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Airbus, BASF, Osino Resources - where is the highest return?

Mario Hose Mario Hose,
0 Comments| June 22, 2020

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Normally, investors are happy about rising share prices, because the stock market is the expression of the future and expected growth in pricing. However, what has been observed since the outbreak of the Corona Pandemic and the measures that have accompanied it has little to do with the old normality. Politicians and economists cannot yet estimate how serious the consequences of the actions around Covid-19 will be. Reports of mass layoffs, bankruptcies and the loss of tax revenues are now part of the daily news. The head of the Bundesbank, Jens Weidmann, recently announced that "things are looking up again", but given that the DAX is currently only around 12% below its all-time high of February 2020, something seems to be out of proportion. "We are currently experiencing the most hated bull market," a banker recently said in a personal conversation.

Gold is a currency

Last week the US bank Goldman Sachs (NYSE: GS) raised its forecast for gold prices. The experts expect the price of the precious metal to rise up to USD 2,000.00 an ounce in the coming 12 months. The previous price target was USD 1,800.00. This assessment is based on the consequences of the actions taken in connection with the current Corona Pandemic. Low interest rates and the need for security are causing the demand for gold to rise. Whoever buys gold buys an independent currency.

Gold production will decrease

In April 2020 the Bank of America (NYSE: BAC) already pointed out the potential of gold. The experts even believe it is possible that the price of gold per ounce could rise to USD 3,000.00 in 2021. There is high demand for the precious metal, especially from the industrial countries. The basis for the changed assessment of the price development is the expectation that inflation will rise due to the increase in the money supply. Coupled with this development is the expectation that gold production will peak in 2020 and by 2029 fall from around 118 million ounces to an expected 63 million ounces.

Takeover target in the gold sector

Considering that the gold reserves of the largest producers have decreased by around 34% since 2012 from 967 million ounces to 584 million ounces in 2019, the costs of future acquisitions will continue to increase as the gold price rises. In Africa, acquisitions in 2018 averaged more than USD 200 per ounce in the ground. In 2012, Heye Daun, the CEO of Osino Resources (TSXV: OSI), sold a company to B2Gold (TSX: BTO). At that time, a price of just under USD 100 per ounce in the ground was paid, but at that time the price of gold was in decline.

In the current market environment and the price rally expected from Bank of America and Goldman Sachs, companies like Osino Resources are facing proverbial golden times. Heye Daun is again looking to exit through a takeover, which is common in the industry. The company's drilling results are eagerly anticipated in the coming months. As soon as the gold reserves move towards two million ounces, the knocking at the door from the major producers should become louder.

Third quarter has great significance

The European aircraft manufacturer Airbus (FSE: AIR) has had an eventful few months. Travel restrictions have brought tourism around the globe to a standstill. Some of the airlines' existence is threatened and the corresponding reluctance to make new purchases is burdening the business of aircraft manufacturers. The easing of the restrictions is currently creating hopes that travel activity will soon increase again.

The economic slowdown did not leave the chemical giant BASF (FSE: BAS) unaffected. However, the use of its products is diversified and for this reason the company is probably in a more stable environment. The truth about the state of the German economy is likely to be revealed in the figures for the third quarter of 2020, when hopefully a positive development will be seen compared to the current second quarter.

Further information:

We would like to point out that Apaton Finance GmbH, the owner of, as well as partners, authors or employees of Apaton Finance GmbH may hold shares in the aforementioned companies and that there may therefore be a conflict of interest. Further details can be found in our ´Conflict of Interest & Risk Disclosure´.

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