by Luis Miguel Ochoa Comments (91)

Metals & Mining Investment Banking: Got Divested Gold Mines?


Metals & Mining Investment Banking 101

Any solid group should have two things: big deals and lots of them, and Metals & Mining Investment Banking is no exception.

A colleague of mine once put it more colorfully: “I’m not a big deal. I just close them.”

Most bankers would agree that they got into the field to affect great change in a sector through strategic decisions (e.g. mergers and acquisitions) – or at least, that’s what they told the interviewers.

And it’s hard to beat the basic materials sector if you want to make big changes: where else could you buy and sell entire gold or diamond mines?

“Basic materials” refers to discovering raw materials and processing them; the 3 main sectors are i) metals and mining, ii) paper, packaging and forestry products, and iii) chemicals.

It’s sort of like a collaboration between industrials and natural resources, with an emphasis on cross-border transactions.

In the article, we’ll cover the Metals and Mining Investment Banking sector and you’ll learn:

  • How to break in
  • What goes down in Team Mining
  • How the coverage universe is broken down, including industry and valuation drivers
  • Analytical topics, including operating and valuation metrics for both companies and mines
  • Life after getting out of the most underground banking department

Now, off to the mines…

Major Hubs For Metals & Mining Investment Banking

Q: Where do metals/mining bankers come from?

A: Canada (laughs). And Australia!

I’m kidding.

Most people in my group were placed here through the campus recruiting process, and some of the senior bankers lateraled over from other banks’ M&A departments.

One guy I know was even recruited from the Colorado School of Mines.

The backgrounds here really run the gamut, and a geology background is neither necessary nor sufficient.

It may help a bit with your response to the “Walk me through your resume” question, but that can easily be accomplished with other means, such as student activities or hobbies/interests.

I read an article about how a senior financial institutions banker was inspired to pursue the calling based on her family’s ownership of a private banking business. And there are plenty of other examples – such as a US Marine Corps officer joining an aerospace/defense banking coverage group.

Really, the sky is the limit when it comes to your story, so put on your thinking cap and learn to spin your way into sounding relevant.

Metals and Mining Investment Banking Groups

Q: So what does your coverage universe look like? And where do you find metals and mining groups at banks?

A: My group can be found in the industrials group, the natural resources group, or in a team called basic materials – so really, we could turn up anywhere.

Geopolitical factors aside, the main demand-side factor with any mineral is end use, while supply-side factors include operational issues, production constraints, and capacity.

Production constraints aren’t a limit on machinery; it’s a limit imposed by a sort of collusion among producers.

For example, if there’s too much aluminum in the market, producers will agree to limit production to prevent further declines in the mineral’s price. It’s similar to what OPEC does for oil, only it doesn’t seem as controversial since aluminum prices attract less attention.

Moving to a broader perspective, the universe can be divided into these sectors:


Key players: Glencore, Vale, BHP Billiton, Anglo American

BMO Capital Markets noted that holding companies such as Glencore trade at a discount to the sum of their asset values due to a lack of specific access to cash flow, the fact that any bid to subsidiaries would result in a share ownership transfer, and the fact that subsidiaries’ dividend tax is relegated to the parent.

(NB: For an in-depth overview of the market for any of the following minerals, please refer to the US Geological Surveys Mineral Information)

Base Metals:

Aluminum: (key players: Alcoa, UC Rusal, China Aluminum Corp – CHALCO)

Historically, producers in this area have selected capacity such that price is equal to the marginal cost of production. In the case of alumina, the input costs include fuel oil, natural gas, caustic soda, and bauxite.

For primary aluminum, the inputs are alumina, electricity, carbon, and materials (source: Alcoa company data).

Compared to other base metals, aluminum is a dominant component used in transportation and packaging. If you’re asking about the price of aluminum, you’ll need to refer to the London Metals Exchange.

Copper: (key players: Freeport McMoran, Southern Copper)

In contrast to aluminum, the New York Mercantile Exchange (COMEX) and the Shanghai Futures Exchange (SHFE) also influence the price of this mineral.

Not surprisingly, diesel, coal, natural gas, and electricity are important inputs. Copper demand reflects construction and industrial production.

Mining operations’ output and recycled scrap material contribute to the supply of copper (source: Newmont Mining company filings). Copper is a dominant component used in infrastructure and electrical applications (source: Brook Hunt).


