Sylvania Platinum Share Discussion Threads

[sr40] 21/6/2021 11:44

Thanks Carcosa!
Very helpful :)
That is reassuring because when I deduct the 14.3m div my net earnings are around the 19.5m mark (not too far from your 21.8m) but I assumed 70k oz prod for the full year and so 16,245 for Q4 (which appears to be on the light side).
I use a (very) simplistic calc: Quarter average for each (6E) PGM x prod oz. = basket (say) 100. I deduct 20%* to get to gross revenue and then take half of that to arrive at net profit.

* a basket price conversion ... for last 6 years, the gross revenue as a % of the basket price has been: 77%, 76%, 78%, 83%, 82%, 82% (so fairly consistent).
Thanks again for the really useful info!

[friskymickey] 21/6/2021 11:10

5p spread?

[carcosa] 21/6/2021 11:08

SR40,

It must be remembered that SLP produce a concentrate so will never get the refined metal prices. If you go through the quarterly, interim and Annual Reports you can work out a reliable 'factor' to be applied to the basket price (although I actually estimate average spot prices for each 4E constituent). The 'trick' is to remember that SLP don't get paid until 2-4 months later so essentially you are always working the prices as they were one quarter ago. That way you can then calculate a factor to be applied for each metal (or basket, if you so wish) to calculate how much revenue then start removing various items such as royalties (paid every six months), dividends, dividend costs, capital expenditure, etc etc. Then don't forget that because of the smelters payment terms there can be an additional cash income/expenditure depending upon the change of the basket pricing between delivery and payment schedule. The other major guestimates surround working capital movements, ounces produced and labour costs.

Whilst I am unable to calculate things to the 'nth degree I am interested in the general theme of...' are things going to better or worse over the short to medium term.'

I generally do a bit more and calculate P/E net of cash and buy if it's below a certain value and sell if its above a certain value. At the end of the day it is the price of the PGM that dictates everything.

As a company, provided it remains essentially asset light compared to its peers then I'm happy for the medium term.

It sounds a lot but stick it in a spreadsheet and its considerably more easier than it appears.

The "you have `only` [21.8]?" is after a $14.3m dividend payment.

[dougmachin] 21/6/2021 10:30

Seems to like this 120-121p line.

[sr40] 21/6/2021 10:03

Also do I read this right, net profit: Q1...20.1, Q2...20.3; Q3...41.3 and for [Q4] you have `only` [21.8]? (I`m equating cash with np)
Thanks

[sr40] 20/6/2021 15:37

Quick question how are you converting gross 6E basket price into revenue? The AR are silent on this. It is straightforward to get to net earnings from revenue but it is the jump from gross basket price to revenue which is the silent bit. Deduction for smelters costs perhaps and if so would that not fall under cost of goods sold?

[carcosa] 19/6/2021 13:29

greggphilips88,

FWIW I have $21.8m cash coming in Q4 after normal payments, including dividends.

For the entire year I see adverse ER losses running around $8m and total costs associated with the dividend (because of the corporate structure) of $1.6m

Using a conversion factor against Ru/Ir JM pricing would be the practical way to deal with it. 0.7 seems a bit high to my way of thinking. 0.5 may be closer to the mark? I think there is some commentary about that in the Annual Report.

However I am getting to close to over-analysing this company; looking for pennies and forgetting the pounds lol!

I think the credit risk question needs to be asked at the next investor meeting. If working capital starts to unwind then all well and good.

Interestingly with PGM prices decreasing that working capital unwinding may provide some interesting (positive) surprises for some investors...maybe!

[greggphilips88] 19/6/2021 10:16

Carcosa,
great points, thank you.
Yes, I was uber conservative on cash - had dividends in mind but didn't list them. My hope is cash is much better than +$20MM Q3 to Q4.

You are right about S&P Platts and Ru / Ir - I use JM as easy to get and then * .7 to factor in smelting and lower prices, but it's not a great calc. I need to update my thinking and numbers with that. What are better numbers to use for Ru and Ir, in your view, right now? I am registered with S&P but can't get their pricing easily.

Agree on cash int and ER movements - starts to get more complex than this broadbrush picture, but very material on results. What do you see the impact of Q4 ER movements having on SLP?

