September 23rd, 2022 | 11:17 CEST
Nel, Steinhoff, Viva Gold: What is going on?
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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
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
Viva Gold: An exciting project even at the current gold price
Contrary to all expectations, the gold price stabilized after the interest rate decision of the US Federal Reserve. Previously, it had reached its lowest level in almost 2.5 years. The relief rally set in after the interest rate hike of 75 basis points, and negative surprises were absent. Fed Chairman Powell's comments at the subsequent press conference were also seen as non-aggressive. In addition, in Russia, the announcement of partial mobilization and nuclear threats created demand for gold and silver as safe havens. From an easing in the sell-off of gold, shares of exploration companies should benefit above average - for example, the stock of Viva Gold. The Canadian explorer has not yet recovered from its low of CAD 0.65 and is currently valued at only around CAD 6 million. The share is also listed on the Frankfurt Stock Exchange.
Operationally, things are going well for the Canadians. Viva Gold is developing an exciting gold mine west of the US state of Nevada. The high-grade Tonopah project covers a 4,250-hectare property and is 100% owned by Viva Gold. Geographically, it is conveniently located within Walker Lane, known for its gold discoveries. Kinross, Coeur Mining, Augusta and Centerra, among others, are also successfully operating there. Viva Gold has increased its mineral resource every year since the purchase. The current mineral resource estimate is 394,000 ounces of gold measured and inferred, an additional 206,000 ounces. A preliminary economic assessment (PEA) with an assumed gold price of USD 1,400 has been positive. The mine would thus be profitable even at the current low gold price.
Most recently, interim results were reported for the ongoing drill program. A buried gold deposit with mineralization of up to 19.9 g/to AU over 1.5m was identified; it lies below the gravels of the valley floor. A prefeasibility study (PFS) is planned for 2023. CEO James Hesketh expressed his satisfaction, "This drilling program, aimed at capturing geotechnical information, has been very successful and has been able to significantly extend the width of the mineralized zone in the center of the western lobe of the resource pit. A significant amount of structural and geotechnical data has been acquired that will be used in mine planning, and drill hole location for a 3,000 meter reverse circulation drill program scheduled to begin next month."
Nel: Does the share price disaster continue?
Things are not looking good for Nel ASA's stock at the moment. First, Credit Suisse, among others, downgraded the stock from "Neutral" to "Underperform" after weak half-year figures. The analysts lowered the price target from NOK 15 to NOK 10. Too much hope for a breakthrough in the hydrogen sector was priced in. In addition, the high sales by the former CEO are a cause for concern. Jon Lokke has sold about 73% of his Nel shares this year. Yesterday, the Norwegian central bank also raised interest rates. This is likely to further increase the financing costs of Nel, which is operating at a high deficit. From a chart perspective, things also look bleak at present. Yesterday, the Nel share fell below NOK 12. This threatens a slide to NOK 10. Incidentally, Nel is still valued at a proud NOK 18.6 billion. In this respect, one can certainly understand the opinion of Credit Suisse.
Steinhoff: +20% followed by -10%
The Steinhoff share is also currently experiencing sharp price fluctuations. Initially, the share had lost two-thirds of its value since January and was only quoted at EUR 0.093. Then, on Wednesday, the share price exploded by over 20% to EUR 0.125. But yesterday it went down again by over 10% to EUR 0.105. Reasons for the price swings are not yet known - neither positive nor negative. The share is thus again living up to its reputation as a gambler's stock. The Group continues to push a massive mountain of debt in front of it. And similar to Nel, concerns about future interest charges are increasing as key interest rates rise. The operating business remains a glimmer of hope. Steinhoff increased sales by 12% to around EUR 7.8 billion in the past quarter. The growth engine was the Pepco division, with an increase of 18%. However, should Europe and the US slip into recession, the continuation of growth is at least doubtful. The ongoing restructuring would then also be at risk.
Nel is ambitiously valued even after the share price slide, and rising interest rates will further lengthen the road to profitability. The recent price swings show that the Steinhoff share is only something for gamblers. Viva Gold is also speculative. But the low valuation and the project progress according to plan make the share attractive.
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