On Thursday, palladium rose to seven-month highs as supply worries became much more serious after Russia launched an invasion of Ukraine by land, air, and sea. Palladium climbed 5.7% to $2,622.43 per ounce on market worries about a potential tightening in supply.
The silvery-white metal is used in catalytic converters and hydrogen fuel cells. Approximately 44% of the world’s palladium supplies come from Russia, and another 40% comes from South Africa. The metal is expected to benefit from the escalating geopolitical situation and could be used as a hedge against the anticipated pricing pressures in commodities such as oil and gas.
With palladium prices up more than 40% year-to-date, we think these sound palladium mining stocks, Anglo American Platinum Limited (ANGPY), Impala Platinum Holdings Limited (IMPUY), and Sibanye Stillwater Limited (SBSW), might be solid bets.
Anglo American Platinum Limited (ANGPY)
Johannesburg, South Africa-based ANGPY produces and sells platinum group metals (PGMs), base metals, and precious metals in South Africa and globally. The company produces palladium, platinum, ruthenium, as well as nickel, copper, and cobalt. On January 31, ANGPY agreed to dispose of its 50% interest in the Kroondal pool-and-share agreement and the Marikana pool-and-share agreement to SBSW, the other 50% owner of the PSAs. The company expects to accelerate its attributable shares in the Kroondal reserves more than under the previous mine plan, thereby unlocking greater value.
On December 20, ANGPY declared that Bokoni Platinum Holdings, in which the company holds a 49% interest, entered a sales and purchase agreement to dispose of its 100% interest in Bokoni Mine to African Rainbow Minerals Limited. Under the terms of the agreement, Bokoni Platinum Holdings is expected to receive an upfront cash consideration of ZAR3.50 billion ($0.23 billion) for the Bokoni Mine.
For its fiscal year ended December 31, ANGPY’s net revenue increased 99.1% year-over-year to ZAR214.57 billion ($14.24 billion). Its profit for the year rose 159.9% from the prior year to ZAR79.02 billion ($5.24 billion), while EPS came in at 29,976 cents, up 160.2% from the prior-year period. Its gross profit improved 164.6% from the same period in the prior year to ZAR105.11 billion ($6.97 billion).
The $12.97 billion consensus revenue estimate for its fiscal year 2022 indicates an 8.3% year-over-year decrease.
The stock has gained 23.2% in price over the past six months and 13% year-to-date to close yesterday’s trading session at $21.84.
ANGPY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ANGPY has a Growth and Value grade of B. In the 40-stock Miners – Diversified industry, it is ranked #11. Click here to see the additional POWR ratings for ANGPY (Momentum, Stability, Sentiment, and Quality).
Impala Platinum Holdings Limited (IMPUY)
IMPUY, which is headquartered in Sandton, South Africa, mines, processes, refines and markets the platinum-group metals (PGMs). The company’s offerings include palladium, platinum, rhodium, cobalt, nickel, and chrome.
On January 17, IMPUY issued its Offer Circular to Royal Bafokeng Platinum Limited (RBPlat) shareholders to provide information regarding the company’s offer to acquire all RBPlat shares that it does not already hold. Nico Muller, CEO of Implats, said “The proposed acquisition of additional RBPlat shares will provide a structure that offers compelling strategic, operational, and financial benefits for all Implats and RBPlat stakeholders.”
IMPUY’s revenue increased 85.5% year-over-year to ZAR129.58 billion ($8.60 billion) in its fiscal year ended June 30, 2021. Its profit for the year came in at ZAR47.86 billion ($3.18 billion), up 190.3% from the prior-year period. And its EPS rose 211.7% from the prior year to 5,957 cents.
The Street’s $2.24 EPS estimate for its fiscal year 2023 indicates a 6.2% increase, while the Street’s $8.76 billion revenue estimate for the same year reflects a 6.7% improvement from the prior year.
Over the past three months, IMPUY’s stock has gained 30.5% in price and 18.2% year-to-date to close yesterday’s trading session at $16.57.
It’s no surprise that IMPUY has an overall B rating, which translates to Buy in our POWR Rating system.
IMPUY has an A grade for Value and a B grade for Growth. It is ranked #8 in the Miners – Diversified industry.
To see the additional POWR Ratings for Momentum, Stability, Sentiment, and Quality for IMPUY, click here.
Sibanye Stillwater Limited (SBSW)
Based in Weltevreden Park, South Africa, SBSW is a precious metal mining company that operates in South Africa, the United States, Zimbabwe, Canada, and Argentina. The company produces PGMs, that include palladium, platinum, and gold.
On February 7, SBSW announced that it had completed its acquisition of the Sandouville nickel hydrometallurgical processing facility from Eramet, SA. On February 4. This move might enhance the company’s operational capability.
On December 8, SBSW reported acquiring a 19.99% equity interest in New Century Resources Limited. SBSW CEO Neal Froneman said “Our investment in New Century complements our successful partnership with DRDGOLD Limited, and we look forward to supporting New Century to build a leading global tailings retreatment business, uniquely positioned to play a key role in green metal supply chains.”
For the six months ended June 30, 2021, SBSW’s revenue increased 87.3% year-over-year to $6.18 billion. Its profit for the period and earnings per ordinary share stood at $1.74 billion and 57 cents, respectively, up 197.9% and 200% from the prior-year period.
Analysts expect SBSW’s EPS to come in at $1.44 for its fiscal year 2022.
SBSW’s shares have gained 35.1% in price over the past three months and 38.8% year-to-date to close yesterday’s trading session at $17.41.
This promising outlook is reflected in SBSW’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
SBSW has a Value grade of A and a Sentiment grade of B. It is ranked #10 in the Miners – Diversified industry.
In addition to the POWR Rating grades we’ve stated above, one can see SBSW ratings for Growth, Momentum, Stability, and Quality for SBSW here.
ANGPY shares were trading at $24.12 per share on Thursday afternoon, up $2.28 (+10.44%). Year-to-date, ANGPY has gained 24.84%, versus a -9.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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