Mining companies around the world have done well over the past year, and are now faced with an opportunity to press home their advantage.
Global consultancy PWC ran the numbers on the mining sector’s performance in 2018, with the world’s top 40 miners going great guns.
They increased production, boosted cash flow, paid down debt, and provided returns to shareholders at near record highs.
Crucially, they were able to increase capex budgets for the first time in years.
However, they weren’t necessarily rewarded by shareholders in that time.
PWC found that while all the financial fundamentals were sound, shareholders in those top 40 companies voted with their sell orders.
PWC said the mismatch between companies’ performance on the balance sheet and their performance in the market meant that investors didn’t simply require a financial return on their investment — they wanted to see evidence of sustainable growth.
“One thing is clear – mining requires far more than good financial performance in order to realise value in a sustainable manner,” PWC’s global leader of mining and metals, Jock O’Callaghan, said.
It said investors were after evidence that mining could co-exist in a world that was being rapidly changed by climate change, and those that changed their practices to avoid the long arm of regulation would be rewarded.
The good news is that miners haven’t been in a better position to change their practices to become more sustainable companies — due in large part thanks to their balance street strength, something PWC put down to a raft of mergers and non-core disposals.
PWC called out copper and battery minerals in particular as having a bright future, as the energy mix moves away from combustion engines and moved to electricity — and these two sectors should expect to see the bulk of capital investment over the next couple of years.
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