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What Analysts Think about the Sibanye-Stillwater Deal

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Analyst recommendations

Let’s look now at Wall Street analysts’ recommendations and target prices for Sibanye Gold (SBGL) stock over the next year. Let’s also see what analysts think about Sibanye’s deal to acquire Stillwater Mining (SWC).

About 36.0% of the analysts covering Sibanye Gold have given it a “buy” recommendation. About 55.0% have issued a “hold” recommendation, and 9.0% have given it a “sell” recommendation.

Over the years, we’ve seen the company’s share price move in line with analyst recommendations. The consensus target price now stands at 55.1 South African rands.

The above graph shows analysts’ recommendations for Sibanye Gold and its peers (GDX), including Harmony Gold (HMY), Anglogold Ashanti (AU), and Gold Fields (GFI).

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Analysts’ opinions

Commenting on the Sibanye Gold–Stillwater Mining (SWC) deal, UBS said, “By Sibanye’s own admission, the valuation paid for Stillwater’s operating assets looks full.” UBS added that the market might not be factoring in the upside from the Blitz project.

J.P. Morgan Cazenove described this offer as “a very full price.” It also said that Sibanye would need to repay a debt of $865.0 million to return the company to a comfortable net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of 1.5x. The firm added, “In our view, this introduces significant balance sheet risk into the Sibanye investment case, which has been absent even post its acquisition of Aquarius Platinum and Anglo Platinum’s Rustenburg platinum mines.”

According to Goldman Sachs (GS), “While post the US elections, palladium has rallied, we see the upside capped to the metal as our auto team sees the US auto market (which is one of the biggest consumer) peaking.” The firm added, “Also, growth in China auto market (another big consumer of palladium) depends on the government extending tax cuts.”

In the next and concluding part of this series, we’ll see if this deal can help Sibanye Gold’s long-depressed valuation multiples.

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