Sibanye-Stillwater (SBGL, Financial) jumped 2.64% to $2.33 per share on the heels of the company's announcement that it was the recipient of a $500 million upfront cash payment from Wheaton Precious Metals Corp. (WPM)
Sibanye-STillware will deliver a certain percentage of gold and palladium to Wheaton in exchange for the 0payment. The resources will be derived from its Platinum Group Metals operations in the U.S. The transaction is effective on July 1.
The deal is of primary importance to Sibanye because as its CEO Neal Froneman has said, it certifies the value of the company's assets: The net debt-to-adjusted Ebitda ratio is lowered at 1.7 to 1.8 times from 2.4 times, as of the end of March. Several leverage ratios will also improve following the streaming contract.
As a result of the transaction, the company has deleveraged the balance sheet and relieved the annual income statement with a reduced financial charge.
As a result, shareholders of the company will receive a significant value. The stock is still offering a good entry point, as its share price is underneath the 200, 100 and 50-SMA lines.
Following a 48% decline for the 52 weeks of trading, the share price is just a few cents off the 52 week low of $2.23 and far below the 52-week high of $6.76 per share.
The company has a price-book ratio of 0.71 times versus an industry median of 2.06 times and an EV-to-Ebitda ratio of 10.77 times versus an industry median of 9.9 times.
This transaction will also improve the company's financial flexibility. The company will have an ampler margin to help it better allocate its financial resources. These operations need to be refreshed since they are below the industry median in terms of an Ebitda margin of 16% versus 24%.
For one analyst, Sibanye-Stillwater is a Strong Buy with a target price of $5.57 per share.
(Disclosure: I have no positions.)
