Independent Capital Group attended this years Denver Gold Group Gold Forum – Virtual Event from 13th to 15th of April. You can find the key takeaways in our Conference Distillate. We had the pleasure to talk to many exciting gold companies and would like to highlight 4 of our Precious Metals Champions Fund portfolio companies we met during the last 3 days.
– Sibanye-Stillwater with the Team of Investor Relations around Henrika Ninham, Chris Law and James Wellsted
– Torex Gold Resources Inc with CEO Jody Kuzenko, VR IR Dan Rollins and CFO Andrew Snowden
– SSR Mining Inc. with CEO Rod Antal, EVP & Chief Corporate Development Officer F. Edward Farid and Corporate Development & Investor Relations Brian Martin
– Kirkland Lake Gold (KL) with Executive Vice President Jason Neal, Vice-President Investors Relations Mark Utting and Senior Vice President Exploration Eric Kallio
The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.
Renewed lockdowns and a slow vaccine roll-out in Europe tempered demand optimism and caused oil prices and energy stocks to recently pull back from their early-March highs. The current demand outlook (and indeed investor sentiment) is heavily divergent by region. Asia and US is focussed on recovering demand, while Europe and Latin America see rising cases and further lockdowns. However, most analysts still believe that with the vaccine rollout gaining pace over the coming months and mobility restrictions being eased, the global oil demand recovery will continue during 2Q21. We are starting to see green shoots in high frequency demand data and US hotel bookings/flights show the scale of pent-up demand. On the other side, OPEC+ cautious approach in bringing back oil production they cut last year should add price support. As the bloc will likely only increase output when it sees a firm recovery in demand, the oil market should stay undersupplied this year. OECD crude oil inventories have steadily fallen through the first quarter but remain above the five-year average. Therefore, further draws in global crude oil inventory is more then likely during the whole year. Outside OPEC+, US oil producer have remained broadly disciplined despite higher prices to attract investors back to the sector. However, the “wildcard” in the oil and gas market became the privately-owned shale companies. Privates account for 30% of US shale production (around 2.5mboe/d) and these players may have less patience than the public companies. Energy has participated in this year’s market rotation from growth to value-oriented stocks. However, despite the strong YTD performance, the energy weighting of the S&P 500 is up only marginally from its YE20 20-year low. Nevertheless, a spotty historical track record of the energy management capital discipline, ESG challenges, and long-term oil demand risk notwithstanding, we believe that the oil and gas sector offers an attractive risk reward underpinned by sustainable FCF, increasing focus on return of capital to investors, and strong balance sheets. As we have seen in recently, management teams remain universally focused on delivering sustainable, competitive free cash flow. This is best visible with an estimated projected FCF yield of 7.2% in 2021E and 9.0% in 2022E in the energy space that is more than double the average of the eleven other sectors in the S&P 500 Index. The ECF has a FCF yield of 12.6% in 2021E and 14.8% in 2022E! Even so, valuations in the oil and gas sector remain depressed on an absolute basis and relative to their broader market indices. The EV/EBITDA estimates for energy in 2021E at 9.7x and 2022E at 7.7x are half the other sectors in the S&P 500 Index. We believe that investors could begin to positively re-value the group on the basis of its yield as oil price visibility improves during the year.
