March 7th, 2023 | 15:13 CET
Precious metals - Now or never: Barrick Gold, Blackrock Silver, SMA Solar
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"[...] The transaction offers benefits to all parties: Shareholders now have three promising projects in their portfolio. [...]" Bradley Rourke, President, CEO and Director, Scottie Resources Corp.
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Historical development: Central banks flee into precious metals
Asset manager and gold expert Ronald Stöferle recently wrote a noteworthy commentary in the Neue Züricher Zeitung (NZZ). The author sheds light on the monetary policy turnaround that February 24, 2022, has brought with it. By freezing Russian currency reserves of around USD 300 billion, the West had "militarized" the major reserve currencies. Stöferle explains the high demand for precious metals from Asian central banks since then with the lower confidence of these economies in currencies. Gold, on the other hand, is an independent currency without counterparty risk. Accordingly, the gold reserves of the central banks are currently at 35,500t gold, as high as in the mid-1970s. Surveys among central banks indicate that the next few months are also likely to be characterized by purchases by this potent group of investors.
So what does the Asian central banks' hunger for precious metals have to do with the current events on the stock markets? In recent weeks, more and more investors have realized several things: First, the economies in the major currency areas of the US, the eurozone and China are more robust than thought - fears of recession have largely faded. At the same time, the major economies are launching spending programs to invest in renewable energy and infrastructure. The latter is also stimulating the economy. At the same time, inflation remains high. The market now expects the central banks to counter this with further interest rate steps before a pause in interest rates could occur. The combination of fading recession fears and the certainty that inflation will remain high for some time is currently driving equities.
Barrick Gold: Buys own shares
Precious metals stocks could be a particular focus in the current market phase. The Arca Gold BUGS Index is just getting ready to leave its downtrend, and gold producer Barrick Gold is putting its capital into a share buyback program instead of into the ground. Also, for private investors, the opportunity seems favourable to deal with investments in precious metals. The reasons are persistent inflation - even in the 1970s, the price of gold only really picked up after the first spurt of inflation - and the encouragement of central banks to the alternative asset class. While all eyes are on gold, silver could also be a candidate for investment.
Blackrock Silver: High-grade silver plus lithium fantasy
Randy Smallwood, gold expert and chairman of the World Gold Council (WGC), is even more optimistic about silver than gold, pointing to its additional property as an industrial metal. According to the market expert, silver is also likely to benefit from central banks' growing commitment to precious metals. A company that has huge silver deposits in the ground and should benefit disproportionately in the event of sharply rising precious metal prices is Blackrock Silver. The Company is exploring for both precious metals in the US state of Nevada and is advancing its two projects, Tonopah-West and Silver Cloud. Having drilled around 150,000 meters since 2020, Tonopah West is considered one of the few undeveloped silver projects of considerable size while offering high grades. Analysis sees grades of up to 446 g/t silver equivalent at Blackrock Silver's flagship project.
North of Tonopah-West, Blackrock Silver still offers the option to profit from the lithium boom with Tonopah-North. A joint venture has been in place with Tearlach Resources since January of this year. If Tearlach invests at least USD 15 million within five years and submits a feasibility study, the Company will earn a 70% interest in Tonopah-North, where lithium is proven to be located. 51% of the shares will change hands after an investment of just USD 5 million. For Blackrock Silver, the deal is a good way to diversify risk on its precious metals project and profit from lithium. The Company thus offers an exciting mix of technology and precious metals. The stock is currently trading at its low for the year, as a corporate action was just announced. Investors with vision can take a closer look at the value - if precious metals continue to rise and the lithium boom expands, Blackrock Silver should benefit disproportionately.
SMA Solar: This is what a trend looks like!
Silver from reliable sources is also in demand from the photovoltaic industry. After all, silver conducts even better than gold and is in many future technologies, such as solar panels and inverters. German company SMA Solar announced last year that it plans to double its production by 2024. "We have strategically positioned ourselves in all relevant business areas of future energy supply and can excellently participate in the global growth of renewable energies," said CEO Jürgen Reinert. Since then, the share has benefited significantly - within six months, the value increased by more than 40%. Although SMA Solar was often criticized for low margins and was considered unprofitable, the special economic situation surrounding renewable energies could continue to affect SMA Solar's share price positively - provided there is no shortage of expensive basic and raw materials that weigh on the already narrow margin.
Even if standard stocks are currently rising to new performance highs, investors should not disregard precious metals. One of the drivers of the rising stock prices is also the ongoing inflation and the dwindling confidence in traditional currencies. Smaller precious metal stocks, in particular, can add exposure to a portfolio even with small investment sums, which is really fun in the event of a precious metal bull market. With Blackrock Silver, the lithium fantasy is added on top. The stock is exciting.
Conflict of interest
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