December 22nd, 2021 | 11:01 CET
Kinross Gold, Almonty Industries, K+S - Is rising inflation the trigger for commodity stocks?
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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.
Kinross Gold - Acquisition Great Bear Resources: curse or blessing?
Kinross Gold has offered CAD 1.8 billion to acquire Great Bear Resources. Kinross is mainly interested in Great Bear's Dixie Project, located in the well-known Red Lake mining region in the Canadian province of Ontario. The drill results so far have been so good that Kinross expects to acquire a top-tier mine here and is letting this cost CAD 29 per Great Bear share certificate. A further payment of CAD 58.2 million has been agreed should the measured and indicated resource reach at least 8.5 million ounces when commercial production is announced.
Shareholders are unsure whether the investment is not too expensive and sent the share price down by around 20% after the announcement. The rating agency Moody's also sees the transaction as a negative event for the creditworthiness of Kinross, as there is no final resource estimate for the project, and the financial scope of Kinross is limited by the transaction. In the meantime, the share price has recovered slightly but is still below the level before the announcement.
Almonty Industries - Quietly becoming a major tungsten producer
The energy and mobility revolution presents humanity with a Herculean task. New concepts and processes must be developed in the shortest possible time, requiring all kinds of materials that are now not so readily available due to the previously low demand. This problem exists both with rare earths, which have been mined almost exclusively in China and with important metals that do not lend themselves as investment objects like gold or silver but perform an important function for the mobility revolution. One of these metals is tungsten.
Although it is found in many countries, tungsten is currently produced mainly in China. The metal with the chemical symbol W, which belongs to the transition metals, was often used for filaments in lamps due to its high melting and boiling point. In addition, it is used in its form as tungsten carbide to manufacture carbide tools. However, another possible application for the rare metal has emerged: its use in batteries and accumulators. Here, tungsten could be used as a substitute for the controversial material cobalt.
Here is where Almonty comes in. The Canadians are currently building the world's largest tungsten mine in Sangdong, South Korea. Supported in part by a loan from Germany's KfW Bank, the project is expected to produce around 30% of the tungsten supply outside China from the end of 2022. Almonty's third-largest shareholder is Deutsche Rohstoff AG, which holds about 12.2% of the shares. The two largest shareholders are Austria's Plansee Group and Almonty CEO Lewis Black. Almonty's other properties are located in Spain (Los Santos, tungsten concentrate) and Portugal (Panasqueira, tungsten-tin). Currently valued at CAD 179 million, the Company should be one of the winners in the coming years. Details are available in a post at researchanalyst.com.
K+S - Top Performer!
2021 was an excellent year for shareholders of the Kassel-based fertilizer group. The share certificates ranked first in the ranks of MDAX stocks, ahead of Hugo Boss and Nemetschek. The K+S share price has doubled and thus outperformed the index, which gained a moderate 12%. The Kassel-based Company benefits from the boom in the agricultural commodity markets and has done some important homework. The sale of the American salt business in the spring and the associated debt relief and balance sheet strengthening were particularly significant.
Next year, the share should also be one of the winners on the German stock exchange floor. Analysts forecast an increase in sales to EUR 3.7 billion. The 2022 P/E ratio is just 5, and the dividend yield is 2.4%. Even though experts on average consider the stock to be almost exhausted, the favorable conditions in the sector and the very low valuation argue for a continuation of the upward trend in the coming year.
Commodities remain an anchor against high inflation. Investors are on the right side with commodity stocks in the long term. Here, established companies such as Kinross Gold and K+S are good candidates. The investment in Almonty is likely to be more exciting. The construction of the world's largest tungsten mine should soon boost the share price significantly.
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