After years of bleeding cash and grappling with the commodity price squeeze, the market capitalization of the world’s top 40 mining companies grew by almost half last year.
PwC’s Mine 2017 report, which was released on the sidelines of the Joburg Indaba yesterday, found that the market capitalization of the companies strengthened by 45 percent last year to $714 billion (R9.1trillion) – approaching the level reached in 2014 – mainly because of rising commodity prices.
The two-day indaba is being attended by 300 explorers, developers and investors in Africa’s junior mining industry.
Commodities had a bumper 2016, with solid performances in the prices of gold, copper and nickel.
The PwC report said the real story of 2016 was the strength of the prices of coal and iron ore, which were battered in the previous year. Investors were taken on a wild ride that continued into the first quarter of this year.
The report said iron-ore prices doubled to the end of the year, reaching a high of $89 a ton in mid-February, only to suffer a sharp reversal thereafter.
It also noted the dramatic peak in the price of coal last year, with the price of thermal coal doubling to reach $100 a ton in November, before beginning to retreat in December.
The top 40 companies reported a net profit of $20bn last year, compared with an aggregate loss of $28bn in 2015.
“Miners managed to turn the historical aggregate net loss in 2015 into a profit, driven by lower impairment charges, and a decrease in interest expenses after key players cleaned up their balance sheets,” the report said.
The report, which is based on studies of financial information and covers the period April 1, 2015, to December 31, 2016, found that the valuations of the top 40 miners had climbed, particularly in the case of the traditional miners.
“The mining industry remains a long way off the peaks of previous cycles, but it has regrouped and has begun to rise again,” it said.
However, the report said the industry was not out of the woods yet, because capital expenditure (capex) has fallen to new lows.
It said capex fell by a further 41 percent, to a record low of $50bn, and there was an absence in the announcement or commencement of significant green fields projects.
It also found that, for the fourth consecutive year, the industry reduced spending on exploration.
“Only $7.2bn was invested in 2016, barely one-third of the record $21.5bn allocated in 2012, with the funds cautiously targeted at less risky, later-stage assets, typically located in politically stable countries,” the report said.
The PwC report said AngloGold Ashanti was the only “real” South African company to make the top 40 list in 2016, at number 40, while South 32, which demerged from BHP Billiton, was a new arrival, at number 22.
Another company on the list was Anglo American, whose subsidiaries include Anglo American Platinum and Kumba Iron Ore, which was ranked eighth.