Mine 2017: Stop. Think...Act

Mine is an analysis of trends based on the financial performance and position of the global mining industry as represented by the top 40 global mining companies by market capitalisation.

2016 was a year of recovery for the world’s largest Top 40 mining companies, with profitability returning and balance sheet repair well underway.

Rapidly rising commodities prices sparked renewed market optimism and improved credit ratings across the Top 40 firms. Valuations also climbed, especially for the traditional miners, with the trend continuing into early 2017 even as commodity prices remained flat.

Our theme of Stop. Think…Act reads like a mining safety mantra as over 2016 we observed the industry move past the danger and decline of 2015, to draw breath and consider where to from here. The longer term question, as the industry moves from ‘think’ to ‘act’ is where and how they will do it as they apply the lessons learned from the last cycle, reap the benefits from investments they made and take a more countercyclical approach to acquisitions and disposals.

Mine 2017: Stop. Think....Act

Stop. Think... Act is PwC’s 2017 annual financial review of the world’s largest Top 40 mining companies.

In our 14th edition of Mine we find that:

Profitability returns but miners are drawing breath to ‘stop, think, act’
Recovery in commodity prices saw an aggregate net profit of US $20 billion, a $48 billion turnaround
Balance sheets were bolstered by a net debt reduction of $20 billion
Market capitalisation of the Top 40 increased by 45 per cent to $714 billion
But, capex down 41 per cent to a record low of $50 billion, and exploration budgets reduced to $7.2 billion

After a year of recovery and a commendable effort in paying down debt, will the industry move to act in 2017 or simply react ?

China remains in the driving seat

During the downturn, Chinese companies demonstrated one enormous advantage over other miners from both traditional and emerging countries: access to capital. With deeper pockets Chinese players bought assets at bullish prices or moved quickly on assets made available at the bottom of the price cycle. The trend of Chinese interest in global mining assets is likely to continue.