$SBGL : Sibanye-Stillwater Updated High Level Analysis

5 November 2019 Updated Global Reserve Model
Discounted Global Gold Reserve Value *$3,704,036,400
Discounted Global 4PE Reserve Value **$16,582,170,000
Discounted Global 4PE Reserve Value, Lonmin ***$6,798,330,000
Discounted Global Copper Resource Value ****$7,589,744,040
Discounted Global Uranium Resource Value *****$286,861,500
Aggregate Net Global Reserve Value$34,961,141,940
Estimated Reserve Lifespan
PGM32.5 Years
AU13 Years
2020 Estimated Net Income$1,165,371,398
2020 Estimated Market Cap$11,653,713,980
2020 Projected Market Cap Growth133%
FCM Target Price$17.45/sh.

Notes: All Values in U.S. Dollars

*Rustenburg, Kroondal, Mimosa, Rustenburg Tailings, Stillwater, East Boulder

**Beatrix, Cooke, Driefontein, Kloof, WRTRP, DRDGOLD, SA

***Marikana, Tailings

****Altar, Marathon, Rio Grande

*****Beatrix, WRTRP

Early Q4 Updates

  1. $IMPUY — We exited Impala Platinum Holdings at our target of $7 for a return of 150%.
  2. $FCUUF — We doubled our stake in Fission Uranium on 22 October.
  3. $AAU — We took advantage of the Ixtaca permitting suspension to aggressively purchase shares on sale at $0.50 on 30 October.
  4. $GUYFF — We took advantage of the Halloween guidance scare to double our stake in Guyana Goldfields.
  5. $TGB — We like Taseko’s pipeline, especially the Florence Copper Project. We also like the way copper is behaving generally. We started to build a stake on 12 November.
  6. On 4 December 2019, we exited Auryn, Black Iron, Crystal Peak, Dolly Varden, Great Panther, Minco Silver, and McEwen.
  7. On 4 December 2019, we initiated positions in Premier Gold Mines, Fortuna Silver Mines and Aurcana Corporation.

“[Copper is] more strategic than cobalt, more strategic than lithium. You can’t replace copper on conductivity. It is a modern metal.”

Mark Bristow

Q2 Updates

In Q2, we reduced our exposure to uranium and increased our exposure to gold, silver and agriculture; our allocations to platinum and rare earths remain unchanged.

At Fahy Capital Management, our investment decisions are based upon quantitative data. Analysis of that data enables us to execute in what we perceive to be a timely and prudent manner. When our data suggest the gap between price and value has closed, we sell. This approach ensures that we do not fall in love with a particular idea or stock. We perceive stocks as inventory and we like to see that inventory get worked off.

Over the course of a 12-month time frame, we typically expect inventory to be reduced by as many as 2 or 3 names, and this has proven a rate that allows us to reinvest and grow.

New Directions

We remain committed to the value proposition, but how we arrive at determinations of value is changing. We have developed new formulas and new ratios that we believe better reveal the merits and shortcomings of businesses under investigation, while conferring to us an edge on the hairy margins.

We are looking forward to sharing some of our results here in our blog. Those results, however, don’t constitute a recommendation to buy or sell; it’s just food-for-thought.

$SBGL : Shrewd Moves from Froneman

Sibanye-Stillwater to mothball, close four gold shafts, but limits job cuts to 3,450…

Shafts that didn’t escape the cull were Beatrix 1 shaft in the Free State, which will be placed on care and maintenance, and plant facilities at Beatrix 2 which will be closed. The Driefontein shafts 6 and 7 will also be closed, while Driefontein 2 shaft will be placed on care and maintenance. [LINK]

See Fahy Capital Management’s Notes and Recommendations for Driefontein and Beatrix from 22 June 2018 for more details: If We Had an Audience with Froneman, This is What We Would Say

Sibanye-Stillwater: If We Had an Audience with Froneman, This is What We Would Say

We respect Neal Froneman and we respect his bold bets. His strategy is not a complex one: buy countercyclically. The Rustenburg, Acquarius and Stillwater deals were good ones, and well-timed. The proposed acquisition of Lonmin is pushing the envelope, but we agree it is a special situation of which Froneman must take advantage.

We are long-time platinum traders and investors and many of the mines flying under Sibanye-Stillwater’s flag have a special place in our hearts. A new era is dawning for platinum mining in South Africa: the industry is graduating to UG2 ore. Consequently, upon sealing the Lonmin deal, Sibanye-Stillwater will need to act decisively in order to transform operations from ones fraught with incalculable risk, to ones that redefine safety in the sector.

Firstly, Froneman needs to commit to swift change at Lonmin’s Marikana, phasing out the following Generation 1 Shafts: Hossy, Newman, Pandora E3 Joint Venture and W1, East 1 and East 2. K4 needs to be closed permanently. Generation 2 Shafts — K3, Rowland, 4B and Saffy — need to be nurtured.

We would like to see Impala Platinum buy out Sibanye’s 50% interest in Mimosa. JV or no JV, we think Wedza Shaft should be placed on care and maintenance and all energy devoted to further development of Mtshingwe Shaft.

We also think there is a case to be made for placing Driefontein on care and maintenance, while concentrating on yield and safety at the Beatrix and Kloof gold operations.

We think Altar, an exploration-stage project in the Andes, should be spun out to shareholders immediately.

On the Valuation of Sibanye-Stillwater

We value things conservatively at Fahy Capital Management and Sibanye-Stillwater is no exception. Its resource base is large, but we believe only a fraction of it is economical at any price and that is the portion we value. Also, we don’t incorporate prospective additions to reserves from the proposed Lonmin acquisition into our calculations.

Resources Subject to Valuation

PGM = 44,261,000 oz

Au = 30,971,000 oz


We believe Sibanye-Stillwater is trading at a 46% discount from intrinsic value. In a word, on any day that Sibanye-Stillwater trades below US $5.14, it is a bargain. But what about tomorrow? What kind of return can one expect at higher Au and Pt prices? We believe that a return of ~200% is probable in an environment that is not hostile to Au and Pt. Our own long-term target for Sibanye-Stillwater at much higher Au and Pt prices is US $8.50.