BUY: SBSW – Silbanye-Stillwater

Bought some SBSW shares (ADRs) on Wednesday at $4.49.

My DD is incomplete but I felt it was an opportunity. The share price fell about 20% on Tuesday due to a convertible bond offering. The offering raises $500M. The bonds will yield 4.5% and be convertible to shares at a 30-35% premium to Tuesday’s close, which was $4.26. This means that the dilution, which won’t likely occur for years, will require a price of around $5.5. Buying the stock at $4.49 seemed like a safe bet. The bonds will be used for the company’s growth strategy.

I came across the company’s story on Brandon Beylo’s Value Hive podcast interview with Calvin Froedge. Key points were SBSW’s strong financial position, diversification (PGMs, gold, lithium, nickel, cobalt, etc.) and beaten-down-but-attractive share price.

The company’s stock has been falling for a year, down from highs in the $19 range. Contributing to this, PGM prices have fallen (which make up a majority of SBSW’s revenue), possibly due to falling production numbers in the auto industry. There was a 3-month strike at its South African mine over wages and problems with the power grid. Relatedly, its AISC for gold production is over $2000/USD. Hopefully this number will decrease as production returns to normal levels.

The company also pays a dividend semi-annually (most recently of 8.61%).

Overall, this is a play on an international mining company at three-year lows. The bet is on the cyclical nature of the industry. The company is a major employer in South Africa. Despite current woes, the company will continue to exist and grow in the commodity boom needed for the future green economy.

More DD is needed on my part.

MB

Disclaimer: This content is for informational purposes only and should not be construed as financial advice. The views expressed are those of the author, who is not liable for any losses or damages arising from any actions taken based on the information provided in this blog. Investing and trading involve risk; you are solely responsible for your decisions.