01. March 2021 | 09:40 CET
Plug Power, Blackrock Gold, Barrick Gold - These are the brands that matter!
Commodities are exploding. Industrial metals such as copper are rushing from one multi-year high to the next. Due to the high metal demand of a low-carbon economy, the US investment house JP Morgan has already declared a new supercycle. Meanwhile, one commodity is correcting: Gold. Optimism about a substantial recovery of the global economy is growing, and uncertainties are decreasing. The correction is likely to continue in the short term, but the calls for the safe haven are getting louder again in the longer term.
time to read:
ISIN: US72919P2020 , CA09258M1014 , CA0679011084
"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
In correction mode
Opinion turns so quickly. After the sound barrier of USD 2,000 and the high of USD 2,069.70 per troy ounce of gold was scaled last August, experts were already touting price targets beyond USD 10,000. Currently, the precious yellow metal has at least a short-term problem. Although the long-term upward trend is still intact, the short to medium-term trend points downward. The reasons are the easing of the Corona pandemic due to the positive vaccination programs, a rapidly recovering global economy, and rising US bond yields. These yields are now quoted at more than 1.4% in the 10-year range, the highest since a year ago.
Gold is "out" - for now!
Investors are leaving the safe haven and are currently seeking their fortune in other investment forms such as equities. According to industry reports, gold ETF holdings are at their lowest level since May of last year. The FED Chairman Powell's statement, who wants to hold on to the current pace of bond purchases for a longer time, does not help much. Thus, the price fell in Friday trading to USD 1,730.0, down 2.73%. There is a broad support zone between USD 1,670 and USD 1,730. Given the long-term outlook, initial positions should be opened in physical gold or promising gold mining stocks. The widely held expert opinion still applies: every portfolio needs a share of gold for diversification. The next crisis is sure to come.
Strongly developed, firmly fallen!
Anti-cyclical trading has reaped the most rewards in the past. At present, the gold price and the gold mining shares are correcting, although they are shining with strong results and record dividends. Industry giant Barrick Gold recently brought strong fourth-quarter numbers to the table, earning USD 0.35 per share in the fourth quarter, four cents more than analysts expected. According to the group, revenue came in at USD 3.28 billion compared to an estimated USD 3.22 billion, and gold production for the quarter also came in at 1.21 million ounces, above the expected 1.16 million ounces of the yellow metal. Furthermore, Barrick Gold announced its intention to distribute USD 0.42 per share of capital to shareholders. In addition, the group also announced a dividend of 9 cents per share for the fourth quarter. However, the stock did not follow the excellent data. Since last year's gold price high, the industry leader has halved.
Seizing the opportunity
Blackrock Gold's stock was also not spared, although it is trending strongly upward. It was recently reported that the Company received CAD 10.35 million due to a bid on a bought-deal basis. Due to the high demand for shares in Blackrock Gold, the offer was previously increased from the original CAD 7.02 million. The offering's net proceeds will be used to fund exploration of the Company's Tonopah West and Silver Cloud properties in Nevada. And these two projects are more than prospective, as reflected in recent results. At the first project, Tonopah West, there was good news at the end of last year. Due to positive results, the Victor gold vein had to be enlarged by 480m. Also, gold and silver discoveries were well above expectations. Thus, in the full year 2020, the Company achieved a total of 14 gold and silver discoveries with peak four-digit results in grams per ton. More drill results are pending for 2021. The prospects of advancing from an explorer to a producer are given here if the news flow continues to be positive.
Price fantasy through a spin-off
Silver Cloud's share price is also on the rise. Due to the excellent drilling results, the management plans to transfer the project to a new company as a spin-off. Silver Cloud, therefore, promises potential, as the geology shows many similarities with the Hollister mine operated by Hecla Mining. It is currently being examined whether Silver Cloud could be an extension of the Hollister mine. Currently, the share price does not reflect Blackrock Gold's positive developments at all. After the August high at CAD 1.61, one share is presently available for CAD 0.79, a discount of 50%.
The end of the correction?
Not only gold mining stocks are in correction mode. Fuel cell manufacturer Plug Power has also been hit hard. The stock, which was trading above USD 75.00 at the end of January, closed the gap at a whopping USD 37.00, only to exit Friday's trading at USD 48.38 with a gain. Blame for the downturn was, in addition to the general market weakness, the figures for the fourth quarter and the full fiscal year 2020, which disappointed analysts. On the other hand, the outlook for the current year was more positive. Plug Power confirmed the recently raised forecast for gross sales from USD 450 million to USD 475 million. Of particular note here are the collaborations with Renault and SK Group, which the Company's management says will be strengthened. We currently refrain from buying Plug Power and put the stock on our watch list.