One of My Favorite Stocks! All-In-One EV Metals Miner! Sibanye-Stillwater Stock Analysis: SBSW Stock

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With so many green trends developing and even ramping up lately, the global need for some key metals is definitely going to rise. By investing in the essential materials that everyone is going to need, you might have a lot to win, no matter what EV producer or whatever is going to be the best in their market.

Now, one company that I believe offers this kind of exposure is Sibanye-Stillwater (NYSE: SBSW). The company has developed a lot from gold and some uranium to platinum group metals and in the past years, green metals like lithium, nickel, cobalt, copper and more. What I like a lot about them is the fact that they basically offer the whole package in one high-quality company.

They have operations in the Americas, Southern Africa, Australia and Europe, and right now they are one of the largest platinum producers on the planet.

Platinum and palladium are currently the company’s main sources of income. Platinum, the number one source, is at the moment of recording this, below the average from recent history. Palladium is currently around the average, and both of these metals have a lot of untapped potential in the future. Think about hydrogen production and storage, fuel cells, solar panels, water purification, and maybe other things as well.

Now, rhodium and palladium and to a smaller degree, platinum, have something in common – other than being PGMs. Around 80% of it is used in catalytic converters which use an alloy made of rhodium, platinum and palladium, to basically make traditional cars pollute less. However, it can also be good for green technologies. Rhodium can be used for example in electrolysis for hydrogen production, and right now people also look into their potential use in fuel cells and other eco-friendly technologies.

But, from an investing perspective, these metals are also good for basically hedging with something that gains from traditional cars. If the transition to EVs takes more than expected, having this exposure is going to benefit Sibanye.

They also produce a bit of lithium, but this is something that I want to cover in the near future and look into a few companies that focus almost entirely on lithium. They want to be the largest lithium producer in Europe, but on the global scale, Europe is not that big when it comes to lithium. Still, having it locally and sustainably produced can be an advantage in the near future.

They are also a key player in recycling, and have recently acquired a metal recycling company for over $150 million. High interest rates resulted in lower car purchases and also less scrapping, so if you ask me, this is probably the ideal time for an acquisition.

Now, at the end of the day – to some degree – every commodity producer on the planet depends on China’s demand, even if they don’t sell directly to the country, because they have a massive influence on the price.

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0:00 Sibanye-Stillwater (NYSE: SBSW) Stock Review
0:49 Investing in PGMs, Lithium, Nickel, and more
2:53 Sibanye-Stillwater (NYSE: SBSW) Financial Analysis
6:58 Sibanye-Stillwater (NYSE: SBSW) Stock Valuation & Conclusions + PGM Talk

#stocks #investing #personalfinance #valueinvesting

Hey, welcome back! With so many green trends developing and even ramping up lately, the global need for some key metals is definitely going to rise. By investing in the essential materials that everyone is going to need, you might have

A lot to win, no matter what EV producer or whatever is going to be the best in their market. Now, one company that I believe offers this kind of exposure is Sibanye-Stillwater. The company has developed a lot from gold and some uranium to platinum group metals

And in the past years, green metals like lithium, nickel, cobalt, copper and more. What I like a lot about them is the fact that they basically offer the whole package in one high-quality company. They have operations in the Americas, Southern Africa, Australia and Europe, and right now

They are one of the largest platinum producers on the planet. Platinum and palladium are currently the company’s main sources of income. Platinum, the number one source, is at the moment of recording this, below the average from recent history.

Palladium is currently around the average, and both of these metals have a lot of untapped potential in the future. Think about hydrogen production and storage, fuel cells, solar panels, water purification, and maybe other things as well. Now, rhodium and palladium and to a smaller degree, platinum, have something in common

– other than being PGMs. Around 80% of it is used in catalytic converters which use an alloy made of rhodium, platinum and palladium, to basically make traditional cars pollute less. However, it can also be good for green technologies. Rhodium can be used for example in electrolysis for hydrogen production, and right now people

Also look into their potential use in fuel cells and other eco-friendly technologies. But, from an investing perspective, these metals are also good for basically hedging with something that gains from traditional cars. If the transition to EVs takes more than expected, having this exposure is going to benefit Sibanye.