Key players: Arcelor Mittal, Gerdau, Nucor

These producers compete on quality, cost, and innovation (research for new uses of the minerals).

The demand-side factors, as with any industrial item, include inventory levels, currency fluctuations, and import/export activity. The raw materials here include iron ore, sinter ore, coal, coke, and steel scrap (source: US Steel company filings).

Flat rolled products are a dominant component used in automotive parts and construction products. Tubular goods are heavily used in oil/gas operations.

Nickel: (key players: Norilsk Nickel)

Applications include the production of stainless steel and in the creation of alloys. Compared to other base metals, nickel is a dominant component used in consumer durables and industrial equipment.

Zinc: This mineral can be used in batteries or in the creation of alloys; it’s also used as a catalyst and in the production of white paint. Compared to other base metals, zinc is a dominant component used in construction.

Precious Metals:

Key players (Gold): Barrick, Goldcorp, Newmont Mining

This might come as a surprise to you, but the end product of a gold miner is not gold, but doré bars.

These items are made of gold, silver, and other minerals, and are then sent off to refiners to be finished into what you and I would expect to see.

The applications for gold include investment and fabrication (ex: jewelry and decorative uses). Gold owned by governments, corporations, and individuals contribute to the gold supply supported by mining operations.

Key players (Silver): Silver Wheaton, Pan American Silver Corp, Coeur D’Alenes

The demand for silver is fueled by its most common uses – coins and awards, household wares, industrial uses, and photography.

Q: That was a pretty thorough walkthrough of your coverage universe. But the name of the game is “metals and mining” – where are diamonds in all this? Were they stolen in a heist?

A: Some banks have a coverage team devoted to this area.

You know how San Francisco is home to technology investment banks, and New York has plenty of financial institutions groups (FIG) bankers; South Africa is where it’s at when it comes to diamonds.

Standard Chartered actually has a team there devoted to diamonds and jewelry coverage.

Mining Equipment Equivalents: Your Transferable Skills

Q: So how do analysts and associates compare mining companies or mining projects to each other?

A: Let’s start with a few trading multiples and operating metrics:

Comparable company metrics include:

  • Price / NAV (Net Asset Value): With this one, you value the mining company’s assets (gold, silver, etc.), subtract its liabilities and divide by the share count to get NAVPS.
  • Price / NPV: (Shown as a percent)
  • Dividend Yield
  • Commodity Exposure (see pg. 7): Portfolio summary of what a mining company’s business entails.
  • Reserves and Resources: Reserves are minerals that are more certain to be extractable and to hold value that’s confirmed by an assessor. You go through a process of converting metals into “equivalent” units so you can compare, for example, a copper producer to a gold producer.

And you would use the following multiples for Reserves and Resources:

  • Enterprise Value / Mineral. Eq. (Ex: Cu. Eq. = Copper Equivalent) Reserves
  • Enterprise Value / Mineral. Eq. Resources

With mining, there is also a distinction between “Resources” and “Reserves” – Reserves are more likely to be extracted from the ground.

Reserves can be split into “Measured” and “Indicated” categories (often abbreviated to M&I, how fitting), while Resources can be split into “Measured,” “Indicated,” and “Inferred.”

Technical reports are based on Reserves because they are more conservative, but investors also look to Resources for a truer picture of what the company’s assets might be worth.

It’s similar to what oil & gas companies do with their reserves, but there are more categories and sub-categories here because there’s more subtlety with determining whether or not mineral resources are truly viable – and there may be more steps to complete when extracting them.

Operating Metrics for Metals & Mining Projects

  • Mineral Eq. Grade: Essentially the concentration of the desired mineral. It’s just the ratio of the amount of mineral desired / (amount of mineral desired + unwanted ore).
  • Stage: How far along the mining project has progressed. If you’re interested in equity capital markets, or equity origination, less certain projects might be of interest to traders and speculators; more stable projects are of interest to institutional buyers (ex: endowments, pensions funds, etc.). The stages include Scoping Study (for early-stage projects – includes inferred resources), Pre-Feasibility (Stricter calculation requirements and includes reserves and resources), Feasibility, Construction, and In-Production.
  • Average Mineral Production
  • Reserves and Resources Composition
  • Cash Cost of Net Product Sold, By Product (Currency / Mineral): This is similar to Cost of Goods Sold for manufacturing or retail companies – it would include all of the expenses for producing each unit of mineral, plus potentially other payments such as royalties.
  • Development CapEx

Then there are different ways of looking at transaction metrics for both mining projects and mining companies. For mining projects, you might look at Precedent Premium Analysis (for 1-month, 1-week, 1-day, and so on).

