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Tonyforever's avatar

Thanks for an informative column on $SBSW. One thing I would like to add is that the PGM price has been depressed by the liquidation of inventories by Russian, who, because of the war, are desperate for money. The price of diamond is brought down also by the liquidation by Russian. While the liquidation is short term negative, it is the positive for both medium and long term for SA producers in general.

The PGM price is below the full cycle cost plus the cost of the capital of the PGM miners. Since you are quoting the legendary natural resource investor Rick Rule, I would add two important points that I learned from Rick. The first is on the countercyclical investment of commodity producers. "ln natural resource investing, you are either a contrarian or a victim. The second is why to buy majors of a commodity sector when the commodity, essential for the society, is in self-liquidation mode. What Rick said in the following short segment about a year ago applies to PGM (eg. SBSW and IMPUY) today. https://youtu.be/ZNJCLXBSZhE?t=1460

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Emerging Value's avatar

Interesting company. You have to kind of normalise earnings that are cyclical and maybe take an average. Looking at the price to book of 0.6, it is also screaming undervaluation.

As for South Africa, this is a country that will send the army before stopping mining production, and there is a precedent (police) with the Marikana massacre. I do not glorify the death of strikers nor do I know the ins and out of the story, if it was legitimate fear on the part of the police or not.

But this is the lifeline of the economy and they will not abandon it, and they have some extremely efficient army and police special units. Not too much to worry about that.

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