July 28th, 2022 | 14:39 CEST
Is Elon Musk making a move on Standard Lithium? News from Newmont and Tocvan Ventures
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Tocvan: Good drilling results and further financing secured
Although the shares of Tocvan Ventures cannot decouple from the weak gold price, there are good reasons why the Canadians could benefit disproportionately from a positive industry sentiment. For example, the Company is convincing with positive news. Tocvan owns two properties in Mexico. The Pilar and El Picacho projects have gold and silver deposits. Recently, drill results for the Pilar project were published and were convincing. Seven drill holes were completed within 30 days. These resulted in a gold recovery rate of a strong 85% to 96%. The grades of the ore samples ranged from 0.4 to 5.0 g/t AU. While the results are being re-assayed by a certified laboratory, further drilling is already underway. So there could be more positive news in the current year. In order to put this in perspective, there are active gold mines in the neighbourhood that are clearly profitable, with gold recovery rates below 80%.
Later in the year, there should also be new drill results from the El Picacho project. There, a sixth mineralization zone was added to the five known at the beginning of July. This zone is particularly promising. The mineralization at the surface extends over a length of 450 meters. In addition, an intercept with a mix of lower grade and higher grade mineralization has been identified. Specifically, the two mineralizations have, on the one hand, 7.2 g/t gold, 36 g/t silver, 4.4% lead, and on the other hand, 4.5 g/t gold, 197 g/t silver, 4.8% lead and 7.1% zinc. Investors should be reassured as the upcoming drill programs have already been funded. At the end of June, Sorbie Bornholm, an investment company focused on small- and mid-caps invested around CAD 5 million in Tocvan. The transaction took place at a price per share of CAD 0.82. Investors can currently get in at CAD 0.71, although more successful drilling has since occurred.
Standard: Interesting with and without Elon Musk
The development at Standard Lithium is also exciting at the moment. Speculation about an investment by Elon Musk or Tesla has not ceased. In the past weeks, the wealthiest man in the world has repeatedly expressed bullish views on the battery and lithium market. Most recently, in the context of Tesla's quarterly figures. He said that the world urgently needs lithium batteries to achieve "energy independence". They are the new oil. For the lithium industry, this means a license to print money. Of course, this opinion went around the world and caused significant price increases for practically all lithium shares. Standard Lithium went up by a good 40%. That is because Musk's comments have rekindled takeover speculation. After all, Standard Lithium owns two exciting projects in the US state of Arkansas and thus in the vicinity of Tesla's Gigafactory in Texas. A takeover would therefore make perfect strategic sense.
Newmont: Dividend yield now at an attractive level
In the meantime, it could also make sense to buy Newmont shares again. The price slide of over 13% on Monday seems excessive at the very least. But it shows that investors' nerves in the gold sector are now bare. The trigger for the two-digit price loss was the quarterly figures of the world's largest gold producer. Newmont reported a profit of 46 cents per share in the second quarter. That was still 15 cents below analysts' estimates. It was not the only negative surprise, as the outlook was also weak. Costs for the full year are expected to be USD 1,150, and a total of six million ounces are expected to be extracted from the ground. Both disappointing. Nevertheless, Newmont's valuation now appears to be anything but too high. After all, the expected dividend yield is now almost 5%. And with free cash flow of around USD 500 million in the second quarter alone, Newmont is a real cash cow. If the gold price does not fall below the USD 1,690 to USD 1,700 mark and an end to interest rate hikes in the US becomes more foreseeable, heavyweight Newmont should benefit.
The development of lithium and gold could not be more different at the moment. Nevertheless, there are also interesting entry opportunities in gold. After all, much of the negative seems to be priced in. Newmont offers an attractive dividend. Tocvan is undoubtedly more speculative, but the upcoming drill results offer opportunities. Standard Lithium, with its two projects in the US, is an exciting lithium pure play - with or without Musk.
Conflict of interest
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