13. September 2021 | 13:43 CET
Xiaomi, Troilus Gold, Merck - First-class developments
Substantial gains were recently seen in consumer and producer prices in Germany and Europe. Inflation in Germany reached its highest level in almost 28 years in August and is close to breaking through the 4% mark. In contrast to central banks, which consider the rate of inflation to be temporary and continue to maintain an ultra-loose monetary policy with interest rates at zero percent, economists expect inflation to remain permanently high. There is a threat of a decline in the value of money, which could be slowed down by buying gold. Currently, the precious metal is still trading at a favorable level.
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ISIN: XIAOMI CORP. CL.B | KYG9830T1067 , TROILUS GOLD CORP. NEW | CA8968871068 , MERCK KGAA O.N. | DE0006599905
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
The precious metal in demand
According to a World Gold Council report, the demand for physical gold in the first half of the current year has increased by 35% compared to the same period last year. In Germany alone, 90t of gold bars and coins went over the counter, more than at any time in more than a decade. Looking at the gold price, one still sees little of the strong interest in the yellow metal. After an interim high at the beginning of September at USD 1,831 per ounce, there was no further momentum to attack the next price target at USD 1,910. In recent days, the gold price fell below the area at USD 1,800, a test of the annual lows below USD 1,700 is not ruled out, but then it is more than attractive long-term buying prices. In the course of the decline in the strike price, mining stocks corrected disproportionately significantly. Again, if investors want to hedge against currency devaluation in the long term, they should position themselves anti-cyclically in gold mine producers and exploration companies.
Flagship project in North America
Led by an experienced team, Troilus Gold is in the process of morphing into a world-class Canadian gold and copper production operation. Developments in recent months show enormous potential, but the share price currently does not reflect this in any way. After reaching a high of CAD 1.30 in mid-May, the share, more than 60% of which is in institutional hands, is trading at CAD 0.83. The market capitalization is around CAD 160 million, and due to a successful capital increase, Troilus Gold has a strong cash position of CAD 48.6 million. Due to the quality of the project, analysts at Cormark Securities see a target price of CAD 4.50, which is more than a five-fold increase in the share price.
The project in question is located in the leading mining district of the Canadian province of Quebec, where the Company owns strategic properties covering an area of 1,420 sq km. The mine produced 2 million ounces of gold and around 70,000t of copper between 1996 and 2010 before it was shut down for cost reasons. In 2017, drilling resumed at the Troilus mine. Since then, aggressive drilling programs have covered 250,000 meters of drilling, and the resource estimate has increased to 8.1 million ounces.
An economic feasibility study last year certified the project as highly profitable. According to the appraisal, the project value is USD 1.156 billion at a gold price of USD 1,950, allowing for a very rapid payback of the required USD 333 million investment. Plans call for the mine to operate for 22 years and produce an average of 246,000 ounces of gold annually for the first 14 years.
Troilus Gold aims to become a gold producer by 2023 at the latest. The Canadian exploration company received support from the government of Québec and the pension fund 'Fonds de Solidarité', which stepped in with CAD 11.15 million on equal terms with which the Company collected CAD 45 million in a bought deal transaction. The funds will be used, among other things, to prepare a feasibility study by early 2022 for the Troilus Gold Project. The Company is more than exciting and should benefit disproportionately from the long-term rising gold price.
Xiaomi continues to expand
Currently, financial giants such as George Soros recently warned against investing in Chinese companies, saying that the efforts of Chinese regulators are not yet over and a rude awakening could follow. Indeed, stocks such as Alibaba or Tencent are currently not showing any signals to justify an investment. In contrast, the technology group Xiaomi shows relative strength and can shine fundamentally despite the regulatory mania in the Middle Kingdom.
After the Company was even able to replace Apple as number 2 in smartphone sales in the current year, the management plans to enter the electric car market from 2024 with the first model. A new model is to be launched every year to expand the product range. According to the Chinese magazine 36Kr, Xiaomi aims to deliver 900,000 units in the first three years. In Germany, the stock is currently trading at EUR 2.60 on a broad support zone. At the current level, long-term entry offers itself.
The chart of Darmstadt-based Merck KGaA has been pointing in only one direction for months. The pharmaceutical and chemical group, represented in the Healthcare, Life Science and Electronics segments, was further upgraded by analysts at the US bank JP Morgan following the Company's own Capital Markets Day. The experts increased the price target from EUR 220 to EUR 230 and maintained their "Overweight" rating.
Fears of sustained high inflation remain. To hedge, gold mining stocks such as Troilus Gold offer protection against a possible devaluation of money as a portfolio addition. Outside the precious metals market, the Xiaomi share shows an attractive entry opportunity at the current level.