Yes, I am long this stock. Yes i’ve been beating the drum. I am highly confident there is money on the table for the taking. Yes, I am always humble in the face of the market, but please let me share a few facts that should convince you Sibanye Stillwater, SBGL, at $5.39 is an excellent opportunity:
1. Neal Froneman, CEO has diversified a former South African (SA) gold mining business, both geographically by purchase of the Stillwater palladium mine in Montana, and by product, so that SBGL gets about half its revenue from outside SA and is now the world’s largest platinum and rhodium miner; 2nd largest palladium miner and 3rd largest gold producer.
2. Neal is visionary and disciplined, revamping Sibanye with the purchase of Stillwater when palladium, now $1650, was $600 and with the recent purchase of platinum miner Lonmin when platinum, now $968, was in the low $800s.
3. SBGL is now a very “asset leveraged” and vertically integrated play on the prices of gold and the platinum group metals (PGMs) given its massive in ground resources and significant annual production.
4. While the company is also financially levered given the debt incurred at the time of the Stillwater acquisition, Neal is committed to paying down debt and hopes to recommence dividends in 2020.
5. With the remarkable PGM position purchased at market bottoms, and the large gold production, the entire company is still valued at less than $3 billion.
6. I believe the market is significantly mispricing SBGL based on prevailing metal prices, and expect the company is in the early phases of a rerating.
7. In addition, I also believe that platinum, a critical and essential element for the civilian and military economy, at near historic discounts to gold, is also in the early stages of a rerating, as demand explodes with recognition that 8 million ounces of production, worth less than $8 billion, is tiny in the context of the investor universe, while supply is limited. As investors, industrial purchasing agents, and government strategic buyers begin to understand the dynamics of this small but vital market, i anticipate $100 per day moves in platinum and the other PGMs, taking prices to multiples of where they are today.
8. I expect similar behavior in gold, a market with annual supply of 158 million ounces, worth $250 billion, but still very small in the context of world money flows for the one asset that has historically maintained purchasing power, as fiat money erodes. While low interest rates reduce the cost of carry, the coming bull market in gold is also the result of limited supply and huge demand that I expect from gold’s “certain” role as a store of value; its not interest rates or chaos that will fundamentally drive this market.
9. Yes, I am an SBGL bull, expecting large moves as the stock is not only undervalued today, but is in the best position to capitalize on the coming rerating and bull market in PGMs, and gold.
10. I am notably comforted that Neal is also a genuinely caring CEO, recognizing that for a company to prosper it needs to take care of its three critical constituencies: its employees; its vendors and clients and its shareholders.
There is opportunity, at the moment, for the taking, in SBGL, and i’m also riding the PGM and gold bull!