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February 24th, 2022 | 12:34 CET

Rio Tinto, Triumph Gold, Nestlé - Conflicts and inflation

  • Gold
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Producer prices of industrial products in Germany were 25% higher in January 2022 than in the same period last year. According to the Federal Statistical Office (Destatis), this represents the highest increase since the survey began in 1949. The main reason for the sudden increase is the sharp rise in energy prices. Price increases compared with the previous year were also particularly high for secondary raw materials such as paper and cardboard (+72.7%), butter (up 61.1%) and wooden packaging materials (+65.7%). The situation in Ukraine is getting worse, which is likely to fuel electricity and energy costs once again.

time to read: 4 minutes | Author: Stefan Feulner
ISIN: RIO TINTO PLC LS-_10 | GB0007188757 , TRIUMPH GOLD CORP. | CA8968121043 , NESTLE NAM. SF-_10 | CH0038863350

Table of contents:

    Nestlé - Passing on to consumers

    Inflation rates are rising and rising and based on the reports of the past few days regarding the Ukraine conflict, we can already be prepared for further increases in energy prices. The blown-up supply chains combined with material bottlenecks in various industries, plus the skyrocketing cost of electricity, should long ago have resulted in a more restrictive monetary policy on the part of the ECB. Now, however, with the threat of war in Europe, Lagarde & Co. are in a quandary about not completely stalling the hoped-for upswing after the Corona pandemic by possible interest rate hikes. Increased production and manufacturing costs are passed on to the weakest, in this case, the end consumers. Those who haven't noticed it yet are likely to feel, at the latest in the course of the year, that their wallets are already empty a few days before they receive their next paycheck.

    The world's largest food company, Nestlé, has already increased the prices of its products in response to rising cost inflation. Nestlé CEO Schneider commented during a presentation on the Company's financial results, "There is now almost no place in the Company that is exempt from inflation." He said it started with transportation and packaging. "Prices in container shipping have virtually shot skyward." And it is hard to hedge for those price increases, he says. Schneider expects it to continue this year. "Input costs will be even higher this year than last year," he said.

    Following the annual figures presented, several analysts were optimistic. In addition to Goldman Sachs and UBS, the analysts at Berenberg also gave the Company a "buy" rating. Thus, they said, the food manufacturer exceeded expectations with its figures on growth from its resources and margins and performed as expected in the outlook.

    Triumph Gold - Positive results

    Experts had already seen the gold price running to new heights last year in the face of skyrocketing inflation rates, rising debt levels, and a low-interest rate policy. But so far, the base value still remains in the range of USD 1,900. Even due to the burgeoning war, fears still lack the final momentum to break out above the resistance at USD 1,916.32. Even another setback in the precious metal could be seen as an opportunity to escape the depreciation of money in the long term and to profit from investments in the gold sector.

    Gold mining stocks are already attractively valued at current levels and offer promising long-term return opportunities. Triumph Gold should be mentioned here as an interesting investment opportunity among the exploration companies. The Company is focusing on the development of the Freegold Mountain project using multi-disciplinary exploration and evaluation technologies. The 100% owned project is equipped with world-class infrastructure and hosts three National Instrument 43-101 compliant mineral deposits, Nucleus, Revenue and Tinta Hill. In addition, the exploration company owns 100% of the Big Creek and Tad/Toro copper-gold properties near the Freegold Mountain project.

    Recently, the Canadians came up with encouraging results from the 755.90m drill program in two holes at the Nucleus deposit at the Freegold Mountain project. Highlights included 4.50m of 2.00 g/t gold and 1.57 g/t silver, within 46.28m of 0.54 g/t gold and 0.53 g/t silver in N21-02 in the Oxide Zone, which returned a gold recovery rate of 83%. Triumph Gold CEO Brian May was pleased with the results confirming extensive oxide gold mineralization at the Nucleus deposit, "The cyanide solubility results indicating suitability for heap leach mining methods are extremely encouraging. We look forward to defining additional oxide gold zones at Freegold Mountain." Triumph Gold's market capitalization is currently EUR 9.63 million. The stock, also listed in Frankfurt, corrected to as low as EUR 0.10 and is currently working on bottoming out.

    Rio Tinto - Record results

    One man's joy is another man's sorrow. The sharp rise in commodity prices gave the mining group Rio Tinto record results. "The recovery in the global economy and industrial production led to a significant increase in the price of our key commodities, which we were able to take advantage of to achieve record results with free cash flow of UDS 17.7 billion and adjusted earnings of USD 21.4 billion. This enables us to pay our highest ever total dividend for the year of USD 10.40 per share," said Jakob Stausholm, CEO of Rio Tinto.

    In the process, consolidated sales rose 42% to USD 63.49 billion and net income climbed to USD 21.09 billion from USD 9.77 billion in the same period last year. Increases in iron ore were mainly responsible for the enormously strong growth. In addition, Rio Tinto also benefited from higher prices for the metals copper and aluminum. After the annual figures, Canadian bank RBC has left Rio Tinto at "Sector Perform" with a price target of 5200 pence, the equivalent of EUR 62.31. The results of the mining group were in line with expectations or just below.

    Producer prices have risen to the highest level since the survey began in 1949, and demonetization continues to advance due to increased energy and commodity prices. Nestlé is passing these on to consumers, and Rio Tinto benefits from rising prices. An investment in gold, such as Triumph Gold, should hedge against demonetization in the long term.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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