Margin compression likely ahead. We launched on the metals and mining sector with a Positive stance in October 2018 on the thesis that supply challenges would emerge given sector underinvestment and the miners were well positioned to generate free cash flow. Since then, despite a pandemic, we’ve seen strong demand and tight physical markets bring unequivocal margin expansion and deliver a wave of free cash flow. Balance sheets are now much improved, dividends are growing, and capital allocation discipline has been very good as well. However, with miner margins now near record highs and stocks trading at elevated P/NAV multiples versus history, we downgrade our industry view to Neutral. Although commodity prices remain elevated versus history, in the second phase of this bull market we expect pressure on the cost side from the move in oil, currencies and inputs, continued challenges from host countries on taxes, and gradual pressure on miner valuations.