enableswww.97yes.com

MineAconfidencecrisiswww.
pwc.
com/miningReviewofglobaltrendsintheminingindustry—2013TheMineseries2013Aconfidencecrisis2012Thegrowingdisconnect2011Thegamehaschanged2010Backtotheboom2009Whenthegoinggetstough.
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2008Asgoodasitgets2007Ridingthewave2006Letthegoodtimesroll2005EntertheDragon2004Mine01Executivesummary602Industryinperspective803Aviewfromthetop1804China'schangingroleasaminingconsumer,supplier,financierandregulator200510yeartrends2003–20122206Financialreview3407Reservesandproduction4408Resourcenationalism'scontinuedimpact4809Glossary5010Top40companiesanalysed5111Explanatorynotesforaggregatedfinancialinformation5212OtherPwCminingpublications5413ContactingPwC5814KeycontributorstoMine59ContentsRevenueflatat$731billion—a6%increaseinproductionvolumeoffsetbysofterpricesNetprofitsdown49%to$68billionMarketvaluesdown,goldminershitespeciallyhardIssuanceof$108billionofdebt,including$43billionofbonds,sendsgearingfrom13%to24%Estimated2013capexof$110billion,21%lowerthan2012NewCEOsatfiveoftheTop10companies4PwCMineAconfidencecrisis501ExecutivesummaryWelcometoPwC'stenthannualreviewofglobaltrendsintheMiningindustry—Mine.
ThesereviewsprovideanalysisonthefinancialperformanceandpositionoftheglobalminingindustryasrepresentedbytheTop40miningcompaniesbymarketcapitalisation.
During2012theTop40'sproductionvolumesincreasedby6%,butsoftercommoditypricesmeantthat2012revenueof$731billionwasonlythesecondyearinadecadethatminingrevenuedidnotincrease.
Netprofitwasdown49%to$68billion.
Decreasedcommodityprices,anescalatingcostbase,and$45billioninimpairmentchargeshitthebottomline.
Atonly8%,returnoncapitalemployed(ROCE)wasthelowestit'sbeenforadecade.
Operatingcashflowsfellwithreducedprofits,down23%to$137billion,whileinvestingcashoutflowsincreased22%to$169billion.
TheTop40'scashpositionfell10%to$104billion,salvagedbytheissuingof$108billioninnewdebt.
Concernsofresourcenationalismhavefurtherweigheddownontheindustry.
Whilethe2012resultswerenotasgoodasrecentyears,itwasn'tallbadnews.
TheTop40increaseddividendsby9%to$38billion—anaverageyieldof3.
7%basedon30April2013shareprices.
Shareholdershavecalledforchangeanditstartedatthetop.
SinceApril2012halfoftheTop10'sCEOshavebeenreplaced.
Butsimplychangingthecaptaindoesn'tturntheship.
Inreactiontoshareholderdemandsandbothcommoditypriceandcostpressures,minershavestartedtoshifttheirfocus.
Thedaysofmaximisingvaluebysolelyincreasingproductionvolumesaregone.
Thefutureisaboutmanagingproductivityandimprovingefficiencies,bothofwhichhavesufferedinrecentyears.
InAviewfromthetop,miningCEOshavetoldusthatnow,morethanever,capitalexpenditurestomeetlong-termdemandwillberebalancedwithreturnstoshareholders.
EightoftheTop10havepubliclyannouncedthattheywillmaintainorincreasecurrentdividendlevels.
Lastyear,theTop40reportedthattheywouldspend$140billionin2012oncapitalprojects—andforthemostparttheydid.
Thisyear,theTop40haveforecast$110billionincapitalspendingfor2013,areductionof21%.
Projectsarebeingdeferredorscaledback.
ManycompanieswithintheTop40havesaidthattheyareincreasingprojecthurdlerates.
Additionally,manymajorplayershaveannouncedplanstodivestwhattheyconsidertobenon-coreassets.
Theindustry'scentreofgravityhascontinuedtoshift.
Halfoftheindustry's40largestminersbymarketcapitalisationhavethebulkoftheiroperationsinemergingcountries—themostever.
Onthedemandside,thelongtermfundamentalsarestillthere.
Chinaconsumesaround40%ofglobalmetalproductionandwillcontinuetobetheindustry'smostimportantcustomer.
While6PwCChinesegrowthratesareslowingdown,theyarecomingfromabiggerbase.
ThiscombinedwiththecontinuedemergenceoflargedevelopingeconomiessuchasBrazil,IndiaandIndonesia,meansfuturedemandforcommoditiesstilllookshealthy.
Butregaininginvestorconfidencedependsonhowtheindustryrespondstoitsrisingcosts,increasinglyvolatilecommodityprices,andotherchallengessuchasresourcenationalism.
Nowisthetimetoshowthattheindustrycandeliveringoodtimesandbad.
Whilecurrentlytheremaybeaconfidencecrisis,wehavefaiththatthelongtermfundamentalswillensureminingisagreatindustrytobeinformanyyearstocome.
TimGoldsmithGlobalMiningLeader,MineProjectLeaderPwCOverthepastdecadetheminingindustryhasoutperformedthebroaderequitymarkets,butthistrendhasrecentlychanged.
Whileminingstocksfellslightlyin2012,duringthefirstfourmonthsof2013miningstockswerehammered,fallingnearly20%.
Theminingindustryisfacingaconfidencecrisis.
MineAconfidencecrisis702Industryinperspective8PwCTheminingindustryisfacingaconfidencecrisis…Miningisanindustryincrisis.
Atthesametime,volumesareup,dividendyieldsareupandcommoditypriceshavefallen,butnotcrashed.
Long-termdemandfundamentalsarestillthere.
Sowhat'sthecrisisThebroadermarketshavereboundedasinvestorshavestartedtorotatebackintoequities.
Butminingequitieshavebeenleftbehind.
Theindustrylacksaclearinvestmentproposition.
ButwhyThemarkethaslostconfidenceinmining.
Confidence……thatcostscanbecontrolled.
…thatcapitaldisciplinewilloccur.
…thatnewCEOscandeliveronpromises.
…thatreturnsoncapitalemployedwillimprove.
…thattheindustrywon'tpilebackintotoomanynewprojectsorexpensivedealswhenpricesrebound.
…thatresourcenationalismwillnotoverwhelmtheindustry.
…thatcommoditypriceswillnotcollapse.
…andthemarketsreflectthisconfidencecrisis.
Althoughtheindustryhasdonewelloverthelastdecade…Thelasttenyearshaveseenunprecedentedgrowthofbothcommoditypricesandglobalproductionvolumes.
ThisisourtentheditionofMineandlookingbackoverthisperiodtheindustryhasclearlyoutpacedthebroadermarkets.
FromJanuary2003throughApril2013,miningstocksareup235%,whiletheDowJonesisup82%andtheFTSE100isup78%.
Whileminingstockshavenotfullykeptupwithcommoditypriceincreases,theyhavebeatenthebroadermarkets.
Althoughminingstockshavebeenmorevolatilethanbroadermarkets,fallingharderduringtheglobalfinancialcrisisandotherdips,performanceforthelastdecadeisstillgood.
Tenyearincreasesinyear-endpricesandannualglobalproductionvolumes—2003to2012CommodityPriceVolumeGold+372%+4%Ironore+302%+168%Copper+384%+25%Thermalcoal+273%+48%**2003to2011Source:TheWorldBank,U.
S.
GeologicalSurvey,BPStatisticalReviewofWorldEnergyMineAconfidencecrisis9Globalindices(January2003=1)01234567Jan13Sep12May12Jan12Sep11May11Jan11Sep10May10Jan10Sep09May09Jan09Sep08May08Jan08Sep07May07Jan07Sep06May06Jan06Sep05May05Jan05Sep04May04Jan04Sep03May03Jan03HSBCGlobalMiningIndexFTSE100DowJonesSource:Bloomberg2003200420052006200720082009201020112012April2013Globalindices(January2003=1)01234567Jan13Sep12May12Jan12Sep11May11Jan11Sep10May10Jan10Sep09May09Jan09Sep08May08Jan08Sep07May07Jan07Sep06May06Jan06Sep05May05Jan05Sep04May04Jan04Sep03May03Jan03HSBCGlobalMiningIndexFTSE100DowJones…andthegapwiththebroaderequitymarketshaswidenedin2013.
ThevalueregainedbytheTop40neartheendof2012waserasedinthefirstfourmonthsof2013fallingby18%.
RoughlyinlinewiththeTop40,theHSBCGlobalMiningIndexfellby20%whilethebroadermarketshitalltimehighs.
SinceJanuary2012,theHSBCGlobalMiningIndexfellby30%whilethebroadermarketsrallied—theDowJoneshitanalltimehigh.
SinceJanuary2012,theHSBCGlobalMiningIndexhasunderperformedtheDowJonesandFTSE100by46%and43%,respectively.
Givenhowfartheminingindustryhasfalleninthefirstfourmonthsofthisyear,itwillbechallengingfortheindustrytofullyreboundintheremainderof2013.
TheTop40facedayearofvolatilityandmixedresultsDespiteaturbulentyear,theoverall2012yearendmarketcapitalisationfortheTop40closedatroughlythesameplaceas2011,atjustover$1.
2trillion.
2012wasagoodyearfordiversifiedplayers.
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Fromamarketcapitalisationperspective,thetop5increasesin2012hadacombinedgainof$61billon.
ThisincludedBHPBilliton,RioTinto,Xstrata,GrupoMexicoandInnerMongoliaBaotouSteelRareEarthHiTech—threediversified,onecopper,andonerareearthsproducer.
…abadyearforgoldminers…2012wasaparticularpooryearforthegoldminers.
Ofthefivecompanieswhosemarketcapitalisationshrunkthemost,fourweregoldproducers—BarrickGold,AngloGoldAshanti,Goldcorp,andNewmont.
In2012theTop40'sgoldminerslost$29billionor15%ofmarketcapitalisation.
…andaterriblestartto2013acrosstheboard.
Butif2012wasgoodforsomeandbadforothers,thefirstfourmonthsof2013havebeenroughacrosstheboard.
Marketcapitalisationfellfor37oftheTop40—losingover$200billion,or17%oftheyearend2012level.
OnlyMineraFrisco,MosaicandInnerMongoliaYitaiCoalhadincreasesinmarketcapitalisation.
TheTop40'sgoldminerslostafurther$58billion,particularlyduetoasignificantsell-offinAprilfollowingthelargestonedaydropofgoldpricesever.
10PwCGlobalindicies(January2012=1)HSBCGlobalMiningIndexFTSE100DowJonesIndustrialAverage0.
60.
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80.
91.
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2Apr13Jan13Oct12Jul12Apr12Jan12ChangeinTop40marketcapitalisation($billion)1,0001,0501,1001,1501,2001,250Apr13OthersGoldDiversifiedDec12OthersGoldDiversifiedDec111,19040(29)331,234(87)(58)(64)1,025Source:Bloomberg…thegrowingdisconnectcontinuedin2012…InourlasteditionofMine,weidentifiedagrowingdisconnectbetweentheperformanceoftheminingindustry'sshareprices,commodityprices,andalsothebroaderequitymarkets.
Theindustry'strendofunderperformanceagainstthebroadermarketsunfortunatelycontinuedinthefirsthalfof2012.
FromMaytoDecembersomegroundwasregained,howeverfortheyear,theHSBCGlobalMiningIndex,akeyproxyfortheindustry'sstockperformance,declinedby13%whiletheFTSE100andDowJoneseachgainedaround4%.
Source:PwCAnalysisThegoldendisconnectStrongprices,weakstocks…Historically,therehadbeenastrongrelationshipbetweengoldminingstocksandthepriceoftheunderlyingcommodityitself.
However,inrecentyears,goldequitiesdeclineddespitesteadygoldpriceincreases.
In2012,themarketcapitalisationoftheTop40'sgoldproducersfellby$29billion,almost15%,whilegoldpricesclosedtheyearupover7%atover$1,676/ounce.
…andweakpricesandevenweakerstocksin2013.
WhentheCyprusbankingsystemwasincrisis,manyinitiallythoughtthatinvestorswouldflocktogold.
Butwiththecountryconsideringoffloadingsome$520millioningoldreservestoraisefunds,investorsfearedthatothercentralbanksmightfollowsuit.
Asaresult,goldpricessawthelargestone-daypercentagefallsincethe1980s.
Whatcouldhavebeenanotherwisebullisheventforgoldturnedouttobebadnewsforgoldminers.
ThroughApril,goldpricesfell12%.
TheTop40'sgoldminerssawtheirstocksgethammered,fallinganastonishing28%.
HasitjustbeenbadluckforgoldminersYearsofglobaleconomicturmoilhelpedpushupthegoldprices.
HasthesameturmoilalsopusheddowngoldminingstocksToacertainextent,yes.
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ortheirshrinkingmarginsButthestoryalsoliesintheircosts.
Macroeconomicfactorsaside,thesluggishsharepriceshavealsobeendrivenbyhighcostsofproduction.
From2010to2012,theTop40'sgoldproducerssawgrossmarginsplummetfrom49%to29%.
