November 2nd, 2021 | 12:59 CET
Newmont, Tembo Gold, First Majestic - The inflation bubble is filling up!
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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 Mining - Downgrade of the outlook disturbed
Who would have thought! The world's largest gold producer, Newmont Corp. from Colorado (USA), has lowered its annual production target by half a million ounces. There are many reasons for this, but the effects of the corona pandemic and operational problems were decisive factors. Last quarter, the mining group's adjusted profit also missed analysts' expectations, adding to the operational difficulties.
First, the ongoing Corona restrictions and now, the lack of qualified, skilled workers and higher costs for transport and energy are all weighing on the bottom line. There are long handling bottlenecks at the ports, and the supply chains are out of balance. We are otherwise only familiar with these problems from industrial metal producers, as their goods are currently in hot demand and lacking at all corners. All in all, the annual guidance was lowered by 8% to 600,000 ounces.
Newmont also announced that they had to shut down the Tanami mine in Australia due to COVID-19 restrictions. The Boddington mine is also suffering from operational delays. The Nevada properties will not compensate for these declines, and overall, Newmont expects production costs to increase by 7% to 8% in 2021 due to higher taxes and royalties. That weighs heavily on net margins, with Q3 earnings reaching only USD 483 million, down 30% YOY.
According to the latest report, Newmont's stock has been under significant pressure since May 2021 and is down about 25% YTD. No disaster, because on a 3-year view, the share still shines with a price increase of plus 68%. Therefore, use times of price weakness to enter.
Tembo Gold - Now it starts in Tanzania
From North America, we turn our attention to Tanzania in Africa. Tembo Gold, based there, is a Canadian-listed explorer with a 100% interest in the Tembo Gold Project. The Company's focus is on the discovery and development of several gold projects in East Africa. Preparations are now progressing for the start of the next phase of drilling. That includes the operational set-up of the camp and the submission of all regulatory permit applications to the Mining Commission in Dar es Salaam, the economic hub of Tanzania.
As an experienced administrator, Paul Magege is responsible for the operations of the newly renovated camp and all non-geological activities on site. He will also handle all government and community affairs. In addition to the representative office in Dar es Salaam, an operating subsidiary will be installed in Geita, the project's site. After a full 7 years of inactivity, the development of the site is now underway. The immediate neighbor is Barrick's Bulyanhulu mine with 14 million gold ounces of proven reserves, and another well-known player is AngloGold Ashanti. Tembo will start its advised 7,000m drill program before the end of 2021.
Notwithstanding the activity in Africa, Tembo Gold's share price in Canada has recently moved significantly higher. There are constant takeover rumors, which keeps the project in strong focus. With approximately 95 million shares issued, the market capitalization is currently CAD 25 million. Similar projects have already paid many times that amount in the event of a takeover.
First Majestic Silver - We are not selling silver at the moment
Back across the Atlantic, we come across First Majestic Silver Corp., a Canadian silver company that operates in Mexico and the US. The Company has four producing mines under its control; one also sells silver and gold bars under its own imprint label. Total production in 2020 reached 20.38 million ounces of silver equivalent, of which 60% in silver and the rest in gold.
The figures for the third quarter were recently published. There was a record production of 7.3 million silver equivalent ounces at the four active mines, of which 54,525 ounces were in gold. In the first nine months of 2021, the Company produced 9.5 million ounces of silver and 124,942 ounces of gold for a total production of 18.3 million silver equivalent ounces. That is roughly 69% of the Company's targeted production of 25.7 to 27.5 million ounces for the 2021 forecast period. An astounding number!
To the current management, the price of silver in the market appears to be too low. As a result, 1.4 million ounces of silver were not put on sale. The record quarter is primarily due to the Jerritt Canyon operation producing for a full quarter, in addition to continued strong production performance at San Dimas and La Encantada. Santa Elena is now on the cusp of significant production increases and cost reductions.
The silver standard share price can still rest on a positive 12-month performance of 26.5% because of the silver hype in January. The price has, however, halved again from the high of EUR 21.80. With the current figures, however, a stabilization should occur. Collect!
Gold and silver investments are currently somewhat on the sidelines of the investment community. The reason is the miraculous increase of money in tech stocks. However, since the stock market trades in cycles, there is a good chance that the precious metals will also pick up some decent momentum. If gold recaptures the USD 2,050 line, the signs point to a storm for Newmont, First Majestic and Tembo Gold.
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