TORONTO, June 17 /CNW/ - While the revenues of the top 40 mining
companies grew by 32% in 2007, costs increased by 38% with the result of
reduced margins, says a report release today by PricewaterhouseCoopers (PwC),
'Mine - As good as it gets?'. The fifth annual report provides a comprehensive
analysis of the financial performance and position of the global mining
industry and also discusses current trends in the global mining industry.
During 2007, the global mining industry did not see the effects of
economic slowdown that hit other regions or sectors of the economy. With
explosive growth continuing, especially in emerging economies, mining
companies were struggling to keep up with demand.
The survey shows that market capitalization of the industry grew by 54%
with the most striking change in composition coming from the relative
reduction in the market capitalizations of the traditional mining powers
(Canada, United States, Australia, and South Africa) and the growth and
emergence into the Top 40 of the emerging markets' companies in the BRIC and
South American regions as geopolitical risk appetites change. In 2003, the
market capitalizations for these emerging markets' companies made up 14% of
the total Top 40 market capitalization; in 2007 this relative weight grew to
Although Canadian and Australian based companies' market capitalization
strength in the Top 40 has diminished, both nations are currently well
positioned for growth and resurgence with their strengths in the junior and
mid-tier mining sectors. Toronto's venture exchange listed Top 100 junior
mining companies have experienced a 135% growth in market capitalization since
2005, with Australia's Top 50 mid-tier mining companies (under $5 billion)
showing 122% growth.
For the first year since 2002, cash flows from operations were
insufficient to cover the increased levels of investment activities;
significant external financing has been obtained to fund the various growth
ambitions. Furthermore, total shareholder returns for the top 40 averaged 119%
in 2007, compared to 55% in 2006.
"The good times continue for the global mining industry," says
Paul Murphy, PwC Canada mining practice leader. "Record commodity prices and
continued growth in emerging economies have let the top mining companies avoid
the slow downs that we have seen hitting other sectors. While most indicators
are still showing strong performance and continued growth, we have seen a
decrease in margins due to cost increases. And with continuing issues with
skills shortages, it is ever harder to bring new supply to the market. For
some industry participants, this may be as good as it gets, however, for those
companies operating low cost long life mines the future looks very bright."
With volatile commodity prices, mining companies are well placed to
exploit the growth in certain regions, and this is reflected in the fact that
the diversified majors, particularly those with iron ore and coking coal
assets, were by far the most profitable players.
Despite this growth, certain challenges are facing the industry today,
both from external and internal influences. A new breed of CEO is having to
deal with these challenges and they have been quick to capitalize on the
increased operating cash in-flows. Many young CEOs (both in age and tenure)
have undertaken dramatic transactions within months of taking on top
positions. How well they can maintain these so far impressive growth rates
will ultimately determine their survival.
According to Murphy, "To help achieve growth, all CEOs must now more than
ever be attuned to managing the 3P's: people, power and procurement. With
constraints in these critical areas, planning and project management are
essential to ensure success."
The full report of 'Mine - As good as it gets?' is available to download
from Tuesday 17 June at www.pwc.com/mining.
The results aggregated in the report have been sourced from publicly
available information primarily annual reports.
PricewaterhouseCoopers is the leading adviser to the mining industry,
working with more explorers, producers and related service providers than any
other professional services firm to ensure we meet the future challenges of
the mining industry.
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