Mine 2018

Tempting times

For the world’s Top 40 miners, 2017 was a remarkable year. The continuing recovery in commodity prices saw revenues rise dramatically.

A remarkable year for the world’s Top 40 miners

  • Market cap $926 billion up 30%
  • Revenue $600 billion up 23%
  • Gearing 31% down from 41%
  • Net debt to EBITDA improved by 38%

Source: PwC analysis

For the world’s Top 40 miners, 2017 was a remarkable year. Thanks in large measure to the continuing recovery in commodity prices, fueled by general economic growth, revenues rose dramatically by 23 per cent. At the same time, the cost saving strategies of the past few years delivered, with margins and cash generating ability improved as well, leading to a sharp increase in profits.

Capital expenditures remained flat. With liquidity concerns that were still lingering in 2016 mostly resolved and balance sheets strengthened, companies have the flexibility to act. Across the board, a heightened focus on safety in operations, reducing leverage, and avoiding aggressive investments in new capacity indicates that management is proceeding in a measured and deliberate way.


Mine 2018 - Tempting Times

Report overview | Duration 1:39


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The global Top 40 mining companies – global production profile and external market drivers

External Drivers

  • North American free trade agreement - United States, Mexico, and Canada
  • US tax reform / trade relations - United States

External Drivers

  • 2018 presidental elections - Brazil
  • Labour environment (disputes) - ongoing labour disruptions - Peru and Chile

External Drivers

  • Fiscal struggles with tax pressures - Democratic Republic of the Congo, Zambia, and Tanzania
  • Potential new regulatory regime - mining charter, environmental regulations, social economic challengesin key producing regions - South Africa

External Drivers

  • Regulatory enforcement - Indonesia and Philippines
  • Auctioning of mining rights - India
  • Safety and environmental enforcement - China
  • Sanctions - Russia

Regional Perspective

Mine 2018 Tempting Times | Duration 4:36


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We have been here before! The Top 40’s performance reflects the cycle upswing 

The Top 40’s performance confirms the upswing in the cycle. In a declining price environment, with a corresponding drop in revenue, EBITDA dropped significantly. A focus on cost saving, productivity and the impact of lower commodity prices on input costs resulted in a recovery in EBITDA even aside from the recovery in revenue. Recent price increases have further improved operating profitability.

The lag between capital expenditures and financial performance is evident and typical in cyclical industries. Significant investments made during the previous boom resulted in a substantial overhang in production capacity and weak balance sheets. So it is not surprising that the industry has been slow to ramp up investment significantly; capital expenditures in 2017 remained at a more than 10-year low.

Top 40 performance trends ($ billions)  Source: PwC analysis

Top 40 performance trends ($ billions)  Source: PwC analysis


Strong financial position brings flexibility and sustainability

In 2018, we expect that favourable market conditions, higher commodity prices and strong internal discipline will produce increased liquidity and balance sheet strength. That in turn will tempt the Top 40 to reinvest in the business, pursue investment or growth opportunities and enhance shareholder returns.

While we expect to see an increase in value and growth opportunities in 2018, we anticipate that this will be tempered by a continued focus on maintaining a robust and flexible balance sheet

Gearing and liquidity position resolved

Over the last few years, companies and improved their financial positions through various strategic actions. The result is that gearing is now back to the 15 year Top 40 average of 31%. The repayment profile of debt for the Top 40 has also improved significantly and will continue to reduce over time in the absence of significant new debt.

Companies’ net debt to EBITDA ratio dropped to 1.5 from 2.2 in the   previous year and only five companies had a ratio above four.


2018 – Tempting times ahead

While Top 40 Miners are enjoying a bounce back, vigilance is key.  Temptations loom in many guises for miners and their stakeholders.  Miners will need to stay focused and deliberate towards the long term goal of creating sustainable value for all stakeholders.  In particular, a watching brief will be on the following issues: 

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Contact us

Jock O’Callaghan

Global Leader, Mining and Metals, Partner, PwC Australia

Tel: +61-3-8603-6137

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