{"id":3303,"date":"2023-10-19T17:12:57","date_gmt":"2023-10-19T17:12:57","guid":{"rendered":"https:\/\/infundpros.com\/news\/sibanye-stillwater-weakness-ahead-offers-opportunity-nysesbsw\/"},"modified":"2023-10-19T17:12:58","modified_gmt":"2023-10-19T17:12:58","slug":"sibanye-stillwater-weakness-ahead-offers-opportunity-nysesbsw","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=3303","title":{"rendered":"Sibanye Stillwater: Weakness Ahead Offers Opportunity (NYSE:SBSW)"},"content":{"rendered":"
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Introduction<\/h2>\n

Johannesburg-based company Sibanye Stillwater Limited<\/strong> (NYSE:SBSW<\/span>) released its six-month earnings results ending June 30, 2023, on August 29, 2023. It is time to update my prior article and discuss the most recent developments.<\/p>\n

Note:<\/strong> This article updates my April 17, 2023 article. I have been following SBSW on Seeking Alpha since Feb. 2014.<\/span><\/p>\n

The company released its most recent Presentation on August 2023. The group is mining Platinum, Palladium, Rhodium, Gold, and, most recently, Lithium and Nickel.<\/p>\n

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SBSW Assets Map (SBSW Presentation August)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

1 – H1 2023 Results Snapshot<\/strong><\/h3>\n

As I said in my previous article, Sibanye’s balance sheet is complex and demands time and patience to properly grasp the company’s business model.<\/p>\n

The group produces Palladium, platinum, and Rhodium in the USA through its Stillwater acquisition (with a bit of Gold and other metals) from direct mining and recycling (which generates a much lower profit margin).<\/span><\/p>\n

It also produces Iridium, Ruthenium, Chrome, and even Nickel by acquiring Sandouville in Northern France. However, the most important metals for Sibanye Stillwater are Rhodium, Platinum, and Palladium, followed by Gold.<\/p>\n

Sibanye reported profits for H1 2023 attributed to SBSW shareholders of $427 million<\/strong> and revenue of $3,326 million<\/strong>. The company’s total profits decreased by 43.8%<\/strong> from H1 2022.<\/p>\n

Sibanye Stillwater ended H1 2023 with net cash of $1,182 million.<\/strong><\/p>\n

2 – Investment Thesis<\/strong><\/h3>\n

Despite some significant weaknesses recently, I believe Sibanye Stillwater Limited shares are an excellent long-term investment, especially considering the sharp drop in stock price. I find the SBSW stock price attractive for the long term.<\/p>\n

Sibanye Stillwater has ventured into a structural transformation, leading the company to be one of the world’s largest primary producers of Platinum Group Metals (“PGMs”). The group has expanded into the nickel and lithium segments, providing exposure to the attractive battery metals sector, which is expected to grow significantly.<\/p>\n

However, I see the short-to-medium-term outlook for the PGMs as particularly uncertain and difficult, increasing further the downside risk towards the end of 2023 and early 2024, even if the recovering US PGM and South African Gold segments will probably mitigate a portion of the downside effect.<\/p>\n

On October 4, 2023, the company warned (emphasis added):<\/p>\n

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CEO Neal Froneman acknowledged that at spot metal prices the group was unlikely to pay a final dividend in 2023<\/strong>. He also said the company could be in net debt at the year-end, but added that “we are better positioned than most to ride it out”. Froneman’s comments come after RMB Morgan Stanley analysts downgraded the gold and platinum group metal company’s prospects. At spot prices, it could post a net cash outflow of about R6bn, the bank said.<\/p>\n<\/blockquote>\n

Overall, there is a strong possibility of materially lower earnings for the full year 2023.<\/p>\n

The CEO Neil Froneman said in the conference call:<\/p>\n

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This has been another period of our results being impacted negatively by one-off events, some of them self-inflicted and some such as the extreme weather events in Australia, an Act of God, or for those of you who believe in climate change also self-inflicted by humanity.<\/p>\n

The economy and hence the running of mining operations is in a particularly tough place globally at the moment. And there could well be a downturn as we see it for some time. Remember, we refer to these more as pandemics, and this is where our anti-fragility culture or differentiator stands us in good stead.<\/p>\n<\/blockquote>\n

While I consider SBSW an excellent long-term PGM miner (platinum group metals), I recommend trading 60%<\/strong> short-term LIFO of your long position.<\/p>\n

Taking advantage of the constant volatility in the PGM sector is essential. Trading LIFO lets you keep a core long-term position untouched, earning dividends until the stock reaches your final target while taking advantage of the short-term volatility by accumulating short-term gain and reducing risks.<\/p>\n

3 – Stock Performance<\/strong><\/h3>\n

The one-year chart comparison shown below indicates the VanEck Vectors Gold Miners ETF (GDX), the Aberdeen Standard Physical Palladium Shares ETF (PALL), the Aberdeen Standard Physical Platinum Shares ETF (PPLT), Sibanye Stillwater, and Impala Platinum (OTCQX: IMPUY). I believe these stocks are a good representation of the PGM industry.<\/p>\n

SBSW and IMPUY have significantly underperformed in the sector and are now down 40% and 54%<\/strong> on a one-year basis.<\/p>\n

It has been a constant, painful slide since January 2022. The outperformance is due to technical problems over the past few months and weakness in the price of Palladium and Rhodium, slightly counterbalanced by the gold price.<\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

