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Tough year ahead for mining - report

Nov 22 2012 17:54

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Johannesburg - The country's mining industry is facing a tough year because of declining profits and strikes, according to a report by auditing firm PricewaterhouseCoopers.

"Generally, balance sheets in the mining industry remained strong for 2012 with stable liquidity. However, the significant margin pressure will result in a challenging 2013," PwC mining analyst Hein Boegman said on Thursday.

The report, titled "SA Mine", highlights trends in the country's mining industry.

This year, the top 39 mining companies shed all gains made since the 2008 financial crisis.

Market capitalisation declined by 9% from R910bn in 2011 to R833bn in 2012.

"On the back of the strike actions in the sector, the position weakened even further and reflected a market capitalisation of only R792bn at the end of September 2012."

Events at Lonmin's Marikana platinum mine and widespread labour disputes had a significant effect on the mining industry.

Thirty-four striking mineworkers were shot dead by the police in August. The miners were demanding higher wages.

The event had forced mining companies to re-think risk and the landscape they operated in, said Boegman.

"It is imperative now that they evolve their risk assessment practices to be more predictive in anticipating and planning for future potential risk events."

Out of the top 10 mining companies, six posted declines with Anglo Platinum, Kumba Iron Ore and Exxaro Resources collectively losing R40bn in market value.

The state received 16% in direct tax, mining royalties and tax from employees' salaries in 2012, compared to 18% in 2011.

Coal overtook platinum as the highest earning commodity.

According to the report, it was unlikely platinum would regain the top spot in the short term due to slower recovery in global markets, the recent economic uncertainty and lower production as a result of strikes.

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