Largest Canadian-based miners increased revenues by 38% in 2010: PwC
TORONTO, June 7, 2011 /CNW/ - The top 40 global mining
companies—including nine headquartered in Canada—increased their total
assets to US$943 billion in 2010 and are poised to break through the
US$1 trillion mark in 2011 driven by record levels of cash, and
property and equipment on company balance sheets, according a new PwC
report released today.
The financial results of the Top 40 in 2010 are spectacular. Total
revenues increased 32% to US$435 billion, breaking the US$400 billion
mark for the first time. Net profit rose 156% to US$110 billion and
operating cash flows grew by 59%, leaving more than US$100 billion
cash-on-hand at year end.
The report also found the Top 40's total year-end market capitalization
increased 26%, driving up the market capitalization of the smallest
company on the list to US$11 billion in 2010 from US$6.5 billion in
The top Canadian-based mining firms significantly contributed to the
overall Top 40 financial totals. Together, the nine Canadian companies
increased revenues by 38%. Net profit increased a staggering 1,536% to
US$8.9 billion and operating cash flows grew 224%. However, the 2009
base for comparison is low as a result of Barrick Gold settling its
gold sales contracts that year.
"We attribute this jump in profits to record high commodity prices
coupled with an overall rise in production by 5% in 2010," says John
Gravelle, National Mining Leader, PwC. "The mining industry is
ushering into a new era where demand will continue to be stoked by
emerging markets whose needs for resources show no sign of letting up.
China's 7% GDP growth target in its recently released 12th Five Year Plan reinforces the support for continuing high demand for
Yet, with a new era comes new challenges for the mining sector. Supply
is increasingly constrained as projects become more complex and remote,
limiting miners' ability to keep up with demand.
"We're seeing miners financially able to build new mines, but skills
shortages both within and outside of the sector mean they can't find
the people to physically build their desired projects," says Gravelle.
"And despite high profits, the costs to mine have skyrocketed due to
lower grades, higher fuel prices and a low US-dollar, which will likely
increase the overall cost base as well as commodity prices
Where is the money going?
To keep up with demand, the Top 40 have announced US$311 billion of
capital expenditures for the coming years, with over US$120 billion
planned for 2011. This is more than double the total 2010 spend, which
also included sustaining capital expenditures.
The deal market will continue to see heightened activity with more
mining firms better equipped to finance mergers and acquisitions. In
2010 for instance, there was a 26% increase in cash payments for
"More shareholders are increasingly asking what companies are doing with
the excess cash and pressuring them for higher shareholder returns,"
says Gravelle. "In the first half of 2011, a number of companies have
acted with providing significant share buy-backs."
Interestingly, exploration spending remains flat and relatively low
amongst the Top 40 at just under US$6 billion and only 8% of net
investing cash flows. Instead, they are effectively outsourcing these
activities to the junior sector, thus magnifying the importance of the
junior sector's ability to raise capital.
For a copy of Mine: The game has changed, PwC's annual analysis of the Top 40 global mining companies, visit: www.pwc.com/ca/mining.
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