March 21st, 2022 | 11:15 CET
Shares between expropriation and the new era: Barrick Gold, Triumph Gold, Alibaba
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"[...] I wouldn't be surprised if the project ends up showing more than 5 million ounces. [...]" Gary Cope, President and CEO, Barsele Minerals
Barrick: The beginning of a new era?
Barrick Gold has made significant gains in recent weeks. For years, the value was considered a toothless tiger. Barrick earned good money but did not bring its horsepower to the street. Investors wanted acquisitions, but instead, the Company paid out special dividends or bought its own shares. What disappointed investors a year ago is now better received. The reason lies in a reorientation of the dividend policy. In addition to buying its own shares, Barrick Gold wants to restructure its dividend in the future. There will be a basic dividend linked to profits, and a performance dividend, which depends on the debt ratio. Given rising prices for gold and copper and the abundant cash flows, this move is proving well received by investors.
In November of last year, the research portal researchanalyst.com stated that Barrick Gold had "catch-up potential". The authors pointed out that special distributions could become a new rule at Barrick: "The continuation of special distributions is quite realistic, which means that the dividend yield should be around 4%. As the guidance shows, production should increase noticeably in the second half of the year. The multi-year outlook of the Canadians is around 4.7 million ounces of gold p.a. This means that the price level of gold will once again be a decisive factor for the Group," said researchanalyst.com. In the meantime, the share price has jumped significantly, and the dividend is flowing. The share still seems to have room to run to the highs from 2020. If the EUR 25 mark is exceeded, this should be the beginning of a new era for the gold market.
Triumph Gold: Positive signals from geologists
The EUR 25 mark for Barrick Gold should also be significant for investors of smaller stocks, such as Triumph Gold - if the large gold stocks reach new record highs, the mass of investors would also jump on the gold bandwagon. Small stocks, in particular, can offer great potential in such phases. In the months between April and August 2020, many small stocks multiplied. Triumph climbed from EUR 0.08 to EUR 0.25 during this period. Meanwhile, the Company has expanded its project in the Canadian Yukon and explored new areas.
In addition to grades of up to 2 g/t gold and 1.57 g/t silver over 4.5 meters, and lower grades around 0.5 g/t for both elements over 46 meters, Triumph Gold's latest results indicated, among other things, the possibility of low-cost leach mining, the Company reported. In this process, elements are dissolved directly in the ground and brought to the surface. No overburden is produced and no rock has to be moved. If this mining method is ultimately possible, in addition to an attractive cost profile, it could ensure the continued approval of First Nation. First Nation has been open to the project and has maintained a partnership exchange with Triumph Gold. Triumph Gold's share price has not yet rebounded. Since smaller project developers usually react to rising commodity prices with a time lag, a comeback of the share could still be ahead. However, the stock remains speculative - while Barrick Gold makes money every day with high gold prices, Triumph lives on its fantasy.
Alibaba: The fear of expropriation
Alibaba's stock has also sparked a lot of fantasy over the years. The Chinese Amazon was seen as the perfect symbiosis of a tech company and online retailer. Since the Company is primarily active in China, investors also projected the rise of the Chinese middle class onto the stock. However, the share has been facing headwinds for some time. Since the canceled IPO of Alibaba's Ant subsidiary, investors have been pulling capital out of Alibaba. The Company seems to have fallen out of favor with the powers that be in Beijing. The Ukraine war and increasing geopolitical turmoil are not improving the situation. Russia has already asked China for help. While many observers assume that China is unlikely to make the mistake of joining Russia in forming an anti-Western camp, tensions are mounting. Moreover, because China stocks, like Alibaba, are organized through offshore companies in which investors invest, there are additional risks. These so-called ADRs hold claims against the Company in mainland China. There is no direct ownership interest.
At a time when Russian stock exchanges are not trading for many weeks, assets worth billions are being frozen, and some of the political rhetoric is getting harsher, a concept like ADRs could become a risk. While Alibaba has made significant gains recently, it remains down around 54% over a one-year horizon. Given the current uncertainty, typical crisis investments are more suitable. Gold producers such as Barrick are among them, but smaller stocks can also act as crisis insurance in a balanced portfolio given their risk profile. Triumph Gold has the potential to benefit disproportionately in the event of new gold highs.
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") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
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