The outlook for Australia’s top-50 mid-tier miners remains clouded, with the iron ore sell-off yet to be balanced by the weakening Australian dollar.
According to PwC’s 8th annual analysis of the 50 biggest local mining companies with market values less than $5 billion, Aussie Mine: Standing Out From the Crowd, those miners able to control costs, productivity, innovation and M&A will be most likely to prosper.
“This report shows that those miners that can wrestle control over the things that can be controlled are standing out from the crowd,” PwC’s Energy, Utilities and Mining leader Jock O’Callaghan said.
However, efforts to boost productivity have so far failed to flow to the bottom line, with $1.6 billion in combined losses reported in 2013-14 despite 10% revenue growth to $24.5 billion.
Volume growth accounted for nearly all the revenue improvement and follows the 30% increase in volumes last year.
Since PwC started the mining research in 2007 net assets have grown almost 4.5 times on the back of some $30 billion in capital investment. In contrast, revenue has grown just 2.8 times, or less than $16 billion.
“These are the numbers that show why boosting capital and operating productivity have become the number one pre-occupation for investors and the industry,” O’Callaghan said.
“Unfortunately, when looked at as a whole that focus has yet to reap any discernible bottom-line benefit, and we expect the year ahead to be another punctuated with red ink.
“In fact, the worst may be yet to come, at least for iron ore and coal miners.”
Overall market value grew 5%, equal to a $1.9 billion rise, to $36.8 billion, a big improvement on the 33% wipe-out the year before but still less than half its March 2011 peak of $75.3 billion.