21. May 2021 | 08:25 CET
Newmont, Desert Gold, Kinross Gold, Aspermont: Gold outperforms Bitcoin
In about eight weeks, the price of gold has transformed from a problem child to a beacon of hope. The reason: inflation is on the rise. In the US, consumer prices are already at 4.2%. At the same time, more and more economies are taking steps towards normality as the pandemic nears its end. That should ensure that prices continue to rise. Gold is particularly interesting because while demand can explode overnight, supply is slow to grow. Using various companies as examples, we explain how money can be made with this mixture of factors.
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ISIN: US6516391066 , CA25039N4084 , CA4969024047 , AU000000ASP3
"[...] We quickly learned that the tailings are high-grade, often as high as 20 grams of gold per tonne; because they are produced by artisanal miners, local miners who use outdated technology for gold production. [...]" Ryan Jackson, CEO, Newlox Gold Ventures Corp.
Newmont: Solid, but will there be more?
If you want to be on the safe side when it comes to commodity investments, you go for the really big companies. One of these companies is Newmont. The Americans have swallowed up several mine operators in the past, including Goldcorp. Today, Newmont produces about 80% gold and 20% copper. This combination is promising, as copper is also rising strongly at the moment and is in great demand for infrastructure projects and regenerative energies. The past year went splendidly for Newmont, sales increased by about one-fifth and cash flow also rose strongly.
Especially for dividend hunters, this is a good signal - the payout of just over 2% should thus be secured and could even be increased further. But high cash flows can also become a burden. Mining companies, in particular, are doomed to replace reserves. Newmont is taking the classic exploration route and has set up joint ventures with Agnico Eagle and Kirkland Lake Gold for this purpose. The stock is scratching an all-time high and is solid. However, the major producer is not an overachiever.
Desert Gold: High-grade gold at a discount price
The stock of Desert Gold might better serve those looking for growth. The Company holds 410 sq km in Mali, not far from the border with Senegal. To date, exploration work has already produced several high-grade results, including 6.28 g/t gold over a distance of 13 meters at Barani East and 3.62 g/t gold over 42 meters at Gorbassi East, among others. Exploration work to date also indicates new potential that the Company plans to explore in more detail. In 2021 alone, Desert Gold plans to drill more than 20,000 meters and already has enough funds in its coffers to do so.
Desert Gold's market capitalization of less than EUR 15 million identifies the Company as a small-cap and shows the potential that speculative investors can see in the value. As recently as last summer, the stock was trading about 100% higher. In the meantime, the Company has raised fresh capital, published further results and the gold price seems to have completed its consolidation. While gold producers are already picking up, smaller companies are currently still lagging behind the trend. However, as soon as the upswing in gold solidifies, stocks like Desert Gold are likely to follow suit.
Kinross: The crux with the mid-sized mines
Between giants like Newmont and agile growth companies like Desert Gold are stocks like Kinross Gold. The Company is valued at around EUR 8 billion and is considered a mid-sized producer. Recently, Kinross was able to publish good quarterly figures within the preliminary estimates. Eight producing mines were doing well in 2020 and the largest mines also provided the lowest costs. In addition, Kinross has several projects in the development stage in Russia and Alaska. To meet its 2021 targets, the Company believes it is on track.
While large producers can absorb problems on individual projects due to many mines, and small companies like Desert Gold only bear exploration risks, stocks like Kinross trade somewhere in between. Recently, smooth operations at the largest mines ensured that the numbers turned out well. On the other hand, problems such as landslides or water ingress could spoil the figures. Even though mid-tier producers are currently showing solid performances, investors should not underestimate their risks.
Aspermont: Raw materials + new technology = future opportunity?
An insider tip when it comes to mining investments could also be the Australian media Company Aspermont. Aspermont publishes renowned magazines, Mining Journal, Mining Magazine and many others. The former has a history of more than a century. Aspermont has undergone a digital transformation in recent years and is now lean and making money. Yesterday, the Company published figures for the first half of the year. These underline the good path the Company is on: gross margin climbed strongly to 63% and operating cash flow increased from AUD 0.7 million to AUD 2 million compared to the same period last year.
Consequently, after a narrow loss in the previous year, the first half of 2021 also stands at a positive EBITDA of AUD 0.7 million. The Company stresses that the strong numbers result from new digital products - Aspermont is heavily involved in news, opinion, research, data, client marketing services and benefits from its customer base that has grown over decades. The stock could be an alternative for those who feel more comfortable in other industries instead of mining. Aspermont should also indirectly benefit from the commodities sector's positive market environment and has a digitalization fantasy.