Mine 2012* The growing disconnect

We are pleased to launch the Mine 2012, The growing disconnect .

This is PwC's flagship mining publication which analyses the financial performance  and position of the global mining industry as represented by the top 40 mining companies by market capitalisation

From ten years of data and trends, we have seen some of the greatest ups and downs the mining industry (and the global economy for that matter) has ever seen.

This years Mine* notes:

  • 2011 was a year of great contrast for the mining industry - record profits for the Top 40 of $133bn but market capitalisation fell 25%
  • The market does not appear to buy the long-term growth story of the emerging world as the European debt crisis lingers
  • While net profits increased, net profit margins remained steady reflecting a changed cost base
  • Supply will be a focus for future years as the industry has undergone a structural change in the cost base as cost increase of 25% on previous year
  • The industry invested a record $98 billion in capital project in 2011 and plan for a further $140bn in 2012 but shareholders and investors are demanding greater returns of cash

Tim Goldsmith, Global Mining Leader states:

"The global mining industry is facing a growing disconnect as despite record profits for the world’s 40 biggest miners in 2011 thanks to high commodity prices, investors proved fickle, demanding greater capital discipline and increased shareholder returns.

Against a backdrop of shareholder demands for heightened capital discipline, the story for the future will be about the ability to bring on supply through developing the right projects. We continue to observe a structural change of higher average commodity prices which are underwritten by higher production costs and lower grades. However, this does not guarantee increasing gross margins.

The Top 40 invested $98 billion in capital projects in 2011 and plan for a further $140 billion for 2012 in an effort to increase supply. The market, however, doesn’t seem to be buying the industry’s long-term growth story, which has sent share prices lower−2011 marks the start of the growing disconnect."