Sibanye Stillwater ADR – H2 2022 – Balance Sheet History And Trend – The Raw Numbers<\/h2>\n

Note:<\/strong> The numbers below are indicated in US$<\/strong> and can vary depending on the ratio ZAR\/$US. You should expect some minor fluctuations. I choose to tell what the company shows in its recent results with a<\/p>\n

An important reminder that I regularly insert in my 6-month report:<\/strong><\/p>\n

Each Sibanye Stillwater ADS represents four<\/strong> (4)<\/strong> Sibanye Stillwater Ltd. Shares. The Sibanye Stillwater ADRs trade on the New York Stock Exchange under SBSW. According to Investopedia:<\/p>\n

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American depositary receipts (ADRS) allow foreign equities to be traded on U.S. stock exchanges. In fact, this is how the stock of most foreign companies trades in U.S. stock markets. Meanwhile, an American depositary share (ADS) is the actual U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange.<\/p>\n<\/blockquote>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Sibanye Stillwater ADR<\/strong><\/td>\n\n

12\/2021<\/strong><\/p>\n<\/td>\n

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6\/2022<\/strong><\/p>\n<\/td>\n

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12\/2022<\/strong><\/p>\n<\/td>\n

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6\/2023<\/strong><\/p>\n<\/td>\n<\/tr>\n

$US vs. ZAR<\/td>\n15.03<\/td>\n15.40<\/td>\n17.33<\/td>\n18.94<\/td>\n<\/tr>\n
Total Revenues in $ Million<\/td>\n5,461<\/td>\n4,570<\/td>\n3,878<\/td>\n3,326<\/td>\n<\/tr>\n
Basic Net Income attributable to SBSW in $ Million<\/td>\n577<\/td>\n782<\/td>\n344<\/td>\n427<\/td>\n<\/tr>\n
Adjusted EBITDA $ million<\/td>\n1,852<\/td>\n1,465<\/td>\n635<\/td>\n776<\/td>\n<\/tr>\n
EPS in $\/share\/ per ADR (4x)<\/td>\n0.76\/3.04<\/td>\n0.28\/1.12<\/td>\n0.13\/0.52<\/td>\n0.14\/0.56<\/td>\n<\/tr>\n
Operating Cash Flow in $ Million<\/td>\n1,267<\/td>\n285<\/td>\n645<\/td>\n264<\/td>\n<\/tr>\n
Capital Expenditure in $ Million<\/td>\n477<\/td>\n399<\/td>\n564<\/td>\n579<\/td>\n<\/tr>\n
Free Cash Flow in $ Million<\/td>\n790<\/td>\n-111<\/td>\n81<\/td>\n-315<\/td>\n<\/tr>\n
Cash and cash equivalent $ Million<\/td>\n1,900<\/td>\n1,673<\/td>\n1,509<\/td>\n1,182<\/td>\n<\/tr>\n
Borrowings, including current in $ Million<\/td>\n1,273<\/td>\n1,282<\/td>\n1,315<\/td>\n1,350<\/td>\n<\/tr>\n
Net debt in $ million<\/td>\n0<\/td>\n0<\/td>\n0<\/td>\n0<\/td>\n<\/tr>\n
Dividend per ADR in $\/share<\/td>\n0.49<\/td>\n0.33<\/td>\n0.27<\/td>\n0.112<\/td>\n<\/tr>\n
Shares outstanding (diluted)<\/strong> in Million<\/td>\n719.22<\/td>\n707.73<\/td>\n707.70<\/td>\n707.64<\/td>\n<\/tr>\n
Production Au Oz<\/strong><\/td>\n12\/2021<\/strong><\/td>\n6\/2022<\/strong><\/td>\n12\/2022<\/strong><\/td>\n6\/2023<\/strong><\/td>\n<\/tr>\n
US 2E PGM Production<\/td>\n272,099<\/td>\n230,039<\/td>\n191,094<\/td>\n205,513<\/td>\n<\/tr>\n
US recycling Oz<\/td>\n352,276<\/td>\n361,333<\/td>\n237,441<\/td>\n162,452<\/td>\n<\/tr>\n
US AISC 2E\/Oz Stillwater<\/td>\n1,039<\/td>\n1,366<\/td>\n1,840<\/td>\n1,737<\/td>\n<\/tr>\n
SA 4E PGM<\/td>\n941,973<\/td>\n823,806<\/td>\n843,658<\/td>\n799,182<\/td>\n<\/tr>\n
SA AISC 4E\/Oz<\/td>\n1,134<\/td>\n1,179<\/td>\n1,179<\/td>\n1,083<\/td>\n<\/tr>\n
4E PGM Price in $\/Oz<\/td>\n2,696<\/td>\n2,817<\/td>\n2,434<\/td>\n1,867<\/td>\n<\/tr>\n
Gold Production Au Oz<\/td>\n554,086<\/td>\n191,683<\/td>\n428,859<\/td>\n416,738<\/td>\n<\/tr>\n
Average gold price $\/oz<\/td>\n1,780<\/td>\n1,864<\/td>\n1,720<\/td>\n1,921<\/td>\n<\/tr>\n
AISC Gold $\/oz<\/td>\n1,685<\/td>\n3,115<\/td>\n2,019<\/td>\n1,813<\/td>\n<\/tr>\n<\/table>\n

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