Sylvania Platinum is a platinum group metals (PGM) producer with six chrome beneficiation and PGM processing plants in the Bushveld Igneous Complex in South Africa. The company’s share price has been on a stellar run as far back as 2018 on account of surging PGM prices but has recently given back some of these gains despite revealing in its recent Annual Report that net profit is up 143% to $99.8m and closing net cash has risen by 90% to $106m.

Recent share price weakness comes as a result of softer palladium and rhodium prices (down 19% and 43% respectively on their record 2021 peaks), which have caused a drop in Sylvania’s average basket price on a quarterly basis. Importantly though, these markets are still forecast to be in deficit this year, the medium term outlook is favourable, and Sylvania remains hugely profitable at current spot metal prices. Its average basket price for FY21 was up 83% year-on-year to $3,690/oz - nearly five times group cash costs of $755 per oz.

There’s no doubt the shares look cheap - the forecast rolling PE ratio of 3.1x reduces even further after adjusting for cash to just 2x - but how certain can we be that SLP is in fact cheap, given the degree to which profitability is driven by commodity prices? The company has demonstrated that its results - and its share price - can be volatile in the short term but medium term PGM drivers remain positive and the group is forecast to generate nearly one third of its current market cap in free cash flow over the next year alone.


Profile

What are the company's principal business activities, how does it generate its revenues?

Sylvania is a producer of PGMs including platinum, palladium, and rhodium. Unlike miners, the core business of SLP is the retreatment of PGM bearing chrome tailings material at its six plants, although the group also holds mining rights for a number of PGM projects and a Chrome prospect on the Northern Limb of the Bushveld Igneous Complex in South Africa.

Sylvania produces around 70,000 ounces of PGM metals per year with the following prill split.

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Source: Sylvania Platinum Presentation, 2021-06-09

Size, Sector & Exchange

Sylvania Platinum is a metals & mining company operating in the Basic Materials sector. The shares currently trade at 101p, valuing the company at £280m (or around £203m on…

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