Johannesburg, South Africa — MININGREVIEW.COM — 18 June 2008 – The year 2007 was another great year for the global mining industry, but although revenues of the top 40 mining companies grew by 32%, costs increased by 38%, thereby reducing margins in the process.
These are the main findings published in the PricewaterhouseCoopers report “Mine – as good as it gets” – a review of 2007 global trends in the mining industry. The annual study is now in its fifth year, and provides a comprehensive analysis of the financial performance and position of the global mining industry, looking at 40 of the world’s largest mining companies representing over 80% of the global industry by market capitalisation.
During 2007, the global mining industry did not see the effects of economic slowdown that hit other sectors of the economy, the review continued. In fact, with explosive growth continuing – especially in emerging economies – mining companies were struggling to keep up with demand.
Other significant findings of the PricewaterhouseCoopers analysis include the following:
- Market capitalisation of the industry grew by 54%, with noted strength from the diversified giants and emerging market companies;
- For the first year since 2002, the initial year analysed, 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;
- Total shareholder returns for the top 40 averaged 119% in 2007, compared to 55% in 2006.
PricewaterhouseCoopers African mining leader Hugh Cameron, said: “2007 continued to be great for the global mining industry. 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,” he added.
“While most indicators are still showing strong performance and continued growth, we have seen a decrease in margins due to cost increases,” Cameron continued,“and with continuing issues with skills shortages, it is ever harder to bring new supply to the market.”
Cameron made the point that “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,” he insisted.
According to the review, the composition and ranking of the top 40 companies analysed continues to change, especially with respect to global diversification and emerging market presence. Companies from emerging markets have shown particularly high growth and now comprise 36% of the top 40’s market capitalisation, demonstrating the importance of these economies to the industry as a whole, it said.
South African companies in the top 40 are Anglo Platinum, AngloGold Ashanti, Gold Fields, Impala Platinum and Kumba Iron Ore.
PricewaterhouseCoopers mining partner Mike Roy said the survey revealed that many regions – including South Africa and South America – have recently experienced the crippling effects of a lack of electricity or inconsistent supply for their operations. “South Africa in particular has been widely impacted with uncertainty around continual power supply, which is hindering the ability of mining companies to operate at normal levels of production, and to bring new projects online,” he emphasised.