At the beginning of April, copper prices advanced the most in over a month on signs the US economy will see a strong rebound this year. A better-than-expected US jobs report fueled optimism that the world’s largest economy will recover from the pandemic faster than other countries. Copper demand should continue to exceed supply this year, analysts expects global consumption to reach 25.8 million tons in 2021, 2.9% higher than last year. Demand will again outpace production growth. Looking at steel, with iron ore prices rallied over the last 12 months, it could be a challenge for companies needing to buy it. Not so for the steelmakers, who have been able to pass on the cost to customers, putting the sector in a sweet spot. Steel futures in China hit almost 10-year highs last month, and the surge in the price of finished steel products in the US and Europe makes the case for further outperformance of steel companies. Steel prices have climbed everywhere since last August, largely offsetting the surge in iron ore, while the CEOs predict a demand surge as the post pandemic recovery takes hold. Citigroup expects a 100%-150% EBITDA increase in 2021 for the sector. Also, it is expected that a lot of materials will be needed for President Joe Biden’s proposed $2.25 trillion infrastructure plan. The plan is a one-time, eight-year capital investment, that tackles classic infrastructure projects like repairing bridges, and includes investments aimed at promoting long-term job growth with everything connected to renewable energies. The plan faces a tough road ahead in Congress though. Looking at companies, Vale announced the biggest mining buyback in years and rose to fresh all-time high. The Brazilian mining powerhouse delivering on a promise to reward investors for sticking with the company through low prices and a dam catastrophe. The board approved a program to buy 270 million shares over a year. Based on the last closing price, that implies about $4.9 billion, one of mining’s biggest repurchase announcements since 2018. The buyback comes on the heels of a bigger-than-expected dividend and is the latest chapter in its turnaround story. While iron ore prices have come off multi-year highs in recent weeks, they’re still well up on a year-ago levels. In general, miners are generating significant cash flow in 2021 due to high commodity prices; with balance sheets strong and capex contained, shareholder returns will be at record levels. With an estimated projected FCF yield of 9.5% in 2021E and 8.4% in 2022E for the IMC portfolio companies, that is more than double the average of the S&P 500 Index. Even so, valuations in the industrials sector remain depressed on an absolute basis and relative to their broader market indices. The EV/EBITDA estimates for IMC portfolio companies in 2021E standing at 7.4x, in 2022E at 7.0x and are half the other sectors in the S&P 500 Index.
March saw another M&A deal in the gold space with Evolution bidding over C$340 million for Battle North Gold – all cash. Despite COVID travel restrictions, this is the third M&A deal in the last two months following TMAC acquired by Agnico and GT Gold by Newmont. Clearly, it is cheaper to grow by buying a company than to build for the majors. Interesting about these transactions is that they are all cash, which means the cash can be redeployed right away in the sector. The average premium is over 40%, which we have not seen in a while in the gold sector. AngloGold Ashanti, the world’s No. 3 gold miner, recently said that the industry braces for another round of mergers and acquisitions. Gold miners flush with cash are expected again to look to expand through acquisitions, as Barrick and Newmont did two years ago. The South African miners look specifically attractive as take-over targets, as the risk perception attached to the country has weighed down the stock’s valuation relative to global peers. Also, the world’s largest producer of palladium and refined nickel, Norilsk Nickel, suspended output at two of its mines last month after a flooding. According to Morgan Stanley, the drop in palladium production equates to about 6% of global supply. By month end, the company could stop water inflows though, putting it on course to resume full production in early May. Nonetheless, the incident affected the palladium as well as the platinum market – which both are expected to be in wider deficit this year due to this incident. The company represents 43% of palladium, 12% of platinum and 6% of the world nickel supply. Gold equities lost some of its steam recently but there is still a bullish case for them. Gold and the stock market have been diverging giving gold an attractive attribute: it provides diversification if the stock market turns more volatile. The lower price of gold is already discounting considerably higher real interest rates. Which means that gold should be able to withstand rising bond yields and perform well if inflation picks up. Some economists predict that core inflation will exceed the FED expectations over the next few years. Also, gold fell in late March after massive $20bn margin call for Archegos Capital which triggered forced selling of assets. Gold may have been sold in the process to generate liquidity. In general, and even with lower gold prices, the companies are highly profitable with almost no debt. The gold miners of the PMC portfolio are set to deliver free cash flow yields of 10.6% in 2021E and 13.7% in 2022E but are still relatively and absolutely attractive valued at an EV/EBITDA of 5.2x in 2021E and 5.0x in 2022E. The companies are financially extremely healthy with a net debt to equity of only 4%.
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The ICG Sustainability Update is our monthly published comment focused on energy-, waste-, raw material-, emission- and water-efficiency.
