The chief executives of the top 40 mining companies in the world are confident of the future, but expect volatility, according to PricewaterhouseCoopers’ (PwC’s) eighth annual review of global trends in the mining industry for 2011 presented in Johannesburg yesterday.
The commodity boom that has been driven by the demand for natural resources to drive growth in emerging economies, including China and India, resulted in a record net profit increase of 156 percent year on year last year, as the top 40 companies raked in $110 billion (R740bn), up from $43bn in 2009, the report said.
Total operating costs of the top 40 companies increased 12 percent last year, with employee costs the main driver, despite a decrease in direct employment.
“Foreign currency fluctuations continue to create volatility in the results and played a role in the cost increase,” the report noted.
Also weighing on the mining industry was the fact that the building of new mines and expansion was not getting any easier.
“Cost inflation, lead times and skill shortages are increasing challenges to all industry players and no one is immune,” the report said.
Presenting the report, Hein Boegman, the head of PwC’s Gauteng audit practice, said that the shortage of mining engineers was a concern.
He said the outlook expressed by industry leaders was increasingly positive, with companies taking definitive action on capital projects and mergers and acquisitions.
There were suggestions that in future, chief executives of mining companies should be politicians because mining was high on the political agenda, with signs of nationalisation in Zimbabwe, Australia and Papua New Guinea, and talk of the same in South Africa.
“The outlook of the mining industry is different. The job of a chief executive is changing,” Boegman said.
The top 40 companies had announced more than $300bn in capital programmes, with over $120bn this year, more than double the total that was spent last year. Cash flow among the top 40 companies had improved and for every $1 revenue, $0.18 was invested back into the business compared with $0.40 in 2007. In the next nine years, the investment would increase to $0.26.
PwC analysed 40 of the largest listed companies by market capitalisation in all parts of the world whose primary business was mining. South African companies that were included in the Top 40 were Impala Platinum and AngloGold Ashanti.
Other Top 40 companies included BHP Billiton of Australia, Vale of Brazil, Rio Tinto, China Shenhua Energy Company of Hong Kong, Xstrata, Anglo American of the UK and Potash Corporation of Saskatchewan of Canada. - Business Report