Attheendoftheday,whilehighgoldpricesaregenerallygoodnewsforgoldminers,marginsmatterevenmore.
Throughconvention,mostpurchasedgoldisstored,notused.
WillglobaldemandeverbesatisfiedDoesgoldhaveapricefloorGoldcompaniesintheTop40totalmarketcapitalisation(December2010=1)vs.
goldpriceMarketcapitalisation00.
20.
40.
60.
81.
01.
230Apr1331Dec1231Dec1131Dec1002004006008001,0001,2001,4001,6001,800Goldprice$/ozSource:PwCanalysisTop5goldcompanyshareprices(January2013=1)vs.
goldprice00.
20.
40.
60.
81.
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230Apr131Apr131Mar131Feb132Jan1305001,0001,5002,000BarrickGoldcorpNewmontKinrossAngloGoldGoldprice$/ozGoldcompaniesintheTop40shareperformancesvs.
grossmarginMarketcapitalisationatyearendGrossmarginGrossmargin$billion0501001502002503002012201120100%10%20%30%40%50%60%49%37%29%Source:PwCanalysisSource:PwCanalysisMineAconfidencecrisis11LesscontrollableCommoditypricevolatilityIncreasedlabourcostsResourcenationalismCapitalprojectoverspend/delaysCapacityoversupplyMismanagingshareholderexpectationsDecreasedproductivityMisallocationofcapitalMorecontrollableWhyhasconfidencebeenlostAnumberofindustrywidetrendshavehurttheTop40…InrecentyearstheTop40havebeenhurtbyanumberofdifferentfactors—somemorecontrollableandsomelessso.
Whileminershavesomediscretionoverhowtheyallocatecapitalandexecuteprojects,commoditypricevolatility,resourcenationalismandoverallcountrylabourcostsaremoredifficulttocontrol.
…anditisapparentinthe2012results.
SohowhastheindustrymanagedthesefactorsOnekeymetrictoevaluatetheindustry'sperformanceisROCE.
Havingdroppedto9%duringtheglobalfinancialcrisis,ROCEreboundedin2010.
Sincethenithasdroppedevenlowerto8%.
Whencommoditypricespickedupthreeyearsago,theindustryrushedtobringcapacityonline,settingnewrecordsforcapitalexpenditures,butintheprocess,decreasingproductivity.
Theindustry'soperatingcostshavealsoincreasedfasterthanotherindustries,impactingmargins.
Headgradeshavefallen,mineshavedeepened,andnewdepositsareinriskiercountries.
Withthestructuralchangeinthecostbasethathasoccurred,moderatepriceincreaseswillnotbeenoughtoclawbacklostmargin.
12PwCTop40returnoncapitalemployed(ROCE)0%5%10%15%20%25%20122011201020092008200720062005200420032002ROCE5%8%14%18%23%22%13%9%18%14%8%Source:PwCanalysisTop40price-to-earningratio05101520253020122011201020092008PEratio(excludingimpairmentcharges)PEratioLowearningshavedrivenhigherPEratiosWrite-downs,lowercommodityprices,andincreasingcostshalvedtheTop40'searningsto$68billion.
Asaresult,theTop40'syearendpricetoearningsratio("PEratio")shotupto18,morethandoubletheyear-end2011ratioof9.
However,adjustingforimpairments,theyearend2012PEratiowasamoremodest11.
ArelativelylowPEratiowouldimplythatthemarketdoesnotbelievethattheTop40willsustainitscurrentearnings,letalonebeabletogrow.
However,whenadjustingforimpairments,the2012PEratioisnotanoutlier.
Thishighlightsthatthebeliefisthataverageyearslieaheadwheredramaticprofitgrowthisnotexpected.
Source:PwCanalysisIsdemandstillthereLong-termglobaldemandfundamentalsremainintact.
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Fortheglobaleconomy,ifitwasn'tonecrisisthisyearitwasanother.
Atthestartof2012therewashopethattherecoveryfromtheglobalfinancialcrisis,althoughtepid,wouldcontinue.
ButglobaleconomicgrowthwasdepressedbythethreatoftheUSfiscalcliff,theongoingEuropeandebtandsocialcrisisandtheleadershiptransitioninChina.
Overtheyear,theglobaleconomygrewbyjustover3%.
BasedonIMFestimates,thetrendofslowgrowthisexpectedtolingerfortherestof2013,withhighergrowthprospectsreturningin2014.
…butitwon'tcomefromadvancedeconomies…ThegrowthfortheadvancedeconomiesisexpectedtobedampenedbythecontinuingslowdowninEurope.
Ascreditandhousingmarketsbegintorevive,theUSisexpectedtooutperformmostotherG7countries,withprojectedrealGDPgrowthof2%in2013,increasingto3%by2014.
Europeisnotexpectedtoseeanydiscerniblegrowthinthenearterm.
Thedebtcrisis,severeausteritymeasuresandtherelatedimpactoncreditsupplywillcontinuetounderminethegrowthprospectsintheyearstocome,withrealGDPgrowthoflessthan2%foratleastanotherfiveyearsaccordingtotheIMF.
MineAconfidencecrisis13…asglobalgrowthprospectsdependonemerginganddevelopingeconomies.
Emerginganddevelopingmarketshavebecometheworld'sgrowthengine.
However,forminingtheonethatreallycountsisChina.
TheChinesegovernmentisfocusingonreducingrisksinitseconomyandmakingitmoresustainablefollowingaonceinadecadepoliticalleadershiptransitionin2012.
WhiletheoutlookfortheChineseeconomylookscautiouslyoptimistic,minersshouldnotignorethepotentialforfurtherdeclinesinrealgrowthrates.
GDPGrowthyearonyear(2000to2018)AdvancedeconomiesIMFForecastEmergingmarketanddevelopingeconomiesChina(4)04812162018201720162015201420132012201120102009200820072006200520042003200220012000%changeSource:IMFSo,howaretheTop40tryingtoregaintheirappealByincreasingreturns…Arenewedfocusonrewardingshareholdersseemstobeheretostay.
AllbuttwooftheTop10havepubliclyassuredshareholdersthatcurrentdividendlevelswilleitherbemaintainedorimproved.
BasedonApril2013sharepricesand2012dividends,theTop40'sdividendyieldisnowalmost4%.
Thisissignificantlyhigherthanrecenthistoricallevelsandisclosingthegapwithothercapitalintensiveindustriessuchasoilandgas.
In2012theTop40paidoutrecorddividends—increasingthedividendpayoutratiofrom25%in2011to57%in2012.
From2009to2012,theTop40'sdividendshaveincreasedbymorethan150%,from$15billionto$38billion.
…seekingtorebalancecapitalspend…Theindustryneedstofundamentallyreduceoperatingcostsandincreaseproductivityofexistingassets.
Theanswerdoesnotsolelyrestintryingtospreadcostsoveralargerbasetogaineconomiesofscale.
Itwillnotbepossiblefortheindustryto"grow"itselfoutoftrouble.
Although2012wasarecordyearforcapitalspending,theoverallmessagefromtheTop40isthatthecapitalexpendituretapisbeingtightened.
Projecthurdlerateshavebeenincreased,withsomeoftheTop40statingthatonlyprojectswithareturnabove25%willbepursued.
Inrecentmonthstheimpactoflowerspendhasbeenseenthroughtheindustry'svaluechain.
Manysuppliershaveannouncedlowerthanexpectedprofitsasaresultofcapitalspendreductions.
Supplyanddemandeconomicssuggestthiswillleadtopricesfallingforsuppliers.
…takingadvantageoffavourabledebtmarkets…Withcheapdebtfinancingavailable,theTop40tookadvantageandleverageduptheirbalancesheets,adding$108billionindebtin2012.
Cheapdebthashelpedtomaintainliquidityflexibility.
14PwCDividendyields—2009toApril2013(%)0%1%2%3%4%13-Apr2012201120102009Netincomeanddividendspaid($billion)NetincomeDividendspaid0204060801001201401602012201125%57%Source:PwCanalysisSource:PwCanalysis…andmakingvisiblechangesatthetop…CEOchangeshavebeenmadeatfiveoftheTop10.
ThebiographiesofthesenewCEOsreflectanindustrythatvaluesoperationalknow-howandminingexperienceoverdealmakingandgrowth.
Newleadershipisalsoavisiblesignalthatchangesareontheway.
…butthekeyistofocusonproductivity,notausterity.
Atthepeakofthemarketmanyminerssoughttobuildnewproductioncapacityatanycost.
Withthepressuretodeliverreturnstoshareholders,productivitywassacrificedinsearchofshorttermprofitabilityfromvolumegrowth.
Minershaveinvestedbillionsinprojectstoincreaseproductioncapacity,butarenotrealisingsufficientreturnsfromthisoutlay.
Thereneedstobearenewedfocusonproductivitythroughtechnologicalinnovationandanimprovedunderstandingofwhathappensattheoperationallevel.
Thekeyisfortheindustrytounlockthelatentcapacityofexistinginvestedcapitalandbringtheirminestomoreoptimallevelsofthroughputcapacity.
Whilethiswillgeneratelongtermvalue,realisingsuchefficienciescantaketime.
Broadcorporateausteritymeasuresarenotenoughandcanbedamagingifnotcarefullyimplemented.
Areminersgeneratingquickwinsorlong-termvalueWiththeincreasedpressurefromshareholdersforinvestmentreturnsandtheshiftinfocusfromgrowthtodeliveringprofits,ithasbecomeafocusofthelargerplayerstofocusongettingthemostoutoftheir"tier1"assetswhiledivestingoftheirnon-coreassets.
Astrategyofgoingafterefficiencygainsappearssensiblegivencurrentcostandcommoditypricepressuresandwillhelpgeneratelongtermvalue.
Incontrast,whiledivestmentcreatesvisibleshorttermfinancialgains,thelongertermimpactonportfoliovalueishardertosee.
"We'veputanextremefocusonissuesofproductivityandcapitaldiscipline,whichreallyareveryclosetomyheart.
"—AndrewMackenzie,CEO,BHPBillitonMineAconfidencecrisis15BalancingproductivityandprofitabilityThecyclicalnatureoftheminingindustryhasillustratedhowapursuitofproductionvolumecanbecomeunbalanced,tothedetrimentofproductivity.
Thepreviousfocusonquicklydeliveringvolumehasledtoinefficiencieswhicharenowstructurallybuiltintomanyminingoperations.
Inwhatappearstobeareactivechangeratherthanaproactivecostfocus,manyoftheTop40arenowseekingtoimprovereturnsthroughoptimisationandenhancedproductivity.
Positiononthecostcurveisonceagainaprimaryfocus.
Gettingthemostoutofyourassetsisthenewpriority.
Achievingthisthroughinvestingtimeand/ormoneyinproductivityimprovementswillleaveminerswellplacedtobuildrenewedconfidenceintheindustry'sperformance.
Thisrequiresmorethandeferringcapitalexpendituresandimplementingausteritymeasures,especiallyoverdiscretionaryspend.
Therealchallengeliesinsettingapathtowardssustainablereducedunitcostsandincreasedcapitalefficiencies.
HowdoyouachievethisThroughtechnologicalinnovation…Therearemanytechnologiesandinnovationsthatreducetheeffortrequiredtoextractresourcesacrosstheminingvaluechain.
However,beforeinvestmentintechnologyismade,adetailedunderstandingofdataandprocessesiscriticaltocapitalefficiencies.
Technologyalonecannotprovidethesolutionifinefficienciesarenotwellunderstood.
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understandingwhathappensatoperationallevel…Whiletechnologyenablesminerstocollectmassamountsofdata,youdon'tfattenapigjustbyweighingit—it'stheinterpretationofthedatathatsupportseffectivedecisionmaking.
Totalavailabletime(8760hours)365daysx24hoursScheduledtime(loading%)LossSchedulednon-operatingtime(holidays,etc.
)AvailabletimeLossNon-availabletime(plannedandunplanneddowntime)OperatingtimeLossNon-operatingtimewithinavailabletime(training,shiftchanges,etc.
)EffectiveoperatingtimeLoss1Loss2Ratelossesduetooperationalandmaintenancematters(e.
g.
,swingtime,productionconstraints,breakdowns)EffectiveproductiontimeLossQualitylosses(e.
g.
,ineffectiveblasting)16PwCConsiderthefollowingsummarytakenfromproductiontimecasestudies:ManyoftheTop40haveundertakenstudiestounlocklatentcapacity.
Ourexperiencesuggestsmanyminesoperateatbelow50%fleetutilisation,whilstoverstatingrealavailability.
Thishighlightsthesizeoftheprizeforthosemineslookingtounlocktheirfulloperationalpotential.
However,tomakethemostofanysuchexercise,impactsmustbeconsideredoverthelifeoftheassets.
Increasedassetutilisationcanimprovemarginsbyincreasingthroughputwithminimalcapitalexpenditure.
Wehaveseenminersaddnewfleettoaddressproductioninefficiencieswhenchasinghigherutilisationfromexistingequipmentwhichwouldgivethesameresultatlowercost.