According to Bloomberg, the UK government released a strategy to help protect jobs and investment in the country’s energy sector, but that it could still ban new oil and gas exploration licenses. The UK energy minister said the country could eventually follow Denmark and stop offering new licenses and end production by 2050 and will instead work to attract investment in alternative energy, carbon capture, storage and hydrogen. The fossil fuel industry is talking more than ever about how to tackle its emissions according to a Bloomberg analysis of conference calls involving America’s oil and gas behemoths, including Exxon Mobil and Chevron. The management teams of the industry’s leading companies went from being almost able to avoid the topic entirely to devoting significant time discussing it. Also, Bloomberg BNEF expects EU carbon prices to hit EUR 100/t by 2030 vs. around EUR 40/t today. With higher carbon prices, it forces companies to be as emissions efficient as possible. If the price is sufficiently high, it might force the entire economy to decarbonize deeply. According to analysts, this will run through two channels: substitution of higher-carbon materials for lower-carbon, and where possible, innovations in production as well. Looking at wind energy, the Biden administration sought to kickstart the US offshore wind industry by setting a target of deploying 20 gigawatts of generation capacity from turbines operating in coastal water by 2030. This capacity is enough to power about 10 million homes for a year. The construction of offshore wind is 2-3x more copper intensive than onshore wind generation. The Biden administration also plans to slash the costs of solar by 60% within the next decade, an essential feature if they are to achieve the President’s goal of 100% energy by 2035. In Asia, China is strengthening efforts to clean up one of the dirtiest corners of its economy, and now plans for its mammoth steel industry to reach peak emissions within 4 years. The nation aims to hit peak carbon emissions before 2025, and reduce them by 30% by 2030. On the electric vehicle (EV) news front, Angela Merkel wants to have as many as 10 million EVs on the road by 2030. This is twenty times the number of today and needs a significant upgrade to its energy grid to support them. On the other hand, EV manufacturing emits more carbon than internal combustion vehicles due to mining intensive battery packs. They produce lower emissions, however, through the life of an average vehicle. This depends heavily on how much coal generated electricity is used for charging though.
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The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.
Oil prices continued to edge higher ahead of a key OPEC+ meeting that may see some supply returned to a fast-tightening market. However, it’s unclear how robustly the group will act, with the Saudi Arabian energy minister calling for producers to remain “extremely cautious”. Further to that, the surge across commodities from agriculture to oil is spurring a debate about whether the current boom may herald a new super-cycle, as banks incl. Goldman Sachs to JPMorgan stated in recent reports. Energy equities continued to outperform the general market. Reflation and normalization sentiment tailwinds have inflected as has the rotation into value and the reawakening of energy equities. Since November 6th, oil prices have appreciated by 60% and the ECF by 76%. Nevertheless, the SPX energy weighting increased from 2% to only 2.9% vs. a 20-years average of 10%. Companies have had to grapple with the worst aggregate macro conditions this century. The sector has taken impairment charges of over $100bn over the last 2 years. Nevertheless, with oil at $60 the outlook improved a lot. The key 4Q reporting season themes were cautious capex (expected decline of 5% YoY in 2021 after a decline of 26% in 2020), a resulting cautious view on production outlook, more ESG efforts (development of renewables and/or low carbon initiatives), an intent to continue to lower net debt and the reset of distribution policies. Interestingly, most companies have signalled formally or informally that some portion of higher FCF at higher oil prices will go towards debt reduction (providing a future shock absorber in the capital structure). However, the sectors indebtedness is not a concern, we think, especially given interest rates and market liquidity. Nor does it look the case that oil companies are somehow being excluded from debt capital markets, although a more nuanced capital structures will increasingly be the order of the day. The reduced investment program will result in record FCF with the ECF having this year an expected weighted average FCF yield of +10%! Unsurprisingly, the energy transition has garnered ample attention too. Energy companies have still significant work to do but some real progress has also been made. However, companies with big efforts (mainly European Oil Majors) have not been awarded by the investor community so far. Furthermore, there is presently an imbalance with the topic, with the discussion focusing disproportionately on aspired outcomes rather than current-day realities (80% of current primary energy consumption is fossil fuel-driven), and the timelines required to more fully realize the transition from fossil fuels to renewable energy. Conventional energy remains a relentlessly capital-intensive industry and there is a growing belief (and concern) that the oil and natural gas value-chain is underinvesting relative to the likely intermediate-term demand outcomes.
