06. October 2021 | 10:26 CET
Steinhoff, MAS Gold, Infineon - The sleeping giant
Rising inflation, historically high government debt, and central banks continue to open the money floodgates and keep interest rates at zero. One would think gold should be more in demand than ever due to the general data. But the precious metal has remained in a deep sleep since its highs of last year. The situation resembles that of about 5 years ago. Back then, the gold sentiment was poor, and interest in gold mining stocks was low until the precious yellow metal put in a performance of just under 30% in the subsequent 6 months. Incidentally, the gold mining index XAU exploded by around 180% in the same period.
time to read:
ISIN: STEINHOFF INT.HLDG.EO-_50 | NL0011375019 , MAS Gold Corp. | CA57457A1057 , INFINEON TECH.AG NA O.N. | DE0006231004
"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Fear of interest rate hikes
In addition to the FED chief Jerome Powell, the ECB's monetary watchdog Christine Lagarde is also holding back with clear statements on a possible interest rate hike next year. In general, it is still believed that the rising inflation is temporary due to the recovery after the Corona pandemic and will return to normal next year. For example, at the last Fed meeting, it was merely signaled that bond purchases, known as tapering, would be "gradually" reduced starting in November. In the coming year, it could also be possible to turn the interest rate screw. Clear commitments look different.
In reality, leverage levels are likely to make it difficult for central banks to raise interest rates, primarily since leading indicators in the United States are already pointing again to an economic downturn. If this proves true, the FED is more likely to counter with further additional monetary easing.
Mining stocks attractive
The sharp correction since August of last year offers attractive long-term buying opportunities for mining stocks. From a technical point of view, there is still a short-term setback potential for the gold price up to the area of around USD 1,620. Still, in the long term, investors should already start building up anti-cyclical positions for portfolio additions.
In this category also falls the mining exploration Company MAS Gold, which concentrates on projects in the promising greenstone belt La Ronge in Saskatchewan, where resources of over 1 million ounces are suspected. Saskatchewan was ranked #1 among 111 jurisdictions in 83 countries for mineral exploration and mining opportunities.
In this belt, equipped with world-class infrastructure, MAS Gold operates the 100% owned North Lake, Point Gold, Elizabeth Lake & Henry Lake & Contact Lake gold projects, each hosting drill-discovered zones of gold mineralization. The geology of the belt is similar to high-grade regions in West Africa.
Strategically, the Canadians are pursuing a "Hub And Spoke" model. The concept is based on the idea that mineralized material from various satellite deposits will be brought together in a centrally located facility near North Lake, providing the opportunity for efficient operations. In addition, management continues to search for other historic resources in the belt to expand the existing portfolio further.
The highly experienced team led by mining veteran Jim Engdahl has much to look forward to in the future. In addition to a strategic partnership with Sprott Securities, MAS Gold also has a long-standing stable relationship with its major shareholders. The stock market value of currently EUR 7.71 million could be raised quickly if the business continues to develop positively.
Chips the new gold
The continued extreme shortage of semiconductors promises further good business for the DAX Company Infineon. Based on this, the Munich-based company expects a strong 2022 fiscal year. According to Company reports, sales should increase in the range of 15% in the 2021/2022 fiscal year, while the operating margin should rise to around 20%. The preliminary figures for fiscal 2020/2021, which ended September 30, met the communicated forecasts. Sales came to EUR 11 billion with a segment profit margin of over 18%.
Both analysts and investors were enthusiastic. Thus, Infineon remained on the "Conviction List" of the US investment bank Goldman Sachs with a confirmed price target of EUR 45. Kepler Chevreux and UBS upgraded the share, which was trading up more than 3%, to "Buy".
Partial success at Steinhoff
The situation remains serious at the crisis-ridden retail group Steinhoff. Nevertheless, the heavily indebted German-South African Company was able to celebrate a success. The first part of the settlement proceedings was concluded in the Netherlands. Here, the settlement is legally binding after a final appeal period against the settlement confirmation by the competent court in Amsterdam has expired.
The future of Steinhoff in South Africa will now be decided. Here, in addition to the second part of the settlement proceedings, a petition for compulsory liquidation by the former owners of Tekkie Town is pending. The petition is blocking a final conclusion of the settlement proceedings. The share remains hot and not for the faint of heart.
Despite the favorable framework data, the gold price is correcting. Investors should take the opportunity to build up long-term positions in gold producers or gold explorers such as MAS Gold. Infineon is currently in a gold rush due to the chip shortage, but serious investors should keep their hands off Steinhoff.