I hadn't really considered credit risk, but it's a good shout. I have been assuming benefit as this unwinds (again, not in my cash estimate above). Do you think credit default is a genuine risk from trade creditors?

[carcosa] 19/6/2021 09:47

greggphilips88,

Historically Q4 production has always been the highest (except last year for obvious reasons) by 20-35% over the Q3 quarter.

Q4 will also see the dividend being taken out of the cash pile (along with additional dividend costs due to the company being registered in Bermuda and operating in SA)

Should also be aware that the effect of Foreign Exchange Movements will dwarf any income arising from bank interest; although this will not be seen until the prelims are issued.

The minor metals you quote will have little comparative impact. SLP don't get anything like that sort of pricing; less than 50% (remembering SLP produce a concentrate and pricing is as per S&P Platts).

Provided SLP have not done anything crazy in acquiring lots of assets i.e. remains effectively asset light compared to Tharisa then I'll be happy.

Having said all of that, I still think you have underestimated the final cash position :-)

Things to keep an eye on in the future are:
Working capital changes; do the receivables carried any credit risk? The amount of receivables is getting uncomfortably high for me in absolute terms (~70m). If that does unwind then that will be a considerable uplift to the cash position. I would like to see at least 20m of that unwinding. Alternatively if there is a credit default/delay then all that cash we expect will end up shifting to working capital.

[greggphilips88] 19/6/2021 08:44

This period has resulted in a predictably lower share price (see 5383), and this was exacerbated by the across the board drop in commodities on Thursday - driven by a rebound in the dollar (see DXY dollar index) and pressure from China’s crackdown on metals speculators and release of commodities like copper and zinc from their vast central stores. I can see the share price dip below 120 in the next few weeks (any wider market meltdown aside) which will mean I bought a bit early in the 120-130 range.

As we head to July/August, the market will start to consider full year results. I see several reasons to be bullish on SLP for July/August:
1) Q4 21 4E and 6E PGM prices will be even higher than the staggering Q3 21 results
Q3 21 avg. Q4 21 avg. Q3:Q4 Var. 17/06 end indicative oz
Platinum: $1,169 $1,208 + $39 $1,156.00 47k oz
Palladium: $2,424 $2,838 + $414 $2,675.00 17k oz
Rhodium: $23,450 $26,775 + $3,325 $22,000.00 9k oz
Iridium: $4,417 $6,247 + $1,830 $6,100.00 3.5k oz
Ruthenium: $330 $576 + $246 $750.00 21k oz

2) 6E Q4 Production will be higher than Q3 (23,618 6E oz) – Q3 is often a lower production quarter due to Christmas and the weather
3) Chrome prices have improved. The host mines will have been more active delivering better ROM feed: “The period post the Christmas mining-break is always associated with a slower ramp-up by the host mines, but RoM production at both the Mooinooi and Lannex operations have improved significantly since March”
4) Planned improvements to processing will have been delivered and refined, and helped by higher ROM feeds:
“ As the supply of RoM material at Lannex is improving, process optimisation of both the chrome beneficiation and PGM circuits can progress after the commissioning of the new RoM circuit in H1 FY2021. Improved performance on the RoM circuit will assist to lower current operating costs and stabilise PGM production at the operation as well as adding substantial value to the host mine in terms of significant improvement in chrome production.
The Mooinooi chrome proprietary processing modifications and optimisation project to improve fines classification and fine chrome recovery efficiency, as announced earlier, is expected to be fully operational during Q4 where further optimisation work will continue and be completed.



5) Cash balance will grow by at least $20MM. A cash balance of over £100MM is creating net interest of £1MM a quarter now. (this quarter will though see large tax and exchange rate impacts – sucking up significant revenue/cash)

6) Production had been forecasted at 74k – 76k oz before COVID. The company has steadily been making improvements to increase outputs, but it’s been masked by COVID impacts and reductions in host mine outputs. The underlying reasons for this increase remain intact. They are likely to exceed the 70k oz for this year (est 73k oz). As a conservative BOD that likes to under-promise and over deliver, I doubt they will increase expected production but I expect at least 73k oz next year. (SLP have forecasted a drop in 2022 based in host mine impacts before a further lift in 2023 – so we’ll see on this).

