PWC released its annual “Mine” report, which provides a summary of key trends in the mining industry.
It shows 2016 was a more profitable year for miners around the world, as companies put a focus on costs and benefited from increases in commodity prices.
In total, global miners made an aggregated net profit of $US20 billion in the calendar year – a significant turnaround from aggregate losses in 2015 of -$US28 billion.
The industry took advantage of better operating conditions to pay down debt, reducing gearing ratios (the ratio of debt to equity) to 41%, down from a record high of 49% in 2015.
In total, $US93 billion of debt was repaid across the industry.
Not surprisingly, the combination of increased profits and reduced debts saw capital move back into mining stocks.
The market capitalisation of the PWC’s list of the Top 40 miners globally increased by 45% in 2016, to $US714 billion.
With company boardrooms across the industry taking the opportunity to pay down debt and strengthen balance sheets, it left little room for large capital expenditure (capex) projects.
In total, PWC reports that capex across the industry fell by 41% to a record low of $US50 billion and exploration budgets were reduced to $US7.2 billion.
That’s a theme consistent with the recent strategic direction of the industry. Mining companies are setting up for the long-term with a focus on cost and operational improvements, while shunning big capital investments and M&A activity.
As part of its Mine report, PWC includes a list of the Top 40 miners in order of size as measured by market capitalisation.
Australian miners BHP and Rio Tinto lead the way, with South32 joining the list in 2016 after being spun out of BHP.
The biggest mover in 2016 was Fortescue (FMG), which climbed to 15th in 2016 from 40th place the previous year. As an iron ore pure play, FMG benefited as ore prices rose and the market applauded its ability to maintain cash flow and pay down debt.
Here’s the Top 40 list for 2016: