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On Tuesday, Berenberg began coverage on Sylvania Platinum (SLP:LN) shares with a Buy rating and set a price target of GBP0.85. The firm highlighted the company’s stable business model and potential for share price outperformance due to favorable platinum prices.
Sylvania Platinum, which produces approximately 80,000 ounces per annum of platinum group metals (4E PGM), operates the Sylvania Dump Operations (SDO) in South Africa. The SDO primarily processes tailings from chrome mines in the region. Berenberg pointed out the company’s position in the first quartile for costs and its robust EBITDA margins, which exceed 30%. The firm also praised Sylvania Platinum’s free cash flow (FCF) conversion rate, which is projected to be around 67% in the long term, attributing this to the low capital intensity of the business.
The research firm expressed appreciation for the "circular nature" of the tailings retreatment business model, considering it an attractive aspect of the company’s sustainability initiatives. Berenberg also noted the potential for a rise in platinum prices over time. With approximately 65% of Sylvania Platinum’s 4E production being platinum, analysts at Berenberg anticipate that sustained market deficits could lead to an appreciation in platinum prices, which in turn would likely result in the company’s share price outperforming.
The coverage initiation by Berenberg arrives at a time when investors are closely watching commodity markets, including precious metals like platinum, for investment opportunities. Sylvania Platinum’s focus on tailings retreatment also aligns with growing investor interest in sustainable and environmentally responsible mining practices.
Market participants will be keeping an eye on Sylvania Platinum’s performance, especially in the context of Berenberg’s positive outlook on the company’s business model and the platinum market. The price target of GBP0.85 reflects the firm’s confidence in the potential growth of Sylvania Platinum’s share value.
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