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Mining & Resources

Tough mining industry could prompt shifts in strategy

10 Jun 2014, by Informa Insights

The tough global mining industry is causing operators around the world to review and adjust their expectations, according to this year’s ‘Mine report’ from consulting firm PwC.

The 2014 Mine report reveals that the biggest mining companies from around the world collectively struggled last year, and in fact, 2013 was one of the worst years on record. This has led to operators shifting their expectations as they came to grips with an increasingly tough industry, PwC said.

One glance over the numbers reported by the largest 40 miners who are with PwC is all that is required to gain an idea of the situation. PwC’s analysis revealed that market values dropped by $280 billion, with gold miners bearing the brunt of the decline.

Net profits in 2013 were also down by 72 per cent, sinking to $20 billion, and forecast capital expenditure as 11 per cent lower last year. Developed markets suffered considerably more than emerging ones, collectively losing $4 billion.

And with mining stocks falling by almost a quarter (23 per cent), industry profitability in 2013 sank to a decade low.

John Gravelle, global mining leader at PwC, said these grim results have led to miners taking stock of their expectations and strategies, with many making wholesale organisational changes.

“The industry is adjusting to tough times in the short-term with strategies in place to regain confidence,” he explained.

“For example, we’ve seen new faces at the helm of almost half of the largest 40 mining companies in the last two years.”

He also revealed that “quick-fixes to falling commodity prices”, which were once commonplace, are now making way for more measured strategies, such as focusing on extracting value from higher quality assets and and emphasising the need to address sinking productivity levels. According to Mr Gravelle, these sustained efforts could lead to greater industry harmony over this year and the next.

“2014 has seen some traces of calm return to mining markets with market capitalisation for the largest 40 miners stable, evidence that some level of confidence may be returning,” he concluded.

There is no better time than now for the mining industry stakeholders to gather at networking events to discuss how to collectively move towards a better future.

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