Copper touched the highest since 2011, with Chinese investors making fresh bets that the metal’s torrid rally has further to run as the nation’s economy rebounds. Prices have skyrocketed last month as a raft of measures to boost growth likely will see consumption outstrip supply. Federal Reserve Chairman Jerome Powell provided the latest boost, signaling continued policy support for the economy and expectations of a return to more-normal, improved activity later this year. Investors have piled into copper on optimism over demand. At the same time, possible cutbacks at Chinese smelters could further reduce already tight supplies. Citigroup for example sees more gains, with a push toward cleaner energy sources boosting demand for the metal used in everything from electric vehicles to solar power systems. The surge across commodities from agriculture to oil is spurring a debate about whether the current boom may herald a new supercycle, as banks including Goldman Sachs to JP Morgan stated in recent reports. Industrial metal prices benefited from the story of an economic recovery and the push for greener energy which could unleash vast amounts of pent-up demand. Base metals are essential inputs for batteries and home electronics, post-crisis consumption threatens to outstrip supply. Governments and companies are announcing net-zero emissions goals, Europe is rolling out package of environmental initiatives as part of its growth plan, and Joe Biden has pledged $400 billion on clean energy research and development over 10 years. That’s set to expand demand for metals and is boosting companies across the supply chain. Miners are sounding upbeat about the outlook for raw materials. Also, quite some earnings came in last month with Vale posting a $4.8bn profit in 2020 – the company is in the comfortable situation of deciding what to do with a significant (and growing) pile of cash. At current spot iron ore prices, Vale is estimated to have a 2021E FCF yield of 30%. Same for BHP, which highlights its significant FCF at present in its FH1/21 results. According to the report, the management is willing to pay out this excess cash to shareholders – the FY2021 dividend forecast implies a 7% yield, with potential for further upside if prices remain strong. Rio Tinto on the other hand delivered $23.9 billion of underlying EBITDA in 2020. Further, not to be outdone by its peers, the company declared a better-than-expected final dividend, taking the total for 2020 to $5.57/share for a yield of 6.8% for the year. It seems that the industry is in a sweet spot with low costs and high spot prices, which spurs shareholder returns and increases the confidence in the operational abilities as well as flexibility of mining companies.
Gold steadied at the beginning of the month after its biggest monthly slump since late 2016 as dovish comments from the world’s major central bankers helped curb rising bond yields. Bets on accelerating inflation are raising concerns that there could be a pullback in monetary policy support despite assurances from the Federal Reserve that higher yields reflect economic optimism for a solid recovery. Bullion has had a rocky start to 2021 as the rollout of vaccines worldwide spurred optimism about a recovery from the pandemic, curbing demand for safe havens and boosting bond yields. ETFs backed by the metal recorded a tenth consecutive day of outflows as of last Friday of February. Looking at gold miners, the high level of current gold prices is welcomed. Expected stability of underlying commodity prices and the promise of strong free cash flows through 2021 makes the gold sector relatively attractive to investors. Gold producers have demonstrated a disciplined approach which should ensure limits on spending in 2021. For example, BMO states that forecast free cash flow yields for large-cap gold stocks have reached highs of 7.7% on average, higher than the previous peak of 6.9% in late 2017 and well above the free cash flow yields at the previous high gold price cycle. Miners are expected to sell at high gold prices and to spend minimal growth capital this year. The market’s keen focus on cash flow vs. a pressure to grown in past cycles, will help to ensure that management teams remain disciplined in their capital allocation approaches through 2021. The confidence in gold prices and cash generation has shown in the latest companies’ earnings such as AngloGold Ashanti, which increased its dividend more than fivefold after record gold prices boosted earnings last year. The world’s No. 3 gold producer joins larger rivals Barrick Gold and Newmont in rewarding shareholders. Both companies increased their dividends (or announced special dividends) and now offer yields of close to 4%. The companies of the Precious Metals Champions Fund offer a 2021E free cash flow yield of 12.5% on average as well as a dividend yield of almost 3% – this comes with clean and healthy balance sheets and a net debt to equity of under 10%. Looking at PGMs, Africa’s big three producers last month unveiled production growth plans of up to 1.2mn ounces annually, but the increases are probably insufficient to bring the market back into balance, they said. There are growing deficits for palladium and rhodium and improve prospects for platinum. Demand growth for PGMs from hydrogen technology and fuel cell applications in electric vehicle batteries was behind the deficits. Palladium and Rhodium are both on a multi-year high, while platinum is rising significantly recently and is standing at the same level last seen in 2014.