The numbers there would be affected by the Approach – Hostile deals usually have higher premiums than Friendly deals – the Stage (Development, Production, or Mix) – you would pay more for a more certain cash flow stream – and the Commodity (Copper, Gold, Aluminum, etc.).

The following metrics and multiples are specific to company acquisitions:

  • Tangible Asset Backing: Corporate acquirers use this framework to determine the value-add of what was acquired. This approach assumes the target’s machinery is still in use.
  • Multiple of Net Assets
  • Market Price / Gross Cash Flow

For the diversified companies, it may be useful to compare the NPV (asset sum taking out debt and cash) to a Sum-of-the-Parts analysis.

I’ve seen a couple variations on the latter; some analysts like to compute a DCF value for each division (NB: use EBITDA – Capex as a proxy for FCF), while others like to collect a set of trading comparables and multiply their range by the EBITDA of the individual departments.

Q: Wow, I can’t imagine that anyone will actually mine for more metrics or multiples after all that. What really drives valuation for mining companies, though?

A: Cash flow. You see there are a lot of approximations around how much of a mineral a mining company can produce, and that’s because they’re using the production levels to approximate cash flow.

The values of these individual mining projects contribute to the total value of the company.

If you are going to acquire a mining company, you’re essentially buying land, equipment, and the management know-how to tap resources – assuming, of course, that the top brass stays at the firm following the integration.

A press release on the discovery or confirmation of a mine’s potential will lead a company’s stock price to pop up.

Q: Could we see some sample metals & mining pitch books?

A: Sure, here are a few you can look at:

Also, refer to the following valuation letters and fairness opinions:

As you can see in the Alpha Natural Resources / Massey Energy pair of fairness opinions, the valuation metrics can be very similar to those used in the industrials sector.

You’ve got EV / EBITDA and Price / EPS. To the list of valuation approaches, you could add:

  • Illustrative Future Stock Price: Start with Historical Enterprise Value / NTM EBITDA, and find out the average share price. Use a multiple to find the future enterprise value, and from there calculate the average share price again. Convert it into today’s currency using the Cost of Equity (see: page 105 of Alpha Natural Resources / Massey Energy).
  • Implied Exchange Ratio Analysis: Essentially you assume an all-stock transaction and  divide the target’s price per share by the acquirer’s price per share.

Breaking Into Metals & Mining Investment Banking

Q: So what should our readers look at if they’re interested in metals and mining?

A: For starters, the Bloomberg command METT <GO> provides mining sector news.

Financial Times, The Economist, Wall Street Journal, and the book Fisher Investments on Materials are all good resources.

Going beyond the usual suspects, Big Four accounting firms such as Ernst & Young do publish thought pieces on the sector.

In terms of industry newsletters, you should look at Metal Miner, Metal Bulletin, and Platts.

If you want something from an investment bank, run a search for ‘HSBC Metals Quarterly.’

Also check out – as you probably know, the internet provides way too much data that can be analyzed. So you’ve got to pick and choose for yourself what you think is relevant.

In your industrials article, you mentioned primers on aerospace and defense. Here’s a rather dated, but similar and still high-quality primer: “Hard Rock to Heavy Metal Amid Scarcity” by UBS.

For a fundamental perspective, you can try Ian R. Campbell’s series on mining company valuation, which discusses in great detail the more qualitative aspects (read: risks, macro-view, etc.) of mining company analysis.

Lastly, a more academic perspective can be found published by Basinvest.

Q: Wow, thanks for all that.  If you’re reading this, you have no excuse for not performing well in any IB interviews with metals & mining groups.

What are the most common deal types in your group?

A: Metals and mining is definitely known for cross-border mergers and acquisitions.

You’ve got to deal with currency fluctuations and, of course, the legal aspect of whether the target is a “strategic asset” in the eyes of the government.

