According to PricewaterhouseCoopers’ (PwC) newly released Mine 2019 report, things are looking good for the world’s top miners.
In 2018, the world’s 40 largest miners consolidated the stellar performance of 2017. As a group, they reportedly increased production, generated cash flow, paid down debt, and provided returns to shareholders at near record highs. There was still cash left to increase capital expenditure for the first time in five years, all while delivering significant value to stakeholders like employees, governments and communities, and supplying the raw materials underpinning global economic growth.
However, despite the strong operating performance of the world’s Top 40 mining companies, PwC is seeing that both investors and consumers are down on the brand of mining.
The ‘big questions’ the industry needs to address
Far-reaching structural changes in the environment – and in the operating environment – are raising questions about the industry’s future. Foremost among them is the impact of climate change, highlighted by the rising frequency of extreme weather events.
As the finder and provider of carbon-based raw materials in the form of coal and a substantial creator of carbon dioxide emissions through mining and metals processing, the mining industry is firmly involved in the climate change debate. PwC has seen a varied response from the Top 40 response so far: some have adopted a climate change strategy, while others are seemingly indifferent.
Copper and battery metals, which stand to gain as the energy mix moves away from combustion engines to electricity including renewable energy, are receiving the bulk of capital investment. (However, as coal contributes 38 per cent to global electricity generation, it remains an important part of the basket and continues to receive substantial capital investment and transaction focus.)
Can mining change fast enough?
While they appreciate the efforts to improve operations and engineer superior results, the report states that investors and other stakeholders are concerned that the industry is lagging when it comes to several factors that have not been a traditional focus of the mining industry. These include dealing with emissions, investing in differentiating technology and digitisation, engaging more proactively with consumers and building brand.
Looking ahead to the rest of 2019 and beyond, PwC forecasts a continuation of the strong operating performances, and pockets of progress in these contemporary factors. However, the firm does not see any signs of a quantum shift in priorities that will allow the industry as a collective to keep pace with changes delivered in other sectors.
“Without such a shift, we expect the growing awareness gap between the brand of mining and the benefits of mining to continue to widen,” PwC states.
What should not be overlooked is that the industry now has a fantastic window of opportunity over the next few years, created by strong operating fundamentals, to adapt to the growing and changing expectations of stakeholders.
By utilising technology to operate safely and more efficiently, addressing global concerns, and maintaining a disciplined strategy to create ongoing value for its stakeholders, the resources industry can forge a better future for all beneficiaries of mining – industry, consumers, communities and other stakeholders.
Top 40 mining companies performance snapshot ($USD):
- Revenue: $683 billion up $51 billion (8 per cent)
- Financial capital: record dividends paid to shareholders – $43 billion
- Earnings before interest, tax, depreciation and amortisation of $165 billion up $7 billion (4 per cent)
- M&A activity up to $30 billion
- Record dividends paid to shareholders $43 billion
PwC’s full Mine 2019 report can be found here.