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The ICG Sustainability Update is our monthly published comment focused on energy-, waste-, raw material-, emission- and water-efficiency.
According to analysts, the green technology and sustainability market is expected to grow from $8.7 billion in 2019 to $28.9 billion by 2024, at a compound annual growth rate of 27.1% during the forecast period. The major factors driving the growth of green technology and sustainability market include the increasing environmental awareness and concerns and the increasing consumer and industrial interest for use of clean energy resources to conserve the environment. The “internet of things (IoT)” technology segment is estimated to hold the largest market size, which is driven by green networks in IoT and will contribute to reduce emissions and pollution, exploiting environmental conservation and surveillance, and minimizing operational costs and power consumption. IoT has broad range of applications including carbon footprint management, green building, water purification, water leak detection, fire detection, and sustainable mining and exploration. The use of green technology and sustainability solution is increasing rapidly especially in the green building application, owing to the growing integration of technology while designing and constructing buildings. Green building considers the classical building design concerns of economy, utility, durability, and comfort. The major considerations include energy and water efficiency, resource efficiency and the building’s overall impact on the environment. North America is expected to be a major revenue generating region for the green technology and sustainability market. The region is considered the most advanced region in terms of technology adoption and infrastructure. Looking at China, the government will soon present climate and energy plans, as the country is responsible for most of the increase in carbon emissions over the past decade. According to climate scientists, over the decade through 2018, emissions increased by 12%, or 4.5 billion tons of carbon dioxide. Breaking out the numbers by country, however, some 89% of the additional greenhouse gases came from just two countries: China, which alone accounted for 69% of the increase, and India. Emissions from the EU, Japan and the US fell, and by 2018 were lower than they were in the 1990s. That’s why the climate and energy plans that will be presented in China’s 14th 5-year plan represent the most important policies being made anywhere in determining the fate of the planet. If they live up to the promise of President Xi Jinping’s pledge to reduce the country’s emissions to net zero by 2060, we may have to start lifting our expectations of what’s possible in terms of decarbonization. The days when China could argue that those numbers were huge only because its population was large, or that they were necessary to catch up with richer countries, are now in the past. The country’s per-capita emissions these days are on a par with most western European countries.
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The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.
It seems to be a good start into 2021 for the energy sector. OPEC+ is trying hard to defend prices and keep the market undersupplied. The surprisingly and unilateral and pre-emptive Saudi production cut for February and March announced at the beginning of the year, backs the Saudi energy minister’s claim of the Kingdom being the self-designated guardian of the oil industry. Indeed, the shift from oversupplied in 1H20 to undersupplied from 2H20 onwards continues to be reflected in the futures curve that is downward sloped (backwardation) and inventories continue to fall. Indeed, visible petroleum inventories fell by 290mboe in 2H20 (1.57mboe/d) according to the IEA showing that the efforts of the market players are quite successful so far despite the complicated market situation. On the demand side, analysts estimate that crude oil is likely to be a key beneficiary of increased mobility once a critical mass of the population is vaccinated this year. However, at the end of the month the broad market suffered its worst week since October 30. For the energy sector it was an even more challenging week with Biden administration’s freeze on new federal oil and gas leases. While the actions resulted in a steep sector selloff, the moves were telegraphed on the campaign trail. The real surprise seems to be that the Biden administration is weighing the possibility of stopping new permits or not allowing permit renewals on federal territory – something the industry hadn’t anticipated. Roughly ¼ of US oil production comes from leases managed by the Department of the Interior. At the same time, it forces a brake on US production growth in a way that should support hydrocarbon prices in the long run. RBC estimates that the production decline from not issuing or renewing federal permits could increase global oil prices by $5/bl over time. As with any sign of danger, the first instinct may be to flee. But sometimes such times call for closer inspection. Interestingly, 2021 is set to be the industry’s best year yet in cash flow terms! Cash flow and earnings growth must be the new priorities. If the discipline sticks, dividend- and value-focused investors could be lured back. Further to that M&A activity is brisk, with $52bn worth of deals done in the US only last year and the consolidation wave is expected to continue. The M&A efforts to achieve adequate size, coupled with the consolidation of weakened companies, will continue to shrink the number of producers. Even two of the biggest players like Exxon and Chevron were said to have considered combining their companies in what could be among the largest corporate mergers ever. Such a deal would reunite the two largest descendants of John D. Rockefeller’s Standard Oil monopoly, which was broken up by US regulators in 1911, and reshape the oil industry. In any case, a more resilient industry is emerging from the ashes that aims to woo investors.
