London, England — MININGREVIEW.COM — 03 June 2009 – Despite the impact of the global economic downturn, mining results for the year to 31 December 2008 were strong, but operating costs continued to erode profit margins. This situation presents the prospect of a tough road ahead, requiring companies to control costs and be flexible.
So says the sixth edition of Mine – the PricewaterhouseCoopers annual report reviewing global trends in the mining industry – which provides a comprehensive analysis of the financial performance and position of the global mining industry, as represented by the largest Top 40 mining companies by market capitalisation.
Despite the strong financial results, 2008 was definitely a year of two parts with the good times quickly turning bad as the global economic crisis took hold in the last quarter and commodity prices went into freefall,” the report added.
“Despite another record year for the industry, the Top 40 mining companies have seen their market capitalisation slashed by 62% from 2007 due to the fall in commodity prices and the drop in shareholder confidence,” said PricewaterhouseCoopers global mining leader Tim Goldsmith. “While the long term fundamentals still look favourable for the industry, companies with high debt levels have been particularly hard hit by investors who are increasingly focused on short-term cash generation,” he added.
“We have witnessed a unique deal environment that has reshaped much of the sector’s ownership. The rapidity of commodity and equity price falls, combined with the immense financing constraints stemming from the financial crisis, has left the sector polarised between the strong and the weak,” he said.
“The first quarter of 2009 also saw 14 of the Top 40 announce mine closures, production cuts or moves to place mines on care and maintenance,” Goldsmith continued, “and US$13billion (R117 billion) of capital expenditure has also been deferred or cancelled. Combined, this has led to more than 40 000 planned redundancies across the industry.”