Sylvania Platinum Share Discussion Threads

[dangersimpson2] 03/12/2019 11:30

Good post Redtrend, a couple of points where I think you may be over-optimistic:

Q1 was exceptional with recovery of almost 60% and high plant feed. On recovery, the company says "recovery figure will taper off to an expected rate of around 52% going forward", and I expect plant feed to reduce slightly in Q2-Q4. So the company is unlikely to have another $12.5m net earnings quarter and taking 4xQ1 will be too high.

If we assume their 74-76koz production guidance is still correct then I'm estimating earnings of around $33m so P/E of 4, not 2. This would still be an EV/EBITDA of around 1.6 though because of the cash on the balance sheet. Almost all of earning flow through to FCF with deprecation now running higher than capex (assuming no major working capital flows), however, again I think you may be slightly optimistic with $36m - I reckon $30-33m is more realistic at current prices.

There is maybe scope for production guidance to be increased if they have a great Q2 but last year they had to reduce their production guidance through the year due to water & power issues, I doubt they want to do that again so will be cautious going forward - given the issues with Eskom I can't see them getting through the year without some power disruption.

[pireric] 02/12/2019 21:06

Another very good post. Thanks, Redtrend. Quite rare to see this quality of analysis on a small-cap commodity-focused company board!

Taken this up to 17% of my portfolio today. Now a waiting game.

[redtrend] 30/11/2019 12:46

Danger – a very delayed response from me, but to answer I believe it’s a rather archaic provision in Companies Act from early on in 20th century and doesn’t appear to have been updated in later versions/ amendments. I had the same question years back to Shanta Gold (Guernsey registered) when I pushed to have it in their Nomads office or a hotel in London.

I've only had 3 detailed queries in the 3yrs I've been invested in SLP. 2 responded very quickly, the other I do remember having to prompt a wee bit, albeit they were quite technical and was diving into areas of confidentiality SLP couldn't answer fully (refiners + refiners fee structure). However from quarterlies and accounts it is relatively easy to estimate the % refiners fee, albeit it is no doubt a mix of flat rates + % margin, hence why it appears to fluctuate around 18-23%.

I don't think investors would mind a fluctuating dividend, as long as it's linked to something tangible to explain the fluctuation. If we have a baseline cash position of $25m (to act as buffer and for SLP to act quickly in event of M&A opportunities), I would like to see 100% net free cashflow after tax, paid out as dividends.

1) At present the SLP PGM 4E Basket is $1,775 per Oz
2) With refiner's fee of circa 23%, revenue to SLP is $1,360 per Oz (the "6E" PGM byproducts of Iridium and Ruthenium have positive impact on top of this I'm probably overlooking)
3) AISC is ZAR 8,818 / 14.6 USD Forex = $606 per Oz.
4) Margin $1,360 - $606 x 78,000 Oz = $59m - $8m Capex = $51m free cashflow before tax.
5) Depending on depreciation of fixed assets and other factors hard to predict tax bill (SA Corp Tax 28%). On assumptions above and say $6m depreciation, could be circa $12-14m tax bill
6) Leaving cash after tax of $36m odd
7) This is in the context where SLP already have $26.6m cash, $34.5m trade balance in SLP’s favour (receivables incl. contract assets minus payables) and $4.2m due for Grasvally sale if it all goes through = $65.3m (near 50% of market cap - rather absurd situation compounded with future cashflows showing how undervalued SLP is).

At $133m Market Cap (£103m), normalising for cash position of $26.6m, SLP are on a Price to “Net Free Cashflow” of less than 3 ($133 MC - $26.6m cash in bank / $36m net free cash), highlighting how under-valued SLP are. Even applying a conservative ratio of 5x net free cashflow (considering SLP currently predict operational life of at least 10-15yrs), would provide share price of 57p (£160m market cap).

More classic Forward Price to Earnings Ratio shows even more extreme undervaluation, with current P/E of only x2 (SLP’s Net Profit for Q1 2020 was a whopping $12.5m. Annualised $50m, however let’s assume may not be able to be repeated, so $45m). A 5x P/E based on $45m p.a. + normalising for $26.6m cash in bank would give 69p (£195m market cap).

In terms of this Q2 2020, with dividend payout of $2.9m + tax bill $5-6m, I don’t expect cash position to change by much, if any.

[basem1] 29/11/2019 14:17

Overhang clearing and a quick pop to 42p

[plat hunter] 28/11/2019 15:10

.. posted incorrectly

[pireric] 27/11/2019 18:38

Wanted to pass thanks to you here DS2. Consistently excellent posts.

I bought a position here earlier this week, helped a lot by info posted here, and also found IC's coverage actually pretty strong and clear. Obviously a number of risks at play, but more than discounted in the valuation. Can see this continuing to perform well as it gets onto more radars and as the cash generation feeds through. Feels like AAZ when it was halfway through its own re-rate story.

[dangersimpson2] 26/11/2019 17:58

Ah right, couldn't find any restrictions in AIM regulations but I assume it must be company law then?

