How To Ride The New Mining Wave

Having recovered financial discipline since the commodity price meltdown in 2012, industry players need to strategise as they face heightened demand in the sector.

- David McKay

One of the major questions on the lips of most, if not all, mining industry investors, is whether the captains of the global industry are going to lose it again. The fear is that a new wave of heightened demand encourages a fresh wave of project optimism and zealous capital spend.

A report by financial services firm PwC shows just how rehabilitated the mining sector is following the commodity price meltdown of 2012 – a horror show of note. It’s worth recalling just how bad things in the sector became. Take the aggregate market capitalisation of the world’s 40 largest mining companies, for instance: they fell from $1.2tr to $494bn in three years.

All the metrics point to a loss of financial discipline that has since been recovered. For 2014, the market capitalisation of the Top 40 – which includes the likes of BHP, Anglo American, Glencore and South32 – rose to $926bn from $714bn a year earlier.

And having exorcised the debt-fest of 2013, in which impairment charges increased to a 10-year high of $57bn – dividends paid increased 125% year-on year to $36bn in 2017 from $16bn. Although less than the $41bn paid in 2013, it’s fair to say the mining sector’s big players are back on an even keel. Impairments totalled $4bn last year.

‘Tempting times’