The world’s 40 largest mining companies continued to consolidate their stellar performance of the past several years by delivering steady growth in 2018, according to PwC’s Mine 2019 report.
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As a group, the Top 40 increased revenue by 8%, buoyed by higher commodity price rises, and lifted production by 2%.
They also boosted cash flows, paid down debt and provided a record dividend to shareholders of $43 billion.
Forecasts indicate continued steady performance in 2019.
Revenue should remain stable, with weaker prices for coal and copper offsetting marginally higher production and higher average prices for iron ore.
Yet investors seemed unimpressed by the Top 40’s result, judging by market valuations, which fell 18% over 2018.
While total market capitalization rose in the first term of this year, it remains 8% down compared to the end of 2017.
Over the past 15 years, total shareholders’ return in mining has lagged that of the market as a whole as well as comparable industries such as oil and gas.
In 2018 the Top 40 paid down $15.5 billion in net borrowings, resulting in the gearing position dropping below the 10-year average.
All liquidity and solvency ratios improved during the year, leaving the world’s largest miners with strong balance sheets and cash flows.
In line with expectations, capital expenditures started to rise again, albeit from historically low levels.
The 13% increase over the previous year to $57 billion suggests that miners are continuing to proceed cautiously; approximately half (48%) of the capital expenditure in 2018 was for ongoing projects.
Copper and gold dominated spending in 2018, attracting $30 billion worth of investment.
Capital expenditure on coal was consistent, year on year, and it is expected that miners will maintain current production levels while the coal price remains high.
An 11% lift in operating cash flows has allowed the Top 40 to increase shareholder distributions in 2018 to a record $43 billion.
Dividend yield for the year was 5.5%.
There was a notable jump in share buybacks to $15 billion, up from $4 billion in 2017.
Rio Tinto and BHP accounted for 70% of the total activity returning proceeds of non-core disposals to shareholders. ■