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Metals & Mining Investment Banking

Metals and Mining is an extremely niche sector in investment banking that has a distinct culture within the industry. Mining groups are known to work longer than average hours and have a reputation for a socializing culture. Mining conferences such as PDAC usually will have after-hour events where mining bankers can destress and network.

Getting into Mining Investment Banking

As mining is so niche, there is a large preference for undergrad candidates with previous mining experience and mining questions will regularly come up in the interview. For MBA hires, mining investment bankers will prefer students with undergraduates in mining engineering and a work term at a miner. However, this is not a requirement, as these credentials are hard to find.

There has been a shift in the demographics of the junior ranks in mining investment banking. Historically male dominated, there have been initiatives to hire more women into mining roles. Also, Chinese speaking bankers are now in demand for all levels in mining investment banking due to the ability to communicate with large State Owned Enterprises. Sometimes, a Mandarin speaker who covers a different industry group may be brought in for meetings to smooth out discourse.

Metals and Mining Investment Banking Interview Questions

What are some trends in the mining space at the moment?
How do you value a mining company?
How do you value a mine?
How does a NAV differ from a normal DCF?
What is the price of gold?
What is the price of silver?
What are all-in sustaining costs?
Pitch me a gold stock.
Where is the price of gold going in one year?
What drives the price of gold?
What are some mining methods?
What mining method would you use if you had a very low ore grade but a giant resource?
What is the appropriate discount rate to use for a mining project?
What countries are high-risk jurisdictions?
What drives base metal prices?
Is Teck going bankrupt?
What is the NI 43-101?
What are reserves?
What are resources?
What are P1 P2 and P3 reserves?
What is a contingent resource?
What trades at a higher P/NAV, an explorer or a producing company?

You can find out how to answer all of these by reading our mining primer.

If the role is for an entry-level analyst or associate, standard investment banking interview questions apply.

Metals and Mining Investment Banking Coverage

In most large global banks, metals and mining is a subset of Basic Materials coverage, but in Canada, Australia and the UK, metals and mining may have its own division (where Basic Materials may be lumped into a diversified/industrials group or energy (for petrochemicals). In Canada, gold and copper coverage is based out of Toronto while silver coverage and western junior gold is covered out of Vancouver. In Australia, coverage is split between Sydney and Melbourne (sometimes Perth).

Mining investment banking has an outsized focus in Canada relative to the actual size of mining companies in Canada due to Canada’s attractiveness as a jurisdiction in listing publicly for miners (and well established natural resources legal frameworks). Many miners who operate elsewhere in the world will list in Canada, and the TSX has a Venture index which has numerous prospective miners.

All of the Big 5 Banks have strong mining franchises, although BMO has the largest one with a focus on being able to cover all metals across global offices. National Bank Financial, Macquarie, GMP, Canaccord and most other boutiques will also have a very large focus on mining, with the work hard culture at the boutiques stemming from lower base salaries and heavy and more frequent incentive pay (quarterly bonuses).

Metals and Mining Investment Banking Deals and Exit Opportunities

Miners are heavy users of the corporate finance solutions of investment banks – especially in equity capital markets. As Canada is a go-to jurisdiction for listing publicly, mining sees a lot of initial public offerings and follow-on offerings.

Often, miners do not have access to public (or even bank debt) due to the uncertainty of cash flows and extensive development and operational risk, so they will tap into equity markets whenever it is opportunistic. As equity deals pay larger fees than DCM issues, mining clients are key clients to investment banks. This major equity dealflow also means that banks put aside substantial resources for equity research on miners – which will cover several segments including junior, intermediate, senior gold and silver, royalty streamers and diversified miners.

More established miners will have access to bank debt and revolver capacity via the bank’s corporate banking divisions. Usually, these will be secured reserve-based facilities (they can borrow, but loans are backed by a conservative view of their reserves plus a haircut) but senior miners may have access to unsecured, syndicated revolvers.

Senior gold producers and large diversified miners are the only ones who can access bonds via debt capital markets in Canada, although some players may use high yield debt in the US.

Miners are frequent clients of the mergers and acquisition department for banks, whether for consolidation (when metals prices are low and cost efficiency is required), joint ventures (two projects in close proximity sharing a grinding/crushing mill), asset sales and portfolio rationalization (there are many more acquisitions at the asset level than at the corporate level), streaming agreements (royalties) and spin-offs.

Due to global international operations and substantial commodity price risk, miners will be sales and trading clients for foreign exchange and commodity hedging, sometimes with complex structured trades.

As metals and mining is very niche, many mining investment banking professionals are able to easily find jobs in corporate development or treasury at major miners. Natural resources in general is not a conventional private equity industry, but there are numerous investment funds  (especially state-owned corporations in China) and niche private equity shops (the most notable mining private equity firm at the moment is X2 Resources, which was started by Mick Davis, the ex-head of Xstrata after the Glencore merger where he was pushed out) that are looking for mining professionals.

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ex investment banking associate

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