22. April 2021 | 07:44 CET
Steinhoff, Yamana Gold, Equinox Gold, Osino Resources: Quick profits? What to watch out for!
Speculative small caps and hot penny stocks have their place on the stock market. But because of their risk profile, the stocks must also deliver what they promise. A quotation in the cent range is not enough. An investment is only worthwhile if a typical penny stock price also stands for a low valuation and meets the prospect of revaluation. Which speculative stocks offer opportunities today and what investors should better keep their hands off.
time to read: 3 minutes by Nico Popp
"[...] We quickly learned that the tailings are high-grade, often as high as 20 grams of gold per tonne; because they are produced by artisanal miners, local miners who use outdated technology for gold production. [...]" Ryan Jackson, CEO, Newlox Gold Ventures Corp.
Steinhoff: Gambling depends on the odds
The Steinhoff share should be familiar to almost every active investor in Germany by now. The furniture group suffered an accounting scandal years ago and has been under legal pressure ever since. The damages demanded could drive the Company into bankruptcy. Since then, the opponents in the proceedings have been bickering, making compromise proposals and presenting arguments. On the stock market, this has caused ups and downs. For investors who are used to riding the wave-like movements of penny stocks, the stock was a ready-made meal for a long time. But how does it look today?
Since the turn of the year, the share has doubled. At times, it had risen even more sharply. Time and again, there were indications that a settlement was imminent - at least that was the interpretation of many bona fide investors. But even in the event of a favorable settlement for Steinhoff, the Company would still be struggling - after all, the group would have to put some of its silverware on the line in order to appease the plaintiffs. Even after a settlement, the outlook for Steinhoff is rather bleak. If the share were still at EUR 0.03 today, speculation about an end to the legal dispute would be justified. Currently, however, an investment resembles a gamble. Since the future of Steinhoff is anything but rosy, the drop rate currently seems too high.
Equinox and Yamana: Opportunities or boredom?
Those looking for quick profits on the stock market can also look for laggards. Now that the gold price is likely to have left its lows behind and is meanwhile stalking the USD 1,800 mark again, smaller gold producers could be promising. The shares of Equinox Gold and also Yamana Gold have gone through a consolidation phase lasting several months. Operationally, both companies have also made changes: Yamana invested CAD 20 million in Ascot Resources and Equinox absorbed Premier Gold Mines, retained some projects and spun off projects in Nevada into new gold developer i-80 Gold.
Although Yamana Gold's stock is already hinting at exiting the downtrend of recent months, both Yamana and Equinox remain rather unattractive to speculative investors. While small and mid-sized producers certainly have their appeal, investors need to look very closely at all projects to identify opportunities and rule out risks. The situation is more straightforward with developers who focus primarily on one project but whose resources are nowhere near as highly valued as those of a producer.
Osino Resources: Sprott analysts see almost 100% potential
Osino Resources is a case in point. The Company operates in politically stable and legally secure Namibia, advancing the Twin Hills project. In 2020 alone, Osino drilled around 35,000 meters with eight rigs and described its project as well advanced. Analysts at Sprott Equity Research agree and refer to the rapid development in recent months: The team around CEO Heye Daun can now present a first resource estimate for Twin Hills according to mining standards, which speaks for itself. 1.9 million ounces at grades of 1.1 g/t are a convincing first house number for the analysts. A preliminary feasibility study is to follow by the middle of next year. The drilling history shows that the previous figures are preliminary. The above resource comprises 69,000 meters of drilling - but 75,000 more meters are planned in 2021 alone.
The team around Osino has already impressively demonstrated how to move a project forward quickly: Years ago, they sold the Otjikoto mine, also located in Namibia, to B2Gold. Today, the mine is the cash cow par excellence for the Company. The analysts at Sprott believe that the Osino Resources share can reach a price of up to CAD 2.55 - the share is currently trading at CAD 1.34. Unlike producers, project developers like Osino Resources offer more potential for dynamic growth, as the market is only gradually pricing in the project's success. Investors who can interpret positive signals around a project at an early stage have the chance to enter the market at an early stage.
In contrast to many classic penny stocks, investors are not betting on a single event, such as a legal case, but on development. This development is sometimes assessed as more optimistic and sometimes more pessimistic depending on the overall market. Anti-cyclical investors, in particular, can take advantage of this.