Top 40 mining firms have returned to the heights of 2007, says the report
The beginning of 2009 saw commodity prices continuing to fall globally, tough price negotiations with customers and challenging market conditions. However, companies responded swiftly and decisively: funding was restructured, mines were closed and production cut as margins declined. However, in contrast, the year ended with the market capitalisation of the Top 40 returning to the heights of 2007 and a cautious optimism returning to the industry, according to PricewaterhouseCoopers' (PwC) seventh annual review of global trends in the mining industry - Mine, Back to the Boom.
The report highlights that although the year 2009 saw the global top mining companies' overall revenues, net profit and cash flows decline, none of the Top 40 companies were subject to bankruptcy or voluntary administration provisions. This was largely due to their prompt action in removing debt overhang, strengthening commodity markets over the year, and the positive impact of government stimulus packages around the world.
On the other hand, the report suggests, the global industry had other challenges to face. Although about $200 billion of capital expenditure was committed over the past three years, production remained flat across most commodities.
The exploration-spend by the Top 40 also declined significantly given its discretionary nature. As reserve replacement becomes more challenging, cutting back on spend on exploration poses a future supply challenge. "In 2009, there were no significant transactions completed – pointing to a potential missed opportunity for Indian mining, metal and power companies who seek to expand and improve supply security and had the available financial resources to acquire them.
However, with the continuing demand for mineral resources in developing countries such as India in the near-term to the long-term it is safe to assume that we are in the next phase of the boom," said Kameswara Rao, India Leader for Energy, Utilities, and Mining PwC.
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