Mining investors call for more consistent performance data in reports

04 Nov 2013

"The investment community is sending a clear message to management. If a measure is important, make sure it’s reliable," says Jennifer Sisson.

The annual report remains the bedrock of corporate financial reporting for mining investors and analysts. But there is a significant gap between the perceived importance of data in company reporting and its adequacy, according to a new PwC survey – Extracting value.

  • Fewer than 4 in 10 said they trust management to provide a balanced and reliable view of performance
  • Most investment professionals agree that the quality and integrity of reporting impacts their perception of management

Investment professionals surveyed, flagged up reporting shortfalls and inconsistencies in relation to a number of key metrics, such as cash costs and reserves data. Respondents also said they would particularly like to see all-in production cost measures included, more detailed capital expenditure reporting and greater industry-wide consistency.

Jason Burkitt, PwC UK mining leader commented: "One challenge for management and investment professionals alike stems from the lack of clear guidance around the reporting of key performance measures, such as non-GAAP and non-financial information. This is resulting in diverse disclosure practices, creating a harder task for investors and analysts as they seek to compare companies - even within the mining sector."

Perhaps because of concerns over presentation of data, 84% of investors and analysts surveyed said they would gain comfort from knowing that non-GAAP measures, such as EBITDA, stuck to some basic 'ground rules'.

There are also opportunities to improve trust in the measures that have the power to influence and ‘move markets’. Only 56% of those surveyed felt that the measures that move the market are sufficiently reliable.

Jennifer Sisson, from PwC’s investor engagement team said: “There is a close link between the perceived importance of a piece of information and the account reader’s desire for assurance.

"From an investor perspective, the metrics most likely to be involved in their models – the 'measures that move the market' – are naturally the areas where they feel assurance is most important. The investment community is sending a clear message to management. If a measure is important, make sure it’s reliable."

What do investors need from oil and gas company reporting?

The next in the series of industry-specific investor surveys, Exploring reporting, shows what information is most important for them.

One interesting difference between the two groups of investors was the relative importance placed on reporting of reserves data. In the mining sector, investors and analysts told us that reserves data closely followed the financial statements and notes in order of importance, where in the oil and gas sector, that order was reversed.

Historic reporting issues around reserves in the oil and gas sector have perhaps made this crucial measure the investment community’s first point of focus.