If you’re looking for a strong investment banking experience (e.g., advisory and capital markets assignments), look no further than JP Morgan, Citi, and Goldman Sachs – in that order.

Q: So do people in your group really come from Canada? And if so, where do they go afterward?

A: Many mining bankers can be found in Canada (Toronto), United States (Chicago, New York), and the UK (London). Australia is also a huge center for mining, with a lot of activity in Perth but also in Melbourne and Sydney.

As with any other group, activity will be strong where mining companies are active – you don’t exactly see any mines in Manhattan, but there are mines in some of the surrounding areas on the East Coast.

A good number of commodity funds specifically ask for a mining background. Some other buy-side shops also appreciate the background.

At the same time, I’ve seen former metals/mining bankers move into corporate strategy within an investment bank, or join or start a start-up in the sector (not exactly a capital-efficient industry, but hey, it’s an interesting ride nonetheless).

As you may already know, it’s not so much what you do in an investment banking division, but how much you can accomplish with what’s on your plate.

Q: Thanks so much for your help!

A: Anytime. If you have questions, please leave your comments below.

About the Author

Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new market development. He earned his B.A. in economics from Stanford University where he was a member of the varsity fencing team.

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  1. Greetings, I am 20 years old doing my bachelor’s degree in Mining engineering in Canada. I plan to get some experience in the industry as a mining engineer first and then do a master’s in Metals and Energy Finance at Imperial College London. I am interested to become an investment banker as well but as I am reading I might be wasting my time gaining experience as a mining engineer. What do you recommend?

    1. I don’t think you need to gain experience as a mining engineer to get into IB. It’s overkill because the job consists of Excel and PowerPoint. You’d be better off doing a minor in Mining/Engineering to learn the field a bit, maybe gain some experience in it, but then focus on winning finance internships… see:

  2. I have recently attended a 1st round mining IBD interview, and was informed that I would be given case studies in the 2nd round.
    Does anyone know what kind of cases studies it might be? I am new to mining and appreciate you very much!

    1. It will almost certainly be a valuation case study where you have to project the cash flows from a mine or mining company, discount them, and use them to determine the asset’s implied value. It’s not “hard,” but you have to get the individual elements right: commodity price scenarios, production volume, operating expenses and CapEx linked to mines/production volume, and so on.

      1. Thank you very much Brian for the tips! Instead of having several commodity price scenarios, may i do a sensitivity analysis of IRR and NPV on price instead?

        1. You need to build in scenarios. It’s a standard part of any natural resource model or any company whose revenue depends on commodity prices. Sensitivity tables are additive, not a substitute.

          1. Thank you Brian!

          2. Hi Brian, after I submitted my case study homework, I have been invited to do a presentation in a few days.

            Could you please kindly give me some advice regarding the presentation?

            Many thanks!

          3. To clarify, we can respond to quick questions and comments on this free site. We cannot go beyond that into actual interview prep, step-by-step instructions for case studies/presentations, and so on. If you feel you need those services, take a look at our courses and coaching. Or, just look at the many free samples and examples of presentations, case studies, and valuations on this site and in our YouTube channel.

  3. Excuse me,

    but this link does not work:
    Smelter Acquisition: by Xstrata

    Could you please update it? many thanks

      1. Thank you very much Brian!

  4. Sharansh Maheshwary, CFA

    I just want to appreciate the article. Its a great one. The discussion as well is very informative. I can relate to many of the concerns listed, like I am 32, have my CFA, moved to Canada as a PR from India where I was working with a KPO for investment banking services.

    I am myself looking to break into IB and found a lot of suggestions, such as MBA, networking, etc, already heard on in last 3 months.

    Thanks for everybody’s comments as well. I read a lot of articles but this is by far the most informative one.

  5. Hi,

    Can you recommend any good books on Metals & Mining (terminology, industry, valuations etc.)?

    Many thanks

    1. I haven’t seen any good references, unfortunately. Perhaps other readers who see this can make a recommendation.

      1. Hugh Thompson

        nice article and comments. This from a guy who has 30 years in mining project reviews.
        Text book references;
        1) Mining Investment Analysis; Authors Gentry & ONeil; Published by SME (Old school, but real good)
        2) Monograph 27 – Cost Estimation; Author and Publisher AusIMM
        3) Mining Economics and Strategy; Author Ian Runge; Published by SME (still available on Amazon, I think)

        I run a “Mining Explained”type course from time to time, as do others.