According to analysts, the macro and fundamental backdrop for industrial commodities is robust and supports commodity prices to remain at elevated levels. Especially metals directly exposed to the EV batteries including cobalt, nickel, copper, lithium, graphite and rare earths are likely to experience transformational demand growth that could lead to further price upside or an extended period of elevated prices. Indeed, the renewables and EV thematic are clear positive long-term drivers for copper demand. UBS expects they could add over 5mt of demand (18% of total demand) over the next 10 years. The bank also notes that this demand growth could be, in part, offset by contraction in demand from China infrastructure and construction during the same period. Looking at copper stockpiles, the ones tracked by leading exchanges including the LME shrank by about a fifth last month to the lowest since 2008. That could raise the odds of increased competition for supplies and higher prices in the coming quarters. Also, market watchers sound the alarm about the tightening supply picture. There are holdings of metal outside the exchange system, but overall, the market’s in deficit. In the iron ore market, the steelmaking ingredient had the shakes last week, with warnings of worse to come as prices retreated from multi-year highs. More broadly, there are concerns about a softer stimulus impulse in China, and government orders for lower steel output this year has fueled recent jitters. However, analysts expect world crude steel production to increase by 5% this year with China +2% and RoW +8%. On the other hand, Fortescue’s CEO is confident that Chinese demand will continue to underpin the high prices that have left the iron ore producer and its bigger rivals BHP and Rio Tinto awash with cash and set to deliver returns to shareholders. Fortescue poured cold water on suggestions China was about to scale back steel production, saying the company was not seeing any slowdown in the demand that has put the big three miners exporting from Australia on track to pay bumper dividends. Fortescue, that is a pure iron-ore player, revealed recently that it had raked in more than $940m of net profit in December alone, which prompted the company to issue its profit update. In general, analysts expect the big miners paying out $16.4bn in full-year dividends. Indeed, with over $110bn in EBITDA for 2021E of the big 5 miners (BHP, RIO, VALE, AAL, GLEN) we wouldn’t be surprised to see further increases in dividends or shares buybacks during the year. The average FCF yield for 2021E of these big 5 mining companies is still above 10%!
In a commodities market that has seen significant interest and price action over 2021 to date, one major commodity has been conspicuously quiet: gold. The market price has dropped slightly since the start of the year, underperforming peers, while ETF flows have been extremely muted. With no change in Federal Reserve interest rate policy expected, with another year of relatively flat supply, and with traditional consumer demand recovering, 2021 is looking more like a steady period. Given the availability of above-ground supply available to the market in vaults, as with other commodities demand is the key delta for any gold cycle. Analysts expect 2021 to be a year of normalisation in global gold demand trends. Last year saw the broadest range in terms of y-o-y changes in gold demand since 2013, driven primarily by an exceptional surge in investment (particularly ETF inflows) on the one hand, and the collapse of jewellery demand on the other. This year a reversion closer to recent historical annual demand trends is expected, with the prevailing risk-off environment fading somewhat while the global economic recovery remains on track. According to analysts, a stable year for gold would not be a bad thing, particularly one which, if current levels are maintained, would mark a new record annual average and extremely strong free cash flow at the producer level. Analysts at BMO stated in a recent study that even with relatively flat gold prices, the profitability of gold companies will continue to rise significantly this year. They point out a 50% free cash flow growth, even after a 25% increase in growth capex baked in, the analysts expect the industry costs to remain low, or even falling and margins increase post Covid and post volatile gold prices the world saw in 1H2020. Interestingly, looking at gold supply growth this year, the biggest assets on the list are copper mines. Freeport McMoran’s Grasberg operation will add over 550koz this year (and a further 200koz next) while the Oyu Tolgoi mine in Mongolia is guiding to gold output almost tripling this year to 500-550koz, making it the second-largest individual asset ramp-up. Also, the macroeconomic backdrop undoubtedly remains a precious-positive one, aided by rising inflation expectations amid an ambitious US stimulus plan and interest rates that look set to remain low for some time amid the Fed’s new policy of inflation targeting. Looking at silver, after the recent surge driven by retail investors, the rally lost momentum – the precious metal had hit an 8-year high on the 1st of February. With silver prices, the producers of the metal also soared but pared most of its gains when the rally paused.
