Long-term bottom reached? - Barrick Gold, Manuka Resources, Newmont

The calm before the storm?

Although it is still too early to announce a long-term trend reversal in gold, there are increasing signs that the annual low of USD 1,680.59 per ounce, which has been successfully defended for the third time since 2021, is the low of the correction that has been ongoing since August 2020. Since then, the precious yellow metal has turned despite announcements by the Federal Reserve to raise interest rates further. The danger of a global recession and the worsening debt crisis speak against further interest rate steps. In addition, gold as a crisis currency benefits on the one hand from the continuing uncertain situation in Ukraine and a threatening conflict in Taiwan.

From a technical perspective, a jump above the psychologically important mark of USD 1,800 per troy ounce would be a strong sign. A prominent buy signal could also be generated at USD 1,811.49. The downward trend formed since March runs here. A sustainable overcoming would therefore result in price targets of around USD 1,875. On the indicator side, on a weekly basis, the relative strength indicator was already able to generate a buy signal, and the trend follower MACD is pointing upwards, but the divergences are still negative here.

Not disappointing

The heavyweight Barrick Gold delivered positive effects for rising quotations with the announcement of the figures for the second quarter. In contrast to the number 1 global gold producer by market capitalization, Newmont, the Canadian company from Toronto pleased with its figures. According to the report, sales in the second quarter increased to USD 2.86 billion compared to the first 3 months of fiscal 2022. However, the main reason for the increase was the 25% stronger copper production. Gold output, on the other hand, increased only slightly from 1.041 to 1.043 million ounces. On balance, the Canadians posted a 19% increase in net income to USD 488 million or USD 0.27 per share.

Similar to its peer group, Barrick Gold posted a glaring increase in capital expenditures as it pushed ahead with the expansion of its Pueblo Viejo mine in the Dominican Republic. In contrast, cash flow plunged 24%. Full-year guidance for both copper and gold remains unchanged. In addition, a quarterly dividend of USD 0.20 per share was announced.

Due to the positively received figures, the Barrick share turned at the critical support area at USD 15.30 and has since been moving towards the next resistance area at USD 18. In contrast, the Newmont share price is still struggling with the bottoming phase. Currently, the stock is trading at the 2016 high of USD 45.55. A drop below this level will likely result in another drop of around 10%.

Manuka Resources - The excitement is building

While the gold price has lost around 20% since its peak, the smaller mining companies have been hit much harder. However, this is not due to the poor fundamental situation but rather to the fact that smaller stocks, in particular, move much more strongly than the base price, both upwards and downwards. Thus, stocks such as Manuka Resources are likely to emerge as clear outperformers in the event of a sustained trend reversal in the gold price.

Australia's newest precious metals producer has two hot irons in the fire despite an 80% plunge in its share price since its successful July 2020 IPO on the Australian Stock Exchange. The market capitalization of Manuka Resources, which is also listed in Frankfurt, is AUD 41.56. It is by no means ambitious, considering that the young company is already generating an ongoing cash flow, which on the one hand, finances the current operations and, on the other, protects existing shareholders from strong dilutions due to various capital measures.

The precious metals producer is based in the Cobar Basin in New South Wales and is the complete owner of two mining projects with a total exploration zone of 1,150 sq km located in the Cobar Basin, an area that is being followed with growing interest by advanced explorers and established producers. Already acquired in late 2016, the Wonawinta project hosts some of Australia's deepest and longest-lived mines. It is based on an estimated resource of 52 million ounces of silver and 236,000t of lead. By October 2022, Manuka Resources intends to provide a corresponding resource estimate to better verify the silver content on their property.

In addition, Manuka Resources secured a 100% interest in the historically high-grade Mt Bobby gold project in 2019. Historically, the mine has produced 500,000 ounces of gold. Here, the focus is on expanding at depth to extend the mine life further. As of May 2022, the Australians still have proven reserves of 281,000t of rock that published a gold grade of 4.95 g/t, equivalent to roughly 44,820 ounces of gold. Manuka Resources has excellent prospects due to an already existing production and should profit disproportionately when the gold price picks up again. Of course, it is still at an early stage, which means there are the usual risks in addition to excellent opportunities.

There is still little sign of euphoria on the gold market. However, this could change quickly by overcoming the downward trend that has existed since March. The chart picture of Barrick Gold is more favourable compared to Newmont. The exploration company Manuka Resources could benefit disproportionately from a sustainably rising gold market.