  6. Interesting read.Thanks so much guy’s for the inside.

    1. M&I - Nicole

      You’re welcome.

  7. Hi, I am wondering if you are still working in the Metals&Ming group, do you see the decline of both deal number and volume in the sector? Seems like the M&A activity is affected by the low commodity price and slow-down of the economic overall. I got an analyst offer from one of the mining M&A group of “big four” Canadian banks.

    Just wondering whether 2016 will be a good time to enter the mining sector considering the industry will not recover, perhaps at least in a few years. Appreciate it if you can share what you are seeing now? Thanks a lot.

  8. Thanks for the great article. I am just curious as you were talking about most metal and mining bankers coming from Canada. how about CIBC’s metal and mining investment banking? Is it a good name in middle-market banks with solid track records in metal and mining? Thanks.

    1. M&I - Nicole

      Yes CIBC has a good name though I’d suggest that you go through league tables to see their ranking in metal and mining

  9. Hi

    I’m 32 and am studying my master of applied finance at a good school in Australia.
    I have a background as a geologist with one of the big mining companies but want to break into a mining analyst role.

    Can you give me any pointers and am I too old to break in?


    1. M&I - Nicole

      I believe you’ve left the same question in our comments before? No, I don’t think you’re too old to break in, but you’re most likely a few years older than most associates. Your background maybe useful to roles such as this:–investment-banking I’d look at similar roles and see if you can connect with people in the industry

  10. Hi,

    Say you had to calculate the NAV of a company. You’d use DCF (NPV), but in order to find the value would you still use FCFF? The only difference being that you don’t have a terminal value?


    1. Yes. There are some other small differences as well (e.g., you may only factor in corporate overhead-type items at the end when calculating implied equity value rather than including them in FCFF).

  11. Great article but there is a small error:

    Reserves= measured+indicated, while, Resources=measured+indicated+inferred.
    For the most part resources provide a more accurate estimate of actual value to be extracted, however, reserves are used exclusively in technical reports and for project valuation because they provide more certainty to investors.
    Inferred resources refers to material that will likely be mined once a project is in its production phase but has not been drilled and sampled during the exploration phase as a result of diminishing returns at that early stage. (exploration is extremely expensive and takes place years before a project becomes cash flow positive).

    1. Thanks for that correction.

  12. Citi’s Metals & Mining group is based out of Los Angeles, interestingly. Small group with a lot of big deals.

  13. Are the offices of the mining groups (in the US) in New York city mostly?

    1. They are all over, but in the US a lot are in New York, yes. There isn’t really a huge mining region in the US, so it’s not like oil & gas/Houston where major groups are all in 1 place.

  14. My gun go bang


    your link “Commodity Exposure (see pg. 7):” under the “Comparable Company Metrics” section is dead, is it possible to fix it?


    1. Think that version is gone, but you can find similar presentations here:

  15. I have a virgin iron ore mine and it looking like it could be a world class open pit.Im
    In need of a investor or a possible buy out. Iron ore 75% to 99% 10 lbs of ore gives me 3.2 lbs steel @ 99.97% grade 1038 with .750 manganese.I also am running gold and silver. Call me @ 406-490-7258 ask for Walt.

  16. Hi, I am a mining engineer with about 5 years exprience. I have completed a Masters in Mining Engineering with my thesis focused setting up a consultancy (which I have been runnning successfully for about 6 months). I was wondering if this finance exprience would be helpful or would I be better off doing an MBA from a target high level target school. I am currently 28 years of age.

    1. An MBA from a top school would be a better bet for getting into IB.

  17. Clara – Toronto is bigger for metals and mining than Vancouver however Vancouver has a bigger silver presence. Perth is where most the junior mining companies / explorers are based but sydney and melbourne has its fair share. In Perth, Macquarie is very strong but there are smaller boutique resource focused firms like hartleys, azure capital, rothschild, Wilson HTM etc. Some resource bankers are based in melbourne with dedicated teams such as Macquarie and bmo capital markets. I know rbc is starting to build a presence in sydney with sales trading and ibd.
    Please feel free to ask any further questions as I have a few years experience in mining banking in aus.

    1. M&I - Nicole

      Thanks for your input!