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The ICG Sustainability Update is our monthly published comment focused on energy-, waste-, raw material-, emission- and water-efficiency.
Even after Covid-19 has wreaked havoc on almost everything else, the new year begins with surging growth for renewable energy. According to analysts, 2020 was the year of positive surprises for the environment in a way that very few saw coming. It was the breakout year in sustainability and infrastructure. Growth will likely continue into 2021, fuelled in part by last year’s major turning points. China has now committed to reaching carbon neutrality by 2060, putting the world’s biggest market for solar and wind power on the path to ramp up installations as it begins its next five-year plan. Some analysts have started predicting that the US power sector is approaching peak natural gas. That would leave room for solar-panel installations to build on the ongoing boom. Looking at solar in the US, residential installations dropped nearly 20% in the second quarter of 2020. According to Wood Mackenzie, the sector bounced back and the country added 19 gigawatts of total solar power. That is slightly more power than existed in the entire nation of Colombia at the end of 2019 according to BloombergNEF. Also, new battery-storage capacity in the US more than doubled in the third quarter of 2020 from the second – projections in California were a key reason for the surge. But not only in China and the US, also electricity from solar farms in Spain, Europe’s greatest solar potential, was up 60% in 2020 compared to 2019, generating over 15’000 gigawatt hours of power, according to data from the country’s grid manager. While the Southern European country still has about a third of the installed solar capacity as the EU’s leader Germany, Spain’s sector is set to grow at about double the Germans’ pace in the next two years. Overall, about 40% of the electricity in the first half o f 2020 in the EU came from renewable sources, compared with 34% from plants burning fossil fuels. On another note, President Joe Biden, pledges to make the US a global leader in the development and adoption of clean energy technologies. He has vowed to spend $400 billion on clean energy research and development over 10 years and a like amount in his first term on federal procurement of low-carbon technologies. His party’s effective control of both houses of Congress suggests some portion of Biden’s agenda can be enacted. Biden also can make significant policy changes through regulations and orders.
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Analysten, Investmentbanken und Medien berichten in jüngster Zeit vermehrt über steigende Rohstoffpreise – Investoren scheinen den Trend erkannt zu haben und schichten zunehmend ihr Kapital in den lang gemiedenen Sektor. Rohstoffe gehören trotz der kürzlich gestiegenen Preise noch immer zu den günstigsten Anlageklassen weltweit. Über das letzte Jahrzehnt verlor beispielsweise der GSCI Commodity Index über 60%. Analysten sind jedoch überzeugt, dass die Serie von negativer Performance ein Ende erreicht hat, und die Erholung der Preise nicht nur kurzfristig, sondern einen langfristigen Trend anstimmen. Experten zeichnen einen Vergleich zu den nuller Jahren und den Superzyklus von 2003 bis 2011, der auf Chinas Wirtschaftswachstum und dem damit verbundenen Hunger nach Rohstoffen aufbaute. Es gibt tatsächlich einige Anzeichen, die diese Prognose durchaus realistisch aussehen lassen. Einerseits gilt der schwache US-Dollar als treibende Kraft hinter den stark ansteigenden Preisen für Rohmaterialien – dieser hat bis Ende 2020 gegenüber den im Dollarindex enthaltenen Währungen deutlich verloren. Andererseits spielt die schnelle Erholung der Weltwirtschaft eine Rolle. Dank des Impfbeginns steigt die Hoffnung auf ein absehbares Ende der Pandemie, der neu gewählte US-Präsident Joe Biden verspricht weniger Spannungen in der Weltpolitik und hat grosse Pläne die «Green Revolution» kräftig voranzutreiben. Die Energiewende soll vor allem die Nachfrage nach Industrie- und einigen Edelmetallen über Jahrzehnte kräftig steigen lassen (siehe Blogbeitrag «Die Bedeutung der Energiewende für die Nachfrage nach Industriemetallen – ein unterschätzter Megatrend»).
