In September, Sibanye Stillwater (NYSE:SBSW) CEO Neal Froneman said that the company is considering diversifying into battery metals as they offered the best opportunities.
Then, in October, Froneman revealed in an interview that Sibanye had been looking at acquisitions in the battery metals space and that the company would make moves in the next six to nine months. He added that a transaction in this sector would be more strategic than the company’s platinum group metals (PGM) acquisition spree, and that it was going to require partnerships.
Given Sibanye’s impressive acquisition-related business performance, it’s worth examining what kind of assets the company would be interested in buying. I think the best candidate for a partnership could be Syrah Resources (OTCPK:SYAAF).
Sibanye’s acquisition history
Commodities nave notoriously volatile prices, but this also provides great investment opportunities as long as you can get the timing right and invest in a counter-cyclical way. The best example I’ve seen is Sibanye, who started their buying spree in the PGM sector in 2016 with Aquarius Platinum and continued with Stillwater and Lonmin. Within a little over three years, Sibanye spent $3.1 billion on acquisitions just in time to reap the benefits from rising palladium and rhodium prices.
Sibanye recently admitted it began looking seriously into buying gold assets in North America two years ago but that it was challenging to find value in the sector due to the re-rating of equities.
Regarding battery metals, Froneman thinks that they are complementary to PGMs. Looking at the past, Sibanye likes investing in already built mines where something has gone wrong or the owner has run out of funds.
Likely commodities and possible targets
According to the consultancy group Wood Mackenzie, over $1 trillion of investments will need to be made over the next 15 years into key energy transition metals such as aluminum, cobalt, copper, nickel, and lithium in order to satisfy soaring decarbonization demands. This provides compelling growth opportunities in the battery metals sector.
Back in January, Froneman said that Sibanye was planning to potentially buy assets producing copper, lithium, graphite, cobalt and nickel. This October, he mentioned again lithium, nickel, and copper and also added a transaction would expose Sibanye to the downstream market for supply chain reasons.
I think the downstream comment is very interesting as there are several such operations in the lithium, cobalt, and graphite sectors. Also, these three are among the worst performing commodities over the past few years.
I doubt Sibanye is looking at cobalt as major electric vehicle makers plan to remove the metal from batteries due to its high price.
Regarding lithium, Benchmark Mineral Intelligence expects prices to bounce back after 2022 due to increasing demand, which means that this is certainly a commodity which fits Sibanye’s criteria. However, the valuations of many companies in the sector still look very high at the moment, and I think Sibanye will find it hard to get a bargain. Things look quite different in the graphite sector,