    2. Hi Brian,

      How do you value a mineral right, i.e.,only have resource estimate but no technical reports?


    3. MC:
      Which Bank and Division would you suggest we talk to for acquisition of a gold mining company who owns several significant, producing properties. These properties would produce roughly $241M USD per year for 5+ years. This can
      be accomplished with an investment of $170M USD.

      Thank you.

  18. Hi Brian,

    Which of these two cities would be better for mining groups: Vancouver or Toronto?

    1. I could be wrong, but I believe Toronto is better since it’s a much bigger financial center than Vancouver.

      1. How about Perth?

        1. Honestly, I don’t know but I believe most deals in Australia are done out of Sydney.

  19. Really like this article! Hope to see articles on mining m&a in 2013 – natural resources have been really hot recently, in particular from Chinese markets…

    1. Thanks! Hope to cover more on natural resources soon.

  20. Brian,

    What an utterly superb article, thank you. I’m a reporter and focus exclusively on M&A in the mining sector, having spent years working for (Canadian abundant) mining corporates, including the odd target. I don’t think I’ve ever found an article that breaks the sector down and conveys the must-learn salient points so well.

    To your list of where readers can look to learn more about miners, I would personally add the National Instrument (SEDAR) and JORC report-to system (ever mindful that NI is securities law and JORC is policy, of course)and exchange RNS statements.

    I would also be interested to hear your thoughts on valuing royalties and streaming targets in precious metals, perhaps based on the likes of Wheaton and Royal.

    Thank you.

    1. Thanks for adding those. Really not sure about valuing royalties as I’m not an expert on mining – this was Luis’ article and the interviewee is the subject matter expert.

  21. How come no one mentioned Macquarie? It is considered one of the top mining banks in OZ and else where.

    1. The interviewee was based in the US so he did not go into coverage in Australia. But yes, Macquarie should be on the list as should the AU region in general.

  22. Hi Brian,

    Do you have a list of questions to ask the Target Company? some high-level questions? Specific to mining?

    It is an interview question where my interviewer gave me a scenario that we would meet the Target CEO the next day. what questions should we ask?

    1. I would go back to what the interviewee stated above – ask about production, CapEx, required funding to complete the project, ongoing operating costs, projections for mineral prices, composition of minerals (Resources vs. Reserves and so on).

  23. Hi Brian,

    Another question, sometimes the local government have some carried interest in a mining project. when you calcualte the percentage the company owns, do you substract the carried interest? say the company have 100% in the project, 10% is the carried interest to the government, do you substract the 10% out of the 100% to get the percentage the company have?

    1. I am not an expert on that one so someone else may have to answer, but I think it depends on what you’re calculating… if it’s something like Cash Flow or Free Cash Flow, yes, you want to subtract any cash flows that the company pays to someone else such as government.

  24. Hi Brian,

    For the P/NAV multiple, when you conduct the comps analysis, do you caculate all the NAVs for the comps?

    1. Yes, you would have to calculate it for all the comps but it is easier than with oil & gas companies because you can just make balance sheet adjustments here.

  25. Mining IB @ a BB

    First of all, this is a very well done article – good job! Very informative for people looking to learn more or get into mining investment banking

    But just two points:
    1) You can’t talk about metals & mining without bringing up Australia. IT’s a HUGE mining market, and all the investment banks have large mining teams on the ground. Melbourne is one of the top-3 mining centres globally (along with Toronto and London)and many iron ore and coal companies along with BHP Billiton are headquarted there.

    2) With regards to Diamonds IBD coverage, it’s a little bit different than other commodities/minerals in that it’s a very consolidated sector. There are virtually no more independent diamond companies anymore and the largest players are actually the diversified miners (BHPB, Rio Tinto, Anglo American (who own De Beers)) and govt owned giants like ALROSA in Russia. So to your question, it makes no sense to have dedicated diamond coverage bankers, as the responsibility is almost always handled by the large-cap diversified mining coverage bankers or general precious metals coverage bankers

    1. Thanks for adding that, agree that Australia should have been mentioned here (maybe another question on key geographies).

      And thanks for noting that about the diamond industry, that makes more sense.

