Min­ing in­dus­try ‘on the rise again’

Turn-around mainly due to higher com­mod­ity prices

The Star Early Edition - - NEWS - Di­neo Faku

AF­TER years of bleed­ing cash and grap­pling with the com­mod­ity price squeeze, the mar­ket cap­i­tal­i­sa­tion of the world’s top 40 min­ing com­pa­nies grew by al­most half last year.

PwC’s Mine 2017 re­port, which was re­leased on the side­lines of the Joburg Ind­aba yes­ter­day, found that the mar­ket cap­i­tal­i­sa­tion of the com­pa­nies strength­ened by 45 per­cent last year to $714 bil­lion (R9.1 tril­lion) – ap­proach­ing the level reached in 2014 – mainly be­cause of ris­ing com­mod­ity prices.

The two-day ind­aba is be­ing at­tended by 300 ex­plor­ers, de­vel­op­ers and in­vestors in Africa’s ju­nior min­ing in­dus­try.

Com­modi­ties had a bumper 2016, with solid per­for­mances in the prices of gold, cop­per and nickel.

The PwC re­port said the real story of 2016 was the strength of the prices of coal and iron ore, which were bat­tered in the pre­vi­ous year. In­vestors were taken on a wild ride that con­tin­ued into the first quar­ter of this year.

The re­port said iron-ore prices dou­bled to the end of the year, reach­ing a high of $89 a ton in mid-Fe­bru­ary, only to suf­fer a sharp re­ver­sal there­after.

It also noted the dra­matic peak in the price of coal last year, with the price of ther­mal coal dou­bling to reach $100 a ton in Novem­ber, be­fore be­gin­ning to re­treat in De­cem­ber.

The top 40 com­pa­nies re­ported a net profit of $20bn last year, com­pared with an ag­gre­gate loss of $28bn in 2015.

“Min­ers man­aged to turn the his­tor­i­cal ag­gre­gate net loss in 2015 into a profit, driven by lower im­pair­ment charges, and a de­crease in in­ter­est ex­penses af­ter key play­ers cleaned up their bal­ance sheets,” the re­port said.


The re­port, which is based on stud­ies of fi­nan­cial in­for­ma­tion and cov­ers the pe­riod April 1, 2015, to De­cem­ber 31, 2016, found that the val­u­a­tions of the top 40 min­ers had climbed, par­tic­u­larly in the case of the tra­di­tional min­ers.

“The min­ing in­dus­try re­mains a long way off the peaks of pre­vi­ous cy­cles, but it has re­grouped and has be­gun to rise again,” it said.

How­ever, the re­port said the in­dus­try was not out of the woods yet, be­cause cap­i­tal ex­pen­di­ture (capex) has fallen to new lows.

It said capex fell by a fur­ther 41 per­cent, to a record low of $50bn, and there was an ab­sence in the an­nounce­ment or com­mence­ment of sig­nif­i­cant green­fields projects.

It also found that, for the fourth con­sec­u­tive year, the in­dus­try re­duced spend­ing on ex­plo­ration.

“Only $7.2bn was in­vested in 2016, barely one-third of the record $21.5bn al­lo­cated in 2012, with the funds cau­tiously tar­geted at less risky, later-stage as­sets, typ­i­cally lo­cated in po­lit­i­cally sta­ble coun­tries,” the re­port said.

The PwC re­port said An­gloGold Ashanti was the only “real” South African com­pany to make the top 40 list in 2016, at num­ber 40, while South32, which de­merged from BHP Bil­li­ton, was a new ar­rival, at num­ber 22.

An­other com­pany on the list was An­glo Amer­i­can, whose sub­sidiaries in­clude An­glo Amer­i­can Plat­inum and Kumba Iron Ore, which was ranked eighth.


The sun sets be­hind a shaft out­side the min­ing town of Car­letonville. The world’s top 40 min­ing com­pa­nies re­ported a net profit of $20 bil­lion last year, com­pared with an ag­gre­gate loss of $28bn in 2015, PwC’s Mine re­port says.

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