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Mining sector set for capital inflows

Jun 10 2018 07:00

The low capital investment levels that have characterised the mining industry over the past decade are set to come to an end, according to PwC’s Mine 2018 publication.

Titled Tempting Times, the publication is based on an analysis of the top 40 mining companies in the world.

PwC predicts that investment will increase in the next year “as companies press ahead with long-term strategies”.

The money will go into new and existing projects and acquisitions. This comes as commodity prices have improved, which resulted from significant growth in most economies last year, a year PwC describes as stellar.

The companies’ $600 billion (R7.8 trillion) revenue for last year was up 23% compared with 2016.

The improved profitability is great news for shareholders, who have seen a return to dividend payments and share buybacks. PwC expects these two trends to continue this year.

Despite the improved conditions and a projected 4% GDP growth in the world economy per year over the next five years, PwC believes industry leaders will be disciplined with their cash and thoroughly evaluate investments before splurging on them.

“This means resisting the temptation to pursue acquisitions or projects at any price,” the company says.

It warns that mining companies will have to be vigilant if they want to capitalise on this “bounce back”.

“Temptations loom in many guises for mining companies and their stakeholders. The companies will need to stay focused and deliberate towards the long-term goal of creating sustainable value for all stakeholders.”

However, PwC cautions mining companies that the improved environment will lead to those involved in the sector demanding a greater share of the success.

“As they view the improving results, shareholders, governments, workers, management and host communities will all be ramping up their asks – for higher dividends, higher taxes and higher wages. Miners need to strike a balance between near-term demands and their long-term vision to deliver value.”

On the darker side, there are still fatalities on mines, despite companies ploughing additional cash into efforts to improve safety.

Even though the number of deaths – as recorded by 28 of the companies – fell from 161 in 2016 to 102 last year, this is far from the top 40 companies’ collective objective of zero deaths. South Africa and India were the worst performers, with 37 and 23 deaths, respectively, among the 28 companies surveyed.

“However, the overall trajectory is improving, with fatalities in South Africa one third and India one half of the level seen 10 years ago,” PwC says.  – Staff reporter

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sa economy  |  mining
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