September 1st, 2021 | 12:45 CEST
ThyssenKrupp, Triumph Gold, Siemens Energy - Is the turnaround coming?
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"[...] 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
ThyssenKrupp - Steel division cannot get on its feet
Steel prices have risen enormously since 2020. It went up from EUR 680 to over EUR 1,500. ThyssenKrupp should have profited handsomely from this, but that is not the case. In the second quarter, just EUR 33 per ton of steel remained as profit. Some of our competitors earn over EUR 200 per ton. Sales fell by 11%, with the quality of the steel also playing a role. In recent years, the Group has invested too little in its existing facilities, and as a result, quality ultimately falls by the wayside.
To make matters worse, the steel industry is one of the biggest CO2 emitters. Since more sustainability is in demand and customers are also demanding this from their suppliers, the Company cannot meet this demand. This transformation is costing a lot of money, with investments calculated in the high single-digit billions. Too much for the cash-strapped Group. There have been repeated attempts to float the steel division on the stock exchange, sell it or merge it with a competitor. So far, none of these plans have been crowned with success. The mood in the Company is also not particularly positive due to the chosen project name "Freedom".
The share, on the other hand, is showing the first positive signs. The downward trend was broken on August 30, and at the same time, the 200-day moving average was overcome again. Analysts are now also positive. Deutsche Bank sees the fair value at EUR 17 and has set the stock to BUY. DZ Bank also recommends buying but sees the price target at EUR 10.50. As an invested investor, you can stay with it, but the share should not fall below EUR 8.33 on a closing price basis. Then the upward trend would be broken.
Triumph Gold - Drilling program underway
The Canadian explorer Triumph Gold owns a total of four projects. Currently, a drilling program is underway on the Freegold Mountain project. The area is located in Yukon, within the Dawson Range, and NI 43-101 standard gold and copper deposits have already been reported. Drilling has been ongoing since late June and a total of 8,000m of diamond drilling is planned in four different zones. In addition, 100km as the crow flies of ground surveys and 35km as the crow flies of soil sampling and surface trenching are to be undertaken.
The Company is also taking a progressive approach to planning its exploration targets. On August 3, the Company was pleased to announce that an artificial intelligence (AI) study of the Revenue-Nucleus Zone has been completed, which Triumph Gold will use to plan their next steps. The AI algorithm was fed data from over 145,000m of drill samples. The result is exploration targets that, if successful, will lead to resource expansion.
Currently, resources are put at 2 million ounces of gold and copper. When the price of gold was above USD 2,000 last year, the stock was trading at a high of CAD 0.48. At present, the Company's shares can be bought for just CAD 0.14, and that at a gold price of over USD 1,800. Currently, the Company's value is only CAD 19.1 million. Looking at the producers around the area, such as Rio Tinto or Newmont, the Company could quickly become a takeover candidate.
Siemens Energy - Gamesa causes problems
Siemens Energy presented its figures for the past quarter on August 4. After Gamesa's profit warning, it was already clear beforehand that the numbers would not turn out well. After two quarters in the black, the Company had to report EBITA of EUR -124 million. Without Gamesa, the quarter would have been profitable. Also negative were new orders, which were down 36.8%.
Siemens Energy holds a 67% stake in Gamesa, but there does not yet appear to be any genuine cooperation. Gamesa chief executive Nauen was quoted as saying, "We, therefore, treat every shareholder equally, including Siemens Energy." In the process, Gamesa has failed to hedge against rising commodity prices. In fact, this is a must if you offer projects three years in advance at fixed prices. In the future, it wants to pay attention to this and also select the countries in which it sets up projects more carefully. The Company seems to want to withdraw from China, Russia and Turkey.
Brazil is important for Gamesa from various points of view. The country accounts for 10% of sales, and 43% of its total electricity consumption comes from renewable sources. Brazil is planning to become a producer of green hydrogen, so there are still promising business opportunities for Gamesa there for years to come. Siemens Energy is trying to cut costs and plans to eliminate 750 jobs in Berlin. It is also optimistic that Supervisory Board Chairman Kaeser himself is buying shares at this level. To leave the downward trend, the share must exceed EUR 27.65.
All three companies are far from their highs. At ThyssenKrupp, the restructuring is in full swing. The Company has been fighting for survival not just since the Corona pandemic. If one wants to invest in steel producers, there are certainly better alternatives. Triumph Gold has gold deposits and is currently trying to expand its resource estimate. The risk-reward ratio looks good here. Siemens Energy is suffering from its subsidiary Gamesa. Clear management mistakes have been made here, which will hopefully be remedied in the future. The Company will then also be technologically well-positioned for the future.
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