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andbybringingpeopleonthejourneywithyou.
Cultureplaysanimportantroleinimplementingnewprocessesandtechnologies—theworkforcemustbewillingandabletosupportchangeinthetransitionphase.
Toooften,theimportanceofhavingaworkforcethatisnotonlyskilledinoperations,butalsosupportiveoftheimplementationprocessisdisregarded.
MineAconfidencecrisis1703AviewfromthetopAchangingoftheguardInthe10yearsthatwehaverecordedinterviewswithCEOsofthemajormininghouseswehaveheldmanyvariedandinterestingdiscussions.
Therehas,ofcourse,beenchangeintheCEOsuiteinallyearsthatwehavebeenpreparingMine,however,thescaleofchangeinCEOsinthelast12monthsisunprecedented,with50%oftheTop10CEOschangingsinceApril2012.
Inlastyear'sdiscussionsweheardtheCEOsremarkthattheirshareholderswerefocusedonthedisconnectbetweenthedividendstheywerereceivingcomparedtotheprofitsbeinggenerated—putsimply,theshareholdersweredemandinghigherreturnsandareductioninthegrowthagenda.
CEOstodayhaveanewmandate.
Theyclearlyunderstandtheexpectationsoftheirshareholders'andareknucklingdowntogetthehouseinorder.
Thiswillmeanthattherewillbeanincreasedfocusonmaximisingreturnsfromexistingoperationsandensuringthattheshareholdersseethisthroughincreaseddividends.
Costcuttinghasoftenbeenseenintheindustry,butproductivity,notausterity,isthekeytokeepingitsustainable.
Theviewthatpositiononthecostcurvewasasecondaryconsiderationaftermaximisingoutputheldtheindustryingoodsteadoverrecentyears,butisnotastrategythatCEOssignuptotoday.
ManyofthesenewCEOswillbeinheritingrecentacquisitionsandthefruitsofinvestmentincapitalprojects.
Therecentmegaimpairmentsonacquisitionsandthecostblowoutsonthecapitalprojectshaveraisedthebarofshareholders'expectationsandtheCEOsunderstandthisrequirement.
Amajornewacquisitionisunlikelytobewellreceivedatthemoment,andanewprojectapprovalwillneedveryrobusteconomicsandastrongriskanalysistopassmuster.
Asiftocompoundthesupplychallenge,resourcenationalismcontinuestohamperinvestment,especiallyinemergingmarkets.
CEOsarejugglingcautionwiththeneedtoinvestThisdoesn'tmeanthattheCEOsbelievethat"managewhatwehave"isthecorrectstrategyandindeedthemajorshaveemphasisedthatownershipandclevermanagementof"tier1"assetsremainthegame.
Thequestionishowwillthefocusonmanagingassetsandinvestingthroughthecyclecombine.
Withshareholdersdemandinghigherreturns,thenotquite"tier1"assetsareundergreaterdivestmentpressure.
Yet,atcurrentvaluationsitishardtogetfullvaluefordisposals.
….
andtheyseesupplygettingtighter.
AlltheCEOsbelievethatChinaandemergingmarketdemandoftheirproductscontinues.
Whilethat'sgoodnews,thesupplysidelooksmoreproblematic,withtheassetsgettingdeeper,havinglowergradesandbeinginriskiercountries.
TheTop40CEOsarealsoconcernedaboutthedifficultythejuniorsarefacinginobtainingnewfinance.
Historicallyjuniorshaveplayedacriticalroleinfindingnewassets,butwithnomoney,howwilltheyfundgrassrootsexplorationTheidentityofwhowillfindthegreenfielddiscoveriesseemseverhardertodetermine.
CEOsshouldbeaskingwheretomorrow'sproductionwillcomefrom,notjusttoday'sreturnstoshareholders.
They'llneedtofocusontodayandtomorrow—allatthesametimeTheeventsofthenextfewyearswillhaveseriousramificationsforthenext10yearsoftheindustry.
ThereisanewbreedofCEOsandtheyhavebeengivenclearinstructionsastohowtheyshouldnavigatetheship.
Executiveswillneedtomakesurethatshareholdersgetsufficientrewardswithoutmissingoutontheopportunitiesthatwillpositiontheircompaniestomeettomorrow'sresourceneeds.
Itperhapshighlightsthegreatchallengetoindustriesthatneeda20-yearinvestmentcyclebutthataremeasuredonquarterlyorhalfyearlyfinancialoutturns.
18PwCMineAconfidencecrisis19Asinpreviousyears,wehavediscussedthefutureoftheminingindustrywithCEOsofanumberoftheTop40companies.
Thisarticlesummarisestheirviews.
04China'schangingroleasaminingconsumer,supplier,financierandregulatorThedragonhasentered…Our2005editionofMinewastitled'EntertheDragon'.
TheminingindustrywasjustbeginningtofeelChina'simpact.
Eightyearson,notonlyisthedragonhere,butithasbecomethedominantforceindrivingdemandfortheindustry.
ChinesedemandismentionedinpracticallyeveryoneoftheTop40'sannualreportsandinvestorpresentations.
NewsofeasingofChineseGDPgrowthin2011and2012sentshockwavesthroughtheindustryshareprices.
TheIMFforecastsChina'sgrowthat8–8.
5%through2018,slightlyhigherthanthe7%intheChinesegovernment'smostrecentfive-yearplan.
…snappingupminingproductsbytheshipload…Demandisabigpartofthe'Chinastory'.
AccordingtoChinesecustomsstatistics,annualironoreimportvolumeshavealmosttripledsince2005andcopperimportshavealmostdoubled—byvalue,theseincreasesareevenmorestaggering.
IMFestimatesputChinacurrentlyconsumingaround40%ofallmineralproducts.
Thekeydriverofthisdemandhasbeentheunprecedentedmovementofruralpopulationstocities,whichhavebeenbuilttohousethem,consumingmanymetals.
Evenafterthemassivemovementstodate,theurbanpopulationisonly50%oftotal—alongwayfromcountrieslikeCanada(81%),theUS(82%),andAustralia(89%).
SoforalloftheconcernsurroundingaChineseslowdown,whiledemandgrowthinpercentagetermswillslowfromthestaggeringpaceofrecentyears,itwillbeonamuchlargerbase,meaningthatonanabsolutevolumebasisitshouldbegreaterthaninthepast.
20PwC.
.
.
butalsofuellinggrowthinitsownbackyard…Howeverdemandisonlypartofthepicture.
Chinaistheworld'slargestminer.
RawMaterialsGroupestimatesthatChinarepresents29%ofglobalminingbyvalue.
Byvolume,in2011Chinaproducedalmost50%oftheworld'scoal.
Itisalsotheworld'slargestgoldproducerandthird-largestproducerofironore.
Since2005China'sGDPhasmorethandoubled.
ButcapitalexpendituresintheChineseminingsectorhaveincreasedsevenfold.
SowhileannualGDPgrowthhasaveragedjustover10%,annualgrowthofdomesticminingcapitalexpenditureshasaveragedalmost35%.
ChinesedomesticcapitalexpenditureshavefaroutpacedtheoverallTop40,andunlikethecurrentsentimentamongstmuchoftheTop40,areunlikelytohitthebrakesinthesamemannerathomeorabroad.
TheChineseminingindustryisdominatedbydomesticplayersandmostsectorsarenotopentoforeigncompanies.
Howeverunlikemanyotherminingcountries,Chinalackstruedomesticchampions.
Asanexample,whileChinaShenhuaisthenation'slargestcoalminer,itmineslessthan10%oftotalChinesecoal.
WhileChineseplayersacrossallcommoditieshavebeenincreasinglyconsolidatingtogainscaleandcontrolafragmenteddomesticindustry,thereisstillalongwaytogo.
…andbecominganimportantsourceoffunding…Chinesecompaniesarealsoincreasinglybecomingoneoftheindustry'sleadingsourcesofcapital.
ChineseacquisitionsmakeheadlinesandChinesecompaniesaresomeofthemoreactivedealmakersintheindustry.
Inadditiontodirectequityacquisitions,Chinesecompaniesarealsoinvestinginminedevelopmentandconstruction,andsupportinginfrastructure.
Todatemostdealshaveinvolvedprojectsthatarewellpastexplorationstage.
SoitislookingunlikelythatChinesecompanieswillsolvethecashcrunchbeingfeltbytheindustry'sjuniorplayers.
…andregulatorAnothersignofChina'schangingroleisontheregulatoryfront.
TherecentlyclosedGlencoreXstratamergerwasheldupbyChineseregulatoryapprovals.
Whetherthisistheexceptionortherulehasyettobeseen.
Sowhat'snextInthenexteightyearsChina'seconomywon'tgrowasfastasthelasteightyears.
But,itwillstillgrow,continuingtodriveincreaseddemandandbeingthecentreoftheindustry'sconsumptionstory.
Domesticsupply,particularlyofcoal,willcontinuetogrow.
Chinesecompanieswilllikelyconsolidateandwithafewdomesticmega-mergersandlargeoverseasacquisitions,ChinesecompanieswilllikelybealargepartofthefutureTop40,ifnottheTop10.
MineAconfidencecrisis21MiningindustrygrowthinChina(2005=1)DomesticcapitalexpendituresIronoreimportsGDP0246820122011201020092008200720062005CopperimportsSource:PwCanalysis0510-yeartrends2003–2012TheinformationincludedbelowdiffersfromtherestofouranalysisasitincludestheaggregatedresultsofthecompaniesasreportedinMineineachoftherespectiveyearsdisclosed.
AllincomestatementdatapresentedexcludesGlencoretradingrevenueandoperatingexpenses.
$billion2012201120102009200820072006200520042003AggregatedincomestatementRevenue525539435325349312249222184110Operatingexpenses(340)(311)(246)(217)(208)(176)(141)(141)(129)(81)AdjustedEBITDA185228189108141136108815529Amortization,depreciationandimpairment(86)(42)(34)(31)(57)(19)(12)(16)(15)(10)PBIT99186155778411796654019Netinterestcost(6)(6)(7)(6)(9)(5)(3)(4)(3)(3)PBT93180148717811293613716Incometaxexpense(25)(48)(38)(22)(21)(32)(27)(16)(9)(4)Netprofit6813211049578066452812Adjustednetprofitexcludingimpairment6813211049578066452812Year-on-yearincrease/(decrease)inrevenue(3%)24%34%(7%)12%25%12%21%67%18%Year-on-yearincrease/(decrease)inadjustedEBITDA(19%)21%75%(23%)4%26%33%47%90%38%Year-on-yearincrease/(decrease)innetprofit(49%)20%124%(14%)(29%)21%47%61%133%100%AdjustedEBITDAmargin35%42%43%33%40%44%43%36%30%26%Netprofitmargin13%25%25%15%16%26%27%20%15%11%AggregatedcashflowOperatingactivities137174137831049577584122Investingactivities(169)(142)(79)(74)(102)(126)(67)(38)(23)(20)Financingactivities21(28)(35)1014364(11)(10)1Freecashflow11176701938444027198AggregatedbalancesheetProperty,plantandequipment701601511467402371262224196140Otherassets54453843233427428419214812083Totalassets1,2451,139943801676655454372316223Totalliabilities563482387354339329217178151114Totalequity68265755644733732623719416510922PwC1Freecashflowisdefinedasoperatingcashflowlessinvestmentinproperty,plantandequipment.
MineAconfidencecrisis23ChangeatthetopSincelastyear,aquarteroftheTop40havechangedleadersandhalfoftheTop10haveseenanewCEOtakethehelm.
ThemediahascharacterisedthisasCEOsbeingheldaccountablefornotdeliveringaspromisedonambitiousdealsatthepeakofthemarket.
Ouranalysisofthenewleadersandtheirpredecessorssuggestthattheshake-upalsoreflectstheneedforadifferenttypeofleaderastheindustryhaschanged.
ThenewCEOsreflecttheindustry'sfocusawayfromM&A,(atrendnotedinourGlobalMiningDeals:Down,butnotout)andtowardsachievingoperationalcostimprovementsanddeliveringprojectsonbudget.
Comparedtotheirpredecessors,morehavebeenrecruitedfromanoperationalbackground.
Atanaverageageof54,thenewCEOsare5yearsolderthantheirpredecessorsandhavegenerallyspentmoreoftheircareersintheminingindustry.
Halfofthe14companiesthathavebeenintheTop40eachyearofthepastdecadehavehiredanewCEOsinceJune2012—anunprecedentedlevelofchange.
Since2008impairmentsrecognisedbythisgroupfollowasimilartrendtoleadershipchanges.
Source:PwCanalysisAnnualCEOchangeofthecompaniesinTop40vs.
Impairments($billion)%thatchangedCEOsImpairment($billion)0102030405020132012201120102009200820070%10%20%30%40%50%24PwCnnualCEOchangeofthecompaniesinTop40vs.
Impairments($billion)%thatchangedCEOsImpairment($billion)20132012201120102009200820070%10%20%30%40%50%AnnualCEOchangeofthecompaniesinTop40vs.
