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Bobwins

01/28/20 10:52 AM

#34712 RE: rrten #34710

I think Sibanye is a great way to play the PGM and gold markets. I expect Q4 numbers to be slightly better than Q3. They should pay down more debt and hit their guidance of reducing ebitda/debt to 1.5. When they hit 1.0, they have said they will re institute dividends, which I think will happen around mid year. So lots of good news coming.

BUT

China is a big part of the new car markets. Less new cars sold, less PGM demand. Palladium is in a bubble because paper sellers of palladium are scrambling to find physical palladium to fulfill their contractual obligations so the price has doubled. Rhodium is lightly traded and is past bubble territory. Both of these metals have probably peaked. Gold and platinum could still have their own bubbles but platinum needs automakers to switch their auto catalysts over to platinum to increase demand. That takes time and probably won't happen in 2020.

So while I expect financial results to be good in 2020 for SBGL, I am worried about the corona virus impact on China's economy and specially auto sales. Even if this peters out like SARS and doesn't turn into a pandemic, it's going to hurt China short term.

So if I were to pick a metals producer now, I'd probably lean more towards a gold heavy producer rather than SBGL. Gold is only about 1/4 the revs for SBGL so even if gold goes up strong, it may not offset the weakness in pgm's.