Industry and financial analysis of the Australian mid-tier mining sector.
Debt repayment up 64% on 2016, and the level of new debt issued almost halved
Operating revenue up 15% on 2016, operating costs flat and lowest impairment levels since 2011
Highest EBITDA margins in over a decade at 34% and a return to a collective net profit
Investors saw a 41% jump in dividend repayments; cash on hand & operating cash flows increased
The results are undeniable, Australia’s mid-tier top 50 miners are back on a steady footing.
After emerging from recent dark days, some miners are reaping the success of having plotted their moves in difficult times, others are carefully pondering their next steps still wary from the experience of having the wisdom of capital allocation decisions questioned.
Building on the brighter investor sentiment in 2016, the mid-tier sector was further buoyed in 2017 as coal and iron ore players joined the strong performance delivered by Australia’s MT50 gold miners.
The deals environment of 2017 was a paradox between actions of the MT50 top-end stayers and the actions taken by the up-and-comers. Commodity prices have improved driving willingness from buyers to seek new opportunities and invest. However, as buyers become more eager, vendors have also reacted to the market. 2018 may see targets increase their price expectations and be willing to hold if they cannot derive their desired value.
The industry now has a golden opportunity to prosper in this new, more positive market environment. The question for the MT50 is which strategic levers should be pulled to capitalise on these conditions?
Coal. Activists still love to hate it, electricity supply still depends on it and in 2017 coal re-established itself as a key contributor to the MT50. With only four coal miners included in our list, they account for 19% of total revenue in 2017, up from 10% the year before.
Which miners caught our attention in 2017?
The top 10 MT50 companies make up 60% of the total market capitalisation and the shareholders of these 10 companies will have welcomed the average 27% growth in market capitalisation.
Eight companies held their position in the top 10 list and we cannot ignore the sense of stability developing at the top end of the list.
As we start to question who the next large independent miner in Australia will be, it seems like the top 10 are all working to a very similar blueprint.
Mining companies are data rich and over the last decade, there has been significant investment in data collection, communications and storage of technology across mining value chains. As pressure on operating costs will inevitably increase, the MT50 will look to continue the enhancement and adoption of technology as one way to optimise operations and keep costs in check. We look at some key technologies and three areas of focus for the MT50 to unlock the power of data and their people.
Energy Utilities & Mining Leader, PwC Australia
Tel: +61 3 8603 0009
Partner, PwC Australia
Tel: +61 (3) 8603 1759
National Thought Leadership Manager, PwC Australia
Tel: +61 2 8266 0252