The price of rhodium, one of the six platinum group metals, surged to a record high of $29,800 per troy ounce on March 23 on the back of higher demand from the automotive sector, which is seeking to meet stricter emission norms implemented worldwide, as well as on supply tightness. The price of the precious metal has appreciated as much as forty-fold since August 2016, when it stood at $625/oz.
As a key element in the production of catalytic converters for automobiles, rhodium has seen massive demand from the major markets of Europe, China and the United States because they are all committed to tightening their emission standards as a part of the Paris agreement on global warming. Because COVID-19 pandemic-induced disruptions and months’-long strikes in South Africa affected rhodium production significantly, the element’s price rise is expected to continue.
As such, we believe now is the perfect time to buy rhodium mining stocks Impala Platinum Holdings Limited (IMPUY) and Sibanye Stillwater Limited (SBSW). These companies have strong balance sheets and solid business models. We think they are well-positioned to deliver higher sales volumes and take full advantage of the robust rhodium price rise.
Impala Platinum Holdings Limited (IMPUY)
Based in Illovo, South Africa, IMPUY is involved in mining, processing, refining, and marketing platinum group metals and in production of platinum, palladium, rhodium, chrome and nickel ores. It has operations on Bushveld Complex, located in South Africa, and Lac des Iles Mine, located northwest of Thunder Bay, Canada.
In February, IMPUY received an “A” performance score for its 2020 CDP Water Disclosure Project, for the second consecutive year. This rate places the company in the top 15% of companies amongst a select group of companies in in terms of disclosure.
IMPUY’s revenue has increased 107% year-over-year to R58.12 billion for the six months ended December 31, 2020. The company’s gross profit was R22.4 billion, representing an increase of 263%, from the same period last year. Its ebitda rose 231% from its year-ago value to R25.1 billion, while its earnings grew 328% year-over-year to R14.4 billion. IMPUY generated a free cash flow of R20.1 billion over this period.
A consensus EPS estimate of $4.52 for the quarter ending June 30, 2021 represents a 222.6% improvement from the year-ago value. The consensus revenue estimate of $8.76 billion for the next quarter represents 110.1% growth from the same period last year. The stock has gained 396.4% over the past year.
IMPUY’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
IMPUY has a B Grade for Growth, Quality, and Momentum. Of 53 stocks in the Miners – Diversified industry, it is ranked #1.
To see additional POWR Ratings for Sentiment, Stability, and Value for IMPUY, Click here.
Sibanye Stillwater Limited (SBSW)
Incorporated in 2002, SBSW is a precious metals mining company that in South Africa, the United States, Zimbabwe, Canada, and Argentina. It produces gold, platinum group metals (PGMs), including palladium and rhodium projects, and their by-products. The company owns an interest in the Marathon PGM project in Canada, and the Altar and Rio Grande copper gold projects in the Andes in north-west Argentina, among others.
In March, SBSW and Johnson Matthey, a global leader in sustainable technologies, formed a strategic partnership to develop solutions to reduce carbon footprints and seek more efficient uses of critical metals used in battery technology. This should enable SBSW to meet the increasing customer demand for responsibly sourced products.
In February, the company made an initial investment of € 30 million in Keliber Oy to help it drive its advanced lithium project in Finland. This strategic investment should allow SBSW to enter the battery metals sector, which complements its leading position in PGM.
SBSW’s profit attributable to owners of the company has increased to R29,312 million from R62 million for 2019, during the six-months ended December 31, 2020. The company’s record adjusted free cash flow was R19.9 billion, while its net cash was R3.1 billion at the end of 2020.
Analysts expect SBSW’s EPS to increase at the rate of 53.6% over the next five years. The company’s revenue is estimated to increase 37.9% for the period ending December 31, 2021.
SBSW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. It has a B grade for Momentum, Value, and Sentiment. Among the 53 stocks in the same group, it is ranked #4.
Click here to see the additional POWR Ratings for SBSW (Growth, Quality, and Stability).
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IMPUY shares were trading at $19.70 per share on Monday morning, up $0.51 (+2.63%). Year-to-date, IMPUY has gained 45.86%, versus a 8.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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