Mine 2016: Slower, Lower, Weaker….but not defeated

Welcome to Mine: PwC’s 13th annual review of the top trends in the global mining industry. Our analysis is based on the financial performance of the Top 40 global mining companies by market capitalisation.

Our key findings:

  • The first collective net loss in the top 40’s history (US $27B)
  • Market capitalization down 37 per cent, in some cases below Net Book Value
  • High debt sees some miners fighting for survival through asset fire sales
  • Focus on costs continues, but so do economic headwinds

2015 was a race to the bottom with many new records set by the world’s 40 largest mining companies according to the PwC’s annual Mine report.

The 13th in PwC’s industry series analysing financial performance and global trends, the report reveals a first ever collective net loss (US$27bn) for the top 40 miners with market capitalisation falling by £297bn (37%), effectively wiping out all the gains made during the commodity super cycle. 

Mine 2016 also found: 

  • Investors punished the top 40 for poor investment and capital management decisions and, in some quarters, for squandering the benefits of the boom.
  • Concerns over the strong correlation between the perception of the future earning potential of the industry and short-term commodity prices, particularly as mining is clearly a long-term game. 
  • A ‘spot mentality’ from shareholders who are much more focused on short term returns in contrast to the long term investment focus by top 40 management teams.
  • A focus on maximising value from shedding assets as well as mothballing marginal projects or curtailing capacity by top 40 miners. This is further evidenced by a significant drop off in capex signalling an almost stagnant investment environment.
  • A positive focus on cost reduction resulting in a 17% drop in operating costs against a backdrop of higher production volumes and lower input costs – an impressive achievement given the production increases seen during 2015. 

…But not defeated

Whilst the industry continues to face significant economic headwinds, there is still a long term positive outlook.