Only the Sky's the Limit! 150% Potential After the Correction: Desert Gold, Lufthansa, Ryanair and easyJet

Lufthansa: A Timely Military Contract

When the travel business grinds to a halt in uncertain times, airlines should integrate new business areas into their portfolio. Deutsche Lufthansa has always been a partner of the German Armed Forces and is now successfully expanding this strategic cooperation. Through its subsidiary Lufthansa Aviation Training (LAT), the Lufthansa Group is taking over the basic flight training of the German Air Force's trainee pilots at the Rostock-Laage base. The trainee military pilots complete their theoretical and practical basic training there on propeller-driven aircraft. This outsourcing enables the federal government to save on aircraft procurement and costly maintenance. Furthermore, Lufthansa Technik works closely with the armed forces on the maintenance of government and mission aircraft. These military contracts secure reliable, state-funded revenue streams for the Group outside the traditional passenger business.

Financially, the complex situation in the aviation sector was reflected in Lufthansa's latest quarterly figures. Rising operating costs and pressure on margins weighed on the core brand, whilst the subsidiaries remained profitable. Although the Lufthansa Group increased its consolidated revenue by 8% to a record EUR 11.1 billion, profits plummeted. Adjusted EBIT plummeted by 56% year-on-year to just EUR 383 million, while the core brand, Lufthansa Airlines, even slipped into the red with a loss of EUR 37 million. The main driver of this massive erosion of margins was the kerosene trap resulting from the conflicts in the Middle East, which cost the Group an astronomical EUR 750 million in additional fuel costs in this quarter alone. Due to this enormous cost pressure, as well as the aftermath of previous strikes, the Executive Board was forced to revise its full-year earnings forecast downwards and now expects adjusted EBIT of between EUR 1.7 and 2.2 billion. Looking ahead, management is focusing on a strict efficiency program, particularly on reducing bureaucracy. A stable trend in bookings for the coming months underpins the Group's adjusted full-year forecast. Analysts on the LSEG Refinitiv platform have set the 12-month average target at EUR 9.81 – almost 30% higher.

Ryanair and easyJet: Discount Airlines Hit by Fuel Costs and Geopolitical Headwinds

There is movement in the European low-cost carrier segment. The sector is clearly dominated by Ryanair and easyJet. Both airlines are benefiting from continued robust demand for leisure travel, but are struggling with the same macroeconomic headwinds. The biggest difference lies in their business models. While Ryanair relies on radical cost-cutting and primarily serves cheaper secondary airports, easyJet focuses on more expensive primary airports and is expanding its high-margin package holidays through easyJet Holidays. The issue of consolidation also affects the two groups in completely different ways. Ryanair is growing organically and meticulously managing fleet constraints, while its competitor easyJet is in the spotlight of a massive takeover. The airline recently agreed to a takeover bid worth around EUR 6.6 billion from the US private equity firms Castlelake and Apollo. However, this takeover is currently stalled due to regulatory hurdles relating to EU ownership rules for airlines.

The latest quarterly figures from both airlines reflect the extreme pressure on profitability. Ryanair's profit plummeted by a dramatic 34% to EUR 538 million in the first financial quarter, as ticket prices came under pressure due to market conditions. easyJet reported an even steeper fall in pre-tax profit for its third quarter, down by around 70% to GBP 85 million. The main culprit behind this collapse in margins is the significant rise in kerosene prices resulting from the conflicts in the Middle East. As fuel costs represent the largest single item of operating expenditure, unhedged price rises have a direct impact on margins. Despite extensive hedging programs, the unhedged portion of fuel consumption drove up the cost of flight operations drastically and pushed easyJet's operating margin down by seven percentage points. According to analysts on the LSEG Refinitiv platform, the average price targets are EUR 29.14 (+30%) for Ryanair, while easyJet has likely reached the end of the road following a 40% appreciation.

Desert Gold: Production in Mali Is Just Around the Corner

When stability is lacking and geopolitical conflicts dominate, gold investments automatically return to the forefront of investors' attention. Despite the current consolidation at USD 4,300, investment banks remain optimistic and forecast the spot price will range from USD 4,900 (Goldman Sachs) to USD 6,300 (JPMorgan) by the end of the year. Following highs of USD 5,400 in January, investors are poised to increase their exposure again at lower levels. This could get quite exciting!

The bullish market environment offers excellent starting conditions for the Canadian mining company Desert Gold Ventures, which is pressing ahead with the development of its Barani-East project in western Mali. Installation of the first processing plant is scheduled for summer 2026; the current focus is on constructing the infrastructure and completing the mining site. Once installed, this plant will start with a throughput of 10 tonnes of ore per hour and is scheduled for expansion to 50 tonnes. A PEA conducted at the start of the year estimates that, based on an assumed gold price of USD 2,850, the site has a post-tax net present value of around USD 61 million and an internal rate of return of a robust 57%. Should the gold price continue to rise in line with the banks' forecasts, the project's value could even jump to over USD 124 million, according to a sensitivity analysis. This is offset by moderate total production costs of just USD 1,137 per troy ounce, which promises a high profit margin. Total gold production of 113,100 ounces is forecast over the calculated 10-year mine life. The initial development costs remain comparatively moderate at around USD 20 million, significantly lowering the barrier to entry.

CEO Jared Scharf recently outlined these upcoming milestones in West Africa at the 18th International Investment Forum.

https://youtu.be/kzjtA0n9kiA

As Mali consolidates its position as Africa's second-largest gold producer, Desert Gold aims to generate operational cash flows rapidly and expand ore extraction organically. As the current assessments have so far covered only a fraction of the total licence area, there remains considerable geological discovery potential. The Tiegba Gold project in Côte d'Ivoire provides additional stability, where the government aims to expand the country's gold production to over 60 tonnes. Thanks to a massively oversubscribed capital raising, the company recently received around CAD 7.18 million, ensuring that the upcoming milestones leading up to the production phase are fully funded. The share price has already reacted with a jump to CAD 0.14 and is currently consolidating in the range of CAD 0.11 to 0.13. Research firm GBC has set a 12- to 24-month price target of CAD 0.93. Good prospects for risk-aware investors!

The global financial markets currently demand the utmost composure. We regard the healthy consolidation in precious metals as normal; this has technically reset many charts and now offers an attractive entry point for counter-cyclical investors. At the same time, renewed unrest in the Strait of Hormuz is once again sharply driving up geopolitical risk premiums, putting pressure on international supply chains and energy prices. Those who make wise use of this phase of market anxiety are now positioning themselves in undervalued stocks in the commodities and transport sectors. A balanced investment strategy helps prevent concentration risk.