ThyssenKrupp, Triumph Gold, Evotec - Growth before inflation

Gold in free fall

The central banks' ultra-loose monetary policy, unlimited bond-buying program and historically low interest rates are driving growth and pushing inflation to frighteningly high levels. With the surprisingly strong labor market data at the end of last week, investors' fears about the threat of interest rate hikes became apparent in the gold market. The price sank by 6% and slid, triggered by stop-loss orders on Monday morning, to a new annual low of USD 1,668.79. Although the precious metal was able to recover and is currently quoted in the "safe zone" around USD 1,730, whether the end of the gold bull market has been heralded is still open.

Technically, it must be noted that a retest and a further sell-off are quite likely. A chart-technical setback under USD 1,600, even in the direction of 1,550 USD per ounce, would offer first-class entry points for investment. After all, one thing should be clear even to the central banks, which still see the rise in inflation as temporary due to the recovery after the pandemic. An abrupt end to the current strategy of significant interest rate hikes and an end to bond purchases would drive both distressed countries and companies into bankruptcy. The room for maneuver is, therefore, minimal.

Opportunity at a low level

The current fall in the gold market offers good countercyclical opportunities to invest in promising gold mining stocks. One investment to add to a portfolio is the gold mining explorer Triumph Gold. While the share price was at CAD 0.48 when the gold price reached highs above USD 2,000 last August, the Company is currently listed at just CAD 0.16. The stock market value is thus just under CAD 25 million.

From a fundamental point of view, everything is going according to plan for Triumph Gold, which operates a large land package in the mining-friendly Yukon. Triumph Gold's flagship Freegold Mountain project is located approximately 200 km northwest of the city of Whitehorse and 70 km northwest of Carmacks within the prolific Dawson Range copper-gold belt of southwestern Yukon. The project, equipped with world-class infrastructure, covers a significant area of the Big Creek recovery zone, a structure directly associated with epithermal gold and silver mineralization and gold-bearing porphyry copper mineralization.

The drill program, funded for the full year, is in its first phase and includes 8 km of diamond drilling, 100 line kilometers of ground geophysics, 35 line kilometers of soil sampling and surface trenching.

Artificial intelligence as a tool

AI is occurring in almost every aspect of our lives. Now the Canadians used it in their drilling activities. Thus, a comprehensive study was completed focusing on the Revenue and Nucleus area, a large zone of gold-copper-silver-molybdenum mineralization located within Freegold Mountain. The Company contracted Minerva Intelligence to use its innovative DRIVER software along with K-Means Cluster Analysis to evaluate drill data from multiple elements. According to management, Minerva's cognitive AI analysis improved technical understanding of the Nucleus and Revenue deposits by strengthening confidence in existing models and identifying mineralization boundaries not yet determined.

Strong numbers, disappointing forecast

Thyssenkrupp was down more than 7% after the publication of its quarterly figures. The interim correction that pushed the stock from EUR 7.57 close to the EUR 9 mark was thus abruptly halted. A test of the old low for the year is threatening again.

The steel group was able to improve its figures. After a minus of EUR 693 million in the same period of the previous year, EBIT improved significantly to a plus of EUR 266 million. Profit climbed to EUR 125 million after a loss of EUR 678 million in the comparable period of 2020. Order intake also almost doubled to EUR 8.8 billion at the end of June.

However, market observers were disappointed with the forecast for free cash flow. Here ThyssenKrupp expects outflows of between EUR 1.2 billion and EUR 1.5 billion. Until recently, the target was reported to improve free cash flow to minus EUR 1 billion.

Rosy outlook

Biotech Company Evotec, on the other hand, confirmed its forecast in its half-year figures. Full-year sales are expected to remain between EUR 550 million and EUR 570 million. The Hamburg-based Company now expects EBITDA to be between EUR 105 million and EUR 120 million, up from EUR 107 million in 2020. In the first half of the year, sales were already at EUR 280 million. The operating result declined by almost 25% to EUR 36 million due to high expenses in research and development as well as investments.

Evotec remains exciting. Breaking above the EUR 38.40 level would create new upside potential by reaching a new all-time high on a closing price basis.

Due to fears of possible interest rate hikes, gold is in free fall. Countercyclically, this creates attractive entry opportunities in shares of gold producers or exploration companies such as Triumph Gold. After the figures, we see good entry opportunities in Evotec, while we would avoid ThyssenKrupp.