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Sibanye Expands Its Renewable Metals Portfolio
Stock Analysis & Ideas

Sibanye Expands Its Renewable Metals Portfolio

Sibanye-Stillwater (SBSW) is a diversified mining company, and the world’s largest platinum producer.

I am bullish on the stock. (See Insiders’ Hot Stocks on TipRanks)

Brazillian Acquisitions

Sibanye has agreed to purchase the Santa Rita nickel mine, and the Serrote copper mine from Appian Capital Advisory, in a $1-billion cash deal.

The Santa Rita is a brownfield mine currently producing 16,000 metric tons per year of nickel-equivalent, and the Serrote mine is a greenfield project which is due to produce in more or less 18-months from now.

According to the Sibanye CEO, Neal Froneman, this is a renewable energy play and part of a long-term value creation strategy.

“The transaction is a significant additional step in Sibanye-Stillwater’s ongoing strategy to position the business for continued value creation during our transition into a climate change resilient business,” he said.

Lithium Operations

Last month, Sibanye agreed to acquire 50% of Nevada-based lithium mine, Rhyolite Ridge, for $490 million from Ioneer Limited.

The two parties are anticipated to spend $850 million to develop the mine before production is possible.

Ioneer is working on rights for another (un-named) lithium project in the area, and should it be successful, Sibanye has an option to own 50% of the project for only $50 million.

Sibanye’s Nevada exploits add to its lithium portfolio after securing 30% in Finnish mining house Keliber Oy (Keliber) earlier this year.

What Does This Mean for the Stock?

High volume acquisitions aren’t always beneficial for a mining stock because they affect the balance sheet, and the costs versus benefits from investments don’t always work out as planned.

However, Sibanye is managing its finances well by looking to offload some of its capital-intensive South African gold projects, namely Beatrix and Kloof. The company’s acquisition track record is also healthy; in 2019, Sibanye acquired Lonmin to become the world’s largest platinum producer.

From a valuation perspective, you can’t fault the investment opportunity. The stock has a forward P/E ratio 62.4% below its five-year average, and a PEG of 0.01. Additionally, a price-to-book that’s 92% below its five-year average indicates that Sibanye’s balance sheet is well managed, and not yet priced in by the stock market.

Wall Street’s Take

Wall Street thinks the stock is a Strong Buy, with two unanimous Buy ratings assigned in the past three months.

The average Sibanye price target of $23.50 implies 66.1% upside potential.

Concluding Thoughts

Sibanye-Stillwater is pivoting well by moving towards renewable energy assets, and offloading some of its expensive-to-mine gold assets.

The stock is in good shape from a valuation perspective, and the market has yet to price most of it in.

Disclosure: At the time of publication, Steve Gray Booyens owned shares of SBSW.

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