Global miners treading water
Ines Schumacher | Tue, 02 Jun 2009 13:06
miningmx.com
[miningmx.com] -- Despite the first signs of a recovery from China, the market is as good as it gets for the global top 40 mining companies right now, said international auditing firm PricewaterhouseCoopers (PwC).
“People are wondering whether the light at the end of the tunnel is actually a train going the other way,” PwC mining leader in South Africa Hugh Cameron said at the presentation of PwC’s May/June 2009 Mine publication on Tuesday.
Mine is in its sixth year and reviews global trends in the mining industry by analysing the top 40 global mining companies by market capitalisation.
Top 40 market cap decreased by 62% year-on-year in 2008. “This is primarily attributed to the fall in commodity prices and the impact of the global economic crisis on shareholder confidence,” the publication said.
Since 2007, PwC has seen 15 of the top 40 companies fall off the list, notably Anglo Platinum. These companies were replaced mainly by gold miners. South Africa’s Harmony Gold is an addition to the list. Gold companies now comprise 26% of the total market capitalisation, more than double the 2007 level.
“The diversifieds still dominate, but gold companies have definitely staged a comeback,” PwC mining director in South Africa Hein Boegman said.
Boegman said gold producers have not benefited from the commodity price rise over the past five years in the same way as other mining companies.
However, this changed in 2008. Four gold companies are now in the top 10 by market cap, making the metal the most represented commodity in the top 10.
However, the market is seeing a tentative recovery in base metal prices. “The copper price is the first indicator of an upturn,” Cameron said. The close of 2008 saw copper at $2,902 per tonne. Currently, it is sitting at around $5,000/t.
PwC said that in 2009 nothing will be as valuable as cash. “For cash-rich companies, opportunities exist as asset values fall for acquisition or organic growth; indeed, potential to ‘bag a bargain’ is high if quality assets come up for sale,” the report said.
“But the sense we’re getting is that the family jewels are not coming onto the market if they don’t have to,” Boegman said.
Cameron said the takeover targets for 2009 are not clear, but the companies who are looking for bargain assets are obvious. “BHP Billiton, Vale and some big Chinese companies are all going to have a go at someone significant this year,” he said.
In interviews with mining company chief executives, PwC found that many were taken aback by the sudden freefall in commodity prices. However, the reaction was dramatic and rapid.
"The coming year will be crucial to determine whether the actions taken are sufficient to combat the current conditions facing the industry. Time will tell whether the announced reductions are enough – or whether there has been an overreaction," PwC said. |
