07. July 2021 | 14:25 CET
Infineon, Desert Gold, BASF - Prepared for the future
The energy turnaround and the achievement of climate neutrality are back in the news as the Corona pandemic fades. Politicians around the world are supporting with billions in subsidies. But the industry is under pressure. Climate neutrality requires the introduction of new production technologies in many sectors, and in areas such as basic materials, the conversion of entire production lines. On the other hand, competitiveness should not suffer in this historic transformation.
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ISIN: INFINEON TECH.AG NA O.N. | DE0006231004 , DESERT GOLD VENTURES | CA25039N4084 , BASF SE NA O.N. | DE000BASF111
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
BASF - Climate-neutral chemistry
For large corporations like BASF, climate change is one of the biggest challenges. The Ludwigshafen-based Company wants to lead the way toward a climate-neutral chemical industry. However, a prerequisite for this is that sufficient quantities of electricity from renewable sources are available at competitive prices. That is why companies are already securing their own access to wind and solar energy.
By acquiring 49.5% of the Hollandse Kust Zuid offshore wind farm, the DAX-listed Company intends to use the electricity generated for chemical production at sites in Europe. The seller of the shares is the Swedish utility Vattenfall. The purchase price was EUR 0.3 billion. In addition, BASF will incur costs of EUR 1.3 billion for the further construction of the wind farm. Once fully commissioned, the wind farm will be the largest offshore wind farm in the world, with 140 wind turbines and a total installed capacity of 1.5 gigawatts.
In return, the sale of the 49% stake in the US specialty chemicals Company Solenis was announced. Combined with the shares of the other owner, Clayton Dubilier & Rice, Solenis will be sold to the investment Company Platinum Equity. The Company is valued at USD 5.25 billion, which includes net financial debt of about USD 2.5 billion. The analysts at DZ Bank positively view the BASF share and raise the price target from EUR 79 to EUR 83 with a buy rating.
Desert Gold - Fully on track
Besides the energy turnaround, rising inflation concerns are the dominant topic in the daily gazettes. The billion-euro stimulus programs that are being spent worldwide are enormously increasing the deficits of the already highly indebted countries. The economy is supposed to grow - the high inflation rates are currently seen as a temporary effect due to the recovery after the lockdowns and are more or less ignored by the central banks. Thus, interest rates are expected to remain at zero, and the money printing machines will continue to run. Due to the current circumstances, long-term hedging of a portfolio with gold or gold mining stocks is essential.
The share of Desert Gold is interesting as a portfolio addition. Since the high last August, the share corrected around 50%, thereby the enterprise development of the Canadians, who search for gold in Mali, points clearly upward. With the 410km² SMSZ project, named after a 38km long section of the Senegal-Mali shear zone, Desert Gold owns the most extensive contiguous non-producing land package in this region. The project is connected on strike to five major mines to the north and south, including B2 Gold's Fekola mine, Barrick Gold's Gounkoto and Loulo mines, and Allied Gold's Sadiola and Yatela mines.
In mid-June, it was announced that 82% of the planned 20,000m drilling program had already been completed. In total, more than 230 drill holes covering 16,400 meters have been completed. Results for approximately 14,000 samples, or 80% of the completed drill holes, are expected in the near term. Desert Gold's objective is to discover a Tier 1 gold deposit associated with the regional gold-bearing structural systems that run through the SMSZ project. Over the long term, the stock offers leverage to a rising gold price.
Infineon - All for the environment
Germany's largest semiconductor manufacturer is also riding the green wave. The Munich-based Company's goal is to achieve climate neutrality by 2030, and it has now joined Apple's environmental program, which requires a switch to green energy. The technology giant's goal is also to achieve carbon neutrality by 2030, including its supply chain. It has already accomplished this at its own sites. According to the Company, 110 of Apple's production partners have already switched to renewable energy.
From the analyst side, Infineon received a buy recommendation from Goldman Sachs. The price target was left at EUR 43.60. Analyst Alexander Duval expects sustainable growth due to the structural acceleration of the digitization trend.
The energy transition is the central topic of our society. Companies are gearing up for the future. BASF's chosen path appears promising, and Infineon is also gearing up for the future. Alongside climate neutrality, inflation concerns remain another issue. As a portfolio hedge, investors should take a closer look at shares in gold producers or gold explorers such as Desert Gold.