A global “confidence crisis” is hindering recovery in the mining industry’s current depressed climate, according to multinational professional services firm PricewaterhouseCoopers (PwC).
In its tenth annual comprehensive publication Mining 2013, released in early June, PwC evaluated the apparent downturn of the industry in the past year and found a lack of confidence to be both a result and continuation of the current market position. The report cited a fall in net profits as a leading cause of declining investor confidence, with final net profit figures recorded at $68 billion – down 49 per cent from 2012’s $133 billion result.
Despite a 6 per cent increase in production, revenue figures also dropped to $731 billion across the period, with the increased volume offset by softer prices.
However, Mining 2013 also highlighted the apparent positives of the global mining industry, referencing increases in product volumes and dividend yields, and the ongoing demand from fundamental consumers while noting that although commodity prices had dropped, they had not crashed.
These observations, within the current depressed market, were interpreted by PwC as evidence of a holistic decline in investor confidence.
“Over the past decade, the mining industry has outperformed the broader equity markets, but this trend has recently changed. While mining stocks fell slightly in 2012, during the first four months of 2013, mining stocks were hammered, falling nearly 20 per cent,” PwC Australia mining leader Jock O’Callaghan said.
“After years of outperformance and superior returns, the industry is now facing a crisis in confidence.”
PwC attributed investor uncertainty to fears of inadequate cost controls, flattened capital returns and a commodity price collapse. Leadership changes at five of the world’s top 10 mining companies further shook investor confidence, the report stated.
PwC global mining leader Tim Goldsmith reinforced this perspective. “Given how far the mining industry has fallen in the first four months of this year, it will be challenging for the industry to fully rebound in the remainder of 2013,” he
Global intelligence agency IntierraRMG reached similar conclusions in its State of the Market 2013 report released last month, which highlighted a 24 per cent drop in investor funding throughout the international sector as an issue of primary concern.