March 25th, 2022 | 12:23 CET
K+S, Ximen Mining, BP - The trend continues
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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
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 - Too fast for analysts
The share of the Kassel-based fertilizer producer has had an impressive run over the past 2 years. Since the Corona crash, the share price has increased fivefold and reached a multi-year high. The recent increase in momentum has been triggered by sanctions against competitors from Russia and Belarus. As a result, potash prices are continuing to rise. Thus, in all likelihood, the Group will sell more than forecast in the current financial year and at high prices.
But K+S is nevertheless pressing the brakes on expectations and "merely" confirmed its targets for the year. Operating earnings are expected to rise to between EUR 1.6 billion and EUR 1.9 billion. "With the aforementioned range, we would generate the best result in our company's history to date," said company director Burkhard Lohr. Rising energy prices are also unlikely to have a significant impact on earnings. "Fortunately, we are 92% covered for reasonable prices this year," Lohr emphasized.
Most analysts are lagging behind the share performance with their price targets. Berenberg increased the price target from EUR 20 to EUR 22 but lowered the rating from "Buy" to "Hold". The experts at Baader Bank are more optimistic, with a buy recommendation and a target price of EUR 30. Nevertheless, the fact remains that the Company's valuation is not high. The 2022 P/E ratio is 5 and rises to a moderate 7 for 2022!
Ximen Mining - Latest data confirm geology
The Company owns several 100% interests in precious metals projects in the Canadian province of British Columbia. These include the Amelia gold mine and the Brett epithermal gold project. An option agreement is in place for the Treasure Mountain silver project, which is adjacent to the past-producing Huldra silver mine, whereby Ximen receives annual staggered cash and share payments, and the option partner finances the development of the project.
Recently, the Canadians announced findings based on previously conducted helicopter-borne VTEM geophysical surveys on the Providence and Bud-Elk properties. The survey was designed to identify magnetic and conductive structures for further exploration of gold-copper mineralization. The current data demonstrate that the geophysical survey results are consistent with the bedrock geology.
New exploration targets for more extensive ground surveys are planned. The Company has a permit for 24 drill sites on the Providence and Bud-Elk properties, with the ability to drill multiple holes from each site. At a maximum, the campaign is expected to cover approximately 14,000m. Known mineralization in the vicinity of the Greenwood properties includes 24 documented mineral occurrences, 15 of which are historic mines.
A particular focus is on the historic Kenville Mine, where Ximen owns the surface and underground rights. The goal is to develop the project into a small underground mine. The Company expects to receive the necessary development permit in a few weeks. "With the upcoming development permit and the funding of USD 5 million in development costs and further financial support from a mid-tier gold producer, 2022 should mark the start of the Kenville Gold Mine," commented Christopher Anderson, CEO of Ximen Mining.
The Kenville Gold Mine was the first registered underground mine in British Columbia. From 1890 to the 1950s, 65,381 ounces of gold were produced. The gold grade was a high 12.8 g/t! Only 50% of the property has been explored, providing additional fantasy.
BP - The general conditions give wings
Oil shares such as BP are currently among the winners on the stock markets. No wonder, given the skyrocketing commodity prices. Further import stops for crude oil and oil products from Russia could fuel the price increase again. The import ban imposed by the US had a signal effect. Added to this is Russia's latest strategic move to only allow payments for gas exports in its own currency in the future.
Even if fossil fuels should lose importance in the future and green energy should continue to grow strongly, there is currently no way around the "dirty" energy sources. In addition, many industry representatives are moderately valued. The share of the British are trading at their current level with a 2022 P/E ratio of 7.5 and a 2023 P/E ratio of 6.8. Analysts believe that the shares have an average upside potential of 25% within a year.
The lights are green for a good performance of commodity stocks. K+S and BP are among the most important players in their sectors. Ximen Mining opens up exciting opportunities given its market capitalization of CAD 21 million and the imminent ramp-up of the Kenville mine.
Conflict of interest
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