Impairments($billion)%thatchangedCEOsImpairment($billion)0102030405020132012201120102009200820070%10%20%30%40%50%AnnualCEOchangeofthecompaniesinTop40vs.
Impairments($billion)%thatchangedCEOsImpairment($billion)0102030405020132012201120102009200820070%10%20%30%40%50%2012netprofitof$68billionwasequivalenttothelevelrealizedin2006,andthenetprofitmarginof13%wasthelowestithasbeensince2003.
Thisindicatesahugestepbackwardsforanindustrywhichhasbeenstrugglingtocontainbothoperatingandcapitalcostpressures.
However,adjustingforimpairments,netprofitisstillhigherthanitwasfollowingthepreviousrecordwrite-downsduringtheglobalfinancialcrisis.
At$525billion,itwasonlythesecondtimesince2003thatrevenuewentdown.
Thedecreasewasdrivenprimarilybysofterpricinginironoreandbasemetalsdespiteproductionvolumesbeingata10yearhigh.
Operatingcostsrose9%to$340billion.
Itappearsthattheindustryhasbeenabletoslowtherateofincreasethatwesawin2011,butthetrendwehighlightedinlastyear'spublicationthatcostshaveincreasedmorequicklythanrevenuesiscontinuing.
Thishascontributedtoayear-on-yeardecreaseinadjustedEBITDAof19%.
At$45billion,impairmentsfortheTop40wereupnearly50%morethantheprevioushighestyearoverthelast10years.
80%oftheimpairmentsrecognisedoverthepastyearwerebycompaniesrepresentingthetraditionalmarkets,manyofwhomcompletedacquisitionsattheheightofthemarket.
NodoubtthishasbeenafactorintheunprecedentedlevelofchangewehaveseenintheCEOsuiteoverthepastyear.
Notwithstandingthefluctuationingearingratiosoverthepast10years,theTop40hasbeenabletomaintainarelativelystablenetinterestcost.
Thishasbeendrivenbyacombinationofthedecreasedcostoffinancingandincreasedcapitalisedinterestaslargerandlongercapitalprojectsareundertaken.
Withrecordimpairmentsreaching27%ofinvestingcashflowsduring2012andtheTop40writingoffnearly20%ofinvestingcashflowsoverthepast5years,it'snotsurprisingshareholdersarecurrentlydemandinghigherdividendsandbetterdisciplineovercapitalallocation.
At50%,2012alsosawthelargestsingleyear-on-yeardecreaseinnetprofitmarginsincetheinceptionofMine,greaterthanthedecreasesexperiencedduringtheheightoftheglobalfinancialcrisisin2008and2009,whichmanyconsideredtobeablack-swaneventfortheindustry.
Incomestatement—Recordcostsandimpairmentsresultinlowestnetprofitmarginsince2003Overthepastfiveyears,theTop40'stotalwriteoffshavebeenequivalentto20%oftheirtotalinvestingcashflows.
Movementonrevenueandoperatingcost(2006=1)RevenueOperatingcost02012201120102009200820072006.
511.
522.
53Source:PwCanalysisMineAconfidencecrisis25Notwithstandingtherecordimpairmentsrecognisedduring2012,thetotalassetbaseoftheTop40hascontinuedtoincreaseatanaverageof21%peryearoverthepasttenyearsandsetnewrecordsthisyearwithtotalassetsexceeding$1.
2trillion.
TheTop40spent$138billiononcapitalexpendituresincludingnon-miningactivitiesduring2012,however,withoperatingprofitsdecliningandthefocusturningtoincreasingshareholderreturnsandcapitaldiscipline,forecastedcapitalexpendituresfor2013hasalreadybeenreducedby21%to$110billion.
At$104billiontheTop40managedtoretaincashlevelsabovethe$100billonmark,firstachievedduring2010.
However,2012sawadecreaseincashforthefirsttimesince2003astheTop40returnedcashtoshareholdersandinvestedincapitalexpansion.
TheTop40haveraised$108billioninfinancingasminerstookadvantageofdemandfrominvestorsindevelopedeconomiesforstableinvestmentswithknownreturns.
Despitesomeofthenewlyraisedfundsbeingusedtorefinancehighercostdebt,totalborrowingreacheda10yearrecordof$270billionattheendof2012.
GearinglevelsfortheTop40wereat24%,lowerthanhistoricalhighs,butonadefiniteupwardtrendwithdebtbeingamuchcheaperandmorereadilyavailablefinancingoptionthanequity.
Whilethetenureofthedebtalsoappearsmorebalanced,thelevelofdebtneedstobemonitoredcarefully.
Theincreasedgearingratiosaredrivenprimarilybyminersfromtraditionalmarkets,withthesecompanieshavinggearingratios3timeslargerthanthosefromtheemergingmarketsinboth2011and2012.
Despitethedifferencesingearing,emergingmarketcompaniesholdalmost50%oftotalcash.
Withsharepricesinthedoldrums,equityincreasedamodest4%to$682billion,thiswasthelowestpercentagefinancingfromequityinthepastdecade.
Balancesheet—GearingupGearingratioforTop400%5%10%15%20%25%30%35%40%20122011201020092008200720062005200420032002GearingratiofortheTop40'straditionalandemergingmarketcompaniesEmergingmarketTraditionalmarket201220111390%5%10%15%20%25%30%35%Year-on-yeardebttoequityissuance(%oftotal)201220112010200920082007200620052004DebtEquitySource:PwCanalysisSource:PwCanalysisSource:PwCanalysis26PwCAverageyieldforbondsissuedin2009to2012Yield%345672012201120102009Top40NonTop40Withinvestorsbeingreluctanttoinvestinequities,debtprovidedanattractiveoptionthattheTop40weremorethanhappytosnapup.
Consequently,2012sawmorefundingcomingfromdebtthananyotheryear.
Bondproceedsof$43billionwereoverdouble2011astheTop40turnedtodebttoaccesscapitalforexpansionandrefinancing.
BondBubbleIn2012theTop40issued69%ofbondswhilethejuniorsgraspedforcashAnalysingbondsissuedbytheminingindustryoverthelastfouryearsshowsthattheTop40havetakenanincreasingshareofthebondmarket.
InvestorshavemovedawayfromequitiesinsearchoflowerriskbondsandtheTop40haveachievedsomeimpressiveterms.
BHPBillitonissuedbondswithcouponratesaslowas1%.
ThegapinyieldsfortheTop40comparedtotherestofthegrouphasalsobeenwideningoverthepastfouryears.
Incontrast,juniorminersarestrugglingtoraisefinance.
Eventhosepreparedtopayhighinterestratescannotgetit.
Debtishardtocomeby.
Combinedwithanapparentdroughtintheequitymarkets,youhaveaperfectstormforthedemiseofmanyentitieswhichplayacriticalroleinexploration.
Ifjuniorfundingdoesnotimprovesoon,thiswillhaveadramaticimpactonthepipelineofnewreserves.
NotjustcheaperbutbiggerIn2012thereweremoreissuancesofbondsgreaterthan$1billionthaninanyofthepreviousthreeyears.
Anditwasnotjusttheminersissuingbigbonds.
InMay2013Appleissuedthelargesteverbondraisingat$17billionaspartofacommitmenttoreturn$100billionincashtoshareholdersbytheendof2015.
Source:ThompsonOne,PwCanalysisMineAconfidencecrisis27BondissueTop40vsrestoftheminingcompanies*($billion)Top40NonTop40010203040506070201220112010200969%42%29%58%*RestofminingincludeslistedminingentitiesgloballySource:ThompsonOne,PwCanalysisNumberofcorporatebondissuesperyear,classifiedbysizeLargerthan$1billion$500millionto$1billion$100millionto$500millionSmallerthan$100million-129111317629157261622009201020112012Source:ThompsonOne,PwCanalysisManyaretoutingthecurrentunprecedentedlevelofactivityinthebondmarketasabondbubble,withitonlybeingamatteroftimebeforeinterestratesstarttoriseandthebubblebursts.
Whileinvestorsintheselong-termbondscouldloseoutifthisoccurs,minersstandtogainastheyhavesecuredlong-termfundingatlowfixedrates.
Enjoyitwhileyoucan.
28PwCAt$11billion,freecashflowreachedthelowestlevelsinceourinauguralMinein2003.
Theyear-on-yeardecreaseof85%waslargerthanthebiggestpreviousdecreaseof50%experiencedduring2009.
ItreflectstheTop40'sstruggletocontaincosts,bothoperatingandcapital,softercommoditypricesandcontinuedinvestmentbytheindustry.
At32%ofrevenues,notonlywereinvestingactivitiesfarinexcessofthe10-yearaveragefortheTop40,italsosawthesettingofanewrecordforinvestingcashoutflowsat$169billion.
Ofcoursetheprojectcapitalcan'tbeshut-offquickly,sowemayseethistrendreversenextyearastheTop40respondtoshareholderdemandsforhigherreturnsandlessgrowth.
Operatingcashflowsdecreased23%to$137billion,settinganewrecordforthelargestyear-on-yeardecreaseandbeating2009whichfollowedtheglobalfinancialcrisis.
Isthistrendacrisis,oratimewhichoffersopportunitiesthatshouldbetakenadvantageofCashflowstatement—Freecashflowatthelowestlevelsince2003Traditionalmarketplayerscutcapex,butemergingmarketplayersstandfirmSpendinglessin2013isonlypartofthestory.
Analysingthe$110billioninannouncedcapitalexpendituresinmoredetailshowsthatonanaggregatebasis,allofthereductionsarebyminersfromtraditionalminingmarkets.
Basedonannouncedcapitalexpenditures,emergingmarketplayerswillaccountfor40%ofcapitalexpendituresin2013.
DoemergingmarketplayershaveadifferentmandateAmoreoptimisticoutlookonwheretheindustryisgoingOrjustadifferentsetofshareholderswhoaremorefocusedonlong-termsupplythanshort-termreturnsOn-track,deferred,ordeadMiningiscapitalintensiveandtier-oneassetsdon'tcomecheap.
Withpressuretoimproveshareholderreturnsandincreasedscrutinyoverfutureprojects,managingcapitalprojectpipelinescanrequireasmuchskillasmanagingtheprojectsthemselves.
TheTop40walkafinelineofprovidingenoughdetailstoallowinvestorstoevaluatetheirpipelineandmanagestakeholderswhowanttoseeprojectsprogress,whileretainingflexibilitytomakechanges.
Informationonthecertainty,value,andresultsoftheseprojectsisofteninconsistentbetweencompanies,makingitdifficulttoaccuratelyevaluateacrosstheindustry.
RebuildingtheconfidencebeforecuttingthechequeAmidrecordimpairmentsandfallingmargins,shareholdershavelostconfidenceinthecapitalallocationdecisionsmadebyminers.
AccordinglyCEOswillhavetodomoretogaintheapprovaltospendtheircashinthefuture.
CEOsmayfindthattheywillneedtotellmoreabouttheirplansandwhyprojectsmakesensetoearnshareholders'backing.
02040608010012014016020132012Actual2012capitalexpenditurevsannounced2013capitalexpenditure($billion)EmergingMarketTraditionalMarket67%33%60%40%Source:PwCanalysisMineAconfidencecrisis29Mine—CompositionofTop40TraditionalMarketEmergingMarket1971221459711013916610410010176817871792431751972012201120102009200820072006200520042003100%90%80%70%60%50%40%30%20%10%0%Overthepast10yearsonly35%ofthecurrentTop40havebeenincludedinall10editionsofMine,illustratingtheturbulencewithintheindustry.
Thisyearwasnoexceptionwith5changes,including3entrantsmakingadebutappearance.
PeabodyEnergywasanotabledeparturefromtheTop40,havingmadethelistineachofthepastnineeditionsofMine,reflectingthechallengesUScoalproducersarecurrentlyfacing.
Continuingwiththetrendofincreasingmarketshare,theemergingmarketsnowrepresent50%oftheTop40.
CompositionoftheTop40—ThreecompaniesdebutinMine2013Source:PwCanalysis30PwCDuring2008,commoditypricesplummetedwhilegoldpricesincreased;thisledtomoregoldcompaniesbeingincludedintheTop40inwhatcouldbecalled"thegoldenkink".
RareearthsjointheTop40Ifyouownalaptop,smartphone,highdefinitionTVorjustaboutanyotherelectronicdevice,youownsomerareearths.
TheTop40nowhavesometoo.
Whilerareearthpriceshitrecordhighsin2011,priceshavesinceslumpedduetoglobalsupplyanddemandimbalances.
Despitethis,InnerMongoliaBaotouSteelRare-EarthHi-TechmarketcapitalisationhasincreasedanditisthefirstrareearthscompanyintheTop40inthehistoryofMine.
TheBigFourFive…thetopbracketwillwelcome'GlencoreXstrata'Afteraprotractedapprovalprocess,inearlyMay2013themergerbetweenGlencoreandXstratacompleted.
Thecombinedyear-endmarketcapitalisationofGlencoreandXstratawouldplaceitintheTop5,incloseproximitytoChinaShenhua.
