Gold: the talk of the town

Sibanye-Stillwater Limited (SGL)

Gold has become the talk of the town as global economic fears rage on the commodity sector especially precious metals have not lost its lustre. The yellow metal has gained over 27% over the last year which has been great for Gold stocks like Sibanye-Stillwater. On 30 August 2017, Sibanye Gold Limited began trading as Sibanye-Stillwater and reorganized its operations by region – Southern Africa (JSE: SGL) and the United States (NYSE: SBGL).

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Fundamentals

Sibanye recently released its results for the first half of the year on the 29^th of August 2019 which lacked the lustre compared to the previous year. The results showed the impact of strikes at Sibanye’s Gold operations despite improved financial results from the South African and U.S. platinum group metals operations.

The AMCU strikes over wage increases significantly impacted operations, costing Sibanye more than $100 million in lost revenue. The strike began in November 2018 and ended in April.

The company’s Earnings Per Share (EPS) missed expectations and was down 11c while Revenue also decreased by 3.47%. Headline Earnings Per Share (HEPS) plunged by 54 cents, compared with a per 4 cents per share in the previous period.

Sibanye-Stillwater share overview:

• Market Cap of R55,9 billion
• Dividend Yield – 0%
• Shares in issue: 2,670,029,252
• PE Ratio: -41.32
• 52 Week Range low of 834c and high of 2,159c per share.

Outlook

With the Lonmin acquisition concluded in June, Sibanye-Stillwater became the largest platinum producer in the world. Platinum prices are up 15% this year which is something to take note of. Sibanye-Stillwater is currently also in talks to potentially acquire the world's deepest gold mine, Mponeng, as current owner AngloGold Ashanti plans its South African exit.

There might also be a Dividend on the cards in 2020 if precious metal prices continue to shine, operations remain positive which would in turn benefit earnings and cash flow in the second half of the year. This will enable Sibanye to Reducing debt, which is high on the priority list and paying a dividend possible. Sibanye last paid a Dividend in February 2016.

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Chart Life

The price action on Sibanye has encountered technical resistance at the 2231c per share level which might see the stock move lower in the short-term to 1773c per share. We would need to see the price close above this resistance level in order to negate the pullback.

When looking at seasonal trends of Gold Futures then we might expect a slight pullback in September and for Gold to gain momentum once more.

Source - Bloomberg

Portfolio particulars:

• Portfolio Hold (Current)*
• Portfolio Buy opportunity: close above R22.31 per share** 
• WhatsTheBeef long term target price: R27.12 per share 

Know your company: Sibanye-Stillwater (SGL)

• In 2012, Gold Fields Limited unbundled its subsidiary, GFI Mining South Africa Proprietary Limited (“GFIMSA”), which was then renamed Sibanye Gold Limited (“Sibanye Gold”)
• Sibanye-Stillwater is the largest individual producer of gold from South Africa and is one of 10 largest gold producers globally
• Sibanye-Stillwater is currently the world’s largest primary producer of platinum, the second largest primary producer of palladium.

*Portfolio Hold (Current) refers to investors who already hold the stock within their portfolio.

**Portfolio Buy opportunity refers to Technical level crossed which might imply that the markets behaviour would support the outlook and Close above refers to a share price close above a Technical Resistance level.

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Barry is a market analyst with GT247.com, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.