Boom times are here again for miners – but costs must be kept in check this time
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Mining companies are reaching near boom time with net profit up 126 per cent in the last year for the top players, as cost cutting and efficiencies take hold, according to analysis by PwC.
Mine 2018 found the net profit of the world’s top 40 miners increased to $US61 billion and is forecast to rise to $US76 billion in 2018. Market capitalisation of the group increased by 30 per cent in 2017 to $US926 billion.
Revenue increased by 23 per cent to $US600 billion, while EBITDA rose 38 per cent to $US146 billion.
This comes at a time when capital expenditure is at $US48 billion, the lowest since 2006, and is limited approvals for new large scale projects on the horizon.
However, past investment in infrastructure by the top 40 during the mining boom, is reaping rewards now.
Here’s the performance of the top 40 miners:
PwC Australia Mining Leader Chris Dodd says the good times may bring increased costs: governments are looking at increased taxes and royalties, workers will demand pay rises and shareholders will seek increased dividends.
“Everywhere we look people are saying, mining companies look profitable again and how can we get our hands on it to get our fair share,” he says.
“Prices (for commodities) are largely sustainable, no longer boosted by unprecedented growth in China like we saw 10 years ago.
“What we are seeing now is that growth in China has been baked into the base, buying everything they did last year, plus more.”
Mr Dodd expects revenue to continue to increase in 2018 off the back of favourable market conditions, higher prices, and a strong cost management discipline resulting in stronger balance sheets for the miners.
“The biggest risk now for mining companies is whether or not the give in to the temptation to meet rising demand by splashing their newly acquired cash balances on deals, projects or assets as many have done previously,” he says.
“To deliver value on a sustainable basis, miners must remain disciplined and transparent in the allocation of capital, and stay focused on the goal of mining for profit, not for tonnes.”
In the latest official statistics, Australian miners were the stand outs for company profits.
Overall company operating profits rose by 5.9 per cent in the March quarter after rising 2.8 per cent in the three months to December. Profits were up 5.8 per cent for the year.
But mining profits jumped by 19.1 per cent for the year to March to a record high of $AU110.6 billion.