Top5marketcapitalisation($billion)—31December050100150200250CombinedGlencoreXstrataChinaShenhuaValeRioTintoBHPBilliton2009201020112012Source:CapitalIQ,PwCanalysisMineAconfidencecrisis31TheTop40'smarketcapitalisationisdominatedbythemajordiversifiedminers—namelyBHPBilliton,RioTinto,Vale,AngloAmerican,Glencore1andXstrata.
Companiesweconsidertobediversifiedmakeupatotalof38%oftheTop40's2012marketcapitalisation.
Goldcompaniesmadeupthesecondlargestsegmentat16%ofthetotal.
Butcloseranalysisofthesecompaniesbegsthequestion,aretheyactuallythatdiversifiedImmediatedifferencessuchasBHPBilliton'spetroleumbusinessandGlencore'stradingandagriculturebusinessescometomind.
Otherthantheobvioushowever,lookingatrevenuebysegmentandassetslocation,since2007,theTop5Diversifiedshaveactuallybecomelessdiversified.
Ironoremadeup38%oftheTop5Diversifieds'totalrevenuein2012.
Thisisnearlydouble2007,whenironorecontributed20%oftotalrevenuesandcopperdominatedat25%ofthetotal.
TheTop5Diversifiedsarealsostickingclosertohome.
AustraliaandBrazilwouldbeconsideredtheprimarysourcemarketsforthisgroup.
Estimatedrevenueassociatedwiththesetwocountrieshasincreasedfrom44%in2007to63%in2012.
Themajordiversifieds—localironoreproducersbyanyothername1DuetoGlencore'ssignificanttradingactivity,theyhavebeenexcludedfromthisparticularanalysis.
Top5Diversifiedsrevenuebyproductionregion($billion)AustraliaBrazilChileSouthAfricaAmerica0204060801001201401601802007201211%19%12%25%16%28%11%15%18%45%Source:PwCanalysisTop5Diversifieds—2007and2012SegmentRevenue($billion)050,000100,000150,000200,000250,00020072012IronOreCopperCoalOthersNickelAluminium6%7%14%17%38%18%10%15%17%13%20%25%Source:PwCanalysis32PwCMineAconfidencecrisis33$billion20122011Change%Revenue7317103%Operatingexpenses(544)(471)15%AdjustedEBITDA187239(22%)Impairmentcharges(45)(13)246%Depreciation&amortisation(34)(28)21%Royaltyexpense(9)(10)(10%)PBIT99188(47%)Netinterestexpense(6)(6)0%Incometaxexpense(25)(48)48%Netprofit68134(49%)Effectivetaxrate25%26%Equity682640Capitalemployed814728KeyratiosAdjustedEBITDAmargin26%34%Netprofitmargin9%19%Returnoncapitalemployed8%18%Returnonequity10%21%06FinancialreviewIncomestatement34PwCIn2012,increasedvolumessoldatlowerprices,combinedwithcostpressureandrecordimpairmentsledtoprofitsdecreasing49%to$68billion.
Revenue:Softeningpricesoffsetbyincreasingvolumes.
Miningrevenue,whichwasdown2%year-on-year,continuestobedominatedbycopper,coalandironorewhichaccountedfor64%oftheTop40revenue(excludingnonminingrevenue),inlinewith2011.
Year-on-yeardecreasesinironorerevenueof13%wereoffsetbyincreasesincoalandtoalesserextentcopper.
MineAconfidencecrisis35Revenuebycommodity($billion)020406080100120140OthermetalsPlatinumDiamondsZincAluminiumNickelPotashGoldIronOreCoalCopper20122011Source:PwCanalysis$billion20122011Totalrevenue7317103%Lessnonminingrevenue*(239)(209)14%Coreminingrevenue492501(2%)Production,usingcopperequivalenttonnes56536%*MainlyGlencoretradingandBHPBillitonpetroleumIronoreTheTop40madeup41%ofglobalironoreproductionandapproximately55%ofglobalseabornevolumes.
Globalironoresupplyincreased5%year-on-year(Top40up7%),andisexpectedtocontinuegrowingasBHPBilliton,RioTinto,ValeandFortescueMetalsGroupcontinueexpansionsin2013.
TheironorepricewentonarollercoasterrideinthesecondhalfoftheyearandmanyChinesesteelmillsdestockedwhichledtoarapidfallinpricefrom$135pertonneto$86pertonne.
Steelproductiondidnotreallyreduce,however,sothepricereboundedequallyfastandwentinto2013inthesameplaceasithadbeenbeforethedrop.
Therearemanythatbelieveamountainofnewsupplyin2013/14willhaveanegativelongtermimpactonprices.
Timewilltell.
CopperTheTop40dominatecopperproductionmorestronglythananyothercommodity.
In2012theTop40copperproductioncomprised46%ofglobalvolumeswhichwasunchangedcomparedto2011.
CoalTheTop40makeuponly14%ofthethermalcoaland13%ofthemetallurgicalcoalglobalmarketsbasedonpublished2011volumedata.
TheTop40accountformoreoftheseabornethermalcoalandmetallurgicalcoalmarkets,at25%and32%respectively.
CoalrevenuesfortheTop40wereup10%in2012.
Thermalcoalrevenueincreasedby13%despitelowerprices.
GrowthwasduetovolumeincreasesfromChinawithChinaCoal,ShenhuaEnergyandYanzhouCoalgrowingvolumesby26%.
CoalIndiabuckedthetrendbenefitingfromhigherrealisedpricesinitsdomesticmarketandgrewrevenueby24%.
Spurredbythedemandfromlocalmarkets,ChineseandIndiancompaniescontinuetogrowtheirshareofglobalproduction.
GoldTheTop40producearound35%theworld'sgold.
Goldrevenuesincreasedslightlyduetohighergoldprices,partiallyoffsetbydecreasedproductionlevels.
36PwCTop40Ironoreproductionin2012asa%ofglobaltotal(Mt)Top40NonTop4041%783Mt59%1,127MtTop40Copperproductionin2012asa%ofglobaltotal(Mt)Top40NonTop4046%9Mt54%11MtTop40CombinedMetandThemalcoalproductionin2011asa%ofglobaltotal(seaborne)(Mt)Top40seaborneNonTop40seaborne27%325Mt73%873MtTop40Goldproductionin2012asa%ofglobaltotal(Moz)Top40NonTop4035%35Moz65%65MozSource:PwCanalysisCommoditypricesWiththeexceptionofgoldallmajorcommoditiestradedsignificantlybelow2011averageprices.
Wenotethatstructuralchangestopricingmechanismsinironorehasledtomoreactivespotpriceswhichisleadingtoincreasedshorttermvolatility.
IronoreGoldThermalCoalCopper$/dmt$/oz$/tonne$/tonne2011average1681,5681218,8282012average1281,670967,9622012close1291,685937,966Q12013close1401,593927,646Source:PwCanalysisandtheWorldBank22Ironore:theWorldBank–Ironorefines,spotprice,CFRChina62%Fe–ThomsonReutersDatastream,WorldBankGold:theWorldBank–Gold(UK),99.
5%fine,Londonafterfixing,averageofdailyrates–PlattsMetalsWeek;InternationalMonetaryFund,InternationalFinancialStatisticsThermalcoal:theWorkBank–Coal(Australia)Copper:theWorldBank–Copper(LME),gradeA,minimum99.
9935%purityAdjustedEBIT—downforallcommoditiesEBITadjustedforimpairmentswasdownforallcommoditiesin2012.
Despiteironorehavingthelargestreduction,itstillhadthehighestEBITandEBITmarginofallcommodities.
Inadditiontolowerprices,continuedescalationincostsfurthersqueezedthemarginsoftheTop40.
Operatingcostsgrewatafasterratethanproductionasinputcostinflationremainedindoubledigits.
Ouranalysisshowsreportedemployeenumbersgrewonly2%in2012butaverageemployeecostsgrew13%.
ROCEfellfrom14%to8%reflectingtheincreasingcostofdevelopingassetsthathavelowergradesandarehardertoreach.
Announcedlayoffsandreducedplansincapitalexpendituremaycoolinflationarycostpressures.
Still,somekeycostssuchaslabourtendnottoreducewithdemandandmanycostsarebuiltintotheassets.
TheonusthenisonoperationalefficiencyfortheTop40toimprovemargins.
Reportedheadcountsgrewbyonly2%in201213%butaverageemployeecostsincreasedMineAconfidencecrisis37Recordimpairmentsof$45billiononacquiredassetsThefourlargestwritedownsaccountformorethanhalftheimpairmentchargeandrelatetoAlcanandRiversdalebyRioTinto,Minas-RiobyAngloAmericanandEquinoxbyBarrick.
ReturningwithlowyieldbondsDebthasincreased36%,butinterestexpensehasessentiallyremainedflat.
Ignoringdifferencesincapitalisedinterest,thisreflectsminers'refinancingpreviousdebtwithlowyieldbonds.
Source:PwCanalysisAdjustedEBITbycommodity($billion)AluminiumNickelPotashGoldIronOreCoalCopper(10)01020304050607020122011-20%-10%0%10%20%30%40%50%60%70%AdjustedEBITmarginbycommodity(%)AluminiumNickelPotashGoldIronOreCoalCopper20122011Source:PwCanalysisIndia'sroleasacoalimporterIndia'sshareofinternationallyimportedcoalhasalmostdoubledfrom6%in2006to11%in2012(121milliontonnes)andimportsareforecasttogrowfurthertoreach200milliontonnesby2017.
Internationallytradedcoalisonaveragepriced15%to50%abovetheIndiandomesticcoalprice.
Therefore,greaterimportreliancewillincreasethecostandvolatilityofpricescurrentlypaidinIndia.
With13%ofglobalreserves,theIndiangovernmenthasannouncedplanstoreduceimportsbystimulatingdomesticproduction;howevertheyarecurrentlynotmeetingtheirambitioustarget.
Ofthe200assetsawardedtocaptiveconsumerssince1993only30arecurrentlyinproduction.
GovernmentbackedCoalIndiareportedthat56ofits117announcedcoalminingprojectsaredelayed,largelyduetoissuesinpermittingandlandacquisitions.
UntilthebottlenecksthatpreventthedevelopmentoflocalproductionaresuccessfullyaddresseditislikelythatIndia'simportsofcoalwillgrow,makingitamoreprominentdestinationofseabornecoalsalesoftheTop40.
38PwCCashflowstatementNetoperatingcashflowsplunge23%The22%decreaseinadjustedEBIDTAtranslatedintoan18%decreaseincashgeneratedfromoperations.
Astaxpaymentstypicallylagaccountingprofitsthe49%declineinnetprofitdidnotimpactincometaxespaidin2012whichremainedat$31billion.
Weanticipatethatnextyearthecashoutflowforincometaxwilldeclineinlinewiththe48%decreaseintheincometaxexpensein2012.
HoweverwedonotexpectthetotaltaxcontributionmadebytheTop40todeclineasrapidlyduetoothertaxpaymentssuchasroyaltiesandemployeerelatedtaxesbeinglesssensitivetonetfinancialperformance.
Withnetoperatingcashgenerationfallingby23%thereisalreadyincreasedpressureoncompaniestomanagetheirspendingandexplaintoshareholderswheretheircashisbeingspent.
Investingcashflowswereup,butaretheyonbudgetLastyeartheTop40forecast$140billionofinvestmentin2012.
WithPP&EandExplorationspendtotalling$138billionatfirstblushtheindustryhasdeliveredonbudget.
However,withcostsmountingintheperiodandanumberofkeyprojectsbeingdelayeditappearslessprogresswasmadethananticipated.
MaybetheTop40haveactuallygoneoverbudgetFinancingcashflowwasup,thankstodebtraisingDepressedsharepricesmeantshareissueswereoffthetablewithonly$5billionraisedthroughequity,down69%.
Minerswantingfinanceraiseddebt,up59%,with$108billionofdebtissuedintheyear.
Despiteminersbeingsqueezedbylowercommoditypricesandcostpressures,dividendswere$38billion,up9%on2011.
MineAconfidencecrisis39$billion20122011Change%CashflowrelatingtooperatingactivitiesCashgeneratedfromoperations178216(18%)Incometaxespaid(31)(31)0%Other(10)(8)25%Netoperatingcashflow137177(23%)CashflowrelatedtoinvestingactivitiesPurchaseofproperty,plantandequipment(126)(100)26%Purchaseofinvestments(37)(38)(3%)Explorationexpenditure(12)(10)20%Other69(33%)Netinvestingcashflow(169)(139)22%CashflowrelatedtofinancingactivityDividendspaid(38)(35)9%Sharesbuyback(5)(30)(83%)Increaseinborrowings1086859%Repaymentofborrowings(45)(41)10%Sharesissuance516(69%)Other(4)(3)33%Netfinancingcashflow21(25)(184%)Netmovementofcashandcashequivalents(11)13(185%)Cashandcashequivalentsatbeginningoftheyear11610313%Effectofforeigncurrencyexchangerateoncashandcashequivalents(1)-100%Cashandcashequivalentsatendoftheyear104116(10%)Operatingcashinflowwasdown$40billionandinvestingcashflowwasup$30billion.
