The world’s 40 largest mining companies have registered the first collective loss of US$27 billion in 2015, a period of high debt which saw some miners fighting for survival and therefore committing to asset sales.
This has emerged from a report released by PricewaterhouseCooper (PwC), which also states that the sector’s market capitalisation has gone down by 37% in the same period.
The US$27 billion record loss set by the 40 miners has effectively wiped out all the gains made during the commodity super cycle, the 13th PwC industry series, which analyses financial performance and global trends, said.
“Last year was undoubtedly challenging for the mining sector. The Top 40 experienced their first ever collective net loss, their lowest return on capital employed, a significant drop in market capitalisation, and an overall decline in liquidity with the result that they were more vulnerable and carrying heavier debt loads than in prior years,” PwC Africa mining industry leader Michal Kotzé said in a statement.
“We are also seeing shareholders persist with a short term focus, impacting the capital available for investment and, as a result, constraining options for growth.”
But an optimistic Kotzé emphasised that the fact that many miners seemed to be down, they were certainly not out.
Furthermore, other findings of the report include the investors’ ‘punishment’ of the top 40 for poor investment and capital management decisions, and in some quarters for squandering the benefits of the boom.
Concerns over the ‘spot mentality’ from shareholders focused on fluctuating commodities prices and short term returns rather than the long term investment horizon required in mining.