We came across a bullish thesis on Sibanye Stillwater Limited (SBSW) on Substack by Hugo Navarro. In this article, we will summarize the bulls’ thesis on SBSW. Sibanye Stillwater Limited (SBSW)’s share was trading at $4 as of Feb 10th. SBSW’s trailing and forward P/E were 4.67 and 24.88 respectively according to Yahoo Finance.
A line of miners in an open-cut mine, surrounded by the shiny glint of precious metals.
Sibanye Stillwater, a diversified mining company listed on the NYSE, presents a complex but intriguing investment opportunity. Over the past decade, the company has outperformed many of its peers, largely due to its extensive asset base, which spans gold, PGM (platinum group metals), lithium, and other minerals. The company is active in gold mining, where it expects to produce over half a million ounces this year, and its PGM mining operations, located in both South Africa and the U.S., are key to its revenue. In addition to its mining operations, Sibanye benefits from its recycling activities, which contribute a significant portion of its PGM production.
Beyond its primary mining businesses, Sibanye is investing in emerging sectors like lithium. The company owns what is claimed to be the largest lithium mine in Europe and also operates a battery recycling plant, positioning it to capitalize on the growing demand for materials used in electric vehicle production. The company also generates revenue from byproducts of its mining operations, including chrome and uranium. Recently, Sibanye entered into a joint venture for the Beisa uranium project, which could provide considerable upside if uranium prices rise. Furthermore, Sibanye holds a 50% stake in DRD Gold, which has a market cap of nearly $1 billion, and has raised $500 million through a streaming deal with Franco-Nevada to pre-sell gold and PGMs from its South African operations.
Despite its diverse and expansive portfolio, Sibanye faces challenges in its PGM operations, particularly with high production costs. Its U.S. PGM production costs are around $1,400 per ounce, making it less competitive compared to peers like Impala and Anglo American. In response to the low PGM prices, the company has placed its Stillwater West Mine on care and maintenance and reduced its workforce to lower costs. Although the company carries some debt, its diverse operations and strong gold business make it unlikely to struggle with debt servicing.
While the weakness in PGM prices may continue to impact the company in the short term, Sibanye’s diversified asset base offers multiple growth levers. Its gold mining business alone could justify much of its current market cap, while its investments in lithium and battery recycling could fuel long-term growth. Despite the short-term risks in the PGM segment, the company’s overall complexity and asset diversification make it an attractive, asymmetric bet for investors willing to navigate the risks.
Sibanye Stillwater Limited (SBSW) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held SBSW at the end of the third quarter which was 18 in the previous quarter. While we acknowledge the risk and potential of SBSW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SBSW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.