Overall,cashbalancesweremaintainedabove$100billionthroughissuanceofcheapdebt.
Balancesheet40PwCThebalancesheetoftheTop40continuedtogrowduring2012withnetassetsup$42billionandPP&Eup$102billiondespiterecordimpairmentcharges.
$billion20122011Change%CurrentassetsCash104116(10%)Inventories887616%Accountsreceivable78745%Other402938%Totalcurrentassets3102955%Non-currentassetsInvestmentinassociatesandjointventures4854(11%)Property,plantandequipment70159917%Goodwillandotherintagibles85832%Otherinvestmentsandloansgranted16160%Other856531%Totalnon-currentassts93581714%Totalassets1,2451,11212%CurrentliabilitiesAccountspayable1028816%Borrowings543554%Other4143(5%)Totalcurrentliabilities19716619%Non-currentliabilitiesBorrowings21616432%Other1501426%Totalnon-currentliabilities36630620%Totalequity6826407%Totalequity&liabilities1,2451,11212%KeyratiosGearing%24%13%Currentratio1.
61.
8Quickratio(times)1.
11.
3Netborrowings($billion)(166)(83)Creditordays(days)6868Capitalexpenditureforcopper,coal,ironoreandgoldaccountedfor79%oftheTop40spend,whichisunsurprisingconsideringthesecommoditiesmadeup76%ofrevenue.
Thebiggestincreaseinexpenditurebycommoditywasironore,up48%.
Despitelowerpricesduringtheyear,ironorestillhasthehighestmarginofallthecommodities.
Agameofde-riskanddivest…In2012theTop40soughttochangetheirfocusandbegande-riskingtheirportfolio.
Thisledto$1.
5billionofdivestmentsin2012andassetsheldforsaleincreasingeight-foldto$8billion.
Whilegearingup…Duringtheyeargearingincreasedasnetborrowingsdoubledto$166billion.
BHPBilliton,RioTinto,ValeandAngloAmericanmadeup67%ofthetotalincreaseandatyear-endheld50%oftotallong-termdebt.
Thesecompanieswereabletoraiseatotalof$61billionatanaveragecouponrateof3%andaveragematurityof12years.
Andmanagingworkingcapital…Overallworkingcapitaldecreased$16billioncomparedto2011,resultinginlowercurrentandquickratiosyear-on-year.
Asignificantdriverofthiswasa$20billionincreaseinshort-termborrowings,relatedprimarilytoGlencoreborrowingtoacquireViterra,anda$12billiondecreaseincash.
Eventhoughtradecreditorsincreased$14billionto$102billion,theTop40wereabletomaintaincreditordaysat68.
ThegrowingrelevanceofassetretirementobligationsInmanyways,accountingforassetretirementobligations(AROs)isablackart.
Numerousassumptions,estimates,andcalculationsareperformed,butcompaniesdon'tclearlyreporthowthebalanceiscalculated.
WhyBecausewithdecadesofminelifeaheadandlargerlineitemsonthebalancesheet,investorsarenotexcited.
Butwithemergingminingcountries,suchasPeruandIndonesia,introducingmorestringentclosureregulations,costinflation,andlowerdiscountratesdrivinghighernetdiscountedprovisions,maybeinvestorsshouldbetakingacloserlookTheTop40'sAROliabilityhasmorethandoubledoverthelastfouryears—sittingat$31billionattheendof2012.
Overthesameperiod,totalassetsonlyincreasedby56%.
Disclosuresvarywidelyanddonotprovidemuchinsightintothefullextentofpotentialexposures.
Asaresult,itisdifficulttodeterminewhatisanaccountingestimateandwhatwillbepaidincash.
Year-to-yearchangesincriticalassumptions,suchasthediscountrate,canhaveahugeimpactonreportedliabilitybalances.
AROshaveincreasedrapidlyandarebecomingalargerpartoftheindustry'sbalancesheet.
So,willdisclosurescatchupwiththeincreasingbalancesMineAconfidencecrisis41Capitalexpenditurebycommodity($billion)05101520253035OtherGoldIronOreCoalCopper20122011Source:PwCanalysisTop40reportedARO($billion)1015202530352012201120102009Source:PwCanalysisTransparencyincostreportingIn2013PwCsurveyed27mininganalystsacrossfiveterritories—amongstthosesurveyed,costreportingandproductioninformationwasconsideredoneofthekeyareaswhereminingcompaniescouldimprovetheirreporting.
Cashcostsareutilisedbymanybutinvestorshavewidelycommentedonfundamentalflawswithsuchmetrics.
Forexample:inconsistencybetweencompanies'calculationsleadstoconfusion,andexclusionofsunkcostsincurredtodevelopoperationspreventsthefullpicturefrombeingunderstood.
Companiesinthegoldsectorhavebeguntoacknowledgetheseshort-comingsandworkingtogetherwiththeWorldGoldCouncil,havedevelopedanalternativemetrictoevaluatetheirperformance—the"all-insustainingcost"metric.
Whilethisgoesalongwaytobridgetheshort-comingsofthe"cashcost"metricbyincorporatingmanyofthesepreviouslyignoredcosts,doesitreallyrepresentthetrue"all-in"costofproductionAnalysingthenewmetric,wenotedsignificantincreasesinreportedcostsperunit,averaging56%forthosethatreportedtheall-insustainingcostmetric,andashighasa70%increaseinoneinstance,fromthepreviouscashcostmetric.
Thisclearlyindicatesthatconcernsoverthecompletenessofcostmetricswerewellfounded,butdotheynowcaptureallthecostsofproduction,includingsunkcostsInanindustrysuchasminingwheremultipleproductsareproducedfromonesource,significantmanagementjudgmentisrequiredtoallocatethecostsacrosstheproductbaseinordertodeterminethecostperunit.
Withalackofinformationfromthereportingentitiesastohowtheseallocationsaremadeandhowthereportedfiguresreconciletotheprimaryfinancialstatements,transparencyislost.
Whileacknowledgingthatthefinaldefinitionhasnotyetbeenreleased,wealsonotethatpracticalapplicationofthismetrichasalreadybeguntodrivedivergentapplication.
Thishasledsomeobserverstobelievethismetricdoesnotgofarenoughtoaddresstheirinitialconcerns,allowingtheindustrytohidethefactthatitiscostingfarmoretoproducethantheyarewillingtoadmitto.
Asanexample,wenotethatoneanalystalreadyincludesprojectcapital,notjustsustainingcapital,inhisanalysis.
Thegoldsectorhastakenanimportantfirststepinreconcilingtheneedsofinvestorsandstakeholders,whichotherindustrygroupsshouldconsider.
Withtheintroductionofsomuchmoremanagementjudgmentinthecalculation,however,hasthiscomeattheexpenseoftransparencythatwillresultinthelossofitsintendedobjectiveInourviewcostreportingrequiresincreasedconsistencyandtransparencyacrosstheindustry.
Itneedstohighlightoperatingcosts,sunkcosts,futurecapital,sustainingcostandalsoreconciletothefinancialstatements.
Werecognisecostreportingisgoingthroughaperiodoftransition,butthisisanareathatneedstobefurtherpursued.
84%ofanalystssurveyedsaidtheywouldgaincomfortfromknowingthatnon-GAAPmeasuresadheredtosomebasic'groundrules'.
42PwC"Thebiggestweaknessformeistheuseofcashcostsinsteadofallincosts.
Asaninvestoryouwanttoknowwhatitcostsintotalperunitproduced.
"—Goldindustryanalyst"Thereneedstobemoreclarityaroundthetruecashcosts,howdotheybreakdownWhatisoperating,stripping,sustainingandcapex.
"—Goldindustryanalyst4307ReservesandproductionReservesreporting—comparingappleswithpearsReservesformthestartingpointforvaluingminingcompaniesandtheTop40have$16trillionofvalueintheground.
3However,withnoglobalstandardgoverninghowreservesestimatesarereported,wehaveobservedconsiderablevariationinbothwhat,andhowfrequently,companiespublishreserveinformation.
ThemostcommonlyusedreservecodesintheTop40areSECIG7(USA),SAMREC(SouthAfrica),JORC(Australia)andCIM(Canada).
Whichstandardsareusedisadirectresultofwherecompaniesarelistedandtherequirementsoftherespectivestockexchange.
Withoutstandardisation,benchmarkingreserveshasitschallenges.
Willreservereportingeverfollowfinancialreportingandintroduceatrulyinternationalstandard3Illustrativereservevalueiscalculatedbasedon2012reservedatatimesyearendcommodityprice44PwCReservereplacementmatched2012'srecordproduction,asoverallreservesweremaintainedGold–decreasesoffsetbyuseofahigherreservespriceGoldminersspent$2.
1billiononexplorationin2012andadded22millionouncestoreserves.
Howmuchofthisincreaserelatestonewdiscoveriesisunclear.
Inthepastthreeyearsgoldminershaveincreasedtheirreservesgoldpriceassumptionbyapproximately25%(source:PwC's2013GoldPriceSurvey)—meaninglowergradematerialbecomeseconomicallyfeasibletomineandisincludedinreserves.
Goingforwardwedonotexpectgoldreservestoincreaseinthenearterm—partlyduetotherecentfallseeningoldpricebutprimarilyduetoanobservedglobaldecreaseinexplorationdrillingactivityforgold.
Ironore–increasefrombrownfieldexplorationUp5%from2011,95%oftheincreaserelatestoadditionsreportedbyAngloAmerican(Minas-Rio)andVale(Germano).
Despitetheseprojectsaddingtoreserves,recordproductionofironoremeantreservelifereducedfrom36to35years.
Coal–differencesdrivenbyChineseminersMetallurgicalcoalreservesincreased12%,primarilyfromtheeffectsofChinaCoalconsolidatingwithintheChinesecoalmarket.
Thermalcoalwasdown4%primarilyduetoYanzhouCoal,usingofadifferentreservestandardcomparedto2011.
Nickel–thebiggestriserBHPBilliton,FirstQuantum,Vale,XstrataandNorilskNickelrepresented35%oftheTop40reserves,withbrownfieldexplorationatNorilskNickelcontributingthebulkoftheincrease.
MineAconfidencecrisis45Source:PwCanalysis2012ContinuityofreservesGold(millionounces)Platinum(millionounces)Ironore(milliontonnes)Copper(milliontonnes)Thermalcoal(milliontonnes)Metallurgicalcoal(milliontonnes)Zinc(milliontonnes)Nickel(milliontonnes)Bauxite(milliontonnes)Potash(milliontonnes)No.
ofcompanies21492010898252011reserves80727126,43134159,7206,28544162,0431,925(Depletion)(35)(10)(783)(11)(1,223)(118)(2)(1)(45)(24)Othernetaddition(reduction)2282,05721(1,202)863(2)7501902012reserves79427027,70635157,2957,03040222,0482,091Change%(2%)(1%)5%3%(4%)12%(9%)35%0%9%Remaininglife(years)23283531475917154687ProductionGiventhehigheraveragepricesin2012,goldminerswerenotshortofincentivestoincreaseproduction.
However,thetrendofdeclininggradesresultedinan11%decrease.
Platinumproductionwasdown12%withlabourstrikesinSouthAfricaaffectingproductionfromAngloAmericanandImpalaPlatinum.
Thecontinuedgrowthbytheworld'smainironandsteelconsumer,Chinacontributedtotheincreaseindemandforironore.
ProductionfrommanyoftheTop40'sironoreproducers,includingAngloAmerican,BHPBilliton,FortescueMetalsGroupandRioTinto,increasedasinvestmentsinexpandingkeyassetsstartedtocomeonline.
CopperproductioniskeepingupwithprioryearsandweexpectproductiontostrengtheninthefuturewhenprojectssuchasMongolia'sOyuTolgoi(RioTinto)comeonstream.
PotashproductionwasnegativelyimpactedbythedecreaseindemandfromBrazil,ChinaandIndiaduringtheyear.
DemandinIndiadeclinedsignificantlyduetochangesinfertilisersubsidiesandaweakerRupee,whichledtohigherretailpricesandreduceddemand.
Usingonetonneofcopperasanequivalentunitbasis,productionacrossallcommoditieswasup6%over2011.
46PwCSource:PwCanalysisSource:PwCanalysisCommodity(measure)Production(measure)Changefromprioryear(%)Gold(oz)35(11%)Platinum(oz)10(12%)Ironore(tonnes)7837%Copper(tonnes)112%Thermalcoal(tonnes)1,22312%Metallurgicalcoal(tonnes)1184%Zinc(tonnes)2(20%)Nickel(tonnes)117%Bauxite(tonnes)4510%Potash(tonnes)24(12%)Totalproductionusingcopperequivalenttonnes—2012averageprices53(0.
8)1.
11.
90.
6(0.
1)5650515253545556570.
32011GoldIronoreCopperThermalCoalNickelOther2012MineAconfidencecrisis4708Resourcenationalism'scontinuedimpactGovernmentsarenowlookingatdifferentstrategiestoextractagreatershareofthevaluefromminingoperations.
Thesestrategiesrangefromincreasingtaxesandroyaltiestorestrictingforeignownership.
