February 8, 2021 BARRON’S 21
supply constraints, resilient automotive
demand, new uses such as hydrogen
fuel cells, and investment interest.
Major platinum producers, such as
South Africa-basedSibanye Stillwa-
ter(ticker: SBSW), are highly profit-
able and trade at some of the lowest
valuations in the mining sector.
Sibanye is a top-three producer of
platinum, at about one million ounces
annually, and among the top three in
palladium and rhodium. It also mines
about a million ounces of gold.
Sibanye, whose U.S.-listed shares
trade around $16, is valued at just four
times projected 2021 earnings of $3.79
a share. The two leading gold miners,
Newmont(NEM) andBarrick Gold
(GOLD), trade for around 15 times
estimated 2021 earnings.
Sibanye CEO Neal Froneman tells
Barron’sthat he sees a “supercycle” in
platinum-group metals this decade.
Palladium is up 70% over the past two
years, to $2,300 an ounce, while ultra-
rare rhodium has risen eightfold, to
$21,000. Froneman thinks platinum
could hit $2,000 in four to five years.
The rising popularity of electric
vehicles could trim demand. Catalytic
converters—exhaust-system devices
used to control pollution in conven-
tional vehicles—are the main use for
the metals: palladium for gas-powered
cars and platinum for diesels.
Yet, Froneman observes, the internal
combustion engine has many years left.
EVs account for only a small part of the
90 million new cars and light trucks
sold annually—a market still expanding
by 2% to 3% a year. In addition, emis-
sions standards in developing nations
are getting tougher, another factor boost-
ing demand for platinum-group metals.
Platinum even could benefit from
EVs. It’s a crucial component in the fuel
cells—rather than batteries alone—that
already help power a few of them, turn-
ing hydrogen into electric current. Fuel
cells could account for 6% of global plat-
inum demand by the end of the decade,
some analysts predict.
Nearly eight million ounces of plati-
num, worth $8 billion, are produced
annually. A reliance on South African
output creates supply risk, given peri-
odic labor strife and an uneasy relation-
ship between mining companies and the
government. Platinum is also hard to
obtain. Most South African mines are
deep underground and labor-intensive.
“If the Reddit crowd had paid at-
tention to platinum, and not silver,
they could have moved the price a lot
more; it’s a much smaller market than
gold or silver,” says Will Rhind, the
CEO of GraniteShares, which runs
GraniteShares Platinum Trust
(PLTM), a $25 million exchange-
traded fund that holds the physical
metal. The largest U.S. platinum ETF
is the $1.4 billionAberdeen Stan-
dard Physical Platinumfund
(PPLT). Platinum ETFs globally hold
about four million ounces, against 100
million for gold and one billion for
silver, according to Bloomberg.
In addition to Sibanye, other plati-
num producers includeImpala Plati-
num(IMPUY) andAnglo American
Platinum(ANGPY), nearly 80%-
owned byAnglo American(NGLOY)
of South Africa. Anglo American Plat-
inum is the blue chip of the group,
with a market value of $27 billion. Its
shares trade at a premium to rivals’ at
seven times estimated 2021 earnings.
Chris LaFemina, a Jefferies analyst,
calls Anglo’s open-pit Mogalakwena
mine in South Africa the “premier
platinum asset in the world.”
Sibanye Stillwater began in 2013 as
a spinoff fromGold Fields(GFI). Un-
der Froneman’s leadership, it began
buying platinum mines. Its most im-
portant deal was the $2 billion pur-
chase in 2017 of Stillwater Mining, a
platinum and palladium producer
based in Montana. That buy was well-
timed because palladium prices then
rose, allowing Sibanye to cut debt. The
deal also made Sibanye less dependent
on South Africa, whose mining compa-
nies trade at discounts to global peers.
“The company is at an inflection
point, with growing free cash flow and
a strong balance sheet,” says Raj Ray, a
BMO Capital Markets analyst. “It’s
well-positioned to participate in the
ESG revolution.” He has an Outper-
form rating and a $22 price target on
the stock. The shares’ low valuation
reflects South African risk and con-
cerns about the sustainability of high
prices for palladium and rhodium.
Froneman sees a “significant re-rat-
ing of the stock” as Sibanye shows con-
sistent performance in coming quarters
and lifts its dividend yield, now under
1%. The company, which reports sec-
ond-half results on Feb. 18, has a goal of
a 25% to 35% dividend payout ratio,
which could lead to a 5% yield.
Platinum has lost some of its luster
in the past decade, but the coming
years look much brighter.B
Why Platinum
Is Poised to Shine
The precious metal has lagged behind gold and silver. Yet its importance
as a component of hydrogen fuel cells is only likely to grow.
Going Platinum
Here are some stocks and exchange-traded funds to play a rally in platinum.
*Impala’s fiscal year ends in June; 2020 EPS is actual; E=Estimate Source: BloombergAngloAmericanPlatinum/ANGPY$17.25 24.9% $1.09 $2.37 7.3 $27.5 1.2%
Impala Platinum Holdings / IMPUY 14.46 44.7 1.24* 3.10 4.7 11.4 3.3
SibanyeStillwater/SBSW 15.99 55.5 2.38 3.79 4.2 11.7 0.7
Company / Ticker Price Change EPS EPS P/E (bil) YieldRecent 52-Week 2020E 2021E 2021E Value DividendMarketAberdeen Standard Physical Platinum Shares / PPLT $102.81 10.9% $1,370 0.60%
GraniteShares Platinum Trust / PLTM 10.86 11.3 25 0.50
Platinum ETF / Ticker Price Change (mil) RatioRecent 52-Week Assets ExpenseFund“If the Reddit
crowd
had paid
attention
to platinum,
and not
silver, they
could have
moved the
price a lot
more.”
Will Rhind, CEO of
GraniteSharesT
he Reddit army of traders
recently took aim at silver,
triggering a brief spike in its
price to nearly $30 an
ounce, before it settled this
past week at $27. Another
precious metal should be in
their sights: platinum. It is generating
more interest because of its role in the
green economy and its relative scarcity.
Platinum, now trading around
$1,100 an ounce, is up 15% in the past
12 months, but has lagged behind gold,
silver, and other platinum-group met-
als, such as palladium and rhodium, in
recent years. Platinum demand for die-
sel-engine pollution controls fell in the
wake ofVolkswagen’s (ticker: VOW.
Germany) emissions scandal in 2015.
Platinum peaked more than a decade
ago at $2,250 an ounce, when it traded
at a premium to gold. It’s now at a 40%
discount to gold, which is fetching
$1,800 an ounce. Bulls argue that plati-
num could head back toward its old
high in the next five years because of
By ANDREW BARY Miners at
Anglo American
Platinum’s
Dishaba open-pit
platinum mine in
South Africa.Courtesy of Anglo American Platinum