What Is In A Valuation: MineCos vs TechCos
By Tshepo Magagane, Executive Director – Pangaea Advisory / Partner – The Critical Minerals Fund
Kobold – people who balk at the USD3bn valuation. I wrote about the fact that investors are only willing to pay USD0.05 for every USD1 generated by Mining Companies v Tech Companies (even Argentina’s bonds have never traded that low) – to recap what I wrote last year Jul: I mean look at the USD60 – 100bn valuation for start-ups in AI…making this analysis so succinct…a margin of USD5ktpa at 10x will imply 20% of NPV (if I move LT price to USD15kt/t, you get 10% of NPV)
NB: African DFIs cannot continue hiding behind the “charters” – charters = political mandate and providing debt facilities to projects at PF does not give any level of control – your principal & interest are repaid, your involvement in the project ends (whilst you have unlocked PFs for the equity holders – let us get serious now)
[Nvidia as Multiple of BHP Billiton metrics!
Yes, valuation in different sectors – but even with all my experience cannot explain this gap between valuation and cash generation!
Nvidia market cap is 22.7x that of BHP Billiton and yet it only generates 1.5x times more Net Income and only has 0.6x the cash BHP has!
I know my way around numbers and valuations – I cant make this make sense!
Let me take this to my favourite topic in Thematics – putting the hat back on when I used to do Tech & Telcos!
1. The market is saying mining cashflows are only worth a 20th of Tech cashflows
2. That mining stocks are ex growth from a production & pricing pov
3. However, for Tech stocks to grow into these valuations, they are going to need the likes of Copper
4. Copper deposits are lacking and the price to bring those available has to significantly go up
5. Therefore, mining stocks are NOT ex growth from a production & pricing pov
Which means, you cant be long (allocations / portfolio) AI, Datawarehouses, Electrification without being long Mining stocks which need to provide the raw materials to enable all that!
Hence buying mining cashflows for a 20th of Tech cashflows presents an incredible investment opportunity which will be a big driver of IRR, with a huge margin of safety!
Quick quote: ‘How the hell were we so slow to the fact that we needed vast amounts of raw material to make it all possible?’ said Connie Chan, a partner at Andreessen Horowitz.”]
