Sylvania Platinum Share Discussion Threads

[elsa7878] 30/4/2021 10:13

The robust demand has been largely tied to increasing nitrogen oxide (NOx) legislation globally, particularly in China. The Chinese auto market is the largest gasoline market in the world, with China's light vehicle sales being about 90% of gasoline engines.

On the supply side, COVID-19 severely disrupted South African supply in 2020, resulting in an estimated loss of some 130,000 oz. According to JM, total world primary supply of rhodium in 2020 came to 583,000 oz.

Rhodium is a byproduct of PGM mining and supply is largely tied to South Africa, which accounts for around 80% of global mined rhodium supply, produced by a small number of companies.

South African research firm Afriforesight's head of precious metals, Pearson Mururi, speaking during the company's Southern African Commodities Outlook for 2021 on Feb. 25, said rhodium accounts for less than 10% of South African PGM production but "for some of the producers it has been contributing to more than 50% of their revenues."

"We expect that going forward the prices will continue to grow but the supply response will be limited because rhodium is generally found in lower quantities [in the rhodium-poor northern limb in South Africa] and it will be difficult to target it more [as the longer term is to trend away from UG2 ore bodies]."

Processing challenges
Anglo American Platinum (Amplats), the world's biggest producer of refined platinum and rhodium, said the repair of its Anglo Convertor Plant (ACP) Phase A unit at its Waterval smelter complex was completed in November, with ACP Phase B unit continuing its full rebuild and scheduled to be completed in the second half of 2021.

However, a key question is the extent to which Amplats' processing challenges have disrupted global supply and demand, and how as well as when will this normalize.

"[South Africa's] refined capacity is expected to be operating close to normal this year after Amplats successfully fixed its refinery capacity issues in their main plant," Mururi said. "Refined output should also be boosted by processing of stockpiles."

Amplats said that, as a result of the ACP process interruptions, there was a build-up of work-in-progress inventory of around 1 million PGM oz, with the build-up in inventory expected to be released by the end of 2022.

New production
Another key question is how much higher PGM prices incentivize new platinum group metals as well as rhodium primary production and how much can be added by when.

Afriforesight's Mururi said that some of the projects that have been abandoned or cancelled, such as Stillwater-Sibanye's K4 project, are now coming back into play, with other producers potentially looking to finance similar projects to get them back online.

"That should up the rhodium supply to also grow in the near term," Mururi said. "We'll probably see some of the capital spent by PGM producers being directed towards UG2 reefs because they have higher rhodium [content of the UG2 ore] and because of the higher rhodium prices will benefit overall their profitability."

Heraeus Precious Metals, one of the world's largest platinum group metals refiners, said in a research note that Sibanye-Stillwater's K4 project could account for around 20,000 oz/year of rhodium, equivalent to 3% of South Africa's annual rhodium supply.

"However, restarts and projects can take years to reach full production," Heraeus said,

No quick ounces
On the subject of reaching full production, this was echoed by Nedbank analyst Arnold Van Graan, who told Platts that in terms of restarting operations "there are no such thing as quick ounces."

"I think that's the misnomer, when people think 'We can just open up mothballed mines and we are going to get a big supply of rhodium,' that's not the case," Van Graan said.

"Then you've got to say 'is there a will to do it?' because what about [state-owned electricity utility] Eskom? What about labour, because you have to remember that if you sign on people and the rhodium price turns, you're going to open up what was previously a marginal mine because the mothballed mines were closed for a reason," Van Graan said.

Another question is to what extent car companies can tolerate higher PGM prices and what potential alternatives are available to them, specifically the option to replace some rhodium with higher loadings of platinum and/or palladium.

"Rhodium's high price is incentivising fabricators to investigate the substitution of rhodium in autocatalysts," Heraeus said.

"Given today's more stringent NOx emissions standards, that might be more challenging than in 2008 when rhodium first traded above $10,000/oz."

Heraeus Precious Metals' rhodium industrial price stood at $26,250/oz, up 1% on Feb. 24.

[elsa7878] 30/4/2021 10:07

Sorry to ask another question.

How much of the basket does Rhodium make up and as it is now 10 times more expensive than gold is it open to substitution or increased supply?

[twirl] 30/4/2021 09:49

kennyp52>> Yes seems daft that good results initiate a price drop. But thats the silly short term UK market. MMs probably facilitate it to encourage sells so they have some stock for the subsequent buys. But the silly maxim of buy on rumour / sell on results encourages a few to sell. Also many invetors have a very short term outlook eg days and after news expect a long wait before further news.

