15. July 2021 | 10:55 CET
Newmont, Troilus Gold, Steinhoff: How much substance is needed?
Rising prices, ever higher national debts - many people are shifting parts of their savings into gold because of this. At first glance, that sounds plausible. Gold has retained its value over thousands of years and has outlasted states and monetary systems. But investors should not just assume the worst. While physical gold paired with silver is a good alternative in the biggest crisis, bars and coins show weakness when things don't end up quite so bad. If only a little inflation threatens and states and governments continue to muddle through in cooperation with central banks, physical holdings are not the best idea. It is here where shares in gold companies can score points. We explain how this works with two examples. Finally, we reject blunt gambling.
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ISIN: NEWMONT CORP. DL 1_60 | US6516391066 , TROILUS GOLD CORP. NEW | CA8968871068 , STEINHOFF INT.HLDG.EO-_50 | NL0011375019
"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
Newmont: Solid to boring
Before we talk about the stock of Newmont, the largest gold miner, the question remains why physical gold is not the best choice when the big crisis is absent. The answer has to do with buying and storage costs. The corner gold dealer usually takes a premium to the current gold price. It also makes little sense to store bars and coins in your own four walls - the risk is too high. Especially in times of low-interest rates, however, every tenth counts when it comes to investment decisions, so securities based around gold have advantages. Like the shares of Newmont.
Newmont mines the precious metal worldwide, as well as copper. Only Europe has been a blank spot for the mining giant so far. Newmont's revenues have grown in recent quarters. The Company has also been able to cut costs and thus pay out more dividends to investors. The last point, in particular, is important for Newmont shareholders. The stock is anything but a growth company - price gains are usually rather slim. Last year, it was only a paltry 2.3%. So it is critically important that production continues and costs remain under control. The stock is currently not very attractive, but it is still better than a bar in a shoebox.
Troilus Gold: Proof of confidence despite weakening gold prices
A completely different caliber than the big ship Newmont is the share of Troilus Gold. The Company is bringing back into production a historic mine in Quebec, Canada, that produced 2 million ounces of gold and close to 70,000 tons of copper between 1996 and 2010. Troilus Gold management emphasizes that the mine was notoriously under-explored during the production period. That is, the operators at the time did not bother to discover and categorize new resources. The beneficiary today is Troilus Gold. The Company has drilled 80,000 meters in recent years and today offers indicated gold resources of nearly 5 million ounces of gold.
These resources are to be mined in the foreseeable future. The chances of this are good with almost the entire infrastructure of the former mine still in place. In addition to climate-neutral water energy, there is also an approved tailings facility with water treatment on the property. The fact that the story around Troilus is promising was also confirmed a few weeks ago by investors who subscribed to a capital increase of around CAD 45 million. In a market phase in which the gold price was weakening, that is a vote of confidence. Troilus is increasingly painting a picture of a company that will soon produce gold and copper. The word should continue to spread.
Steinhoff: Forget this stock!
A much-discussed topic in stock exchange forums was also the share of Steinhoff. The furniture group, embroiled in an accounting scandal a few years ago and battling investors in court ever since, became a gambler's plaything on the stock market. The assumption: If Steinhoff reaches an agreement with the plaintiffs, the value will take off. Since then, water level reports, partial successes, but also setbacks have moved the share. The latter accumulated, and there are now more and more doubts whether the settlement with the creditors can proceed as expected so far. The share always traded around EUR 0.12 and has now slipped to EUR 0.09. Unlike companies with more substance, investors should not play with the idea of entering now supposedly cheap. Steinhoff remains a gamble.
While Steinhoff is an exciting case only for lawyers, investors have to weigh up between Newmont and Troilus Gold. The former is very solid but offers neither the prospect of high price gains nor a rich dividend. Troilus is a mine in development. Here, the market is still pricing in risks. If these risks do not materialize in the end, there will be room for appreciation. Troilus thus offers the opportunity to profit from gold and the promising project in Quebec with low capital investment.