2016 was a year of recovery for the world’s largest Top 40 mining companies, with profitability returning and balance sheet repair well underway.
Rapidly rising commodities prices sparked renewed market optimism and improved credit ratings. Valuations also climbed, especially for the traditional miners, with the trend continuing into early 2017 even as commodity prices remained flat.
Balance sheet clean-ups require discipline, and this has resulted in a tailing-off of impairments, the avoidance of any new bankruptcies, the absence of any significant streaming transactions and a general passing of distress.
All of this provides a platform for decisive action in the future. While many will be willing to ride the waves of industry sentiment, others will see the conditions as ripe for value accretive moves, with market differentiation their immediate goal.
Action might also come in the form of commitments to greenfield projects, M&A or technology – or a combination of these – while others may realign their strategy in response to external forces such as recycling and substitution, shareholder activism and government intervention.
The key question is, who will act rather than simply react?