Mining

An unparalleled period of soaring commodity prices and economic growth has given way to slowdown and recession. The big question is whether the sudden downturn represents a relatively short-term interruption in growth, or whether it is the signal of a more long-run recession. Mining companies have to balance short-term responses with long-term strategy, weighing the long timescales needed for major infrastructure projects, such as mine development, against sharp downturns in prices and demand.

The mining industry, at first thought to be somewhat insulated from the debt crisis, is now fully impacted amid falling demand, tumbling commodity prices, high operating and capital costs and falling share prices. New mines will be rare. Under-performing mines, or those with cost over-runs will be carefully scrutinized for potential closure. Cash conservation and cost management is the order of the day. Mid and lower tier companies will need further debt/equity to fund development but face constraints in sourcing funds. There will be opportunities for cash rich companies to look beyond the downturn to make strategic acquisitions at bargain prices.

If they are not to be targets, cash strapped companies will need to consider joint ventures with cashed up local or international players, especially from China and India. Companies will need to be rigorous in their option analysis and risk evaluation. Postponement or cancellation can increase costs and leave companies exposed in an upturn.

PricewaterhouseCoopers delivers a range of services to help mining companies address the many challenges they face today and to help them to prepare for the upturn in the future.

Mining challenges

Recent postings

Global mine bulletin: September 2009
This edition of Global mine bulletin highlights a number of reports and surveys recently issued by the PricewaterhouseCoopers global mining team.

IFRS bulletin: Straight away: The extractive activities project at the IASB
The extractive activities project at the IASB opens the door to potential radical changes to financial reporting for mining and oil & gas.

Total tax contribution: Global study for the mining industry
The first ever Total tax contribution study for the global mining sector reveals the total taxes of fourteen of the world’s largest mining companies, focusing on their largest operations in a variety of countries.

Finding cost efficiencies in mining operations through effective value driver modelling
This paper highlights Australian mining best practice in both operations cost management and production value maximisation through robust modelling of operational value drivers.

Mining deals: 2008 annual review: Mergers and acquisitions activity in the mining industry
After the rise comes the fall. The mining industry experienced a violent downward tailspin in the last three months of 2008 which has turned much of the deal-making in the sector upside down. We examine both the rationale behind the overall trends and look at the key individual deals. We look at the year under review, the context of the preceding three years, and ahead to the future direction of deal-making in the sector.

Global mining capability statement 2009
PwC is the world’s leading adviser to the mining industry, working with exploration, production and service companies to provide business solutions tailored to the mining sector. This publication discusses the key challenges mining companies face today and how PwC is helping them identify and implement solutions.