Posts Tagged ‘PWC’

Mining Week 25/’12: Whitehaven buyout options; Mine 2012

June 17, 2012 Comments off

Top Stories of the Week:

  • Whitehaven rejects initial offer from largest shareholder
    • Tinkler, largest shareholder of Whitehaven with over 20% of shares, is trying to arrange financing to buy the full group. An initial approach was rejected by Whitehaven as financing of the bid was not deemed solid.
    • Whitehaven became Australia’s largest listed coal group last year after taking over Ashton. Share price dropped approx. 30% over the past 2 months, making the company an attractive buyout target
    • Sources: Wall Street Journal; Financial Times; Reuters
  • PWC launches ‘Mine 2012’
    • Consultancy PWC recently published its annual study on the key industry trends in the mining industry, focusing on the 40 largest mining companies. This year’s report is titled ‘the growing disconnect’, zooming in on the paradox between the need to build new projects to increase supply and the reluctance by shareholders to have their companies commit funds to investment.

Record historical results, high commodity prices, and a bullish outlook shared by many miners continues to underline the industry’s strong fundamentals. But investors’ reluctance to emerge and support growth plans points to a growing disconnect between the market and the mining industry.

Source: PWC

Trends & Implications:

  • PWC identifies the following key trends in their report:
    1. Increased volatility is here to stay
    2. Long-term demand fundamentals remain robust …
    3. … but supply will be the industry’s real challenge going forward
    4. Structural changes to the cost base
    5. Changing fiscal regimes and resource nationalism
    6. Capital expenditure requirements
    7. Can’t bring it on fast enough
  • The report presents the numbers around investment and use of cash for the Top 40 mining companies: $98 billion was invested in capital projects in 2011 and plan for a further $140 billion for 2012. At the same time share prices have decreased across the line. PWC argues 2011 marks the start of the growing disconnect.

©2012 | Wilfred Visser |

Consultant’s 2011 Mining Reports

September 22, 2011 Comments off

Deloitte: The top 10 issues mining companies will face in the coming year:

  1. International investment fuels the sector
  2. Volatility is the new normal
  3. Engaging stakeholders takes centre stage
  4. Political agendas to the force
  5. You’ll need a long term plan
  6. The war for talent rages on
  7. Maintaining the search for that elusive pot of gold
  8. Climate change disclosure and adaptation are getting harder
  9. Inadequate infrastructure hampers growth
  10. Exploring new revenue opportunities

Source: Deloitte – Tracking the Trends 2011

Ernst & Young: The top 10 business risks of 2011-2012:

  1. Resource nationalism
  2. Skills shortage
  3. Infrastructure access
  4. Maintaining a social licence to operate
  5. Capital project execution
  6. Price and currency volatility
  7. Capital allocation
  8. Cost management
  9. Interruptions to supply
  10. Fraud and corruption

Source: Ernst & Young – Business risks facing mining
and metals 2011–2012

PWC: Game changing trends:

  • Mining companies have continued to outperform the overall market
  • Market cap is (almost) back
  • Undervalued industry? The Price to Earnings (P/E) multiple has declined in 2010
  • During 2010 we saw BHP Billiton, Vale and Rio Tinto step clear of the rest of the industry
  • Return on equity and return on capital employed lag despite record profits
  • There has been a fundamental shift in the cost base of the industry.
  • Operating cash flow returns, but investing lags

Source: PWC – Mine 2011

©2011 | Wilfred Visser |

PWC: Mine 2011 – The game has changed

June 13, 2011 Comments off

Accountant and consultancy PWC launched its annual review of the mining industry: Mine 2011. The report analyzes the financial performance of the 40 largest listed mining companies and describes the underlying trends in the industry:

“Last year we highlighted the growing optimism in the mining industry and demand fundamentals that were driving the industry back to boom times. The 2010 results have delivered on this expectation, but it is clear that the game has changed.

  • Combined net profits hit $100 billion
  • Operating cash flows up 59%, leaving more than $100 billion cash on hand
  • Emerging market miners outperform traditional players
  • Capital expenditure of $300 billion announced
  • Supply and cost management key challenges

Revenues for the world’s 40 largest miners leapt 32% to a record $435 billion, driven by surging commodity prices and a 5% increase in production output in 2010.The strong top-line result catapulted the miners’ net profits to an impressive $110 billion – a 156% increase over the previous year.”

Source: PWC, June 2011

Key takeaways:

  • PWC argues that the cost base for many commodities has shifted, resulting in a fundamental change in the supply structure that justifies the commodity price increase. This shift of the cost structure is partly caused by downstream players entering the mining market with a focus more on supply security than on cost effectiveness.
  • The report further shows that the capital expenditure in the industry is still very much lagging the increase in profits, further creating a situation of supply shortage: “In 2010 for every dollar earned in revenue only 18 cents were invested, significantly lower than the 40 cents invested per dollar of revenue in 2007 and the 2003-2009 average of 26 cents per dollar. In 2010 Investing cash flows were only 58% of operating cash flows, compared to an average of 94% for 2003-2009.”
  • New players in the global top 40 are: Agnico-Eagle Mines, Coal India, Industrias Penoles, KGHM Polska Miedz, Shandong Gold Mining, and Silver Wheaton.

More consultant’s reports? See the Business of Mining special ‘Free consulting: Mining industry reports’

©2011 | Wilfred Visser |

Free Consulting: Mining Industry Reports

December 7, 2010 3 comments

“While financing remains scarce, Asian buyers and sovereign wealth funds are increasingly closing the gap, sparking a surge in M&A activity. To expand supplies, companies are also looking at ways to access reserves from some of the world’s less hospitable regions. Amid this complexity, mining companies continue to contend with traditional issues—from securing a social licence to complying with more stringent government regulations. To respond to these industry trends, mining companies must continue to structure strategic plans that take the full measure of their global risks and opportunities into account.”

Source: Deloitte, December 1 2010


  • Deloitte released its ‘Tracking the Trends 2011’ report this week, describing what the consultancy thinks will be the top issues mining companies will be facing next year. ‘managing international investments’, ‘coping with volatility’ and ‘ensuring the social license to operate’ top the list.
  • Most consultancies publish industry research reports to position themselves as experts in the industry. A search on the industry pages of the top consultancies reveals that the consultancies known as the ‘Big Five’ are much more productive in delivering valuable ‘free consulting’ than the more specialized strategy consultants.

Overview of consultancy’s mining industry reports:

The Big Five

Specialized Consultancies

  • AT Kearney: Focuses on the buying side of raw materials business. Released report on M&A in the Mining & Steel industry in January 2010.
  • Bain: No recent mining industry reports.
  • BCG: Focuses on steelmaking rather than mining. No mining industry reports published since 2007.
  • Booz: No recent mining industry reports.
  • McKinsey: Leverages its involvement in drafting the World Economic Forum’s Scenarios to 2030. No mining industry reports published since December 2008.
  • Roland Berger: No recent mining industry reports.

©2010 | Wilfred Visser |

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