18. August 2021 | 13:24 CET
Newmont, Sitka Gold, Royal Dutch Shell - Commodity prices to rise further
Research conducted in July with 1,000 European companies found that all respondents expect commodity prices to continue to rise. In part, these price increases we have seen over the past year are due to the Corona Pandemic. During the lockdown, production of raw materials was shut down, and when demand suddenly increased noticeably, they were not prepared for it. Supply chains are still disrupted today. But thanks to rising vaccination rates, the economy is picking up again in many parts of the world. Demand for oil remains high in the long term, and gold is still in its long-term uptrend despite the short-term sell-off.
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ISIN: NEWMONT CORP. DL 1_60 | US6516391066 , Sitka Gold Corp | CA8606471065 , ROYAL DUTCH SHELL A EO-07 | GB00B03MLX29
"[...] Our SMSZ project is the largest contiguous land package of any exploration company in the region at 400km2 and overlays a 38km portion of the prolific Senegal Mali Shear Zone. [...]" Jared Scharf, CEO, Desert Gold Ventures Inc.
Newmont - Currently in a downward trend
Newmont is the largest gold producer globally, so the stock has been dragged down by the falling gold price. When the sell-off in gold began on August 6, the share held up reasonably well in relation. On the flip side, gold's rally of more than USD 100 passed the stock by with just as little impact. Operationally, the Company is very well positioned, especially due to its copper production. The increasingly valuable metal accounts for 25% of sales.
The figures for the second quarter showed a significant year-on-year increase. A net profit of USD 640 million was achieved compared to USD 412 million in the previous year. Sales increased by more than 29% to USD 3,065 million. The main reason for this is the significant increase in gold mining of over 15%. On average, one ounce of gold was sold at USD 1,823. For the year, management expects production of 6.5 million ounces. The cost per ounce is currently USD 970.
The stock has currently formed a downtrend, breaking two important marks on the way down. The downtrend was activated with the break of the USD 60.89 mark. The next resistance at USD 59.26 was also broken, and so a test of USD 54.18 could be imminent. For dividend hunters, the current dividend yield of about 3.7% may already be attractive. We see Newmont as well-positioned in the long term.
Sitka Gold - Many exciting projects
Sitka Gold Corp. is a Canadian explorer focused on the development of mineral deposits, mainly gold. The Company owns five different projects that host gold, silver, copper and zinc; these are located in Canada and the United States. Drilling programs are currently underway in Nevada and the Yukon. The RC Gold Project in the Yukon is 372 sq km in size, and nine drill holes totaling 3,494 m have been completed there since June. The drilling is intended to expand the area of gold deposits discovered in 2020. One is currently waiting for the results from the laboratory. The second project in the Yukon is called OGI and contains silver, zinc and gold.
The Alpha gold project in Nevada is 404 hectares in size and will be further explored after initial results in May this year. The first drill hole has already been completed and sent to a laboratory for assaying. A step-out hole is currently being drilled on this property to test high-grade zones of the gold system further. Arizona is home to the Burro Creek Project, a historic silver and gold mining district. Initial drilling was completed in 2020 and encountered up to 17.55 g/t gold and 33 g/t silver. Currently, the Company is trying to obtain permits for further drilling. There is also the Coppermine River Project in Canada. There, high-grade copper samples with up to 41.54% were discovered.
Management has already proven with Tundra Copper that they know how to build a company with success. At a current share price of CAD 0.15, the Company is favorably valued at a current good CAD 8.5 million. The high for the stock this year was CAD 0.34. When the new shares from the last capital increase became tradable, selling pressure arose, but this seems to have subsided. Interested shareholders should work with a limit, as the spread is relatively high.
Royal Dutch Shell - Currently favorably valued
Royal Dutch Shell (RDS) is having a hard time at the moment. First, the verdict in Amsterdam, forcing the Company to do significantly more to protect the climate. Then the payment of USD 110 million to settle a long-running dispute over an oil spill in Nigeria. On August 4, the price of oil fell below USD 70; in addition, fears of Corona are again circulating as incidences in many industrialized countries are on the rise again. That would mean a weakening of the economy and thus the demand for oil.
In China, an entire port was closed after a Corona spill. With its hunger for resources, China is always a barometer for overall oil demand. Nevertheless, it must be noted that oil prices above USD 50 are sufficient for oil multinationals like RDS to make a profit. In contrast to its competitors, the Company is currently favorably valued. Analysts expect a price-earnings ratio (P/E) of 8 this year, and the last time the stock had such a low P/E was during the financial crisis.
The stock is running sideways in the sliding zone that formed between early February and mid-March. On July 20, the share managed to avoid falling below the 200 moving average. For the chart to brighten up, the share price would have to close above EUR 17.82. For dividend lovers, the dividend yield of over 4% is quite attractive.
As long as there are no further lockdowns in the major industrialized nations, the economy will recover. Oil is still needed, and so Royal Dutch Shell will deliver a very good result this year. In the case of gold, there is also inflation, which could create more demand for the precious yellow metal. As an investor, you can go for a top dog like Newmont with a dividend or speculatively go for an explorer, like Sitka Gold, where there is a chance that the value will double in a short time.