Close menu




March 4th, 2022 | 12:33 CET

K+S, Phoenix Copper, Barrick Gold - Commodities as portfolio boosters

  • Copper
  • Gold
Photo credits: pixabay.com

Prices for raw materials went through the roof last year. On the one hand, the global economy recovered faster than expected. On the other hand, demand for copper increased significantly, especially due to the turnaround in the automotive industry. Now, raw materials are becoming scarce again, as Russia is partially eliminated as an exporter of raw materials. It means that supply is lagging behind demand and resulting in rising prices. Especially for oil, gas and wheat, supply is expected to tighten significantly. Today we present three exciting commodity companies that could benefit from the crisis.

time to read: 4 minutes | Author: Armin Schulz
ISIN: K+S AG NA O.N. | DE000KSAG888 , PHOENIX COPPER LTD. | VGG7060R1139 , BARRICK GOLD CORP. | CA0679011084

Table of contents:


    K+S - Strong year ahead

    Now that Russia is no longer a major exporter of wheat, an alternative is needed. If you want to harvest more wheat, you can resort to fertilizers. K+S, which put in an impressive performance in 2021, is particularly worthy of consideration. The shares gained more than 120%, and a break in the trend is unlikely because the other wheat producers have to close the gap as best they can. Already last year there were crop failures due to severe weather, causing the potash price to skyrocket.

    This high price puts the Group in a position to forecast a significant increase in earnings even though energy and logistics costs have risen significantly. Management expects EBITDA of between EUR 1.6 and 1.9 billion. That would then almost double the already very good operating result from 2021. Incidentally, the Company reduced its debt significantly and is well equipped for the future.

    The sanctions against Belarus, which are likely to remain in place, will also have a positive effect. In addition to the Russians, athletes from Belarus are now no longer allowed to compete in the Paralympics. Belarus is home to one of the world's largest potash producers. The Canadian competitor Nutrien, which expects record sales this year, has also benefited from this. The share of the Kassel-based fertilizer manufacturer is currently quoted at EUR 22.94 and has not been affected by the poor mixed situation in the DAX environment but has merely been slowed down.

    Phoenix Copper - Ahead of production start

    Worldwide electrification continues to advance, and more people have access to electricity. Copper's properties make it ideal for transporting electricity. The revolution in the automotive industry away from combustion engines to electric vehicles has once again significantly increased demand. 3-4 times as much copper is needed in an e-car as in internal combustion vehicles. Phoenix Copper Limited can help meet the demand in the future. The Company owns three exploration projects in Idaho called Red Star, Borah Resources and Navarre Creek, where gold, silver, lead, zinc, copper and cobalt are present. However, the flagship project is the Empire Project, which is on track for production.

    Since 2017, the Company has owned an 80% interest in the project, which has historically mined copper, zinc, gold and silver. A total of 445 drill holes have been drilled, and resources of 129,641 tons of copper, 58,440 tons of zinc, 10,133,772 ounces of silver and 355,523 ounces of gold have been inferred. In addition, there is tungsten and molybdenum on the nearly 29 sq km property. According to the consulting geologist, just 1% of the ore system has been explored. The operating plan for the mine was submitted in June last year, and operations are expected to begin in 2023. The cost is USD 52.6 million and should pay for itself in 2 years. At the International Investment Forum, CFO Richard Wilkins presented the Company and projected first-year net sales of USD 90 million, USD 56 million EBITDA, and USD 43 million after-tax cash flow. Here is the transcript.

    On Feb. 16, SISM Research published its analysis on the Company. It issued a price target of EUR 1.72 for the next 12 months and a speculative buy recommendation. The Company currently has about USD 15 million in cash and is thus financially well-positioned. The stock traded in Stuttgart, Frankfurt, London and the US is currently trading at EUR 0.60. The high from 2021 was EUR 0.92. The share still offers some upside potential and is diversified.

