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Mine 2016: Slower, lower, weaker...but not defeated

In our latest report we found that 2015 was a race to the bottom with many new records set by the world's 40 largest mining companies including the first ever collective net loss and market capitalisation reduction of 37%.

Key findings:

  • 2015 saw the first collective net loss in the Top 40’s history (US$27B)
  • Market capitalisation is down 37% negating all gains from the commodity super-cycle
  • High debt sees some miners fighting for survival through asset fire sales
  • Focus on costs continues, but so do economic headwinds

2015 was a race to the bottom with many new records set by the world’s 40 largest mining companies including the first ever collective net loss and market capitalisation reduction of 37%.

A 25% year-on-year decline in commodity prices meant mining companies had to continue to find productivity improvements and for some, to fight for survival with asset disposals. $297B was wiped off the market capitalisation of the Top 40 miners, effectively wiping out all gains made during the commodity super-cycle.

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Mine 2016 also found:  

  • Investors punished the Top 40 for poor investment and capital management decisions and, in some quarters, for squandering the benefits of the boom.
  • Concerns over the 'spot mentality' from shareholders focussed on fluctuating commodities prices and short term returns rather than the long term investment horizon required in mining. 
  • A focus on maximising value from shedding assets as well as mothballing marginal projects or curtailing capacity by Top 40 miners. This is further evidenced by a significant drop off in capex signalling an almost stagnant investment environment.
  • A positive focus on cost reduction resulting in a 17% drop in operating costs against a backdrop of higher production volumes and lower input costs – an impressive achievement given the production increases seen during 2015.  

Whilst the industry continues to face significant market challenges and constraints, there is still a long term positive outlook. Many of the Top 40 appreciate what is required for the marathon of mining and have their eyes firmly fixed on the long term rewards.

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Chris Dodd

Partner, Assurance, Melbourne, PwC Australia

Tel: +61 418 316 892

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