Thistrendisalsonotuniquetofrontierminingcountriesastraditionally"miningfriendly"countriessuchasAustraliaandCanadahavealsoincreasedtaxesandroyalties.
Theissueisparticularlydistressingtoemergingmarketssinceitcouldincreasethecostofmineralswhichcouldinturnlimittheirabilitytourbaniseandreduceeconomicgrowthinthejurisdictionsthataredrivingdemandforminerals.
SohowaregovernmentslookingtogetalargerpieceoftheactionGovernmentsarechanginghowminingistaxed…TheannouncementofAustralia'sResourceSuperTax,wasahugeblowtominingcompanies.
TheglobalrippleeffecthasbeentoraiseconcernthatifAustralia,traditionallyaminingfriendlycountry,coulddothis,anyonecould.
StiffnewminingtaxesintheCanadianprovinceofQuebecaddtotheseworries.
Zambia,Ghana,India,BrazilandtheUSA,tonameafew,haveannouncedorimplementedplanstoincreaseminingtaxesandroyalties.
Manyofthesechangesareleviedongrossrevenuesorgrossprofitsratherthannetprofits.
Thisisparticularlybadforminersasnetprofitshavefallen,butrevenuesstayedflat.
Ultimatelythismayreduceinvestmentinthosejurisdictionssinceroyaltiesonrevenueswillnegativelyimpacttheproductioncostandthepre-taxrateofreturn.
…howproductsareprocessed…Requiringin-countryprocessingorbeneficiationpriortoexportisanotheravailablelever.
SouthAfrica,Indonesia,Brazil,theDemocraticRepublicofCongo,andVietnamhaveannouncedplanstorequireaformofin-countrybeneficiation.
Resourcenationalismremainsasoneoftheindustry'sbiggestrisks.
Relativelyhighcommodityprices,particularlyforwellfollowedandvisiblecommoditieslikegold,havepromptedmanygovernmentstocontinuetoseekagreaterpercentageofminingprofits.
Encouragingin-countryprocessingcanalsobeachievedindirectlybyimposingexportrestrictionsandincreasingexportleviesonunrefinedores.
Indiaraisedironoreexportdutiesfrom20to30%andIndonesiaannounceda20%taxonexportsof65categoriesofunprocessedores.
In-countryprocessingpromisestocaptureagreaterpartofthevaluechain—creatingjobs,developingskills,andimprovinglocaltechnology.
Buttheserequirementscanbeunrealisticandcanthrottleupstreamminingprojects.
Localcompaniescanstruggletofinanceexpensivebeneficiationplants.
Manyprocessingtechnologiesareenergyintensiveandlocalpowersupplycanbelackingorprohibitivelyexpensive.
…andhowminesareownedandlicenced.
Localownershiprequirementsorcapsonforeignownershiparebecomingincreasinglycommon.
Insomecasesgovernmentownedcompanieswillgetastake,inothersitwillbeprivatelocalcompanies.
Tojustifytherisks,miningprojectsneedtohaveanappropriatelevelofreward.
Changingownershiplevelsafterriskshavebeentakenimpactsthereward.
Inmanycasesminerstakealltheriskandonlyreceivepartofthereturn.
Notableexamplesinclude:Zimbabwe'sindigenisationpolicyrequiring51%ofanyminingprojectbeheldbyindigenousZimbabweans.
Indonesia'sannouncedplansforallminestobe20%locallyownedafterfiveyearsofproductionand51%aftertenyears.
Mongolia's49%caponforeignownershipofstrategicmines.
Russia'srestrictionsonforeigninvestorsseekingtoacquirecontrolofRussianminingcompaniesorassetsthataredeemedstrategic.
48PwCComplexlicenseobligationsareanotherissuefaced,withunclearterms,monitoringandcomplianceisnotalwaysstraightforwardandcanbeopentointerpretation.
Intheworstcasesgovernmentscanuselicensingasatooltochangethetermsofwhatwasagreedorasabargainingchip.
SoareshorttermpressuresaffectinglongtermsuccessBeingtoughwithminingcompaniesmightlookgoodtostakeholdersathomeintheshortrun.
Butgovernmentsshouldconsiderabroaderviewofthereturnfromnaturalresourcedevelopment.
Miningactivitiesprovidejobs,bothdirectandindirectpayrolltaxes,infrastructureandpromoteoveralleconomicdevelopment.
Continuedresourcenationalismfromgovernmentsmakesthecountrieslessattractiveformininginvestment.
Additionally,thelegislativelaginintroducingnewlawsmeansthatnationalismiscomingatatimewhentheindustryisstruggling.
Governmentsshouldconsidertheriskoflosingthesemininginvestmentsandtheimpactontheireconomyandinfrastructuredevelopment.
Theslowdowninglobalcommoditypriceshasledtorecordwrite-downsofassetsandforcedsomeminingcompaniestoshelveexpansionplans.
Withtheincreasedfocusoncapitaldiscipline,miningcompanieswillbepayingmoreattentiontowheretheywillinvest.
Giventhelongtermnatureofminingprojects,miningcompaniesmustconsiderthedangerthatjurisdictionsthatarelowrisktodaymightenactvariousformsofresourcenationalismtomorrow.
Themainissueisthatresourcenationalismisnevermorethananelectionaway.
Toattractmininginvestment,governmentsshouldprovidelongtermassurancetocompanies,forexamplethroughrobuststabilityclausesinminingagreements.
Bybeingmoreconsistent,countrieswouldbemoreattractiveforforeigninvestment.
AresomegovernmentssofteningtheirstanceTherehasbeenaslightshiftinsomecountrieswheretheyareintroducingindustryspecificincentives.
Thesegovernmentshaveatleastsomewhatrealisedthataggressiveresourcenationalismcanhurttherevenuestheyaretryingtogenerateandcitizenstheyaretryingtohelp.
Recentweakercommoditypricesandlargequantitiesofadditionalsupplycomingon-streamforcommoditiessuchasironorehavebeenablessingindisguisewithcountrieslikeBrazilpotentiallynotbeingastoughastheycouldbewithnewmininglaws.
Butasminersbecomeincreasinglyglobal,governmentsaregoingtoneedtorealisethattheonlyprizeforbeingthetoughestcountryonminingmaybenominingindustryatall.
MineAconfidencecrisis4909GlossaryAdjustedEBITDAEBITDAadjustedtoexcludeimpairmentcharges.
AmeasurethatisclosetotheunderlyingcashearningsofacompanybeforeservicingitscapitalbaseAdjustedEBITDAmarginAdjustedEBITDA/RevenueCapitalemployedPropertyplantandequipmentpluscurrentassetslesscurrentliabilitiesCreditordaysAccountspayable/Operatingexpenses*365CurrentratioCurrentassets/CurrentliabilitiesDmtDrymetrictonneEBITEarningsbeforeinterestandtaxEBITDAEarningsbeforeinterest,tax,depreciationandamortisationEBITDAmarginEBITDA/RevenueFreecashflowOperatingcashflowslessinvestmentinproperty,plantandequipmentGDPGrossdomesticproductGearingratioNetborrowings/EquityIFRSInternationalFinancingReportingStandardsIMFInternationalMonetaryFundMarketcapitalisationThemarketvalueoftheequityofacompany,calculatedasthesharepricemultipliedbythenumberofsharesoutstandingNetassetsTotalassetslesstotalliabilitiesNetborrowingsBorrowingslesscashNetprofitmarginNetprofit/RevenueOzTroyouncePrice-to-earningsratio(PEratio)Marketvaluepershare/earningspershareQuickratio(Currentassetslessinventory)/CurrentliabilitiesReturnoncapitalemployed(ROCE)Netprofit/Property,plantandequipmentpluscurrentassetslesscurrentliabilitiesReturnonequity(ROE)Netprofit/EquityTop10BHPBilliton,RioTinto,Vale,ChinaShenhua,Xstrata,Glencore,AngloAmerican,CoalIndia,PotashCorpandBarrickGold.
Top4040oftheworld'slargestminingcompaniesbymarketcapitalisationTop5DiversifiedsBHPBilliton,RioTinto,Vale,XstrataandAngloAmericanWorkingcapitalCurrentassetslesscurrentliabilities50PwCNameCountry(**)YearendAngloAmericanplcUK31-DecAngloGoldAshantiLimitedSouthAfrica31-DecAntofagastaplcUK31-DecBarrickGoldCorporationCanada31-DecBHPBillitonLimited/BHPBillitonplcAustralia/UK30-JunChinaCoalEnergyCompanyLimitedChina31-DecChinaShenhuaEnergyCompanyLimitedChina31-DecCoalIndiaLimitedIndia31-MarEldoradoGoldCorporation*Canada31-DecFirstQuantumMineralsLimitedCanada31-DecFortescueMetalsGroupLimitedAustralia30-JunFreeport-McMoRanCopper&GoldInc.
UnitedStates31-DecGlencoreInternationalplcUK31-DecGoldcorpIncCanada31-DecGoldFieldsLimitedSouthAfrica31-DecGrupoMéxicoS.
A.
B.
deCVMexico31-DecImpalaPlatinumHoldingsLimitedSouthAfrica30-JunIndustriasPenolesS.
A.
B.
DECVMexico31-DecInnerMongoliaBaotouSteelRare-EarthHi-TechCo.
China31-DecInnerMongoliaYitaiCoalCo.
Limited*China31-DecJiangxiCopperCompanyLimitedChina31-DecKGHMPolskaMiedzSpolkaAkcyjna*Poland31-DecKinrossGoldCorporationCanada31-DecMineraFrisco,S.
A.
B.
deCV*Mexico31-DecNewcrestMiningLimitedAustralia30-JunNewmontMiningCorporationUnitedStates31-DecNMDCLimitedIndia31-MarMMCNorilskNickelRussia31-DecPolyusGoldInternationalLimitedUK31-DecPotashCorp.
ofSaskatchewan,Inc.
Canada31-DecRioTintoplc/RioTintoLimitedUK/Australia31-DecSilverWheatonCorporationCanada31-DecTeckResourcesLimitedCanada31-DecTheMosaicCompanyUnitedStates31-MayUralkaliJSCRussia31-DecValeSABrazil31-DecXstrataplcUK31-DecYamanaGoldIncCanada31-DecYanzhouCoalMiningCompanyLimitedChina31-DecZijinMiningGroupCompanyLimitedChina31-Dec10Top40companiesanalysed(*)Referstocompanieswhichwerenotincludedinthe2011analysis(**)ReferstothecountryofprimarylistingwheresharesarepubliclytradedMineAconfidencecrisis5111ExplanatorynotesforaggregatedfinancialinformationWehaveanalysed40ofthelargestlistedminingcompaniesbymarketcapitalisation(theTop40).
Ouranalysisincludesmajorcompaniesinallpartsoftheworldwhoseprimarybusinessisassessedtobemining.
Theresultsaggregatedinthisreporthavebeensourcedfromthelatestpubliclyavailableinformation,primarilyannualreportsandfinancialreportsavailabletoshareholders.
Where2012informationwasunavailableatthetimeofdatacollation,thesecompanieshavebeenexcluded.
Companieshavedifferentyear-endsandreportunderdifferentaccountingregimes,includingInternationalFinancialReportingStandards(IFRS),USGenerallyAcceptedAccountingPractice(USGAAP),andothers.
Informationhasbeenaggregatedforthefinancialyearsofindividualcompaniesandnoadjustmentshavebeenmadetotakeintoaccountdifferentreportingrequirementsandyear-ends.
Assuch,thefinancialinformationshownfor2012coversreportingperiodsfrom1April2011to31December2012,witheachcompany'sresultsincludedforthe12-monthfinancialreportingperiodthatfallsintothistimeframe.
AllfiguresinthispublicationarereportedinUSdollars,exceptwhenspecificallystated.
TheresultsofcompaniesthatreportincurrenciesotherthantheUSdollarhavebeentranslatedattheclosingUSdollarexchangeratefortherespectiveyear.
Somediversifiedcompaniesundertakepartoftheiractivitiesoutsidetheminingindustry,suchasthepetroleumbusinessofBHPBillitonandpartsoftheRioTintoaluminiumbusiness.
Noattempthasbeenmadetoexcludesuchnon-miningactivitiesfromtheaggregatedfinancialinformation,exceptwherenoted.
EntitiesthatarecontrolledbyothersintheTop40andconsolidatedintotheirresultshavebeenexcluded,evenwhenminoritystakesarelisted.
52PwCMineAconfidencecrisis5312OtherPwCMiningPublicationsProductivity,notausterityProductivityscorecard–miningfocusTheminingindustryisgenerating56%lessoutputperhourofworkemployedcomparedto2002Supportserviceshaveballoonedsince2002,accountingfor13%ofhoursaccruedtotheminingindustry,upfrom3%in2002Theminingindustryhascommittedcapitaltoaddover250ofnewironoreandcoaloutputbeyond2012www.
pwc.
com.
aumilliontonnesApril2013Ournewproductivityscorecardfortheminingsector:Productivity,notAusterityThefundamentalbusinessdynamicoftheminingindustryischanging.
