May 24th, 2023 | 08:10 CEST
IPO Price driver: ThyssenKrupp, Volkswagen, Desert Gold
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"[...] One focus will be on deposits near the surface. These would be good arguments for a quick production decision using the low-cost heap leaching method. [...]" Brodie Sutherland, CEO, Tocvan Ventures
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.
Desert Gold: Is a neighbour driving the share price?
At EUR 0.035, one might think that a company is doing poorly. But sometimes, the impression is deceptive, as in the case of Desert Gold. The explorer has been delivering positive news about the development of the SMSZ project in Mali for months. Virtually every drill sample reported on the 440 sq km site - one of the largest non-producing land areas in West Africa - is promising. Initial proven and indicated mineral resources include 8.47 million tonnes grading 1.14 g/t gold totalling 310,300 ounces. In addition, there are probable mineral resources of 20.7 million tonnes grading 1.16 g/t gold totalling 769,200 ounces, more than 21 gold zones and numerous other high-quality exploration targets. But the share price has been trading around EUR 0.04 since the beginning of the year. To put this in perspective, it was EUR 0.10 in January 2022. At that time, the gold price was significantly lower, and Desert Gold was nowhere near ready for development.
But sometimes, it takes an external trigger for a stock to wake up. In the case of Desert Gold, this could be the IPO of Allied Gold Corp. Limited on the London Stock Exchange. Behind the Company are former managers of the well-known Yamana Gold. Allied Gold's main asset is the Sadiola Mine. The project contains proven and probable mineral reserves of 7.3 million ounces in 149.5 million tonnes grading 1.51 g/t Au and is adjacent to Desert Gold's SMSZ project. Allied Gold is hoping for a valuation of more than USD 1 billion. Desert Gold's market cap is currently just over CAD 10 million. The two projects are not directly comparable, and Allied has some other exploration areas, but it shows that Desert Gold is anything but expensive at the moment.
Therefore, the takeover fantasy should be rekindled. Because in the neighbourhood, there are several producing mines of Barrick Gold, Allied Gold, Endeavour Mining, and B2Gold. And the region is also attracting new players: Fortuna Silver Mines has just announced that it will acquire Chesser Resources for USD 60 million.
ThyssenKrupp with nucera IPO: Analysts dampen hopes
At ThyssenKrupp, investors hope that the upcoming IPO of the hydrogen subsidiary nucera will cause a jump in the share price. According to the news agency "Bloomberg", the IPO is to take place in June, and the valuation is to be around USD 4 billion. However, JPMorgan is putting the brakes on hopes of a price firework in ThyssenKrupp shares. Despite the recent news about the IPO, analysts only rate ThyssenKrupp's stock as "Neutral." The price target is set at EUR 5.70. The analysts themselves value nucera at EUR 3 billion. But even if it becomes EUR 4 billion, they see little upside for the parent company's stock. To put this in perspective: ThyssenKrupp currently has a market capitalization of just over EUR 4 billion. Therefore, nucera is worth more than just a valuable asset within the Company.
At the same time, things are going well at nucera. Numerous orders have been reported in recent weeks. Most recently, there was a partnership with H2 Green Steel to construct the first large-scale green steel plant in Europe. The standardized 20 MW "scalum" electrolysis modules from the provider of world-leading electrolysis technology for the production of green hydrogen enable an installed capacity of more than 700 MW. This will also create one of the largest water electrolysis plants in Europe.
The green hydrogen will be used to operate a new, fully integrated, digitalized and cycle-oriented steel plant in Boden, northern Sweden. In the initial phase, the plant will produce 2.5 million tonnes of green steel. Green steel is already in particularly high demand from the automotive industry, which can significantly reduce its carbon footprint in this way. H2 Green Steel is also the first company to reserve production capacity due to the high demand for nucera's solutions earlier this year.
"The market for green hydrogen production solutions is growing very dynamically. This development is also reflected in the demand for our large-scale and highly efficient water electrolyzers with our 20 MW modules "scalum". It is important for companies to reduce delivery times by continuously building up capacity and thus improve the plannability and feasibility of projects. By reserving production capacities, customers can secure access to these capacities and thus a decisive competitive advantage," says Dr Christoph Noeres, Head of Green Hydrogen at ThyssenKrupp nucera AG & Co. KGaA.
Volkswagen: Difficulties with software development
In the autumn of 2022, Volkswagen took its subsidiary Porsche public. Since then, the share price of Porsche AG has increased by around 50%. The parent company cannot keep up with this. The preferred shares of the Wolfsburg-based carmaker are currently trading at EUR 120, the same level as in October 2022. Bernstein Research sees little room for upside, with a price target of EUR 147. The rating is "market perform". The development in the current year is surprisingly positive. Demand in China and the US is better than feared, and the order books are full to bursting in Europe. DZ Bank is somewhat more optimistic about the shares of the DAX-listed company. The analysts recommend buying the stock with a target price of EUR 150. However, they are concerned about the difficulties in software development. These would slow down the important implementation of the strategy for e-cars.
IPOs are an opportunity: for the stock market candidate, the parent company and the entire peer group. Desert Gold should benefit not only from the gold price, which is expected to continue to rise but also from IPOs or takeovers in the industry. If the drilling results continue to be positive, the share should react strongly sooner or later. The nucera IPO fits the spirit of the times. However, the question is, what will happen to ThyssenKrupp afterwards? Volkswagen is not making much progress with the sales of its e-cars. Tesla and BYD are a long way ahead.
Conflict of interest
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