skills/full-company-analysis/references/modules/M088-mining-and-metals-analyst-playbook.md

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<!-- Module: 088 | Title: Mining and Metals Analyst Playbook -->

## PART XV - SECTOR PLAYBOOKS | MODULE 088

# Mining and Metals Analyst Playbook

> Mission. Build a sector-specific research system for Mining and Metals that converts operating data into financial outcomes, highlights the accounting areas most likely to distort comparability, and selects valuation methods that reflect the sector's economics.

## Economic engine and binding constraints

Model production, grade, recovery, realized price, by-product credits, cash cost/AISC, strip ratio, sustaining/growth capex, reserve life, permits, royalties, and closure liabilities. Build mine-level NAV where project economics differ materially.

## Primary KPI stack

| KPI | Construction / analyst control |
| --- | --- |
| production | Oil, gas, NGL, mineral, or other physical output produced during the period in standardized units, net or gross according to stated ownership convention. Validation: Tie physical/operating units to company disclosures or source-system data; reconcile beginning/ending populations where applicable and test scope, ownership, and period consistency. |
| grade | Average ore/metal concentration in mined or processed material, such as g/t or %, measured on a consistent reserve/production basis. Validation: Recalculate independently from cited source data; verify definition, period, units, scope, signs, and any reconciliation to reported financial or operating totals. |
| recovery | Payable metal/mineral output recovered divided by contained metal/mineral in processed ore/feed. Validation: Recalculate independently from cited source data; verify definition, period, units, scope, signs, and any reconciliation to reported financial or operating totals. |
| realized price | Revenue for the commodity/product divided by sales volume after quality/location differentials and before or after hedges as explicitly stated. Validation: Recalculate price/cost from underlying dollars and physical units; test mix, rebates, FX, timing, and unit-definition effects; reconcile to reported revenue or expense. |
| cash cost | Direct mine/site operating cash costs net of applicable by-product credits divided by payable production units, using the issuer's consistent definition. Validation: Recalculate price/cost from underlying dollars and physical units; test mix, rebates, FX, timing, and unit-definition effects; reconcile to reported revenue or expense. |
| AISC | All-in sustaining cost: cash operating cost plus sustaining capex and sustaining corporate/exploration costs, net of defined by-product credits, divided by payable production. Validation: Recalculate price/cost from underlying dollars and physical units; test mix, rebates, FX, timing, and unit-definition effects; reconcile to reported revenue or expense. |
| reserve life | Proven and probable reserves divided by normalized annual production, adjusted for mine sequencing and recoveries where appropriate. Validation: Verify start/end timestamps or periods from source records, use a consistent calendar/business-day convention, and test outliers rather than averaging them away. |
| capex | Maintenance capex is the spending required to preserve current earning power, estimated from asset replacement and operating evidence rather than management labels alone |



## Sector-specific accounting and comparability traps

- Stripping costs: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Asset retirement obligations: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Reserve assumptions: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Impairment: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Streaming agreements: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

## Valuation frameworks

- NAV: mark identifiable assets and liabilities to economic value, subtract debt and other claims, and divide residual value by diluted shares; document commodity/discount-rate assumptions.

- EV/EBITDA: enterprise value divided by normalized EBITDA; adjust leases, pensions, minorities, recurring restructuring and capital intensity before peer comparison.

- P/NAV: common equity market value divided by independently estimated net asset value; stress commodity prices, reserve quality, development capex, discounts, taxes, and ownership.

- FCF yield: normalized levered free cash flow divided by equity value; reconcile SBC, working capital, maintenance capex, taxes, and cycle before comparing companies.

## Sector diligence questions

- What is the most important leading indicator for Mining and Metals, and how many months does it lead reported revenue or cash flow?

## Sector stress and falsification

- Stress production and grade together in the direction most likely to break the equity story; flow the result through working capital, capex, liquidity, financing, dilution, and valuation.

- Explicitly test stripping costs. Determine whether it can make the reported sector comparison look better or worse without equivalent economic change.

## 99-point standalone execution extension

### Model architecture and forecast chain

Model production, grade, recovery, realized price, treatment charges, cash cost, sustaining capex, growth capex, reserves, and mine life.

### Leading-indicator dashboard

Track benchmark prices, inventories, treatment charges, production guidance, grade, permitting, labor, power, freight, and new project supply.

### Primary-source map

SEC filings and technical/reserve reports; USGS mineral statistics; mine regulator/permit data; benchmark commodity prices; smelter/refiner disclosures; jurisdiction royalty/tax rules.

### Accounting normalization test

Stripping, reserve estimates, rehabilitation liabilities, JVs, royalties, impairment, and exploration capitalization can distort comparisons.

### Valuation implementation

Use project NAV, commodity sensitivities, mid-cycle FCF, and asset quality. Corporate overhead and future development capital matter.

### Worked numerical mini-case

> Illustrative mine case.

Production 500koz, realized gold $2,200/oz and AISC $1,350/oz imply $425m pre-tax mine margin before sustaining/growth distinctions and corporate costs. A $200/oz price change moves mine margin about $100m.

Reconcile grade, recovery, strip ratio, reserve life and sustaining capital. Do not value ounces without extraction economics.

### Monitoring and falsification cadence

Breaks include reserve/grade disappointment, project overrun, jurisdiction change, lower commodity incentive price, or capital needs exceeding balance-sheet capacity.

At every quarterly update, rebuild the driver bridge from operating units to revenue, margin, cash flow and valuation; compare leading indicators with the prior forecast; record definition changes; and precommit the threshold that would trigger a thesis reset rather than a cosmetic estimate change.

## Sector exit standard

The Mining and Metals work is complete only when the analyst can explain the business in its native operating units, reproduce the KPI history, identify the binding growth constraint and marginal price setter, normalize sector-specific accounting, quantify a coherent adverse case, and translate the current market price into the operating expectations that must be met or exceeded.