Miners catch-22 (#372)

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Commodity miners catch 22

Implats (JSE code: IMP) is buying a Canadian palladium miner for some R11.5billion.
Now the deal looks decent, 3m ounces producing about 220k a year with an all in sustainable cost of some $820 and making EBITDA of some R1.6billion a year, so PE of 7x.

But those numbers are all grand with palladium just off all-time highs of $1,700. What happens when palladium falls?

This is the challenge of single commodity miners. You can't buy at the bottom because you have no money, but buying at the top screams a 'hail mary' pass.

The catch 22 is how else do miners grow? Every day the mine they lose some value as they mine reserves.

Maybe the smallish size of this deal is what saves it?

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