Johannesburg, South Africa — 06 June 2013 – The global mining industry is facing a market confidence crisis, a PricewaterhouseCoopers (PwC) report has found.
“While 2012 saw mining stocks fall slightly, they fell nearly 20% in the first four months of 2013,” PwC said in a statement reported here by Fin24.
According to the report, the industry faces a confidence crisis. “Confidence over whether costs can be controlled, return on capital will improve and commodity prices will not collapse, among others.”
The report analysed 40 of the largest listed mining companies in major economies, including the United Kingdom, the United States, Canada, Australia, China, Russia, India, Brazil, Poland, Mexico and South Africa.
It found that global mining revenues levelled at US$731billion, and net profits were down by 49%, to US$68 billion.
With regard to total market capitalisation gold miners in the top 40 lost US$29 billion in 2012, while in the first four months of 2013, they lost a further US$58 billion in value.
The report found that since April 2012, half of the CEOs had been replaced at the largest 10 mining companies.
PwC Africa mining leader Hein Boegman said in the statement that on the demand side of the industry, fundamentals are still there.
“But regaining investor confidence depends on how the mining industry responds to its rising costs, in particular labour, to increasing volatile commodity prices and other challenges, such as resource nationalism and whether new CEOs can deliver on promises,” Boegman added.
“Our analysis of the new leaders and their predecessors suggests there is a demand for a different type of leader as the industry undergoes change.” Boegman said, however, it was important to recognise that the industry’s emphasis continued to shift.
“For the first time ever, half of the top 40 miners are from non-traditional markets, and China continues to be the industry’s most important customer,” he continued.
“While Chinese growth rates are slowing down, they are coming from a bigger base, so future demand for commodities still looks healthy, according to Boegman.
He said mining companies were trying to rebuild the market’s confidence. “Across the board there is a shift from the days of maximising value by solely increasing production volumes, to a renewed focus on maximising returns from existing operations," he said.