They also produce a bit of lithium, but this is something that I want to cover in the near future and look into a few companies that focus almost entirely on lithium. They want to be the largest lithium producer in Europe, but on the global scale, Europe

Is not that big when it comes to lithium. Still, having it locally and sustainably produced can be an advantage in the near future. They are also a key player in recycling, and have recently acquired a metal recycling company for over $150 million.

High interest rates resulted in lower car purchases and also less scrapping, so if you ask me, this is probably the ideal time for an acquisition. Now, at the end of the day – to some degree – every commodity producer on the planet depends

On China’s demand, even if they don’t sell directly to the country, because they have a massive influence on the price. So, if China keeps being such a huge player in the EV market, we can expect this to be the case in the future for all the green metals and PGMs as well.

Like any other miner, they depend a lot on commodity prices, and we can see how they jumped around 500% in a very good year a couple of years ago. Of course, the free cash flow is going to depend on this, and recently we saw a high

Amount of CAPEX due to several investments and even issues and they expect 2024 to also be above normal. They say that this is going to decrease, but you should never count on this with a miner, especially if they want to develop like Sibanye.

Sure, maybe the ones you see on the screen will decrease in time, but I guarantee you that there will be other projects added to the graph in the future, and honestly, I would be worried if there weren’t.

In the first half of 2023, they had a negative free cash flow of around 2.5 billion South African Rands, or around $140 million. However, this includes additions to property, plant and equipment of almost 11 billion rands, or around $600 million.

So, without these, they are not doing that bad, and the negative cash flow is due to massive investments and several issues that they had to deal with in 2023. On the screen, you can see their latest EBITDA and AISC, but keep in mind that the US PGMs

And gold operations are affected by these issues. For gold, the true AISC should be at around $1.7 thousand per ounce – which is still very high – but for the US PGMs, it’s more like a thousand, so it’s a massive difference.

They are now cutting jobs and restructuring in the US to adjust to the high inflation and falling palladium prices. Since the production fully recovered only in October and they expect the final Q to be much better, I think we should wait and see the final results.

The issues they had were very significant, and this is a risk we have to take into account with any miner out there, no matter how careful or where they may be. I say this because the mine that got flooded and shut down for like 2 months was in the

US, so there is inherent risk to this industry. We saw them producing around $1 billion back in 2020 and 2021, which is amazing for the current market cap of around $3.5 to $4 billion. However, what I’m counting on is an increase in the demand for their key metals.

During a time like today, when platinum is down, they pretty much break even – maybe profit a bit if the CAPEX are not that high. However, if the demand for PGMs and green metals develops as expected, they would produce many times more than today on average.

In the future, a normal year could result in $300 million or even more, even with higher CAPEX. Today, when the price of platinum is relatively low, the PGM operations in South Africa bring in most of the money because of the low production cost.

This should partially balance the losses from the other branches of the business in case commodity prices fall even more. So, there is a bit of a safety net thanks to how cheap the African operations are, but

If there is an issue with a mine or whatever in that region, there could be some trouble. Now, when we look at historical commodity prices, we have to keep in mind all the recent money printing.

Is platinum ever going to fall to – say – $700 again, or is the current roughly $950 the new low? We can’t know the answer, of course, but even now, platinum is at some of the lowest levels in recent history.

Anyway, one of the main reasons I like this company so much is their balance sheet. They have $3 billion in current assets, with over $1.1 billion of that being in cash, and current liabilities of around $1 billion, while the non-current ones are around $3.3 billion.

This means that the current assets are almost enough to cover the company’s entire liabilities, which is exceptionally good for a miner. At the current price, you basically buy this company below its book value, so I think there is a good margin of safety.

