Mining

2011 will be remembered as a year of paradox- profits were often in record territory, yet share prices were weak, cash returned to shareholder hit new heights yet price earnings ratios were lower than in the depths of the Global Financial Crisis’s first wave.

The financial woes that gripped most of the world’s developed economies over 2011 seem to have unnerved investors to the point that they became wary about the industry’s growth story, or were instead reacting to other short-term global economic concerns.

The bleakness that characterised world equity markets led investors, it seems, to forget the fundamental strength underpinning mining’s future.

The industry’s future lies not in Europe, nor the US, nor Australia for that matter. Rather, mining looks to where its customers reside - the developing world. Over the past 20 years growth in places as diverse as China, India, South East Asia, Africa and Latin America has far outpaced growth in the west. Even with some slowdown expected in China – from double to still sturdy single-digit growth – the International Monetary Fund forecasts the emerging world will average about 6 per cent growth or more through to 2016.

The short reason for this is that these economies are growing. They need cities and infra-structure to be built to cater for their growing populations. Resources are the means to this end.

The industry faces a number of key challenges in particular bringing supply to market. The issues here are varied and include:

  • Evolving fiscal regimes and rising resource nationalism will have on the industry,
  • Decreasing grades
  • Rising input costs
  • Higher capital costs needed to bring supply to market.
  • Continued disruptions to production from labour strikes to weather events
  • The increasing remoteness of deposits

The world’s big miners need to consider all these issues at the same time as they are required to placate often voracious shareholder calls to assert strict capital discipline and to return ever greater reams of cash.

Answers to these challenges are complex but the onus is on the industry to continue to tell our story and present to investors, governments, and the communities in which we operate an investment story that remains one of the strongest in the world today.

Mining challenges

Recent postings

Mine: A confidence crisis
Mining is an industry in crisis. At the same time, volumes are up, dividend yields are up and commodity prices have fallen, but not crashed. Long term demand fundamentals are still there. So what’s the crisis? The broader markets have rebounded as investors have started to rotate back into equities. But mining equities have been left behind. The industry lacks a clear investment proposition. But why? The market has lost confidence in mining. And the markets reflect this confidence crisis.

2013 Global Gold Price Report
Gold is the favoured commodity of 2013 with more than 80% of gold executives expecting to see a rise in the price of gold.

Junior Mine 2012
Equity financing, raised by 2012’s Top 100 mining companies listed on TSXV, as at June 30, decreased by a troubling 41%.

Corporate income taxes, mining royalties and other mining taxes
This summary of income taxes, mining taxes and mining royalties compares the various governmental costs of investing in a mining operation in a particular country. We have gathered specific tax information by country regarding coal, copper, gold and iron ore mineral operations.

Mining Tax Quarterly
A quarterly review of tax developments and industry updates for the global mining sector. This issue features a discussion of a rare earths trade dispute with China and a review of recent PwC mining sector publications.

Mine ― The growing disconnect
The global mining industry is facing a growing disconnect as despite record profits for the world’s 40 biggest miners in 2011 thanks to high commodity prices, investors proved fickle, demanding greater capital discipline and increased shareholder returns.

On the road again? Global Mining 2011 Deals Review & 2012 Outlook
This new study offers key PwC observations of M&A in the mining sector in 2011. In addition to traditional deal tallies and metrics, it also includes a précis of geographic trends, M&A value drivers and a closer look at activity by resource.

2012 Gold Price Report
Annually, PwC surveys gold mining companies from around the world, including executives from senior and junior mines. Read our 2012 survey to learn why gold companies’ shares are not keeping pace with gold prices.