AMN - Tough year for miners toughens them up further - comment by Yolanda Torrisi

PwC has released its 2016 Mining Report stating the world’s top 40 mining companies made a collective $27 billion loss in 2015, wiping out all the gains made during the commodity super cycle and cutting their capitalization by 37%. The report says 2015 was one of the toughest years for the industry as many metal prices hit new record lows.

PwC Africa mining industry leader Michal Kotzé stated: “The Top 40 experienced their first ever collective net loss, their lowest return on capital employed, a significant drop in market capitalization, and an overall decline in liquidity with the result that the top 40 were more vulnerable and carrying heavier debt loads than in prior years.”

Michal Kotzé said the increased focus on the short-term by shareholders of these companies was impacting the business negatively, but while miners were down “they are certainly not out”.

In 2014, the 40 top mining companies by market capitalization posted a profit of $50 billion.

A slowdown in the Chinese economy is likely to keep demand low for metals in the medium term, but it is seen picking up sooner rather than later. Metal prices have however recovered after bottoming out in January this year and are ticking up slowly alongside other commodities including crude oil.

“While China is still critical to the success of the mining industry, accounting for about 40% of overall commodity demand, it can no longer be relied on to supercharge returns,” 

Meanwhile PwC assurance partner Andries Rossouw said, “As the country moves from a manufacturing-based economy to a services-based economy the previously rampant demand for commodities will still not resume with the same intensity. Despite this shift, the number of Chinese mining companies in the Top 40 continued to increase from nine to 12.”

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the African continent. Contact:yolanda@yolandatorrisi.com