January 5th, 2021 | 08:11 CET
NEL ASA, Desert Gold, Barrick Gold: Risk Check on Trendy Stocks
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"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
NEL ASA: Why caution is advisable
There is no question that the Norwegian Company is exciting. Anyone with solutions around hydrogen at the ready these days is rightly a trending stock. But what NEL's stock has been accomplishing for several months now is breathtaking for investors looking to lock in returns quietly. Although the stock has gained more than 200% over a one-year period, this development has also been accompanied by many frantic price jumps. NEL reached the EUR 2.90 mark around the turn of the year twice and came under selling pressure in this price zone.
At the beginning of the week, rumors about a possible new large order from the Netherlands created a buying mood - the fact that profit-taking can occur after such news seems to be ignored by many investors who are gripped by the gold rush for hydrogen shares. Investors should exercise caution with the NEL share in the short term given the dynamic price development and the increased volatility.
Desert Gold: The summer hit of 2020 is grooving again
Desert Gold's stock shows that there are still trend stocks to buy near historic lows these days. The Company is developing a promising project in Mali, Africa's fourth-largest gold producer, which has unearthed good drill results in recent months. The property is located in the middle of a mining region where B2Gold, Barrick Gold and AngloGold Ashanti, among others, operate mines. Desert Gold says it has the most extensive contiguous land package in the region. In Desert Gold's view, the chances are good that mineralization will continue up to the already producing mines. The Company would then be a potential takeover candidate.
In December 2020, Desert started a new drilling program that will initially cover 20,000 meters and can be expanded to double that volume if necessary. Desert Gold expects the drilling to provide closer information about its project and has already announced a continuous news flow throughout 2021. After the share reached its previous performance high in Germany of over EUR 0.23 in August 2020 and raised fresh capital in late summer, the share went into reverse and at times even sank to below EUR 0.10.
In the course of the rising gold prices at the beginning of the year, however, first investors rediscovered the value and gave the share a good success. Given the already financed drilling program and the general conditions around gold, the share could be a promising latecomer - especially in the mirror of hype shares like NEL and Co.
Barrick Gold: Takeover congestion weighs on established gold producers
However, investors should not disregard the fact that Desert Gold, with a market capitalization of around EUR 16 million, is anything but a long-established Company and must be considered speculative. Therefore, those who like it more conservative can also take a closer look at the shares of the largest gold producer Barrick Gold. While investors in Desert Gold focus on two properties under development (the Company has optioned one project), Barrick Gold offers a colorful bouquet of gold mines worldwide. Barrick therefore benefits directly from rising gold prices. Nevertheless, the share price has only risen by around 14% over the past year.
Although the gold giants' figures have improved in recent months and the gold price has brought Barrick new attention, the Company is suffering from an investment backlog. While mines are pulling gold out of the ground daily, the acquisition business has come to a virtual standstill in the wake of the pandemic. However, major producers are relying on replacing reserves and looking for new potential projects. This dilemma also weighs on the share price, as Barrick Gold has been living off its substance for some time. Moreover, buying new projects after the end of the pandemic could be expensive - other companies in the sector are also on the lookout for promising projects. Producer Kinross Gold already announced in the fall that these could well be in West Africa. Desert Gold may then join the big players.
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