Nolongercanminersfocusonexpansionatanyprice—thesocalled"volumefrenzy"—andsimplyrelyonhighcommoditypricestomaintainprofitabilityanddelivershareholderreturns.
Rather,fluctuatingcommoditypricescombinedwithaballooningcostbasehavereducedprofitsandchallengedassetvalues.
Thishaspromptedanurgentneedforbettercapitalinvestmentdisciplinesaswellasacloserfocusonproductivity.
RecentseniorleadershipchangesatanumberofmajorminingcompaniesareevidenceofthisstrategicshiftasBoardsgearuptorespondtonewpriorities.
ContactJockO'Callaghan,Melbourne+61(3)86036137jock.
ocallaghan@au.
pwc.
comwww.
pwc.
com/ca/miningdealsDown,butnotoutGlobalMiningDeals2012Review2013OutlookMarch2013March2013GlobalMiningDeals:Down,butnotoutItwasfarfromthemostactiveyearforminingmergersandacquisitions(M&A),but2012haditsshareofexcitingtransactionsandtrends.
Thoseparticipatinginthedealmarketwillremaincautionsnottooverpayforassetsormakeinvestmentsthatappeartooriskytoshareholders.
While2012wasalreadyadisciplinedyearforM&Aactivity,minerswillbeequallyascautionsin2013.
ContactJohnGravelle,Toronto+14168698727john.
gravelle@ca.
pwc.
comMiningfortalentAstudyofwomenonboardsintheminingindustrybyWIM(UK)andPwCwww.
pwc.
co.
ukWomeninMining(UK)January2013PhotographcourtesyofAngloAmericanJanuary2013Miningfortalent:AstudyofwomenonboardsintheminingindustryWehavepublishedareportinconjunctionwithWomeninMiningontrendsofwomenonboardsandseniorexecutivepositionsintheglobalminingindustry.
ContactJasonBurkitt,London+442072132515jason.
e.
burkitt@uk.
pwc.
comOurcommitmenttotheindustrygoesbeyondourservices.
Asindustryleaders,wearegloballyrecognizedforourbroadknowledgeoftheminingindustryandthelawsthatgovernit.
Setoutonthispageareexamplesofrecentminingthoughtleadershippublications.
54PwCDecember20122013GlobalGoldPriceReport:ResponsiblyoptimisticAnnually,PwCsurveysgoldminingcompaniesfromaroundtheworld.
Thisyearwecontactedexecutivesfromacross-sectionofsenior,mid-tierandjuniorgoldminingcompaniesrepresenting35millionofouncesofgoldminedin2012and35millionofouncesexpectedtobeminedin2013.
ContactJohnGravelle,Toronto+14168698727john.
gravelle@ca.
pwc.
comwww.
pwc.
com\miningFinancialreportingintheminingindustryInternationalFinancialReportingStandards6theditionNovember2012TheFinancialreportingintheminingindustry(FRIM)2012editionlooksathowIFRSisappliedinpracticebyminingcompanies,identifyinguniqueissuesfortheindustry.
Inthiseditionweincludeanumberofexamplestodemonstratehowcompaniesarerespondingtothevariousaccountingchallengesalongthevaluechain.
ContactJasonBurkitt,London+442072132515jason.
e.
burkitt@uk.
pwc.
comGlobalminingindustryupdateJune2012Corporateincometaxes,miningroyaltiesandotherminingtaxesAsummaryofratesandrulesinselectedcountrieswww.
pwc.
com/gx/miningJune2012Corporateincometaxes,miningroyaltiesandotherminingtaxes:AsummaryofratesandrulesinselectedcountriesThissummaryofincometaxes,miningtaxesandminingroyaltiesshouldallowthereadertoroughlycomparethevariousgovernmentalcostsofinvestinginaminingoperationinaparticularcountry.
ContactStephenF.
Ralbovsky,Phoenix+1(602)3648193steve.
ralbovsky@us.
pwc.
comMineAconfidencecrisis55November2012JuniorMine2012:MustsurvivebeforeyoucanthriveAnnuallyPwCanalysestoTop100miningcompanieslistedontheTSXVentureExchange,basedonmarketcapitalisationat30June2012.
ContactJohnGravelle,Toronto+14168698727john.
gravelle@ca.
pwc.
comwww.
pwc.
co.
zawww.
pwc.
co.
za/miningSAMineHighlightingtrendsintheSouthAfricanminingindustry4theditionNovember2012November2012SAMine:HighlightingtrendsintheSouthAfricanminingindustryOurfindingsarebasedonthefinancialresultsofminingcompanieswithaprimarylistingontheJohannesburgStockExchange(JSE),aswellasthosewithasecondarylistingwhosemainoperationsareinAfrica.
WeonlyincludedcompanieswithamarketcapitalisationofmorethanR200millionattheendofJune2012,andweexcludedcompanieswithsuspendedlistings.
ContactHeinBoegman,Johannesburg+27(11)7974335hein.
boegman@za.
pwc.
compwc.
com.
au/industry/energy-utilities-miningAussieMine2012StayingthecourseAussieMineNovember2012November2012AussieMine—StayingthecoursePwC'sannualreviewoftrendsinthemid-tierAustralianminingindustry.
Thisreportfocusesontheannualresultsofthelargest50miningcompanieslistedontheAustralianStockExchangewithamarketcapitalisationoflessthan$5billionat30June2012(themid-tier50).
ContactTimGoldsmith,Melbourne+61386032016tim.
goldsmith@au.
pwc.
comRegionalminepublicationsBesidestheGlobalMinepublication,PwCpreparesanumberofregionalminepublicationswhichfocusonanalysisoftrendsintheminingindustryinparticularregions.
56PwCMiningExcellence@PwCTheminingsectorisfacingarangeofcompetingtrendsandarapidlychangingglobalbusinessenvironment.
Againstthebackdropofcommoditypricefluctuations,minersneedtobalanceshareholderdividendexpectationswhilstmaintaininganinvestmentpipelineinthemidstofincreasingoperatingcosts.
Safety,environmentalandcommunityprinciplesalsocontinuetoshapetheindustryasminerslooktoachievetheirlicencetooperateanddeliveroncorporateresponsibilities.
MiningExcellence@PwChasbeendesignedtomobiliseandleveragePwC'scollectiveglobalknowledgeandconnectionstodeliveranexceptionalandtailoredclientexperience,helpingourclientsnavigatethecomplexindustrylandscapeandmeettheirgrowthaspirations.
Ourteamofspecialistsisexclusivelyfocusedonthesectorandbringsanindustry-basedapproachtodelivervalueforyouandyourorganisation.
leadingedgeknowledgeandglobalthoughtleadershipWithsignificantinvestmentintheresearchbehindourminingpublicationsandacomprehensiveindustrylearninganddevelopmentprogram,ourprofessionalscansharebothindustryandtechnicalinsightwithourclients,suchas:Alibraryofindustrypublicationsdesignedtohelpchallenge"conventional"thinkinganddelveintotopicalindustryissues.
Thisincludes:–globalthoughtleadershippublicationsincludingMineandMiningDeals–flagshipterritorypublicationsfocusedonregionalandindustry-specificissuesconnectionstoourvastnetworkofminingexpertsandglobalclientportfolioWehavethewidestnetworkofindustryexpertswhoworkoutofstrategicmininghubsacrosstheglobetohelpbetterconnectyoutovitalminingmarkets.
Ourconnectionsprovide:seamlessclientservicedeliveredwithcollaborativecross-borderaccountmanagementmaximiseddealpotentialthroughawell-connectedglobalcommunityofminingleadersamobileworkforcetoensureeffectiveservicedeliveryineventhemostremotemininglocations.
thedeliveryofanexperiencethatmeetsourclients'definitionof'value'Withminingexpertsworkingaroundtheglobe,ourawardwinningteamsarehelpingclientsdeliveronspecificprojectsandorganisationalgrowthaspirations.
Weofferadvisory,taxandauditservicestoglobalcorporationsandlocallylistedcompanies.
MiningExcellence@PwCcomplementsthiswith:asuiteofnicheminingconsultingcapabilitiesfocusedonoptimisingvalueacrossminingoperationsandeffectivelymanagingrisktohelpourclientsgrowtheirbusinessanddelivershareholdervalueacomprehensiveclientfeedbackprogramtoensurewearealwaysimprovinganddeliveringonindividualclientneeds.
HardHat:TheMiningExperienceAtthecoalfaceMiningExcellence@PwCprovidesourclients:anextensiveindustrydevelopmentprogramforourpeopleandclients.
Thisfeaturesourannuallearninganddevelopmentprograms:–HardHat:TheMiningExperience(Australia)–AmericasSchoolofMines(NorthAmerica)–LondonSchoolofMines(UnitedKingdom)–AsiaSchoolofMineswww.
pwc.
comAPwCIPOCentrepublicationhelpingminingcompaniesassesstheirchoicesFebruary2012ExecutingasuccessfullistingMarketsforminersReviewofglobaltrendsintheminingindustry—2012www.
pwc.
comMineThegrowingdisconnect"Workinginthesectorforover20years,Ihaveseenandworkedacrosstheminingsectorinbothgoodtimesandbad.
It'sfantastictoseeourclientsandPwCteamsworkingtogethertorespondtotheeverchangingbusinessdynamicsminersfacetoday.
"TimGoldsmith,PwCGlobalMiningLeaderKenSuBeijingJohnGravelleTorontoJasonBurkittLondonHeinBoegmanJohannesburgKameswaraRaoHyderabadJohnCampbellKievSachaWinzenreidJakartaSteveRalbovskyPhoenixGlobalMiningLeaderTimGoldsmithMelbourneJockO'CallaghanMelbourneRonaldoValinoRiodeJaneiroDeliveringlocalsolutionstoglobalchallengesMineAconfidencecrisis5713ContactingPwCPwCfirmshelporganisationsandindividualscreatethevaluethey'relookingfor.
We'reanetworkoffirmsin159countrieswithmorethan180,000peoplewhoarecommittedtodeliveringqualityinassurance,taxandadvisoryservices.
PwCisaleadingadvisertotheglobalminingindustry,workingwithawidevarietyofexplorers,producersandrelatedserviceproviderstoensurewemeetthechallengesoftheglobalminingindustryintothefuture.
Ourstrengthinservingtheglobalminingindustrycomesfromourskills,ourexperience,andourseamlessglobalnetworkofdedicatedprofessionalswhofocustheirtimeonunderstandingtheindustryandworkingonsolutionstominingindustryissues.
FormoreinformationonthispublicationorhowPwCcanassistyouinmanagingvalueandreporting,pleasespeaktoyourcurrentPwCcontactortelephone/e-mailtheindividualsbelowwhowillputyouincontactwiththerightperson.
GlobalMiningLeadershipTeamGlobalMiningLeaderTimGoldsmith,Melbourne+61386032016tim.
goldsmith@au.
pwc.
comIndonesiaSachaWinzenried,Jakarta+622152890968sacha.
winzenried@id.
pwc.
comAfricaHeinBoegman,Johannesburg+27117974335hein.
boegman@za.
pwc.
comAustraliaJockO'Callaghan,Melbourne+61386036137jock.
ocallaghan@au.
pwc.
comLatinAmericaRonaldoValino,RiodeJaneiro+552132326139ronaldo.
valino@br.
pwc.
comCanadaJohnGravelle,Toronto+14168698727john.
gravelle@ca.
pwc.
comRussiaandCentral&EasternEuropeJohnCampbell,Kiev+380444906777john.
c.
campbell@ua.
pwc.
comChinaKenSu,Beijing+861065337290ken.
x.
su@cn.
pwc.
comUnitedKingdomJasonBurkitt,London+442072132515jason.
e.
burkitt@uk.
pwc.
comIndiaKameswaraRao,Hyderabad+914066246688kameswara.
rao@in.
pwc.
comUnitedStatesSteveRalbovsky,Phoenix+16023648193steve.
ralbovsky@us.
pwc.
com58PwC14KeycontributorstoMine1.
FranzWentzel,Australia2.
MalvinoYudo,Indonesia3.
AramyeesBroderick,Brazil4.
JohnMatheson,China(Projectleader)5.
RebeccaChan,Canada6.
PeterAcloque,UnitedKingdom(Projectleader)7.
JanandreLamprecht,SouthAfrica8.
ChaitanyaMawji,Tanzania9.
DavidBuist,UnitedStatesofAmerica10.
PukhrajSethiya,India11.
PaulQiu,ChinaWrittenonlocationinBeijing,China1346891125107MineAconfidencecrisis592013PwC.
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com/structureforfurtherdetails.
Thiscontentisforgeneralinformationpurposesonly,andshouldnotbeusedasasubstituteforconsultationwithprofessionaladvisors.
PwChelpsorganizationsandindividualscreatethevaluethey'relookingfor.
We'reanetworkoffirmsin158countrieswithmorethan180,000peoplewhoarecommittedtodeliveringqualityinassurance,taxandadvisoryservices.
Telluswhatmatterstoyouandfindoutmorebyvisitingusatwww.
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