15. October 2021 | 13:39 CET
Newmont Corp, Triumph Gold, Lufthansa, TUI - Dramatic turnaround in the course!
Gold and silver are turning in significantly, Lufthansa and TUI have gone through with their large capital increases - what is next here? Even if the major indices experienced a strong correction in October yesterday, there was a dramatic turnaround in several respects. Volatility as a fluctuation indicator even came back so strongly in the last few days that it fell below the threshold of 20 again. This indicator shows that the need for hedging is probably dwindling, i.e. the interest of the investment community tends to be directed upwards again. But inflation can still put a spoke in the party's wheel - but that would again be a buying argument for the precious metals! We direct our view on some turnaround candidates.
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ISIN: NEWMONT CORP. DL 1_60 | US6516391066 , TRIUMPH GOLD CORP. | CA8968121043 , LUFTHANSA AG VNA O.N. | DE0008232125 , TUI AG NA O.N. | DE000TUAG000
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Newmont Corporation - Up again after 25% correction
Of all the major gold stocks, the industry leader Newmont Corporation has corrected the least. That is because its production portfolio is spread worldwide and yields around 8 million ounces of gold per year. This natural hedge across the globe is significant because, in some jurisdictions, political changes lead to shifts in sentiment or even new levies that were not foreseen in the planning in this way.
Until now, the US and especially the state of Nevada, where mining giants like Newmont Mining and Barrick Gold also operate, was considered one of the most mining-friendly regions. A new law passed by the US House of Representatives could change this because little has changed in mining law since 1872. For instance, unlike oil, gas and coal companies, hard rock mines do not pay royalties to the state and thus often avoid liability for environmental risks.
Similar to Chile, the US mining industry, which has profited from the sharp rise in commodity prices, is to be put under closer scrutiny. Earlier attempts by the Democrats were unsuccessful due to a lack of congressional support. The royalties now to be levied on domestic hard rock mines for the first time in the USA would provide for a levy of 8% on new mines and 4% on existing mines. Each would be levied on gross revenues.
Gold mining, in particular, would be severely negatively impacted if the bill is passed by Congress in its amateurishly drafted form. After all, the US is the fourth-largest gold producer globally, with a market share of about 10%. The largest production comes from the "gold state" of Nevada, where all of Newmont and Barrick's core areas are located. If the bill is passed through Congress, these will take a 20-40% hit on their net margins.
So it is not just the weak gold price that is weighing on sentiment. The desire of politicians to finance their green policies through taxes could also weigh on the mining companies. So if you are betting that such a thing will never be passed, buy the analytically cheap Newmont into your standard portfolio. The leverage to the gold market for this stock is about 5.
Triumph Gold - A flagship project in the Yukon region
Those looking for unique opportunities in the precious metals sector, in addition to the standard stocks, look to the share of Triumph Gold Corp, a Canadian-born explorer focused on several properties in the Yukon Territory. The flagship project hosts three world-class mineral deposits in the extensive section of the Big Creek fault zone. Current drilling has been ongoing since late June, and a total of 8,000m is planned in four different zones. In addition, 100km of ground surveys, soil sampling and surface trenching will be undertaken. Since the middle of the year, the search algorithms have also been supported by artificial intelligence; this significantly improves the data-driven hit accuracy in the target area.
Newmont is already a well-known shareholder of Triumph Gold and operates its Coffee Creek project in the immediate vicinity. The existing infrastructure benefits both companies. In 2021, Triumph additionally secured the Big Creek property, which is expected to host gold and industrially recoverable copper. Historically, many successes have been proven within the Dawson Range, especially in gold and copper.
Currently, resources are put at 2 million ounces of gold and copper. When the gold price shot above USD 2,000 in 2020, TIG shares traded at a high of CAD 0.48. Currently, the junior explorer has a low capitalization of CAD 18.5 million. Given high inflation figures, the gold stock in the range of CAD 0.12-0.15 is an interesting addition with good leverage.
Lufthansa and TUI - Lots of new money in the coffers
Lufthansa and TUI have managed to collect yet more money from their investors. In the case of Lufthansa, the crane line will repay more than 50% of the government crisis aid in 2021. Several states in the EU had granted Lufthansa bridging loans worth billions during the height of the Corona pandemic; these are now happy to be triggered by the inflowing equity.
Lufthansa raised EUR 2.16 billion by placing new shares. The Economic Stabilization Fund (WSF) received an immediate transfer of EUR 1.5 billion. The airline intends to repay the remaining loan of EUR 1.0 billion before the turn of the year. Since August, WSF has reduced its shareholding in Lufthansa from 20% to currently 14.1%, and the fund only participated in part of the capital increase.
TUI also successfully placed its EUR 1.1 billion capital increase on the market. However, as this was not enough to stabilize the balance sheet sufficiently, the travel group again sold a hotel investment. Specifically, the tour operator sold its 100% subsidiary Nordotel to the joint venture Grupotel, in which the Hanover-based company and the Spanish hotelier family Ramis each hold a 50% stake. With this step, TUI intends to continue its streamlining process and further reduce complexity in the Group.
Both Lufthansa and TUI are not high on analysts' radar at the moment. Usually, these times of poor sentiment mark turning points in the share price development. Therefore, those who are not afraid of risks and are speculatively oriented can get involved in both charts close to the 3-year lows. Whether the deal works out or not will probably depend primarily on the further course of the pandemic and future political decisions on how to deal with the new widespread flu.
Difficult political or economic situations put downward pressure on prices for the affected sectors. While commodity and energy prices are exploding worldwide, tour operators, airlines and precious metal stocks are once again significantly cheaper in a 12-month comparison. The stocks discussed here are rich in opportunities but have a high-risk profile. Triumph Gold can multiply with appropriate discoveries, which will probably not be achieved with the standard value Newmont Corp.