March 11th, 2022 | 11:19 CET
Rheinmetall, Triumph Gold, Siemens Energy - Safe havens despite the crisis?
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Rheinmetall - First orders have arrived
For a good two weeks now, the world has been out of balance with Russia's invasion of Ukraine. While there are peace demonstrations in many cities, Germany and Poland are supplying weapons to Ukraine. When the German government then declared that it would spend an additional EUR 100 billion on the German armed forces, the prices of arms companies exploded. Whether it is morally justifiable to invest in arms companies is something everyone has to decide for themselves. Still, enough investors invested in Rheinmetall and made a lot of money.
Former President Trump already called for Germany to invest 2% of its gross domestic product in the country's defense. While he was laughed at back then, Germany now wants to invest even more than 2% in the future to ensure the country's security. Rheinmetall will undoubtedly benefit from this in the future and is reporting between 1,000 and 3,000 new employees to be hired in order to be able to handle the orders from the German armed forces. A first-order for helmets has already been received. Ammunition stocks are also expected to significantly increase to prepare for a possible emergency.
Since the start of the war, the share price has risen by over 68%. Investors assume that the Company, which in addition to security technology is also a supplier to the automotive industry, will get a big piece of the EUR 100 billion pie. Profit-taking set in after the share shot up to EUR 162.95 in the initial euphoria. The share is currently trading at EUR 147.55. Several analysts issued new Buy ratings for the share, and most recently, UBS raised its price target to EUR 170 on March 8. A more detailed analysis can be found at researchanalyst.com.
Triumph Gold - Mineralization extended
It took a long time for the gold price to break out. Despite inflation throughout 2021, the price did not get off the ground, but with the flare-up of the Ukraine crisis, it finally succeeded. In the long term, gold explorers such as Triumph Gold will also benefit from this. The Canadian explorer holds more than 2 million ounces of gold, silver and copper, according to NI 43-101 report. Four projects are owned by the Company, with the focus on the flagship "Freegold Mountain". The property is located in Yukon, northwestern Canada and features more than 20 mineralized zones.
On February 17, the Company released the latest results from its drill program at the Nucleus Zone of the Freegold Mountain Project. A total of 4 holes have been drilled, of which 2 have been completed. The two holes have a total length of approximately 756m and have extended the mineralization. At the top, 2 g/t gold and 1.57 g/t silver were discovered over 4.50m, and within 46m, 0.54 g/t gold and 0.53 g/t silver. In addition, the presence of a strong oxide profile was confirmed in the area of the proposed open pit. The gold recovery rate with heap leach using cyanide solubility is up to 87%.
President Brian May expressed his satisfaction, "We are pleased with the drill results. We look forward to defining more oxide gold zones at Freegold Mountain." The more successful the Company becomes, the more interesting it will be to the major gold producers operating their mines around the Freegold Mountain project. Newmont already has a 12% stake in Triumph Gold as a strategic investor. Despite the gold deposits, the stock has been under pressure since mid-2021 and is currently trading at 0.095 Canadian dollars (CAD). The 2021 high was CAD 0.23. The value has not yet benefited from the rising gold price and offers catch-up potential. The market capitalization is just CAD 13 million.
Siemens Energy - Will the turnaround succeed?
Besides the defense industry, the green energy sector is the winner of the crisis. The EU plans to import two-thirds less oil and gas from Russia. That is to be compensated for with significantly higher investments in renewable energies. One of the beneficiaries could be Siemens Energy. The Munich-based company is a global power engineering group that operates in gas, electricity, and renewable energy segments. However, its wind power subsidiary Gamesa has been a source of negative news lately.
As the German government wants to develop alternatives to Russian oil and gas, wind power is to be increased by 100 to 110 gigawatts by 2030. While the domestic market is booming, the Company announced that it would not accept any new orders from Russia. The Group is also abandoning all its projects in Russia. On the other hand, an order from Denmark provided positive news. The Munich-based company is to supply electrolyzers that produce eMethanol. The electricity for this will come from a solar park with an output of 300 megawatts. The customers will be a shipping company and a fuel retailer.
The share was able to break out of the downward trend on February 28 and is currently trading at EUR 20.42. It is a little surprising because the Company has to leave the DAX and will be included in the MDAX in the future. In addition, one has to wait and see whether Gamesa manages to get into the profit zone on a sustainable basis. Margins in the wind power business are very thin, and a miscalculation like in Brazil immediately eats up potential profits. Management is currently examining the extent to which the sanctions surrounding the Ukraine crisis are impacting the Group.
Even if the conditions are good, there is no guarantee that a company will turn a profit. Rheinmetall can at least expect an increase in incoming orders. Whether this directly justifies a share price jump of over 68% remains to be seen. Triumph Gold is valued very low for the number of raw materials it offers. Since the rising gold price has not yet moved the share price, this stock has the most potential. Siemens Energy must now show that the wind power division has learned from past mistakes and must secure a piece of the pie.
Conflict of interest
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