September 20th, 2022 | 10:52 CEST
Siemens Energy, Barsele Minerals, Nordex, HelloFresh - Markets under the spell of the Fed
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"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Change in strategy possible in November
The gold sector is suffering from the change in strategy by central banks. As expected, the precious yellow metal marked a new low for the year at USD 1,680.59 in the run-up to the Fed decision and is now heading for the next support zones at USD 1,650 and, in the event of a further breakout, USD 1,620 per troy ounce of gold. There is also no relief from the futures markets, where currently, the sellers still have the upper hand. Thus, in the week ending September 13, the number of open contracts fell from 465,900 to 463,700, according to the Commitments of Traders Report published by the US regulator CFTC.
While gold is in a medium-term correction loop, the long-term outlook remains excellent. In addition to the geopolitical conflict hotspots in Ukraine and Taiwan, gold should appear in new splendor after the mid-term elections in the US at the latest. After all, continuing these massive interest rate hikes would be tantamount to burying what is still the world's largest economy. Instead, it looks like the Biden administration is eager to nip in the bud the Republicans' main charge of ignoring rampant inflation in the country.
Barsele Minerals - Gold pearl in Sweden
That both gold producers and exploration companies correct more strongly in percentage terms than the gold price can be seen historically in both directions. The correction of the gold price since the beginning of the year amounted to about 20%. The share of Barsele Minerals lost more than 43% in the same period. At the same time, the stock market value of the Canadian company amounts to CAD 41.98 million, compared to the project value, which results in a valuation gap of several hundred percent.
The Barsele project of the same name is located in the mining region of Västerbottens Län in northern Sweden, 600km north of Stockholm, and covers 34,500 hectares. Around 55% is owned by major Agnico Eagle, which is also bearing the exploration costs. Barsele Minerals own the remaining 45%. In recent years, Agnico Eagle, as the operator, has advanced exploration and drilled some 158,000 meters, with a total of 404 drill holes completed. In 2019, Barsele released a resource estimate of 2.41 million ounces of gold. Since that estimate, an additional 93 drill holes have been created, and approximately 20,000 meters of drilling have been completed. The next target is a resource estimate of 3.5 million ounces.
In 2016, the Royal Bank of Canada (RBC) conducted a valuation of the Barsele Gold Project for Agnico Eagle. At a gold price of below USD 1,350 at the time, the experts calculated a project value of USD 375 million. Last year, the Belcarra Group, which in turn provides the management of Barsele Minerals, was willing to take over Agnico Eagle's share completely, which failed, at least for the time being. However, well-informed circles say that a further push is to be made to acquire the high-grade project completely.
Siemens Energy in free fall
The Siemens Energy share reacted to the resumption in the German leading index DAX with a new all-time low. As of yesterday, the energy technology manufacturer is again part of the DAX 40 family and replaces the cooking box shipper HelloFresh, which will be represented in the MDAX in the future. Market capitalization is decisive for the promotion and relegation of companies. For this purpose, the volume-weighted average price of the last 20 trading days before the indices were reviewed is considered. As a result, HelloFresh has had to drop out of the Champions League of the German stock market with a minus of over 75% since November 2021.
There were also three other newcomers to the MDAX. In addition to the US telecommunications equipment supplier Adtran, which recently acquired Adva, the two automotive suppliers Stabilus and Hella move up into the second German stock market league. In return, the crisis-ridden energy group Uniper, Grand City Properties and the IT service provider Cancom left the MDAX and will now play in the third league, the SDAX. Wind turbine manufacturer Nordex has also returned to both the SDAX and TecDAX. It had to say goodbye to the two segments months ago because the quarterly report was not published on time.
The stock market week is again dominated by interest rate decisions. Another sharp rise in interest rates, experts expect 100 basis points, could further weigh on the stock and precious metals markets. Due to the correction, the gap between market capitalization and actual project value is widening at Barsele Minerals. Despite moving up into higher stock market segments, both Siemens Energy and Nordex continue to lose ground.
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