A spectacular and rapid decline for the global mining industry

    Industry now divided between the haves and have not's

    TORONTO, June 2 /CNW/ - While the 2008 revenues of the top 40 mining
companies in the world is 3.7 times that of 2002, their reported robust net
profit for 2008 of $57 billion is the first decrease since the start of the
annual PricewaterhouseCoopers (PwC) survey Mine: review of global trends in
the mining industry. This 28% reduction returns net profit to the levels
recorded in 2005/6 but net profit remains well above the 2002-2007 average of
$42 billion.

    -   Market cap of Top 40 drops to $2.3 billion from $9.0 billion in 2008
    -   Gold companies the least affected but still see market decrease by
    -   Total shareholder return sees significant decline

    2008 has seen the market capitalization of the Top 40 decrease by 62%
from 2007 - primarily due to the fall in commodity prices and the impact of
the global economic crisis on shareholder confidence. This represents a
spectacular and rapid decline for the industry - but one which is mirrored in
many sectors. In 2007 the cut-off for inclusion within the Top 40 was a market
capitalization of greater than $9.0 billion - in 2008 this has dropped to $2.3
    "There is no doubt that the industry is facing tougher times, and
steering a path through this downturn will require tough decisions from the
leaders of the Top 40," says Paul Murphy, leader of the Canadian Mining
Practice at PwC. The rapid fall in market capitalization and increased debt
levels for some of the Top 40 has created two distinct groups; the 'haves' and
the 'have not's'. In the current climate there is no more valuable an asset
than cash, and for cash rich companies, opportunities exist as asset values
fall. Options for this group of companies continue to include acquisition or
organic growth."
    Gold companies have been the least impacted with their market
capitalization decreasing by 20% based on the perception that the commodity is
a safe haven in a time of economic turmoil, and a protector of wealth. 14 gold
companies are included in the Top 40 in 2008, up from ten in 2007 and gold
companies now comprise 26% of the total market capitalization, more than
double the 2007 level, having taken the place of base metals, platinum and
coal companies.
    According to the survey operating costs continue to rise at a greater
speed than revenue, further eroding margins. Costs continue the upward trend
of the past six years with the current rise consistent with the 19% annual
average; and adjusted EBITDA increased to a record $141 billion, seven times
the result achieved in 2002. Higher costs eroded the percentage growth in
EBITDA to the lowest levels experienced.
    In 2008 operating cash flows broke the $100 billion barrier and were
almost five times the 2002 level. However, the industry continues to spend its
funds with almost all operating cash flows generated over the seven-year
period matched by outflows in investing activities. In aggregate $380 billion
has been spent on investing activities by the Top 40 since 2002.
    Despite plant and equipment being at its highest level, the increase of
8% in the year is the lowest since 2002 (average of 23% p.a.). A significant
part of this decrease results from impairment and reflects the high levels of
M&A activity over the six years to 2007.
    Total assets are more than 3.5 times those reported in 2002 fuelled by
acquisitions and expansion capital spending during the boom times. Total
liabilities have increased 3.3 times to fund the growth and shareholders
equity experienced only a small increase in 2008 - 3% growth versus an average
30% increase over the other reported years. Share issues and positive retained
earnings were offset by significant negative fair value and other reserve
movement primarily relating to currency translations from functional to
presentation currencies. Total equity in 2008 is 3.8 times larger than total
equity in 2002, representing a trend of investment in the mining industry,
particularly in light of the number of share buy-back program.
    "Investors in mining companies have ridden the boom over the past five
years, experiencing high levels of returns, both through capital growth,
dividends and share buyback programs," says Murphy. "Last year we saw that 14
of the Top 40 achieved a one year Total Shareholder Return (TSR) of greater
than 100% and only five companies had negative TSR. Four companies reported a
TSR of greater than 400%. This year the contrast could not be starker. Only
three companies had positive TSR and the four lowest were a 75% or greater

    This year's MINE also includes:

    -   A view from the top: A summary of views expressed by leading CEOs
        through interviews and discussions conducted during the past year
    -   Seven year trends: A comparative look at results from 200 through to
    -   Rewarding talent in the downturn
    -   Investing in the downturn
    -   Fraud in the downturn
    -   Flexibility in the downturn
    -   Total tax contribution of global mining companies
    -   Sustainable development for mining companies
    -   Water risks

    For more information, please visit www.pwc.com/mining

    About PricewaterhouseCoopers LLP

    PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 155,000 people in 153 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP
(www.pwc.com/ca) and its related entities have more than 5,200 partners and
staff in offices across the country.
    "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.

For further information:

For further information: Carolyn Forest, (416) 814-5730,
carolyn.forest@ca.pwc.com; Nina Godard, (416) 941-8383 x 13520,

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