Now’s your chance

Finweek English Edition - - MARKETPLACE HOUSE VIEW - ed­i­to­rial@fin­ By Mox­ima Gama

Sibanye’s share price has been slid­ing, down nearly 70% since its Au­gust 2016 high, and about 30% lower than the lev­els it was trad­ing at in De­cem­ber be­fore it an­nounced the ac­qui­si­tion of US plat­inum/pal­la­dium miner Still­wa­ter Min­ing.

The de­cline has led some an­a­lysts to be­lieve it is un­der­val­ued at cur­rent lev­els, with Seek­ing Al­pha rat­ing the stock as a “strong buy” on 26 June. Seek­ing Al­pha be­lieves the mar­ket has been overly con­cerned about the pre­mium Sibanye of­fered Still­wa­ter, and has dis­counted the rise in the pal­la­dium price since then.

At the time of writ­ing on 27 June, pro­duc­tion was also set to restart at its Cooke gold mine near Jo­han­nes­burg, where op­er­a­tions were halted for nearly four weeks due to an un­pro­tected strike. Work­ers at the mine downed tools ear­lier this month fol­low­ing an agree­ment be­tween mine man­age­ment and the Na­tional Union of Minework­ers (NUM) to ban em­ploy­ees from tak­ing food un­der­ground. The step was taken to root out il­le­gal min­ers, who bought food and wa­ter from work­ers at hugely in­flated prices. The strike led to the ar­rest of 461 il­le­gal min­ers, who were forced to the sur­face as their food sup­plies were cut off, EWN re­ported.

A key risk is South Africa’s new Min­ing Char­ter, which has set in­creased tar­gets for black own­er­ship on min­ing companies, as well as a 1% rev­enue tax. Moody’s warned that the Min­ing Char­ter will be “credit neg­a­tive” for SA re­sources groups, in­clud­ing Sibanye, which has ar­ranged a $2.65bn bridging loan to fi­nance the Still­wa­ter deal. How to trade it: On the charts Sibanye, which has been con­sol­i­dat­ing be­tween 1 410c/ share and 2 370c/share since De­cem­ber last year, has formed a ris­ing bot­tom – po­ten­tially sig­nalling a new en­try of buy­ers. It has re­tained sup­port at 1 565c/ share once again and up­side through 1 770c/ share could see Sibanye ap­pre­ci­ate to 1 980c/ share. In­crease long po­si­tions above that level.

The in­ter­me­di­ate peak of a po­ten­tial double-bot­tom pat­tern (the bot­toms are at 1 565c/share) is at 2 370c/share, and Sibanye may aim for that level if up­side should con­tinue through 1 980c/share. Gold spot is form­ing the fourth ris­ing bot­tom, mean­ing it’s in a bull trend. Al­ter­na­tively, go short on down­side through 1 565c/share. Sup­port at 1 165c/share could be tested.

Sibanye’s share price has been slid­ing, down nearly 70% since its Au­gust 2016 high.

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