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A number of miners are deferring or scaling back projects and many major players are said to have plans to divest non-core assets. This is in the context of almost half of the 40 largest miners having bulk of their op..

12 Jun 2013

Commodity Online
Manage productivity; Ramp up efficiency looks to be the mantra of miners world wide.

In an anualised report on mining sector, Pricewaterhouse Coopers has said that gone are the days when miners used to rely on ramping up production to generate value. Instead these days, they focus on managing productivity and enhancing efficiency.

The report--Mine: A confidence crisis--said that capital expenditure by miners to meet long-term demands will undergo a re-balance with returns to share holders even as eight out of the top ten miners said they would be maintaining or even increasing current dividend levels.

The year 2012 had seen almost $140 billion spent by miners on capital projects. In sync with the shift mentioned above, for the current year, miners have said only $110 billion would be shelled out, a reduction of 21%.

A number of miners are deferring or scaling back projects and many major players are said to have plans to divest non-core assets. This is in the context of almost half of the 40 largest miners having bulk of their operations in emerging markets in a shifting of the centre of gravity.

The production of top 40 miners in 2012 increased by 6% with revenues at $731 billion, almost unchanged. Net profit of these miners dropped by 49% to $68 billlion. What hit the bottom line was decline in commodity prices, cost escalation and $45 bn in impairment charges.

Return on Capital Employed was at 8%, lowest in a decade. However they have managed to dole out dividends of $38 billion.

“On the demand side, the long term fundamentals are still there. China consumes around 40% of global metal production and will continue to be the industry’s most important customer. While Chinese growth rates are slowing down, they are coming from a bigger base. This combined with the continued emergence of large developing economies such as Brazil, India and Indonesia, means future demand for commodities still looks healthy,” the report concluded.

The report also expressed concerns on the resource nationalism issue faced by miners in many parts of the world.


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