London, UK, 30 October 2021

Sylvania Platinum (SLP): Initiation - Massive free cash flows post-spike in PGM prices

Sylvania Platinum's (SLP) core business is the production of low-risk platinum group metals (PGM) from chrome tailings dump retreatment in South Africa (SA). The business is high margin, reflecting a low-cost base and in FY21 it benefited from the surge in PGM prices, which have since moderated with a sharp dip in Q122 and are now firming up again. The company's large net cash position and highly cash-generative nature, even post the spike in PGM prices in 2021, positions it well for attractive dividends, high cash generation and possible corporate action.

Sylvania's business has a favourable cost base. It has low labour intensity, high efficiency of 116oz PGM per employee pa (vs Anglo Platinum at 78oz PGM per employee pa), surface-only operations (low-cost vs underground mining), a long life and the lowest cash cost/oz in the SA peer group. Alongside the group's strong cash generation, this leads us to a valuation of 175p/share, including 163p/share for the producing operations and a carrying value of 12p/share for its E&E assets, representing more than 60% upside from current levels.  

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