Crescat Capital Investor Presentation — October 2021

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The M acro Case for Precious Metals

Where are we in the precious metals cycle?

There is no shortage of questions on why gold has significantly underperformed during such an ideal macro

Let’s start by looking at the usual fundamental trends of this industry as part of prior historical cycles.

Gold and silver stocks have neve r peaked at historically undervalued levels. Miners are now trading at the

cheapest fundamental multiples we have ever seen.

Assuming the current 2022 free -cash -flow estimate relative to the current enterprise value, the median

company among the 50 largest miners in the US and Canada exchange now trades at an unprecedented 7%

yield. Crescat Capital LLC

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Note that in aggregate terms, the same basket of companies also trades at its highest free -cash -flow yield in

Additionally, as shown in the second panel of the chart below, gold and silver miners continue to expand their

margins in a sign ificant way. The median free -cash -flow margin is now above 25%.

Believe it or not, today, 73% of the top 50 gold and silver miners are pro fitable on a free cash flow basis. That is

the highest level we have ever seen.

Historically, mining companies tend to lever up and dilute massive amounts of shares when they are at the top

We are experiencing the complete opposite today.

These companies have become true free -cash -flow machines and are now able to not only pay down debt but to

avoid significant equity issuances to finance their businesses.

In fact, gold and silver miners just repaid the largest amount of debt in the last 25 years.

We have not even seen the onset of an M&A cycle yet. PM miners have turned gun -shy when it comes to

acquiring new projects or companies.

Rememb er, mining companies tend to overpay for deals at the peak of the cycle. We are barely seeing any deals

It is quite normal for gold to struggle after making new highs. We have seen this price behavior happen twice

In March 1978, gold briefly reached a record level and then corrected by 15% soon after.

Also, January 2008, the metal hit new highs and c ontinued to appreciate for another month until declining by

We are probably seeing a similar issue today again. The price is now 14% lower, and the entire financial media

already claims that gold is dead.

Note, however, how the shiny metal tends to come screaming back after these pullbacks.

The gold to silver ratio usually reaches historical lows when miners are near peak cycle.

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