Sylvania’s Q222 report showed good cost control with the ZAR cost per oz down 5.5% on Q1 and direct operating costs down 1.4%. If sustained, FY22 costs will be 2% lower than our forecast, indicating operating margin upside. The FY22 PGM production estimate is 66,000 to 68,000oz. Revenue recovered from Q1, but remains under pressure relative to FY21 due to lower production and the average gross basket price. Despite a healthy pick-up in Q2 US$ net profit (80%), FY22 earnings will be affected by a slower recovery in basket prices. However, long-term valuation dynamics remain strong and could be enhanced with cost control. Sylvania’s share price is at a more than 40% discount to the valuation of 175p/share in our October 2021 initiation.
