1. A look at the Mining Sector from an investor perspective
Finity Asset Farzad Moshfeghi

2. Historical importance
The oldest mine on record dates back 43,000 years and can be found in Switzerland.
Civilisation has grown because of mining.
We owe all our technological advances to discoveries from mining:
Iron, Copper, Bauxite, Silicon, Carbon, Gold, Coal etc
Lithium, Tantalum, Uranium, Cobalt, Nickel, Potash etc
Mining was (and say would say still is) a core pillar for Financial Markets
Mines continue to be a major employer of work force.

3. Mining Sector and its Performance
Consider the main mining Indices
FTSE 350 Mining
EMIX
TSX Global Mining Index
S&P/TSX Global Mining Index
MSCI World Metals and Mining Index
VOLATILE

4. Risk & Reward
Comparing the risks and rewards of the mining indices versus NASDAQ as the benchmark
Mining Indices are mostly up in value over last 5 years (except for the S&P/TSX)
Benchmark has grown 250% over the last 5 years.
All mining indices have experienced a violent downturn in 2009 and in 2014, wiping away any gains made in previous years.
Benchmark has grown in value over any 12 month window
Benchmark is heavily traded and market forces are in control of the underlying constituents.
Mining indices are not always heavily traded and many mining stocks suffer from illiquid markets.

5. Benchmark Comparison The MSCI benchmark test shows the disparity well:
The Risk Indicators are a further confirmation
The Net Returns demonstrate the volatile nature of the mining sector

6. Investment Perspective
Private Equity
WACC
Hedge
IRR
Todays major risks arise from three interconnected trends which seem to be transforming the nature of geopolitical risks globally:
The vacuum created by fragile or failing states;
The return of strategic competition between strong states with conflicting interests;
The long-term impact of recent technological advances.
Equity Swaps
Geography has become a much bigger consideration for investors
Funds have much tighter mandates that drive and control their investment criteria
The sanctions list has grown to an all time high with over 6000 SDN’s on the OFAC list.
China dominates the minerals market and has more recently implemented controls and policies which have a more strategic than economic nature.
Cyber attacks on companies such as GoldCorp have demonstrated the need for mining companies to pay much more attention on IT and security, but this to a greater extent is dependent on local states and their technology controls and monitors
Portfolio
CDS
VAR
These are just tools of the trade.
Investors need to manage and measure risk

7. What can Mining Companies Do
Look at the next project from the eyes of the investor and reduce the risks
Align your strategy with investors before starting a project.
Consider the political risks not only with the host country and its neighbours but more importantly with the countries who have a dispute with the host.
Who is the off-take and is there a plan B (or C)
Try and leverage skills and technology to reduce risk.
Finally – do some mining!

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