Insight
Top miners perform,
but investors not
impressed
The world’s 40 largest mining companies continued to consolidate their stellar
performance of the past several years by delivering steady growth in 2018
according to PwC’s Mine 2019 report, released at the recent Junior Mining
Indaba held in Johannesburg, South Africa. Editted by Leon Louw.
A
s a group, the Top 40 increased
revenue by 8%, buoyed by
higher commodity prices and
marginally improved production.
They also boosted cash flows, paid down
debt and provided a record dividend to
shareholders of USD43-billion. Forecasts
indicate continued steady performance in
2019. Revenue should remain stable, with
weaker prices for coal and copper offsetting
marginally higher production and higher
average prices for iron ore.
Yet investors seemed unimpressed by the
Top 40’s result, judging by market valuations,
which fell 18% over 2018. While total market
capitalisation rose in the first term of this
year, it remains 8% down compared to the
end of 2017. Over the past 15 years, total
shareholders’ return in mining has lagged
behind that of the market as a whole, as well
as comparable industries such as oil and gas.
Michal Kotzé, PwC Africa energy
utilities and resources leader says: “In spite
of the strong operating performance of
the world’s top miners, there is still more
room for improvement for mining to
continue to create and realise value in a
sustainable manner. Both investors and other
stakeholders have concerns about the mining
industry’s ability to respond to the risk and
uncertainties of a changing world.
“Globally, stakeholders are concerned that
www.miningmirror.co.za
Stakeholders have concerns about the mining
industry’s ability to respond to the risk and
uncertainties of a changing world.
the industry is lagging behind when it comes
to a number of factors that have not been
a traditional focus of the mining industry.
These include dealing with emissions,
investing in differentiating technology and
digitisation, engaging more proactively with
consumers and building brand.
“The mining industry will have a window
of opportunity to adapt to the growing and
changing expectations of stakeholders. By
utilising technology to operate safely and
more efficiently, addressing global concerns,
and maintaining a disciplined strategy to
create ongoing value for its stakeholders,
the industry can forge a better future for all
beneficiaries of mining.”
With strong balance sheets and cash flow,
now is the time for the mining industry to
address the issues weighing down market
valuations. Climate change, technology and
changing customer sentiment are among many
of the business challenges. In order to restore
faith in ‘brand mining’, the top miners will
need to prove they are keeping up with the
pace of change. Miners have a critical role to
play in addressing the awareness gap between
the brand of mining and the benefits of mining.
Strong balance sheets
In 2018 the Top 40 paid down USD15.5-
billion in net borrowings, resulting in the
gearing position dropping below the 10-year
average. All liquidity and solvency ratios
improved during the year, leaving the world’s
largest miners with strong balance sheets and
cash flows.
AUGUST 2019 MINING MIRROR [39]