It is worth looking at Sylvania Platinum Limited (London: SLP) primarily engaged in the extraction of platinum group metals (PGM) in South Africa and Mauritius. PGMs are platinum, palladium, and rhodium.
This is a primary player in Platinum extraction and it has been very over sold. As such, it offers a very interesting entry opportunity with a favourable asymmetric skew.
On the depressed share price the dividend yield is double digits. The company has also been buying back its shares, reducing the share count by 12% over the last 8 years.
The market cap is £107m GBP, but it has a net cash position of $98m GBP - so the business is incredibly underpriced.
The net asset value of the company is £225m GBP, so there is a huge margin of safety here. It is what Ben Graham would call a net/net.
Sylvania Platinum has faced several significant headwinds that have impacted its performance. One of the primary challenges is the decline in the platinum group metals (PGM) basket price, which has dropped by around 36% in the average PGM prices, significantly affecting the company's revenue and net profit. Commodity prices are cyclical and we seem to be emerging from the low of the cycle now.
Additionally, the company has encountered operational disruptions, including a 22-day strike in the fourth quarter of 2024, which resulted in 10% lower production and increased operating costs by 5.6%. Those strikes are now over. Other challenges have included operational difficulties such as power disruptions due to poor local infrastructure - but the company has now invested in generators to mitigate this risk.
All of these challenges have been exogenous - none affect the viability of the business nor do they undermine its unit economics. Management has proved itself to be competent and shareholder friendly, exercising prudence but also seeking to optimize the outcome for investors through dividends and buy-backs as appropriate.
As a bonus, in addition to its PGM operations, Sylvania Platinum's has recently entered a joint venture, known as the Thaba Joint Venture (Thaba JV), involving a 50:50 partnership with Limberg Mining Company (LMC), an affiliate of ChromTech Mining Company. he venture is expected to start production in the first half of 2025 and runs for 10 years. For the first time, Sylvania will receive a full margin chromite concentrate revenue stream, in addition to PGM revenues. This is expected to significantly enhance the company's earnings, with up to 75% of the JV's revenue over the next four years anticipated to come from chrome production.
Not investment advice - just an idea for you and others to explore further.
I know, a recession will hit hard the PGM market but maybe it could even benefit my picks in the long term as most mines will be closed and when demand spikes up again supply will lack.
Great write up Hugo.
It is worth looking at Sylvania Platinum Limited (London: SLP) primarily engaged in the extraction of platinum group metals (PGM) in South Africa and Mauritius. PGMs are platinum, palladium, and rhodium.
This is a primary player in Platinum extraction and it has been very over sold. As such, it offers a very interesting entry opportunity with a favourable asymmetric skew.
On the depressed share price the dividend yield is double digits. The company has also been buying back its shares, reducing the share count by 12% over the last 8 years.
The market cap is £107m GBP, but it has a net cash position of $98m GBP - so the business is incredibly underpriced.
The net asset value of the company is £225m GBP, so there is a huge margin of safety here. It is what Ben Graham would call a net/net.
Sylvania Platinum has faced several significant headwinds that have impacted its performance. One of the primary challenges is the decline in the platinum group metals (PGM) basket price, which has dropped by around 36% in the average PGM prices, significantly affecting the company's revenue and net profit. Commodity prices are cyclical and we seem to be emerging from the low of the cycle now.
Additionally, the company has encountered operational disruptions, including a 22-day strike in the fourth quarter of 2024, which resulted in 10% lower production and increased operating costs by 5.6%. Those strikes are now over. Other challenges have included operational difficulties such as power disruptions due to poor local infrastructure - but the company has now invested in generators to mitigate this risk.
All of these challenges have been exogenous - none affect the viability of the business nor do they undermine its unit economics. Management has proved itself to be competent and shareholder friendly, exercising prudence but also seeking to optimize the outcome for investors through dividends and buy-backs as appropriate.
As a bonus, in addition to its PGM operations, Sylvania Platinum's has recently entered a joint venture, known as the Thaba Joint Venture (Thaba JV), involving a 50:50 partnership with Limberg Mining Company (LMC), an affiliate of ChromTech Mining Company. he venture is expected to start production in the first half of 2025 and runs for 10 years. For the first time, Sylvania will receive a full margin chromite concentrate revenue stream, in addition to PGM revenues. This is expected to significantly enhance the company's earnings, with up to 75% of the JV's revenue over the next four years anticipated to come from chrome production.
Not investment advice - just an idea for you and others to explore further.
Amazing information as usual James. I plan to write a whole article about the company as it is one of my favorite opportunities in the PGM market.
Hugo
What is the current above ground inventory for platinum and palladium
I also like Sylvania Good company with 8%growth beginning their 4th quater plus remittance of 50% capital expenditure
I also bought intellego in sweden. Liked the story after doing some research myself.
Hi Harold appreciate your comment.
There are less than 6 month demand reserves for both palladium and platinum.
Just remember in a recession 6months can be elongated
I know, a recession will hit hard the PGM market but maybe it could even benefit my picks in the long term as most mines will be closed and when demand spikes up again supply will lack.