They have a dividend policy where they pay 25 to 35% of normalized earnings, and in the first half of 2023 – which again, was affected by these issues – they paid around 2.1% in dividends. However, in 2021 for example, when they had a very good year, they paid the equivalent

Of almost 15% today. Again, if we see the average cost of metals during a cycle increase, this can pay even 10% on average if I buy today. Now, you just saw this a moment ago, but remember that the obvious issues are corruption, strikes,

Theft, safety issues, and so on, but this is unfortunately the mining industry. To get into a valuation, I think the classic 3 scenarios based on the commodity cycle are going to be enough. In a bad scenario, when the price of commodities is below the average, I think they should

Be able to pretty much either break even, or not lose too much. This difference is going to depend on the CAPEX. If they invest a lot in a time when commodities are down – which I want to see from them – then the free cash flow would probably be negative.

Anyway, the good financials should allow them to keep investing even during a bad time, which I think is ideal for a miner. But, you can imagine that if the price of commodities is down, the market wouldn’t think about this.

There is honestly no limit to how low the price can fall, even if it’s down a lot lately. So, it can easily go down 50% or even more, but if that happens, I think this would be an excellent buy.

Even in this scenario, I think they would still make a profit, meaning that there would also be a small dividend, but I think it would be better if they didn’t pay it. Now, in the middle of the cycle, every branch of the business should be profitable, but

The issue is that they have invested so much lately that we don’t know how much they can actually produce today. We simply can’t compare it to 5 years ago, because they expanded into so many other branches and we don’t have enough relevant data about them.

Also, today, the price of PGMs is all over the place. Platinum is around the average, palladium is kind of below average, and the rest are very high, but platinum and palladium represent the main sources of income.

Overall the basket price of PGMs is around half of what it was a year ago, but it can of course get lower. I think we can use today as a conservative average for Sibanye, but without the high CAPEX and the issues I mentioned before.

If you look at the data for the first half, the US PGMs, and European operations had a negative cash flow – this is in rands, by the way – and the gold was barely profitable. In reality, at the current prices, with a normal production and around $1 billion in

CAPEX, the company should produce around three to five hundred million per year. So, the current price is around 10 times that amount, but we don’t really know the company’s full potential today. Anyway, in the upper side of the cycle, they can produce more than $1 billion, probably

Something like $1.5 billion when the current investments are done. If the market is trading them at only 10 times that amount, that’s a market cap of $15 billion, so around a 4x from today. But, if there is a bit of hysteria, and the market cap is twice that much, and I manage

To buy around $4 bucks, this can even be a 10x. By the time the demand for platinum and the other PGMs in traditional cars goes down significantly – and from what we can see, EVs already have some issues – I believe that the increase

In demand from other sources should help mitigate this decrease. If you think about it, there is a chance that the overall demand for PGMs goes up by the end of the decade, which can be very good for Sibanye. That’s because you would have a somewhat stable or slowly decreasing demand from traditional

Cars, but a faster growing demand from green technologies like solar, wind, fuel cells or hydrogen. Anyway, this should give Sibanye enough time to position for the – let’s say – post-transition stage – which they already do by investing in nickel, lithium, and so on.

I think the current environment with falling prices of commodities gives them a very good opportunity to invest at a better price. I’m working on a video about lithium right now, and you will see that the market is starting

To hate the industry that a year ago it was praising as one of the best investments possible. Just because the stock prices are going down. Anyway, Sibanye has the financials to take advantage of the current market, and the low

Debt and over $1 billion in cash should prove to be very useful in the near future. So, overall, I think Sibanye has a lot of potential and is currently traded at a very nice price. The financials are exceptional for a miner and the company is able to produce a very

Significant amount of money. Of course, like any other commodity producer, the stock can easily crash even in half, but the long-term should be good, and I think the risk-reward is very attractive. As always, what I cover in my videos shouldn’t be enough for you to make any investment decision,

So please do your own research before investing in anything. If you want to see more videos like this one, please leave a like and even a comment to help me out, and make sure to subscribe. Thank you for watching and I’ll see you next time.