Miners are smashing the ASX200 thanks to electric cars and gold
Australia’s mid-tier miners have increased their profits and market cap over the last year as commodities prices rise and costs are contained.
PwC’s 12th Aussie Mine Report, which analyses the 50 biggest ASX-listed mining companies with market values under $5 billion (MT50), shows overall market capitalisation up 28 per cent to $58.7 billion.
Only three of the 50 miners didn’t increase market capitalisation.
Love a bit of lithium
The push to electric vehicles has driven strong interest in lithium, the second biggest contributor to growth in terms of dollar value to the group’s total market capitalisation.
There are now seven lithium-related companies in the 50 mid-tier ASX miners list.
“We’ve seen another year of stonking results for the mid-tier miners due to cost-focused strategies of prior years, the continuing upward trend in commodity prices and strong interest in lithium in particular, which is used in everyday electronics and increasingly in industry applications,” says PwC Australia mining leader, Chris Dodd.
“This new boom is the fruit of the fourth industrial revolution, which has brought with it rising demand for modern conveniences like smartphones, electric vehicles, lightweight engines and next-gen batteries.
“Lithium was a standout, but we’re also seeing interest in other tech metals like manganese, nickel and rare earth.
“Gold is a part of the advanced tech story, but the strong results we’re seeing there are more reflective of increased global tensions, given investors often flight to gold in times of high uncertainty.”
Catching the goldbug
Gold miners now make up 53 per cent of total mid-tier miner revenue.
“It is a huge positive to see profits soaring back to 2012 levels as a result of investment from prior years and recent operating cost discipline,” says Dodd.
“This has allowed increased productivity and, combined with improved commodity prices almost across the board, has driven increased focus on dividends, debt reduction and capex.”
But operating costs have jumped by 10 per cent, impairments are up by 56 per cent and exploration as a proportion of capex has decreased by 12 per cent.
Dodd says the most concerning factor is waning interest in the sector from Australia’s future workforce.
Mining engineer enrolments have dropped each year for five consecutive years and are now less than one-third of those in 2013.
The MT50 group of companies is outperforming the broader ASX200. While the ASX200 has grown 9 per cent since July 2015, the MT50 market capitalisation is up 140 per cent.