7) Liberium, SLPs broker, will bring out new broker note update soon. It’s likely to be very positive. They will at least maintain their 200p share target price, and perhaps consider upside given Q4 will have beaten their expectations. Their 5 year view on Rhodium and Palladium bull cases won’t have changed.

8) Rhodium and Palladium will remain in deficit over the next few years. 2-4 year trends are very favourable for PGMs. Other metals like Ru and Ir have maintained elevated prices – they have very limited supply and are purely outputs from other PGM processing. No one builds a mine for Ru or Ir. However, they are c24k oz of 6E SLP output (c85% Ru and 15% Ir) and at a simple price x oz calc (ignoring smelting and other costs) they alone would contribute c$24MM in revenue next year at current prices

9) If we take these prices below, which are significantly below 17/06 end prices, and assume just 3k oz increase in 21-22 production vs expected 72k oz (to 75k oz 4E PGM), then I forecast we make approx. the same revenue and profits in FY22 as this FY21

Pt $1150
Pd $2500
Rh $17500
Au $1700
Ru $400
Ir $3500


10) 3 development opportunities remain, with Volspruit, Northern Limb, and Grasvally – they have been slow burners but some progress is happening. They are not factored in to valuations currently.

11) I think the share price already factors in a discount for geo-political risk, perceived limited life of mine estimates/visibility, commodity price volatility, conservative dividend history, COVID – and these risks remain

In my opinion, it’s easy to see this share price being above 150p at some point later this year, I personally think 165-170 is probable target as we approach year end results.
Just sharing some thoughts. DYOR obviously. Happy to get any feedback on where I’m wrong in my thinking or data here.

[eggbaconandbubble] 19/6/2021 07:50

bbluesky, I've looked a bit more into the possibility of the Fed raising rates and it's likely that if inflation rears its head that they will be forced to move before 2023!

[russman] 19/6/2021 06:59

and the cash pile keeps mounting up.

[johnrxx99] 19/6/2021 04:04

Yes, because the Fed are going to tapper their 120 Billion a month - yes 120B - bond purchases and increase interest rates in/before 2023. It's been free money for ages and can't go on for ever.

But, it all depends on inflation. If it eases, so will the view and the VIX will calm down. If it increases - tin hats boys.

How this will affect SLP is anyone's guess but if growth slows and the $ keeps strong, raw materials will be weaker than they have been. Keep some powder dry imo, dyor etc.

Good luck all.

[freddie ferret] 18/6/2021 19:37

Pt, Pd, and Rh all down again today.

Chart for Rh looks better that for the other two.

Copper also down again.

[eggbaconandbubble] 18/6/2021 09:17

Doh - I missed that bit!!!

[bbluesky] 18/6/2021 08:34

Egg. They said in 2023! And Freddie, wood for the trees methinks. They are still making money hand over fist every day.

[eggbaconandbubble] 18/6/2021 08:30

Dollar up because the Fed are about to raise interest rates?

[johnrxx99] 18/6/2021 06:47

Dollar up - simple.

[freddie ferret] 17/6/2021 21:45

Pt has fallen very heavily in sympathy with gold which has crashed back to below $1800. We may see Pt below $1000 very soon. The gold fall seems to have been in response to the US talking about increasing interest rates and scaling back printing.

Pd has also fallen.

Rh has also fallen and is now NY $22,000 JMM prices.

Ru and Ir are steady.

The %age fall in Pt is larger than for Au today.

Copper also fell heavily today, though SLP does not produce Copper, JLP does.

[manrobert] 17/6/2021 11:19

the chinese offloading stock probably not helping.

[santangello] 17/6/2021 11:15

Just looking for a re-entry point. Stops being taken out easily here, triggering profit takers too I would imagine.No negative news from the company, and it's last reveal to the market was uber positive....so re-entry for me I'd a no brainer, perhaps close to it now ?

[eggbaconandbubble] 16/6/2021 07:28

It would good to see it nearer $30000 again!

[tonytyke2] 15/6/2021 19:18

Rh up another $200 this evening.

[tonytyke2] 14/6/2021 19:18

Carcosa is right IMO....

[manrobert] 14/6/2021 18:19

depends how they open tomorrow.