We find similar conditions in the West African country of Mali, which is now considered very mining-friendly and is encouraging international companies to set up operations there. From a major's perspective, expansion via further regional acquisitions makes great sense. Barrick Gold's stock is trading at EUR 19, well below its medium-term intrinsic value.
Takeover fantasy is again noticeable in the gold sector. The valuation of many mines and projects is simply too low, as precious metal prices begin to price in inflation. Large producers are trying to make smart acquisitions, especially in Africa. From this point of view, both the majors Barrick and B2Gold are interesting. A possible target in Mali is the Canadian explorer Desert Gold with excellent drilling results.
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