  26. This is a really great article!!
    I have been working in this sector in SEA and there really is no better place to do a large amounts of (cross border) M&A deals to build up your experience!
    This industry has so many transactions that its one of the best places to start if you have no idea what to specialize in; after a year of this your CV will be loaded!
    Great amount of detail on the valuation by the way, this much detail is very well suited for those new analysts coming to the office…

    1. Thanks for adding that, glad to hear the valuation details were accurate.

    2. I couldn’t agree more! This is a really great article. Which firm do you work for Bob? I’m SEA-based myself.

  27. Hi Brian, Thanks a lot posting this! I have been waiting for this for while since I joined the site.

    I am a 31 yrs old Professional geologist from Canada who has a strong interest in Mining Finance (project evaluation, mining equity research, M&A activities in the sector). I also speak Fluent Korean and Chinese.

    I struggled with choices between CFA Vs MBA in order to transfer to the mining finance sector. Enrolled in CFA level 1 for now. I would really appreciate what is most effective way to break into the Mining&Metal group in banks? MBA? Some people told me Investment banking prefer to hire young MBA graduates (not like me who will be at least 34 when I finish). But if I study CFA at home, how can I be connected to the sector? Relentless networking? Attending lots of mining investment related conferences?

    People always say with my language and industry related skills along with cultural background in the Asia and Canada, I should be in high demand. But I am still searching and feel frustrated and discouraged.
    Any advice or suggestion is very much appreciated!

    1. The CFA is not really useful for getting into IB. Maybe in Canada it helps a little more but to really make a career change you need an MBA from a top school. The CFA would be more helpful for getting into hedge funds or asset management. Banks do prefer younger graduates but it’s still possible to get in when you’re older.

      The problem is that you don’t have much finance / business-related experience on your resume, which is why banks are not wooing you – you need to get that first and combine it with your existing skills to have a good shot. So an MBA program is highly recommended… will be tough to re-brand yourself otherwise if you have nearly 10 years of work experience.

      1. Thanks Brian!

        1. Hi guys,
          First of all to Brian, what a superb article and might I say how relevant!
          I have a question which I’m posting under Hua’s comment as it is similar to his issue.
          Here’s my situation: I’m currently working at a German Steel major in Germany, as a “Senior Steel Trader” for their international trading division. After 7 years of building up my career in Europe in the steel business, I’m considering to move back to Toronto. I know for a fact that there is not a lot of opportunity in Toronto for furthering my career in the steel business. Therefore, I have contemplating entering banking/finance, hopefully where I can put my knowledge of “steel & ferrous metals sector ” and its global trade flows to good use so I don’t have to start from scratch.
          After some research I’ve narrowed down my options to IB in metals & mining; STCF, or if none of that works, equity research in that sector(??) As for S&T, big 5 Canadian banks have their desks outside of Toronto as far as I’m told (London, NY,..).
          I’m 30yrs old, have a B.Eng and while my title is “Senior Trader” i have to point out the fact that steel is traded mostly physically and does not involve “paper trading”. So other than some Steel and Iron Ore futures and options courses I’ve attended and trade finance issues I’ve dealt with, I have limited “banking” knowledge.
          Long intro, short (read less-longer) question(s):
          1- Will my sector knowledge be of siginficant advantage in banking?
          2- Will I need to do an MBA to rebrand myself? If yes, will entering IB at about 33 be a wise idea given my profile?
          3- Could you name any other fields in Banking (which have traction in Toronto) where my sector know-how could be put to good use?
          Really appreciate your feedback.

          1. M&I - Nicole

            1. It is somewhat relevant, though I suggest you branch out and look at research as well as other commodities trading roles. I’m not sure which area fits you best just based on this forum alone but you can check out
            2. It maybe useful if you get into a target MBA. Otherwise I’d just try to break in now given the opportunity cost
            3. See 1. I’d also open this to readers who are more familiar with the Toronto market

          2. Many thanks Nicole. The problem with “commodities trading” is that according to my knowledge there are hardly any metals desks in Toronto. I am also looking into research though.

          3. M&I - Nicole

            Awesome, let us know how it goes!

