Sibanye Stillwater: Recovery Hope Dies Last

seekingalpha08-22

Sibanye Stillwater underperformed the market in the past 3 years, but recent corporate events suggest a potential turnaround. Read on.Despite challenges in the mining industry, Sibanye's cost-cutting ...

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Read on.Despite challenges in the mining industry, Sibanye's cost-cutting ...</p>\n\n<a href=\"https://seekingalpha.com/article/4716450-sibanye-stillwater-recovery-hope-dies-last\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Sibanye Stillwater: Recovery Hope Dies Last</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSibanye Stillwater: Recovery Hope Dies Last\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-22 22:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4716450-sibanye-stillwater-recovery-hope-dies-last><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Sibanye Stillwater underperformed the market in the past 3 years, but recent corporate events suggest a potential turnaround. Read on.Despite challenges in the mining industry, Sibanye's cost-cutting ...</p>\n\n<a href=\"https://seekingalpha.com/article/4716450-sibanye-stillwater-recovery-hope-dies-last\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4523","symbol_name":"印度概念","start_time":0,"source_url":"https://seekingalpha.com/article/4716450-sibanye-stillwater-recovery-hope-dies-last","article_id":"2461466753","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/165528005/image_165528005.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2461466753","pubTimestamp":1724337368,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Sibanye Stillwater underperformed the market in the past 3 years, but recent corporate events suggest a potential turnaround. Read on.Despite challenges in the mining industry, Sibanye's cost-cutting ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4523":"印度概念","HOPE":"Hope Bancorp, Inc.","BK4188":"贵重金属与矿石","BK4168":"多种金属与采矿","TTM":"塔塔汽车","BK4099":"汽车制造商","BK4211":"区域性银行","AAUKF":"Anglo American plc","SBYSF":"Sibanye Stillwater LTD.","SBSW":"Sibanye Gold Limited"},"translate_title":"西班耶·斯蒂尔沃特：复苏希望最后破灭","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AAUKF":1,"HOPE":1,"SBSW":1,"SBYSF":1,"TTM":1},"content_text":"Sibanye Stillwater underperformed the market in the past 3 years, but recent corporate events suggest a potential turnaround. Read on.Despite challenges in the mining industry, Sibanye's cost-cutting efforts and focus on the green metals market show promise for growth.Sibanye's recent gold prepayment deal and potential recovery in PGM prices indicate a positive outlook for the stock in the medium term.I expect a rise of at least 25% in the medium term, based on my technical analysis. In the longer-term, the potential should be way more.I therefore rate the stock as a \"Buy\" again today.   Monty Rakusen/DigitalVision via Getty Images My Thesis Update I've been covering Sibanye Stillwater Limited's (NYSE:SBSW) (OTCPK:SBYSF) stock here on Seeking Alpha since May 2021, always reiterating my bullish stance on it. Unfortunately for my track record on this stock, over the past 3 years, Sibanye has underperformed the general market significantly. Data by YCharts In my very last \"Buy\"-rated article published in mid-April 2024, I argued that the tide for Sibanye may be finally turning because, despite falling metal prices at the time, the company's cost-cutting efforts and focus on the green metals market made it seem undervalued with potential for growth. I thought a recovery was possible with the implementation of management's strategic plan and the rise in commodity prices. However, as time has shown, my call was quite premature as the stock kept falling lower.   Oakoff's coverage of SBSW However, today it seems to me that, given the latest corporate events, my previous bullish thesis may start to come to fruition (in any case, as the saying goes, hope is the last thing to die). My Reasoning As I noted in my previous article, mining is a nuanced industry closely tethered to the prices of its extracted resources. So sadly for SBSW, 2023 brought less-than-ideal pricing conditions as its main operations are tied to PGM metals, which were falling as a rock.   Johnson Matthew data, Oakoff's notes added On the other hand, in Q1 2024 (the latest data we have on hand as of today), Sibanye's US PGM operations saw a significant improvement in operational stability and cost reduction, with mined 2E PGM production increasing by 22% compared to Q1 2023. This was achieved despite challenges such as geological complexities and skill shortages, and at the same time, the restructuring efforts I wrote about last time led to a 28% reduction in all-in sustaining costs (AISC) for the period, reflecting the benefits of reduced contractor labor and deferred capital expenditure. Also, according to the IR materials, the SA PGM operations saw a 3% increase in 4E PGM production, largely \"due to the acquisition of an additional 50% of the Kroondal operation.\" However, AISC here increased by 16% YoY due to restructuring costs and legacy leave liabilities, but the bright spot was the Sandouville nickel refinery in Europe, which improved its production by 42% and reduced its sustaining costs by 40%, benefiting from \"lower feedstock purchase costs and operational improvements.\" In Australia, the Century zinc retreatment operation faced disruptions due to severe weather, impacting production and costs, but the outlook improved with higher zinc prices and lower treatment charges. In addition to PGMs, the company also mines and sells gold. As we know, Sibanye produced ~5,117 kilograms during Q1 2024, an 18% YoY decrease due to the Kloof 4 shaft closure and operational challenges. The AISC for gold operations was R1,236,571 per kilogram, according to the IR materials, which is a 19% YoY increase largely due to inflationary pressures and the closure of the Kloof 4 shaft. Despite these seemingly very negative things, it is gold that is now in the focus of SBSW investors, as thanks to it the company plans to strengthen its balance sheet. According to recently published news, Sibanye has finalized a ~1.8 billion South African rand (~$101 million) gold prepayment deal to bolster its cash reserves and assist in repaying loans, following a significant drop in earnings due to the decline in platinum group metal prices.   