Es gibt jedoch weitere, gewichtigere Faktoren, die einen langfristigen Einfluss auf die Rohstoffpreise haben und die Märkte strukturell verändern können.
In einer kürzlich erschienen Studie von Goldman Sachs beleuchten Analysten den Case einer strukturellen Veränderung der Rohstoffmärkte, die die Phase eines neuen, langjährigen Bull-Marktes einläutet. Die Bank geht davon aus, dass der Aufwärtstrend für Rohstoffe auf drei Säulen beruht:
Für das Jahrzehnt 2020 wird erwartet, dass analog zu den 2000er Jahren ähnliche strukturelle Kräfte eine Rolle spielen könnten. Die massiven Investitionen in die «Green Revolution» dürfte einen vergleichbaren Umfang haben wie die Investitionen in den 1970er und 2000er Jahren.
Zusätzlich gehen Analysten von einem Umverteilungsschub in den entwickelten Ländern und einem starken Anstieg der Verbraucherausgaben in China aus. Darüber hinaus bieten die strukturellen Unterinvestitionen einen guten Nährboden für steigende Rohstoffpreise in den kommenden Jahren. Im Hinblick auf wirtschaftliche Zyklen, haben Rohstoffe besonders in Expansionsphasen besonders hohe Renditen erzielt. Momentan befindet sich die Wirtschaft zwischen Phase 2 (Erholung) und Phase 3 (Expansion) – doch selbst in der vierten Phase, der Abkühlung, haben Rohstoffe einen Vorteil gegenüber anderen Anlageklassen.
Angesichts prognostizierten, steigenden Rohstoffpreisen in den kommenden Jahren befinden sich Rohstoffaktien ebenfalls in einem günstigen Umfeld. Rohstofffirmen haben über die letzten 10 Jahre stark korrigiert und mussten sich neu erfinden. Die Rohstofffirmen haben jedoch während dieser Krise weitgehend ihre operative Widerstandsfähigkeit bewiesen und sind so gut positioniert wie nie zuvor. Die Kostenbasis war dynamischer als erwartet und konnte schnell und effizient reduziert werden. Um ihre Bilanzen zu sanieren, haben viele Rohstofffirmen über die letzten Jahre kaum in neue Rohstoffressourcen investiert. Dies widerspiegelt sich vor allem in den rekordhohen Gewinnen, Margen und im freien Cash Flow. Firmen erhöhen ihre Dividenden sowie ihre Aktienrückkaufprogramme – «Shareholder Return» geniesst bei den meisten Rohstoffunternehmen mittlerweile erste Priorität. Unserer Meinung nach sollte der Sektor nicht ausschliesslich über den Rückspiegel analysiert werden, denn der Wert dieser Firmen widerspiegeln eine Dekade von sehr moderatem Wachstum – die Zukunft ist jedoch vielversprechend. Nicht alleine die Popularität einer Unternehmung sollte den Wert bestimmen, sondern auch die Rentabilität und die Qualität der Erträge, welche generiert werden. Die Bewertung des Sektors ist noch immer auf historischen Tiefstständen und bietet eine attraktive Möglichkeit, vom künftigen Wachstum zu profitieren.
Die Independent Capital Group offeriert Anlegern drei aktiv verwaltete Fonds zu den Rohstoff-Subsektoren «Industrie Metalle», «Edelmetalle» und «Energie». Gerne können Sie über den untenstehenden Button mehr Informationen zu unseren Fonds anfordern.
Sources: Independent Capital Group, Haver, World Bank, Goldman Sachs Investment Research, NZZ
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