[thelongandtheshortandthetall] 30/4/2021 09:46

IMO the host mines will not be able to construct the infrastructure to do what SLP does in any time frame that makes it an option for them.

What we all need to appreciate is that miners/processors are already running at max capacity.
Of all the mining companies RNSs I have read over the years not one has said they they didn't mine as much as they could.

Demand has kicked in big time for industrial metals and the minors cannot turn up the taps to meet this demand over night.

Do you own research.

[stemis] 30/4/2021 09:40

As I predicted, the windfall dividend hardly makes a dent in the cashflow. $35m generated in one quarter alone and they pay a windfall dividend of $14m!! Really need to be looking at a further distribution.

I'd be a little careful of the results for the quarter on it's own. The profit in the quarter includes a $15m sales adjustment, revaluing the revenue from the previous quarter for the actual commodity price received. But even adjusting for this, current valuation is 2.1 x annualised ebitda for Q3. Ridiculously cheap. Should be at least 200p

[elsa7878] 30/4/2021 09:40

Thanks. Is there a chance that the host miners might think they should be doing this themselves as the profits are so huge or do they have binding long term agreements in place?

[kennyp52] 30/4/2021 09:28

Well ... didn’t understand the initial negative movement on this RNS but at least it is showing a bit of life now . Good luck all holders

[elsa7878] 30/4/2021 09:12

Thanks Overeager. Even if the commodity basket halved the pay back would be 4 years. Still incredible.
What is the resource estimate. Mostly tailings but blended with some new mining...is that right? I'm trying to catch up. Appreciated.

[eggbaconandbubble] 30/4/2021 09:10

elsa - people don't trust mining stocks.

The definition of a mine is 'A hole in the ground with a liar standing by the entrance'!

[overeager] 30/4/2021 09:07

"Negatives are that they don't deliver food/pizza/burgers at a loss , that seems to be whats important at the moment."


That made me laugh - very good.

[metis20] 30/4/2021 09:04

Basket breakdown by value is currently approx 1/1.0/4.9 for Pd/Pt/Rh

[farnesbarnes] 30/4/2021 09:03

Now where's the updated Liberum note? And ST. Chop chop.

[death by donut] 30/4/2021 09:03

Negatives are that they don't deliver food/pizza/burgers at a loss , that seems to be whats important at the moment.DbD :-) - Happy (small) holder.

[overeager] 30/4/2021 09:01

Elsa, the market has yet to believe that the prices of the PGM basket of commodities are sustainable at current levels. I think they probably are due to systemic demand. It may take a while for the market to catch up - in the mean time these are a bargain IMHO

[elsa7878] 30/4/2021 08:55

Cash £78 million.

Market cap ex - cash £260 million.

£30 million net profit per quarter. Worst quarter and material improvements forecast. So if commodity prices stay at these levels then they will cover the market cap in probably under 2 years.

Amazing wish I'd heard of this company before!

What are the negatives that make this seem so cheap. The market clearly doesn't believe something. Commodity prices, resource..? Thanks in advance.

[twirl] 30/4/2021 08:54

ST of IC target price was 180p based on Q2 - maybe update next week.

[eggbaconandbubble] 30/4/2021 08:51

$102m cash = £75m
285m shares in issue - 25p per share
Surely they can afford a divi circa 10 - 12p?

[kennyp52] 30/4/2021 08:51

When markets no longer value share on profit / cash and fundamentals it does make you wonder how you can sensibly trade in such a market .

[overeager] 30/4/2021 08:49

Just as I'd hoped. Cash of just over £70m so SLP has a Market Cap of £270m after stripping out cash. Annualise Q3 results and you get a net profit of £118m.

Which implies a run rate P/E of 2.3 - Lovely, what a bargain.

[whitefish] 30/4/2021 08:47

EPS run rate using Q3 and est Q4 over 40 pence per annum unadjusted for cash!!

Q3 EBITDA and Production spot on my forecasts but actual Net Profit $4m higher.

Hopefully, people will realise on the basis of EPS annualised of circa 40p the share price must head towards 160p - well I hope so!

Contracted assets / debtors will continue to increase with the rising PGMs.

[1ups1de] 30/4/2021 08:46

Key driver :Basket price has more than doubled vs last year. This will feed through for some time given positive commodities outlook

[tonytyke2] 30/4/2021 08:43

metis20, I see that Q3 results indicate 9% of Rhodium in basket?

[tonytyke2] 30/4/2021 08:37

Crikes, debt free and more than $102m cash!

[thelongandtheshortandthetall] 30/4/2021 08:31

Cash adjusted and after converting the $s into £s SLP is trading on around 1.6x revenue lol - Cheap IMO