{"id":23291,"date":"2021-08-18T09:59:23","date_gmt":"2021-08-18T13:59:23","guid":{"rendered":"https:\/\/capital10x.com\/old\/?p=23291"},"modified":"2021-08-18T18:57:47","modified_gmt":"2021-08-18T22:57:47","slug":"markets-metals-navigator-crypto-copper-miners","status":"publish","type":"post","link":"https:\/\/capital10x.com\/old\/markets-metals-navigator-crypto-copper-miners\/","title":{"rendered":"Markets & Metals Navigator: Crypto & Copper Miners"},"content":{"rendered":"

Crypto in the Drivers Seat vs. Precious Metals<\/h2>\n

Gold and silver have struggled in year-to-date versus the two largest crypto currencies: Bitcoin and Ethereum.<\/p>\n

The precious metals are negative YTD (gold -6% and silver -10%) while Bitcoin has rallied +56% YTD and Ethereum elevates over all commodity assets rising +312% YTD.<\/p>\n

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What’s driving Ethereum? NFT (digital collectables) trading volume has skyrocketed, these assets are run primarily on the Ethereum network.<\/p>\n

Trade volumes on NFT marketplace OpenSea have soared in the last month as the craze for non-fungible tokens continues; OpenSea has done $1.22 billion in volume in the past 30 days, a 950% increase from last month.<\/p>\n

In the shadow of Ethereum’s moonshot Bitcoin has rallied strongly as well off its YTD low of $30K, Bitcoin is up over 50% in the last month.<\/p>\n

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Performance of Commodity Mining ETFs<\/h2>\n

Over the last year the performance of commodity mining ETFs has directionally followed their underlying commodities.<\/p>\n

Gold and silver mining ETFs have underperformed gold and silver bullion; we believe this disconnect presents an opportunity for investors – however it would likely require return of capital from the large cap gold miners (buybacks or dividends) or a wave of M&A.<\/p>\n

Coppers miners have consistently outperformed the underlying copper metal over 1, 3 and 5 years – this is a much more constructive backdrop for copper miners relative to gold and silver miners. In the section below we examine valuations within the copper mining universe.<\/p>\n

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The Value Case for Copper Miners<\/h2>\n

We believe we\u2019re at the early stages of a commodity bull market and copper will be front and center, there\u2019s significant upside ahead.<\/p>\n

Commodities have historically provided investors a safe haven to protect against inflation. Investors are in an advantageous position as commodities are the cheapest they have been in the last 50 years relative to US equities.<\/p>\n

Commodities Relative to US Equities<\/h4>\n

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Hunting for Value – Small & Mid Cap Copper Stocks<\/h3>\n

Small & mid cap copper producers are trading at steep discounts relative to large cap producers on every valuation metric. Small & mid trade at a 55% discount on forward price-to-cashflow, 42% discount on forward EV\/EBITDA and 48% discount on forward price-to-sales.<\/p>\n

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Bloomberg consensus estimates.<\/figcaption><\/figure>\n

Given that large cap valuations are nearly double that of small\/mid producers, M&A is one of the most tangible ways for large caps to grow production and enhance shareholder value.<\/p>\n

Sierra Metals: Valuation, Q2 Results & PEA Update<\/h2>\n

Sierra Metals Trades at a Deep Discount to Peers<\/h3>\n

Looking at updated valuation metrics (Bloomberg consensus), Sierra Metals trades at a deeply discounted valuation multiple relative to its copper peers across all metrics.<\/p>\n

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  • 75% discount on forward price-to-cashflow<\/li>\n
  • 72% discount on forward EV-to-EBITDA<\/li>\n
  • 65% discount on forward price-to-sales<\/li>\n<\/ul>\n

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    Bloomberg consensus (copper universe – market cap weighted)<\/figcaption><\/figure>\n

    Q2-2021 Results: Solid Production & EBITDA Growth, Guidance Revised Lower Due to COVID-19<\/h3>\n