Now’s your chance
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.