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
The current situation of SBSW/PGM is probably similar to CCJ/uranium in fall of 2016. After Fukushima earthquake in Spring 2011, spot price uranium finally bottomed out around $18/lb. Even if you were lucky enough to have bought CCJ at slightly below $8 (which was also the bottom), the following 4.5 years was very frustrating. Basically, the stock just moved between ~$8 and ~$12.5. When pandemic lockdowns happened, you were back to where you started. CCJ did not break out that 4.5 basin until early 2021. The point I am trying to make is that getting in, even if near the cycle bottom, is one thing. Having ability (i.e money tied to the shares for 4-7 years) and the endurance (i.e. hold the position without attempting to do short term trades and outsmarting the back and forth moves) are another. It is hard to carry out your original grand plan when your position is too large. Given that we are in tax loss harvesting season and my tendency of getting too early, I have only bought a partial position so far. I will primarily fund my future purchases with dividends from my oil and gas stocks.
also, sbsw has a history (so far) of better balance sheet vigilance than cameco.
paraphrasing a local value investor there; SA has islands of extreme dysfunction in a sea of surprising normality. maybe this is now accepted as par, and anti-fragile adaptions are at the ready, probably better than in the developed world.
either way, most value investors' losses are probably large enough that selling doesnt make sense in a positive secular theme.
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.
1) Catalysts is the insanely low valuation and Gold prices at an ATH. This is supportive for their earnings. Further, Funds in Europe are buying lots of shares, which shows their interest.
2) Well in 2021, they earned like 2 Billion $. Let’s take this as a bull cycle earnings estimate.
Great write-up and insights! Sibanye somehow made it onto my watchlist a few months ago, but after reading your analysis, I need to revisit and rethink my position on Sibanye!
This Is a very interesting situation,I Just wonder of the have the ability to jeep this situation for longer so in the worst case the stock Will stay flat
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
Great insight Tony! I’m gonna pull the buy trigger on SBSW. The risk reward is inviting!!
If you don’t take a chance, you don’t have one !
The current situation of SBSW/PGM is probably similar to CCJ/uranium in fall of 2016. After Fukushima earthquake in Spring 2011, spot price uranium finally bottomed out around $18/lb. Even if you were lucky enough to have bought CCJ at slightly below $8 (which was also the bottom), the following 4.5 years was very frustrating. Basically, the stock just moved between ~$8 and ~$12.5. When pandemic lockdowns happened, you were back to where you started. CCJ did not break out that 4.5 basin until early 2021. The point I am trying to make is that getting in, even if near the cycle bottom, is one thing. Having ability (i.e money tied to the shares for 4-7 years) and the endurance (i.e. hold the position without attempting to do short term trades and outsmarting the back and forth moves) are another. It is hard to carry out your original grand plan when your position is too large. Given that we are in tax loss harvesting season and my tendency of getting too early, I have only bought a partial position so far. I will primarily fund my future purchases with dividends from my oil and gas stocks.
also, sbsw has a history (so far) of better balance sheet vigilance than cameco.
paraphrasing a local value investor there; SA has islands of extreme dysfunction in a sea of surprising normality. maybe this is now accepted as par, and anti-fragile adaptions are at the ready, probably better than in the developed world.
either way, most value investors' losses are probably large enough that selling doesnt make sense in a positive secular theme.
I really love this post 👏
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.
Thanks for sharing. The accident at the Impala Mine is tragic too. Although I think that everything will go more or less smoothly.
Here we are a month later and I have a 20% profit in SBSW thanks for the recommendation Tony !
A great call ✅
what is the catalyst and what they can earn on an up cycle demand for platinum?thanks
Not sure if I got your question, but let me try:
1) Catalysts is the insanely low valuation and Gold prices at an ATH. This is supportive for their earnings. Further, Funds in Europe are buying lots of shares, which shows their interest.
2) Well in 2021, they earned like 2 Billion $. Let’s take this as a bull cycle earnings estimate.
Great write-up and insights! Sibanye somehow made it onto my watchlist a few months ago, but after reading your analysis, I need to revisit and rethink my position on Sibanye!
Thanks 🙏
Why the AISC for SA gold production is so high?
Sorry I don’t get the question ;)
This Is a very interesting situation,I Just wonder of the have the ability to jeep this situation for longer so in the worst case the stock Will stay flat