Rheinmetall, XXIX Metal, Newmont – The Merz trade is on

Rheinmetall – Profiteer of the Merz victory

The decisive victory of the Christian Democratic Union (CDU) and the future Chancellor Friedrich Merz is also a victory for Ukraine, which has been severely shaken by the war of aggression. The CDU's leading candidate promised "consistent support" in terms of defense. The primary beneficiaries of the "second turning point" can, therefore, be clearly identified in the German arms industry. Rheinmetall, the key supplier to the German Bundeswehr, exploded by over 3.5% to EUR 925 and, after a brief pause, is heading for an all-time high of EUR 968.

Despite the steep rise in recent years, the analysts at UBS do not believe that the share price has reached its peak yet. Analyst Sven Weier has raised the target price for the integrated technology group from EUR 924 to the current EUR 1,208, and the investment recommendation has been raised from "Neutral" to "Buy".

According to the expert, the reason for the increase is the new German government, which, despite some hurdles in the future coalition, is considering the possibility of further increasing defense spending. Moreover, positive statements on the increases in the defense budget are expected at the NATO summit in June.

For a similar reason, Deutsche Bank Research has raised its target price for Rheinmetall from EUR 780 to EUR 1040, with the rating confirmed as "Buy".

XXIX – Excellently positioned

While precious metals, led by the price of gold, are rushing from one record to the next, things are still quiet around copper. But it could be the calm before the storm, as the price of the industrial metal has performed around 13% since the beginning of the year and sustainably broken the downward trend established since May 2024. In the long term, experts predict that the red metal will likely face a significant supply deficit due to a further increase in demand in connection with the global energy transition and electric mobility, which would also result in new highs. The primary beneficiaries of this development are then, of course, copper producers and exploration companies like XXIX Metal, which could sell the scarce commodity at significantly higher prices.

The two projects of XXIX Metal, Opemiska and Thierry, are first-class assets. Opemiska, which spans over 13,000 hectares in the Chapais-Chibougamau region of Quebec, is considered Canada's highest-grade copper resource. A January 2024 resource update published a 16% increase in contained copper equivalent and a 10% increase in grade, including 87.3 million tons at 0.93% copper equivalent in the measured and indicated categories and additional resources outside the pit.

The Thierry Project, which has first-rate infrastructure, hosts two producing ore bodies, one of which was mined underground for six years and produced 5.8 million tons grading 1.13% copper and 0.14% nickel by UMEX Inc. between 1976 and 1982. A comprehensive data validation and reinterpretation process has recently been finalized here. This has resulted in a modern, consolidated geological model for the K1 deposit, which is estimated to contain 53,614,000 tons grading 0.38% copper, 0.10% nickel, 0.03 g/t gold, 0.05 g/t platinum, 0.14 g/t palladium, and 1.8 g/t silver.

The K2 deposit is estimated to contain 23.74 million tons at 1.64% copper, 0.16% nickel, 0.5 g/t gold, 0.04 g/t platinum, 0.13 g/t palladium, and 5.5 g/t silver. It is currently undergoing the same validation and reinterpretation process as K1. XXIX Metal is also investigating the potential connection between K1 and K2. Preliminary geophysical evidence suggests a mineralized corridor between these deposits, which could represent a new exploration opportunity.

Newmont – Sell-off despite strong numbers

The gold price continues to hit new highs, but gold producers are not making any headway and are even being sold off after surprisingly good figures. This underperformance could be due to the fact that investors have doubts about the sustainability of the largest gold producer's positive performance due to rising production costs caused by inflation in the commodities sector, which is likely to put strong pressure on margins. As a result, Newmont's shares fell sharply after initial gains and closed down almost 6% at USD 45.33.

In the fourth quarter of 2024, Newmont posted earnings per share of USD 1.40, a significant increase compared to the previous year's USD -3.22. Revenues rose 44% to USD 5.63 billion, beating analyst consensus estimates of USD 5.14 billion.

Over the year as a whole, there was also a significant turnaround. After a net loss of USD 3.0 per share in 2023, Newmont made a profit of USD 3.47 per share. Total revenue for the year was USD 18.68 billion, up from USD 11.78 billion the previous year.

Several factors contributed to the positive results. In addition to higher production, particularly in North America and Australia, Newmont was able to improve its position through efficiency gains and strategic acquisitions, such as the takeover of Newcrest Mining. This enabled the Company to optimize production, reduce costs, expand its portfolio, and realize synergies.

Despite the gold boom, the performance of producers is lagging. Newmont was sold off further despite good quarterly figures. Rheinmetall emerges as the winner of the German parliamentary elections. XXIX Metal owns two outstanding copper projects and could benefit disproportionately from the rising copper price.