06. May 2021 | 07:05 CET
NSJ Gold, NIO, K+S: Size matters
Project developers in the commodities sector are speculative investments per se. At the same time, however, these projects offer many advantages for growth-oriented investors: they can develop enormous leverage on commodity prices and usually offer a clear investment horizon, as drilling programs and development targets are fixed in advance. Investors can position themselves on a one-to-two-year horizon and quickly assess whether or not an investment is on a sound track once the time limit expires. If a project then combines two megatrends, it becomes all the more exciting.
time to read: 3 minutes by Nico Popp
"[...] 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often as high as 20 grams of gold per tonne; because they are produced by artisanal miners, local miners who use outdated technology for gold production.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.
NSJ Gold: 4 million market capitalization and two hot irons in the fire
One such case is the stock of NSJ Gold. The Company is further developing the Golden Hills property in the US state of Arizona. The property covers 8.5 square kilometers and includes several mining claims. To acquire 100% of the project, NSJ Gold is only required to raise staggered cash contributions, totaling USD 4.6 million over five years. Further, a 3% NSR royalty will be payable. The Golden Hills project has impressive historical drill holes with grades ranging from 7.8 to 18.4 g/t gold and drill intersections over 4.6 meters with 4.4% copper. What makes NSJ Gold unique is its low market capitalization of currently less than EUR 4 million. As the Company still had around EUR 1.2 million in cash at the beginning of March and can work with existing funds, NSJ Gold could be an attractive portfolio addition for speculative investors.
The Company itself considers itself significantly undervalued compared to other gold/copper projects. As soon as further drill results indicate that NSJ Gold can expand its resources, the share price should rise dynamically. Since NSJ Gold is based on gold and copper simultaneously, the stock also sparks a lot of fantasy around current investor topics such as inflation and electromobility. After all, there is around three times more copper in every e-car than in classic combustion cars.
NIO: Well positioned but expensive
Demand for copper is also being driven by emerging e-car manufacturers such as the Chinese Company NIO. Although NIO is still unknown in Germany, it is convincing with attractive products, such as a sedan that can drive 1,000 km without recharging and rising sales figures. As a Chinese company, NIO also benefits from the far-sighted raw materials policy of the central government in Beijing. Decades ago, the Chinese set about securing promising raw materials projects worldwide and now has a foot in the door in many promising mining regions.
NIO's stock is somewhat overshadowed by Tesla and also BYD. About a year ago, investors were able to take advantage of that - since then, the stock has climbed a whopping 930%. On a three-month horizon, the value fell by around 35%, which is no cause for concern given the rise. In the short term, the price range around EUR 30 could provide support for the share. Below that, however, further selling pressure could then emerge. NIO is innovative and well-positioned in the e-car business, but the share is already expensive.
K+S: Many open questions, one goal
Investors who tend to expect rising inflation and therefore want to invest in commodities also have the K+S share on their radar. The fertilizer specialist has been shaken for years: First, margins kept shrinking, then the US business was a drag, then BaFin suspected errors in a write-down and initiated investigations. Although K+S has since received an unqualified audit certificate from the auditors at Deloitte, investors remain partly irritated.
Nevertheless, the share could still get some tailwind in the short term: K+S is pushing ahead with its debt reduction, which will give the Company more breathing room again in the long term. Above the EUR 10 mark, the share could develop further momentum in the short term. However, given the uncertain course of business, it is impossible to estimate how much room there is for upside. In contrast, the situation is clearer for NSJ Gold. The Company is at the very beginning and the share price has not yet priced in any expectations.
Those who expect an inflationary environment and are looking for suitable investments can also make the right decision with a corresponding position size with more speculative stocks such as NSJ Gold. In addition, there is the latent e-car fantasy at NSJ Gold. The share is a small-cap that is worth considering.