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

A step change by the Australian government on the proposed resource rent tax regime
The Australian government announced that the Resources Super Profits Tax (RSPT) would be scrapped. In its place, we now have a newly titled “Minerals Resources Rent Tax” (MRRT) in conjunction with an extension to the existing Petroleum Resource Rent Tax (PRRT) regime.

Total tax contribution: A study of the economic contribution mining companies make to public finances
This study aims to bring greater transparency to the full contribution that mining companies make to public finances. The results analyse their total payments to government, focusing on their most significant operations in the various locations.

Mine: Back to the boom: Review of global trends in the mining industry - 2010
This year's publication marks our seventh annual survey of the Top 40 mining companies by market capitalisation, provides a comprehensive analysis of the financial performance and position of the global mining industry and also discusses current trends in the global mining industry.

Mining Deals: 2009 Annual Review - Mergers and acquisitions activity in the mining industry
The total value of mining M&A halved in 2009. Highlighting the significance of this decline was the fact that the biggest deal in 2009 would not have made it into a list of the top 10 deals by value in 2008. Overall, deal value fell from US$153.4 billion in 2008 to US$77.1 billion in 2009.