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Value creation in the mining sector: A long term divergence between copper and gold producers

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Report summary

In one of the most significant divergences observed across the mining sector, gold miners - which in the year 2000 commanded a 50% market premium over copper miners, have seen their relative valuations erode and now trade at a 25% discount relative to copper miners. We've tracked nineteen gold and pure play copper companies over a fifteen year period and discuss how and why the copper sector has outperformed despite gold prices rising faster than copper prices over the analysis period.

What's included

This report contains

  • Document

    Value creation in the mining sector: A long term divergence between copper and gold producers

    PDF 578.75 KB

Table of contents

    • Copper miners have outperformed gold miners significantly
    • The approach to capital allocation has dictated the divergence in returns between the copper and gold sectors
  • Cross-sector performance between 2000 and 2015
  • Understanding long term value creation in the mining sector – net worth per share growth
  • M1 and residual cash flow margins and dividend policy across the two sectors
  • External financing in the copper and gold sectors between 2000 and 2014
  • Business growth versus per share business growth diverge – shareholder dilution
  • Randgold Resources and First Quantum Minerals shine
  • Erosion of gold mining premium and state of the industry
  • Conclusions and outlook
  • Methodology

Tables and charts

This report includes 10 images and tables including:

Images

  • Miners share price appreciation along with underlying commodity prices from 2000-present
  • Tracking the correlation between tangible net worth per share and share prices for nineteen mining companies between 2000 to 2014
  • A comparison between copper and gold miners residual cash flow margins from 2000-2015F
  • A comparison between copper and gold miners dividend payout and yield between 2000-2014
  • A comparison in the total shares outstanding and total debt growth between the gold and copper sectors between 2000 and 2014
  • A comparison of business net worth of selected copper and gold miners compared with net worth per share between 2000 and 2014
  • A comparison of net worth per share and share price for Randgold Resources and First Quantum Minerals
  • Valuation and leverage of gold and copper miners
  • Share price, net worth and metal prices for gold and copper miners

Tables

  • Value creation in the mining sector: A long term divergence between copper and gold producers: Table 1

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