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PwC Mine 2018: Tempting times as mining market cap exceeds $900 billion

We are on the cusp of a market upswing across the mining industry, as a new report has shown that 2017 was a “remarkable year” for the world’s leading miners.

In its latest report, Mine 2018, PwC has found that through a continuing recovery in commodity prices and an economic growth, mining revenues soared over the past 12 months.

Total mining revenue rose by 23% in 2017 to $600 billion across the world’s Top 40 miners. 

PwC believes that the findings prove that these are “tempting times” for the industry, as market cap also rose by 30% to $926 billion. This comes at a time where almost all of the leading miners have been implementing cost saving strategies and debt reduction plans.

In fact, PwC argues that the report shows a much more flexible industry.

“With liquidity concerns that were still lingering in 2016 mostly resolved and balance sheets strengthened, companies have the flexibility to act,” says PwC.

“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.”
 

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The report also highlights that in a declining price environment, with a corresponding drop in revenue, EITDA dropped. This happened concurrently with a recent increase in prices, further improving operating profitability.

Looking forward, PwC believes that favourable market conditions, higher commodity prices and strong internal discipline will increase balance sheet strength.

This is where it feels these are tempting times, as the Top 40 will reinvest in their business, pursue investment or growth opportunities and enhance shareholder returns.

But as with any cyclical industry, companies should head caution.

“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.”

 

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