    Barrick Gold - Gold price boosted

    For a long time, the share of Barrick Gold hung in there. It was said that there was too little imagination in the value. Even as inflation continued to rise in recent months, the value could not free itself from lethargy. Since the Ukraine crisis, falling indices and weakening cryptocurrencies, the gold price has released itself from its sideways phase. The profiteer of this is naturally Barrick Gold, one of the world's largest gold producers. Despite some Corona difficulties and natural disasters, the presented annual figures were on target.

    In addition to gold, the Company is particularly well-positioned in copper production, even though production slumped 9% YOY. A total of 415 million pounds of copper were produced. However, copper production in the fourth quarter was 11-13% higher than in the third quarter. One should wait for the first quarterly figures in 2022 to see if the trend continues. For gold, 2022 production volumes are expected to be between 4.2 and 4.6 million ounces, and for copper, between 420 and 470 million pounds are expected. The Group expects production costs to increase due to higher energy and logistics costs.

    As a result, analysts expect the Company's profit to decline. One forecasts a decline of about 10%. However, it should be noted that Barrick's estimates are based on a gold price of USD 1,700 and USD 4 per pound of copper. Currently, both values are well above these fundamentals, so the analysts could be wrong here. There could be a similar effect as with K+S, where costs are more than absorbed by significantly higher raw material prices. The share is quoted at USD 23.15 and has thus broken out to the upside.


    No one knows how long the Ukraine crisis will last, but raw materials will remain scarce. More and more people in the world need access to electricity, and copper is indispensable for this. If the sanctions against Belarus were to fall, K+S would suffer. But this is not expected to happen for the time being. With Phoenix Copper, another copper producer is in the starting blocks. As soon as the mine goes into operation, it will no longer be possible to buy the share at today's favorable price. Barrick Gold has gold as an inflation hedge and copper as a metal for the future in the automotive industry. In addition to the price fantasy, there is a dividend.


    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.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author



    Related comments:

    Commented by Nico Popp on May 24th, 2022 | 10:20 CEST

    Monkeypox: risks and opportunities - Bavarian Nordic, Desert Gold, Varta

    • Gold
    • Monkeypox

    Supply chain problems, energy price chaos and now monkeypox? The list of disturbing news never ends. Investors need to keep a cool head in this market phase. Which construction sites are a permanent burden on the markets, where are only isolated problems still looming, and where are there possibly even surprising potholes? We have taken a close look at three stocks from different sectors. Let's go straight to the monkeypox!

    Read

    Commented by Armin Schulz on May 23rd, 2022 | 12:49 CEST

    BASF, MAS Gold, Plug Power - Shares with great turnaround potential

    • Gold
    • Hydrogen
    • Investments

    The Fear & Greed Index is down to 11, which means nothing other than extreme fear. And there are many areas causing headaches for investors. There is the Ukraine crisis, inflation, rising interest rates in the US, supply chain problems due to zero-COVID policies in China, and fear of recession. However, the S&P has formed a double bottom last week, which raises hope for a turnaround in the markets. Due to the crises, there are currently also opportunities again. We take a look at three potential turnaround candidates.

    Read

    Commented by André Will-Laudien on May 23rd, 2022 | 11:42 CEST

    Share sell-off: TUI, Barsele Minerals, Nel ASA - Buy or sell these stocks?

    • Gold
    • Investments
    • Hydrogen
    • travel

    The sell-off in equities entered a new round in May. With rising inflation, disrupted supply chains and uncertain energy supplies, the risk for investors is increasing as interest rates are now exploding to unprecedented levels in parallel with the highly volatile environment. The 10-year yields on government bonds in Germany and the USA have moved up from near zero to 1.14% and from 1.5% to 3.12%, respectively. Whenever there was a noticeable rise in interest rates for bonds, things became critical on the stock market. At the moment, this is weighing on technology stocks in particular. The DAX and S&P have already lost 20% in the current correction phase. After initial losses, gold is now accelerating. Where are the opportunities for investors?

    Read