Industry and financial analysis of the Australian mid-tier mining sector.
The mining industry has been in decline over the last few years and this has continued with another weak performance in 2016, with the mid-tier 50 miners (MT50) recording an aggregated net loss after tax of $1bn.
However, improvements in dividend payments, market capitalisation, cash flow from operations and capital expenditure all point to increasing confidence and the end of the mining industry downturn.
As gold continues to develop a strong and dominant lead in the mid-tier, and with lithium’s debut as a budding star, we believe we have seen the bottom and ‘the next act’ is about to begin for Australian mid-tier miners.
The first half of 2016 presented the ideal environment for gold stocks to flourish and high prices provided a refuge for investors in times of global uncertainty.
With an aggregated market capitalisation of $20.6bn, the MT50 gold miners have experienced an unparalleled 158% uplift in value since 2015 and now accounts for 23 companies – almost half of the MT50.
Fortune favoured the bold, especially those active in M&A, raising capital and spring-boarding production, with capital spend levels not seen since 2011.
There were 11 standout performers this year who drove an active pursuit for new opportunities and reaped the rewards with strong investment cash flows in 2016. Did the remaining MT50 miss their big break?
It seems the mining industry is at a crossroads. On the one hand, it faces volatile prices, hard to predict demand, and a whole host of regulatory, competitor and fundamental geological issues. On the other, the public’s trust in the industry is wounded with stakeholder activism growing and becoming more invasive.
How will the public’s trust in the industry evolve? Can miners restore trust or will the public demand greater levels of scrutiny and regulation. Will today’s miners continue to be the miners of the future or will new entrants wade into the sector to disrupt value chains with radically new methods of mining, new ideas on end-user engagement and new ways to brand themselves or their products?
“It’s to be expected that in the mining industry we’ll see winners and losers, that’s the way it’s been for 100 years. Today’s mid-tier miners are faced with challenging future scenarios though that will be highly competitive, more volatile and technology driven”
Energy Utilities & Mining Leader, PwC Australia
Tel: +61 3 8603 0009
Partner, PwC Australia
Tel: +61 7 3257 5236