Sibanye-Stillwater Ltd. (SBSW, Financial) is the largest primary platinum producer in the world and holds interests in an array of gold and renewable energy production projects. Much has been made of the company's labor issues of late, but it seems as though matters are soon to be resolved, which could see the stock reach its full potential.
Union updates
Sibanye and two South African labor unions have agreed that the mining company will only increase its monthly workers' wages by 700 rand ($48) instead of 1,000 rand.
The unions that have agreed to the matter are Solidariteit and UASA. Generally speaking, the mentioned unions have conflicting interests, but a sense of alignment is in the offering in this instance. It's likely that mineworkers, unions and Sibanye will soon reach a final agreement, suggesting we may shortly see the company's Kloof and Beatrix gold mines become fully operational.
Labor issues are a common denominator for any primary producer in South Africa. Thus, the stock's 18% sell-off over the past month has been overdone by market participants.
Dividend news
Sibanye declared a quarterly dividend of 48 cents per share after producing fourth-quarter earnings worth $3.44 per share.
The company's future dividend payouts are safe as houses seeing as its dividend payout coverage ratio is solid at 2.71 times, with its interest coverage ratio also looking more than healthy at 30.31 times.
We're likely heading for multiyear prosperity in the metals and mining sector as the Russian short supply of critical metals will ultimately lead to a supply void to fill, which isn't something that can be done overnight.
Valuation
Sibanye's stock is still undervalued with its price-earnings ratio trading at a sector discount worth 64.42%. In addition, the market has yet to price in the company's earnings per share growth as its PEG ratio is trading at a 1.15 times discount to its relative benchmark.
To add to the mentioned relative valuation metrics, Sibanye has tapered its leverage ratio significantly recently. In contrast, the value of its total asset base has increased, suggesting that we're looking at a stock with excess intrinsic value, making it a very lucrative value play.
The bottom line
Sibanye hasn't lived up to its potential yet. However, core business operations in its platinum group metals segment could enter a multiyear expansion, subsequently sustaining the company's impressive dividend yield. The stock is undervalued, but once labor issues are settled, we'll likely see the shares surge.
