April 4th, 2022 | 12:09 CEST
K+S, Almonty Industries, Barrick - Full speed ahead!
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"[...] While tungsten has always played an important role in the chip industry, it is now being added to batteries for e-cars. [...]" Lewis Black, CEO, Almonty Industries
The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.
K+S - Records
The fertilizer producer's business has been going very well for some time. Last year, the MDAX-listed group benefited from higher demand from farmers and sharply rising prices for potash. In addition, the strategic focus on the potash and magnesium products segments with the sale of the salt business in the US and the associated debt reduction had a positive impact.
As a result of the war in Ukraine, the supply shortage of potash, an important mineral fertilizer for plant cultivation, has been further exacerbated as sanctions have been imposed on the Russian and Belarusian suppliers Uralkali and Belaruskali. Together, the two companies produce about one-third of the world's potash. Fertilizer prices have risen to a record high.
The Kassel-based company's shares, driven by its good operating business, were the best performing mid-cap on the German stock market in 2021. This year, too, the shares are at the top of the performance list. However, many analysts now no longer see any upside potential for the stock. However, the experts at Kepler Cheuvreux have recently raised their price target from EUR 36 to EUR 42.
The Group itself has announced record earnings for the current year. According to the analysts' consensus estimate, the share has a very moderate 2022 P/E ratio of 5, which rises to 7 in 2023. The flip side of high fertilizer prices is rising food prices. While industrialized countries can cope with this, the situation in the developing world could soon prove dramatic. Because of the high fertilizer prices, farmers here will, in some cases, purchase less, and production will fall as a result.
A detailed analysis of K+S can be found here: https://researchanalyst.com/en/report/k-s-ag-fertilizer-for-the-portfolio.
Almonty Industries - Potential not yet reflected in the share price
Numerous raw materials are indispensable for sectors such as technology or industry. The European Union has defined a catalog of so-called "critical raw materials", 30 in number. These raw materials, mainly metals, are urgently needed for business locations. Supply risk and economic importance lead to the classification "critical", as these raw materials cannot be extracted in Europe or only to an insufficient extent. In general, China dominates the global market with shares of up to 90%.
One of these critical raw materials is tungsten. The chemical element has the highest melting and boiling point and is used in many industries. Canada's Almonty Industries is well on its way to soon becoming a globally significant tungsten producer, thus making supply chains more secure. The Sangdong mine in South Korea, which houses one of the world's largest tungsten resources, is scheduled to start operations in the first quarter of 2023. The project is fully financed.
Recently, the Company was able to shine with two positive announcements. An agreement was reached with the Korean Mine Rehabilitation and Resource Corporation and Hannae For T to jointly mine and recycle rare metals such as tungsten and molybdenum for further processing into nano-tungsten oxide and other essential products for Korean domestic consumption in the semiconductor and battery sectors.
In addition, the Company announced it is exploring the construction of a vertically integrated plant to further process nano-tungsten oxide for the South Korean industry. The product will be used to produce battery anodes, reflecting the strong growth in demand from the electromobility sector. To finance the project, a memorandum of understanding has been reached with the potential lender, Germany's KfW IPEX-Bank, which is already financing the Sangdong mine. Almonty is currently valued at CAD 205 million. Given the current market environment, this does not adequately reflect the Company's potential.
Barrick - Upgrade by S&P
Unsettled stock market times and rising inflation provide a good breeding ground for rising precious metal prices. The shares of the world's second-largest gold producer have also benefited from this recently. Since the beginning of the year, the shares of the Canadian company have gained about 30%.
High profits in the past fiscal year led to net debt of almost zero. Analysts expect the net cash position to grow to USD 2.5 billion as early as 2023. Meanwhile, Barrick lets its shareholders participate in the Company's success with special dividends. The well-running business thus allows the Canadians to effortlessly develop their projects further. Acquisitions could also become an increasingly important topic.
Recently, the rating agency S&P upgraded Barrick's long-term corporate rating from BBB to BBB+ with a stable outlook. S&P justifies this decision by citing considerable financial flexibility due to operational efficiencies. Experts also said that Barrick is very resilient in the event of lower gold prices.
The environment for commodity producers is ideal. The three stocks presented are suitable for building a long-term, well-diversified commodity portfolio. K+S and Barrick reflect the aspects of agriculture and precious metals, respectively. With Almonty, investors can focus on the promising area of critical raw materials. The Company will soon be a major player in the global tungsten market.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
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