I agree a special dividend makes sense. The current PGM pricing is making the company highly cash generative, but that may change in the future, hence committing to a large regular dividend and then cutting wouldn't be ideal. I like it when companies say we think we need £xm to cover all future potential Capex, WC, etc and we will return everything above that amount via a special dividend.

Surely this requirement has to be around $20m max for SLP? I can't see Sanamcor investing in new mines anytime soon given current chrome prices which would be the only possible big future Capex requirement. Cash balance could be as high as $50m at year-end, if you take the $26m Q1 cash balance and add Grasvally proceeds, Q2-Q4 FCF at current pricing and take off the planned $5.5m Capex Q2-Q4.

A $30m regular + special dividend for FY20 would be c8.3p.

I've found the company a bit mixed on the communication front - got a response to initial enquiries but took a bit of chasing to actually get answers to the questions and then my follow up questions were ignored. Some of them were fairly technical, such as how sales adjustments are calculated (which I have since got a better understanding from the Liberium note) and the accounting treatment of non-controlling interests so probably couldn't be answered by an admin assistant but still disppointing that these were ignored despite several follow ups. Originally they had a UK phone number on the RNS that didn't work and now have a SA one, and some RNS revert back to the non-functioning UK one.

I agree about the quarterly updates - these are detailed and well written but the direct communication with shareholders is pretty bad in my experience and I know people who have been put off investing due to the non-functioning phone number on RNS's.

[redtrend] 26/11/2019 15:23

Danger - on the AGM location, the place of an AGM must be at the registered office or "any other place in the city town or village where the Registered Office is situated". Hence Bermuda.

Whilst I didn't go this year, i actually do plan on going next year if I have significant reservations on the dividend for FYE June 2020 or any other issue (e.g. anything less than 10% dividend yield against this sp).

I'd like to see SLP move to an interim and final dividend. If Grasvally sale finalises in April/May 2020, they can pay out a special div of the net proceeds (3-4% div yield) and final div in Nov 2020 of 6-8%. Thereafter it would be easy to move to an interim + final divs.

In any event I find SLP to be pretty receptive when contacted via email or phone. With the most transparent quarterly reports of any mining/producing company I have followed, I rarely have that many questions in comparison to other companies.

[pyemckay] 25/11/2019 18:02

im expecting IG to buy in here now that an excellent twitter investor has recently bought in.

[dangersimpson2] 20/11/2019 23:29

Interims likely to be February and you will get Q2 results first at end of Jan (which contains all the pertinent information anyway).

AGM is in Bermuda - anyone going? Thought not. I know they are technically registered in Bermuda as a company but they are London listed and they are doing themselves any favours having it in Bermuda IMO, where most shareholders will not be able to turn up and ask questions.

They are fairly transparent in other ways such as issuing good quarterly reports and the quality of their investor presentations so it is disappointing to have an AGM where no one can go.

[basem1] 20/11/2019 16:34

Is it not just the AGM ?

[eentweedrie] 20/11/2019 15:10

meant friday

[eentweedrie] 20/11/2019 15:08

actually the interims are due tomorrow

[dangersimpson2] 20/11/2019 11:35

After a bit of PGM pricing strength & Rand weakness in the last few days and this is looking v. cheap again.

At current spot prices, if they hit their FY production targets then they are on a fwd P/E of around 4 and an EV/EBITDA of about 1.6, and they did 28% of their production target in Q1 so barring water issues or industrial action there is scope for a small upgrade to production above this if they continue to perform well operationally.

Next news should be Q2 production report end Jan.

[russman] 15/11/2019 09:30

and the cash keeps rolling in.

[mick1909] 10/11/2019 08:57

What amount of pgm reserves does SLP have?

[brad_k] 07/11/2019 15:36

I must admit to being rather confused by the price action over the last two days. Does anyone have Level 2 prices ... are there large sells already declared and waiting to be taken out?
If not I can't see who's interests are served by keeping the lid on the share price )other than PIs who are getting a bit longer to load up at this price).

[mfhmfh] 07/11/2019 10:10

once the seller clears this will fly. IMHO.

[davebowler] 05/11/2019 15:54

Sylvania at 20 mins in this podcast by Simon Thompson on Investors Chronicle site-

[hickersp] 04/11/2019 16:08

If she holds the current price at close of play, I'd argue we have a breakout of the recent channel. Onwards and upwards hopefully!

[qvg] 04/11/2019 12:25

Thanks Hicker, yes I agree

[mfhmfh] 04/11/2019 10:30

From cnbc.com:

Platinum futures $956 (approaching year high).

Palladium futures $1,786.

[hickersp] 04/11/2019 10:12

qvg, just worked it out with the help of IG help desk ....... when putting in the EPIC code it needs to be SLP Ln to to enable the execution of a trade. Bought in this am. Looks like it could be an interesting ride.

[qvg] 04/11/2019 09:59

I had the same problem a week or so ago. I gave up and bought in another account