    2. Some banks may hire you purely as a resource geologist (analyse exploration drilling results, assess resources/reserves) so finance experience is not technically necessary

      1. Thanks Bob

    3. Network, and do your MBA. If you want to get in as an ibanker (as opposed to as a hired geologist, as has also been mentioned), the CFA is certainly not going to get you in at this point. MBA is the only way you’re going to be able to come in as an associate. It is definitely rare to come in as an associate at 34 as well, but not impossible – network and talk to people; different banks will have different views on the matter

  28. a technical question on selecting mining comps: what is the most important criteria in selecting in the comps and precedent transactions? stage of development (Resource estimate, PEA and etc), location, majority/minority, cash cost, grade??

    1. Resources, Reserves, or Production are the most important, along with location. Stage of development is more relevant for individual projects rather than entire companies because companies always have multiple projects that are in different stages of development. The main point is to make sure you’re using companies in similar geographies with similar minerals that have similar amounts of reserves (or resources, or both).

  29. You mentioned “some other buy-side shops” regarding exit ops. Could you please be a little more specific? Are you talking about industry focused PE?

    1. It is pretty rare for PE firms to focus on natural resources because commodity price fluctuations can result in going from positive returns to negative returns overnight, or at least very quickly. So LBOs of mining and oil & gas companies are not very common.

      I think he was referring more to HFs focused on commodities or other trading firms that deal with commodities. Probably not as many PE opportunities on the mining side.

      1. Brian, some interesting stuff that our PE firm has been involved recently is participating in JV operations. As long as there is a direct contact/relationship with a project owner than we would take a position either through debt, equity or a combinatin of both (convertible note).

        1. Interesting, thanks for sharing. I could see how JV participation may work, but I think it’s pretty rare for PE firms to buy entire mining projects or mining companies outright (correct me if I’m wrong).

          1. That’s exactly right, Brian. It happens rarely. Unincorporated Joint Ventures are highly utilized for mining projects where PE firm will take a hold of 30%, 40% and sometimes 50% stake.

            You will find that majority of the time PE provides funding while asset holders (who hold titles and rights to subsoil use) take charge of the operations.

  30. Hi Brian,

    I think the pdf of “KCM Valuation” is damaged so I couldn’t open it up. Do you mind updating it with a link?

    Thanks a lot!

    1. Hmm I just tried it and it seemed to work – can you try copying and pasting the link into a browser window and see if that works?

  31. Great article!

    Any advise on the alluvial gold sector? I am particular interested on valuation (financial modelling) and feasibility. In other words what list of items should be included in the financial model to estimate cost vs benefit?


    1. Really not sure on that one as I am not an expert on mining. I think you’d have to look at equity research on companies in the sector and see what kind of metrics analysts use. I would imagine that the expenses would be significantly higher due to the filtering required and the fact that the purity will be much lower, but this is just a guess based on common sense. I’m not even sure if there are dedicated alluvial gold producers.

  32. In the article, it talks a lot re valuing mining companies using cash flow multiple. how about early-stage project? say a project hasn’t been into production yet.

    1. I think you would rely more on Resource-based multiples there e.g. Measured & Inferred Resources rather than trying to determine cash flow, similar to what you might do with early-stage oil & gas projects that haven’t been proven out yet.

  33. Awesome article! You mentioned JP Morgan, Citi and Goldman for metals & mining, who are the strongest players in term of Canadian banks?

    1. Not sure on that one, perhaps a Canadian reader can offer some insights. I think the Big 5 all do a good number of mining deals since it’s one of the largest industries in Canada.

    2. Well, BMO is considered top metals & mining shop in Canada, though other banks also do good no. of deals.

    3. BMO, hands down. It’s often considered to be the best mining bank in the world, let alone in Canada (it’s been named best mining bank in the world by Global Finance for the past two consecutive years, if I recall) – it’s got a lot of weaknesses in other areas, but it dominates in mining, definitely

  34. Another great article – a follow-up question: If you have absolutely no previous experience in Metals & Mining, would they still grill you on the industry specifics during the interview?


    1. Thanks! Honestly, anything is possible these days. Previous readers in Canada have reported receiving difficult technical questions on mining. I wouldn’t say they would “grill you” necessarily, but you should definitely expect some questions on the industry and might want to familiarize yourself with the key metrics above.

      1. Thanks Brian – And when being asked why M&A group instead of other industry coverage groups, what could be some good points to discuss?

        1. Say you want to gain more in-depth technical skills and learn about all industries rather than just focusing on one. There are some more suggestions in the interview guide.

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