Shares in precious metals (gold, platinum, palladium, rhodium) company Sibanye Stillwater (SBSW -0.61%) slumped by more than 11% in early trading today. The move happens as investors digest the company's latest operating update for the quarter ending on March 31.
The miner attracted investor attention in 2022 due to its position as a producer of precious metals that may be in short supply due to sanctions applied on Russia. For example, Russia and South Africa each produce around 40% of the world's palladium -- an essential metal used in semiconductors and catalytic converters in vehicles. When sanctions were applied on Russia, the price of palladium soared in response to fears over future tightness in supply.
However, there are a couple of things holding Sibanye from taking full advantage, highlighted in the operating update.
First, despite a positive outlook for commodity prices, many miners find it difficult to deal with rising costs. Indeed, management is currently conducting an "operational review to optimise operating output to ensure an appropriate sustainable return on capital from the US PGM operations." (PGM refers to the platinum group of metals.)
Second, the miner's South African gold operations are suffering strike action by two of its four unions, leading management to suspend "annual guidance for the SA gold operations."
The update is a frustrating reminder that many mining companies face uncertain cost environments and sociopolitical uncertainty.
Investors should keep a hopeful eye out for a successful resolution to the dispute with unions in South Africa while awaiting the result of the review of PGM operations in the U.S. The end market environment remains favorable for Sibanye Stillwater, but the miner struggles to take full advantage. There are better ways to get exposure to rising precious metal prices.