Desert Gold: The First Ounce Could Change a Lot
Desert Gold Ventures aims to break into production with a small facility. At the heart of the project is the 440 km² SMSZ project in western Mali. It stretches 38 km along the Senegal-Mali Shear Zone, a major gold-bearing structure. B2Gold, Barrick Mining, and Allied Gold are already mining in the region. Desert Gold is thus operating in an established gold-mining area.
The reported resource base comprises 336,800 ounces in the measured and indicated categories, as well as an additional 879,900 ounces in the geologically less certain inferred category. In addition, the company has identified more than 20 gold zones. The area thus offers ample opportunities for further drilling. The key question remains how much of this can be mined economically.
On the stock market, however, the focus is shifting to the planned production at Barani East. Desert Gold is starting with a gravity separation plant designed to process 200 metric tons of ore per day initially. The technical acceptance, including spare parts and a 650-kilovolt-ampere generator, took place in China this spring. Six containers were shipped at the end of April. At the same time, the company cleared approximately 52,000 sqm of land, prepared foundations, and initiated water drilling.
These initial steps are being financed by a capital increase totaling CAD 7.18 million gross, which was completed in February. The funds are earmarked for commissioning as well as drilling operations in Mali and Côte d’Ivoire.
The preliminary economic assessment for the Barani and Gourbassi projects yielded a net present value (NPV) of USD 61 million and an internal rate of return (IRR) of 57% based on a gold price of USD 2,850 per ounce. The study forecasts 113,100 ounces of recoverable gold over 10 years, with sustainable total costs of USD 1,137 per ounce. The initial capital requirement is USD 20.4 million. At a gold price of USD 4,070, the net present value and IRR already rose to USD 124 million and 101%, respectively.
However, this model does not guarantee profitability. The study is a preliminary economic assessment (PEA) and also includes inferred resources, which are less precisely defined from a geological standpoint. Desert Gold has not yet defined any mineral reserves. The initial small-scale plant is intended to demonstrate how the ore, recovery rates, costs, and logistics actually perform in day-to-day operations. Only if this real-world test is successful will the planned expansion gain credibility.
A reliable update is now also needed regarding the timeline. The company had most recently announced a start-up date of July 19, 2026. This date has passed, and the company has not reported either a start or a delay so far. At the same time, the company is searching for additional ore. In April, a drilling program covering 4,250 m with 46 drill holes across five target areas began. Additional near-surface deposits close to the processing plant would be particularly interesting because of the short transport distances. A successful start-up and good drilling results could trigger a re-rating.
With the 297 km² Tiegba Gold project in Côte d’Ivoire, Desert Gold also holds another exploration option that, while still in an early project phase, will spread the political risk across two countries in the future. In the short term, however, the story will play out in Barani.
An interesting interview with CEO Jared Scharf regarding Desert Gold Ventures’ planned gold production this year can be found here:
At a share price of around CAD 0.11, Desert Gold has a market capitalization of about CAD 40 million. The Augsburg-based financial services provider GBC Research sets a price target of CAD 0.93, a 750% premium over the current price. The large difference reflects a sum-of-the-parts valuation and the assumption that the ramp-up to production will be successful. The potential is enormous, but it is also offset by high construction, metallurgical, and financing risks, as well as the potentially challenging location in Mali.
The bottom line is that Desert Gold remains a speculative gold stock with exceptionally high leverage. The transition from explorer to producer would pave the way for a significantly higher valuation. Before that, however, the company must prove that the facility is up and running and is producing gold. For risk-tolerant investors, the stock is an attractive portfolio addition.
Barrick Mining: Gold Boom Meets IPO
For investors looking for a more conservative approach to the gold sector, Barrick Mining is a stock worth a closer look. A specific catalyst is currently developing alongside the gold price. The commodities group plans to spin off its North American gold business and take it public by the end of the year. Joint venture partner Newmont has already approved the plan. A standalone valuation of these assets could reveal previously hidden value. Whether this actually results in a premium, however, depends on the structure and terms of the IPO.
Operational performance is also improving. In the second quarter, gold production rose by 11% from the previous quarter to 796,000 ounces, exceeding the company’s own projections. The faster-than-expected restart of the Loulo-Gounkoto mine in Mali contributed to this. This connects Barrick geographically with Desert Gold and simultaneously underscores the importance of reliable on-site operations.
Revenue rose 44% year-over-year to USD 5.29 billion, while net income increased 50% to USD 1.22 billion. On an adjusted basis, Barrick earned USD 0.82 per share. However, sustainable total costs rose 11% to USD 1,866 per ounce. Pro forma free cash flow fell to USD 141 million. Higher gold prices therefore do not guarantee rising profits across the board.
Stock buybacks totaling USD 1.2 billion for the quarter and a declared dividend of USD 0.175 per share round out the picture. Barrick offers recurring income and additional upside potential through its corporate restructuring. Analysts remain decidedly optimistic, however. Currently, 13 banks and research companies recommend “Buy” ratings for the stock, while only 3 analysts have issued “Hold” ratings. There are currently no “Sell” recommendations. The median price target of just under CAD 77 implies approximately 23% upside potential. For more conservative long-term investors in the gold sector, the stock remains an attractive portfolio addition.
Newmont: Billions for Shareholders
Newmont offers the counterpart to Desert Gold’s speculative growth story: large production volumes, strong cash inflows, and a solid balance sheet. In the second quarter, the company produced approximately 1.3 million ounces of gold. The full-year forecast remains at 5.3 million ounces.
On average, Newmont generated USD 4,414 per ounce in revenue. Sustaining costs, after accounting for by-product revenue, were USD 1,621 per ounce. Adjusted net income reached approximately USD 2.2 billion, or USD 2.10 per share. After investments, free cash flow also amounted to approximately USD 2.2 billion. At the end of June, Newmont had USD 3.4 billion in net liquidity.
Shareholders are benefiting. From the earnings presentation in April through the release of the July results, USD 1.9 billion was allocated to share buybacks and dividends. This period also includes share purchases made in July. The second-quarter dividend is USD 0.26 per share.
Nevertheless, Newmont is not a sure thing. Compared to the first quarter, free cash flow fell by 30%. Lower selling prices and higher capital expenditures took their toll. Rising diesel prices and taxes are also weighing on the company. The figures thus reveal both enormous profitability at current gold price levels and sensitivity to cost increases.
Analysts are also very confident about Newmont: 24 banks and research companies rate the stock “Buy”, while only 3 institutions rate it as a “Hold.” As with Barrick Mining, there are currently no “Sell” recommendations. However, the average price target of just under USD 134 currently signals only limited upside potential of around 5%. Price pullbacks on weak trading days remain an option for interested new investors who want to include the gold theme in their portfolio through an established producer.
Conclusion: Three Leverage Points on the Gold Price
The gold price creates favorable conditions for all three. The hot stock Desert Gold offers speculative upside for a re-rating and strong price gains as development plans turn into reliable operations. However, among the trio presented, it is also the riskiest option. Progress at Barani will now be the key factor in determining whether the stock can capitalize on this potential. Barrick combines rising profits with the prospect of an IPO for its North American gold business. The stock is significantly more conservative, but its upside potential is considerably lower. The parameters are similar for Newmont. The company is generating strong free cash flow and substantial returns on capital, but its upside potential is limited.
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