March 23rd, 2023 | 08:00 CET
Gold to USD 3,000? Barrick Gold and Desert Gold profit. What is going on at Vonovia?
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"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
Barrick Gold - In the "Decade of Inflation"
Leigh Goehring expects that the US Federal Reserve will not raise interest rates again but may even cut them this year. "Then we are going to have another big inflation problem. This is the decade of inflation," he warned in an interview with Kitco News. The current situation, he said, is comparable to that in the 1970s. Starting in 1973, the Fed aggressively raised interest rates, and gold prices corrected by 45%. But the Fed could not get inflation under control and ended the rate hikes despite 5% inflation.
Subsequently, the price of gold shot up. As a result, Goehring said he would not be surprised if we see USD 3,000 this year. In the gold sector, Barrick Gold is a base investment. However, investors also need to keep an eye on the copper price more and more. That is because Barrick is working to develop one of the world's largest and highest-grade undeveloped copper-gold deposits: the Reko Diq project in Pakistan.
Desert Gold - Price jump
The share of Desert Gold Ventures has reacted to recent news from the Company with a jump of over 10%. The explorer has completed 445 drill holes with over 2,067 meters on priority ground and structural targets near the Mogoyafara South and Gourbassi West North gold deposits at the SMSZ project. These include the commencement of prospecting approximately 500 metres south of the Mogoyafara South gold deposit (estimate of probable mineral resource of 412,800 ounces of gold grading 1.05 g/t gold) for a new zone 400 metres long and 50 to 75 metres wide. Samples from this site have returned up to 1.55 g/t gold. Another new mining site is located approximately 1,000 metres east of the Mogoyafara South trend. There, samples from two 50-metre long and 2 to 5-metre wide artisanal workings have returned values up to 5.04 g/t gold. With the SMSZ project in Mali, Desert Gold owns one of the largest non-producing land areas in West Africa at 440 sq km.
Desert Gold CEO Jared Scharf commented, "I am always pleasantly surprised when new artisanal mining sites appear on our SMSZ concession area. This new activity reinforces our belief that we will discover new gold zones in our concession area as we continue to work. I am also pleased to report that we have completed more drill holes than planned and are still under budget. We look forward to releasing these results as soon as possible."
With that, Desert Gold is feeding the takeover fantasy. To do so, the Canadians must prove that mining the SMSZ project is worthwhile. To this end, a drilling program covering more than 35,000 meters is currently underway. There are several producing mines in the neighborhood, including those of Barrick Gold, Allied Gold, Endeavour Mining and B2Gold. These large corporations continue to swallow up smaller explorers in the region. If the upcoming drill results from Desert Gold continue to be positive, this could lead to a takeover.
Vonovia: EUR 19 or EUR 40?
From gold to "concrete gold". The latter is not shining at the moment. High interest rates and energy prices are causing problems for real estate companies. The share of Germany's largest real estate company Vonovia, for example, has lost around 60% of its value in the last 52 weeks and is now trading below EUR 19. Analysts at Morgan Stanley see no light at the end of the tunnel. The real estate companies in continental Europe are predominantly linked by low yields or the risk of falling rental income - sometimes even both. The debt burden is also high for many companies in the sector. In Vonovia's case, analysts would have favored eliminating the dividend altogether to strengthen the balance sheet. But the payout was only reduced, so analysts downgraded Vonovia shares to "underweight" from "equal weight." The price target was reduced from EUR 30 to EUR 19.
Warburg Research is more optimistic. The analysts continue to recommend the share as a buy and have "only" reduced their price target from EUR 45.40 to EUR 40. They expect Vonovia to sell properties in the current year to reduce debt and lower interest costs. Whether a sale at an attractive price is realistic in the current environment is a question on which the analysts do not comment. Therefore, Morgan Stanley had more influence yesterday, and Vonovia shares were down more than 4%.
The mixed situation of high inflation, rising interest rates and a banking crisis is anything but straightforward. Gold should continue to benefit from this. And hopefully soon also gold shares like Barrick Gold and Desert Gold. Maybe even soon, one will take over the other. Concrete gold is currently more reminiscent of lead. That is why there is no urgent need to buy Vonovia shares at present - although the price level is becoming increasingly tempting.
Conflict of interest
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