Seeking Alpha News Under this agreement, Sibanye will deliver 1,497 kilograms of gold in equal monthly installments from October 2024 to November 2026 to an undisclosed offerer, in exchange for the prepaid cash. We also know that in addition to that, Sibanye has successfully negotiated a refinancing and increase in its revolving credit facility with South African lenders from 5.5 billion rand to 6 billion rand - the maturity of this facility, initially set for November, has been extended to August 2027, with the possibility of two additional one-year extensions. Another piece of positive news is the forward curve for the PGM metals that we are still seeing today. Fellow SA contributor Pearl Gray Equity and Research wrote about it in mid-June: \"An upward sloping forward curve is encouraging unless the miner is fully hedged against price fluctuations.\" Today, the curve is still upward-sloping for both platinum and palladium, the most important metals for SBSW.   TradingView  TradingView According to Mordor Intelligence data, the PGM market size is expected to reach 625.03 tons in 2024 and grow at a CAGR of 4.48% to reach 778.16 tons by 2029, so the nature of the above upward sloping is clear. I expect Sibanye to find the most favorable conditions for itself with the increased demand for these metals and the corresponding increase in future selling prices, especially after it has improved its liquidity situation following the recent deal with the prepayment for gold. According to Seeking Alpha Premium, Sibanye is set to report for Q2 2024 on September 12, 2024, but we don't have sufficient quarterly estimates to make any definite conclusions today. All we have is the outlook from management, which seems cautiously optimistic. For 2024 they expect the US PGM operations to produce 440,000-460,000 2E ounces, with AISC ranging from $1,365 to $1,425 per 2E ounce. The SA PGM operations are forecasted to produce between 1.8 million and 1.9 million 4E ounces, with AISC between R21,800 and R22,500 per 4E ounce. Gold production from the managed SA gold operations should come to 19,500-20,500 kg, with AISC between R1,100,000 and R1,200,000 per kilogram. The company is also focusing on its Sandouville nickel refinery, with production expected to be between 7.5 and 8.5 kilotonnes of nickel product, and the Century zinc tailings retreatment operation, which is forecasted to produce between 87 and 100 kilotonnes of zinc metal. While Sibanye remains exposed to market volatility, particularly in PGM prices, I still believe it's positioned to benefit from any potential recovery in these markets. If the tailwinds that I described above materialize, the next logical price level from a technical analysis perspective should be $5.7/share, i.e. 25% above the current price. TrendSpider Software, SBSW daily, Oakoff's notes  Analysis of the stock's valuation reinforces this bullish expectation. SBSW stock is still \"dirt cheap\" today, as some analysts put it. Looking at the most important competitors, SBSW's EV/EBITDA (TTM) of less than 3.4x is the lowest of all peers, with forwarding EV/EBITDA ratio of just 4.1x trading way lower than Anglo American PLC's (OTCQX:AAUKF) corresponding multiple:   YCharts, Oakoff's notes It's also worth noting that according to Seeking Alpha's Quant System, SBSW's Valuation grade has improved (from \"B+\" to \"A-\") over the past quarter, as has its Revisions grade (from \"D\" to \"C\"). The latter should logically have an impact on Growth and Profitability, so the \"A-\" in the Valuation would theoretically be a compelling reason to buy.   Seeking Alpha Quant System, SBSW, Oakoff's notes Therefore, I expect the stock to begin its recovery, at least within its current price channel, given the softening of negative sentiment around the stock following the recently announced $101 million gold prepayment deal and the potential recovery in PGM prices. That is my basic expectation for the medium term. Risks To My Thesis The risks of my thesis today are not very different from the risks I have mentioned to readers in previous updates. As I wrote last time, SBSW's financials are very vulnerable to fluctuations in commodity prices and exchange rates. A fall in gold or PGM prices coupled with a stronger South African rand would likely have a negative impact on earnings due to the company's operating leverage. Moreover, some analysts disagree with my bullish conclusions that Sibanye's business is likely turning around gradually against a backdrop of more favorable pricing and cost-cutting efforts.   MarketWatch, Oakoff's notes Also, every reader of this article should keep in mind that my conclusion that the stock still has a recovery potential from a technical perspective can't be verified using scientific methods - as I noted last time, any kind of technical analysis is more of an art that can be interpreted in different ways. Your Takeaway Despite the abundance of risks, I still think that Sibanye Stillwater is focused on maintaining a strong balance sheet and operational resilience to meet the challenges and opportunities in the mining sector - as evidenced by recent corporate events. In addition, the backdrop for improvement is clearly getting better - I'm talking primarily about the potential for an improvement in the overall PGM and gold price environment. I believe that with a combination of stronger pricing and cost-cutting measures, which I wrote about in the last article and which are still underway, Sibanye Stillwater stock should begin a rapid recovery - at least by 25% in the medium term, based on my calculations. I therefore rate the stock as a \"buy\" again today. Good luck with your investments!  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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