Big miners expected to deliver record rewards to investors
The world’s 40 largest mining companies were expected to increase returns to shareholders to record levels during 2018 despite spending more on their assets to make up for the past few lean years, PwC said in its Mine 2018 report.
Dividends paid by the top 40 global mining companies by market capitalisation grew 125% to $36bn in 2017 from the previous year on the back of a 23% increase in revenue to $600bn, creating a problem with governments and other stakeholders wanting to grab a slice, said Andries Rossouw, a partner at PwC’s energy and mining assurance group.
"For 2018 we forecast a quite substantial increase in dividends and distributions to shareholders, including share buy-backs. We expect it to be at record levels," Rossouw said.
He noted that the market capitalisation of the 40 companies had swollen 30% to $926bn during 2017.
Of the 40 companies, there was a strong presence of Chinese, Australian, Canadian and UK-based companies.
Only two had listings in SA, being Anglo American and South32, both diversified miners. AngloGold Ashanti, the world’s third largest gold miner, was on the list, but dropped off in 2017, with Rossouw blaming its deep-level and expensive South African gold mines, which the company has disposed of apart from the Mponeng mine.
Looking ahead, PwC said the question for the companies with strongly improved cash flows was whether they would maintain their cost discipline and prudent capital allocation strategies, "responsibly creating value for all stakeholders on a sustainable basis. We think they are operating with that discipline."
Net investment for 2018 was forecast to rise to $58bn from $46bn in 2017, a 21% increase over the previous year’s spend. Cash holdings grew 17% to $102bn. Long-term borrowings fell to $232bn from $245bn.
"The second question around temptation is whether the stakeholders bear long-term viability in mind or will they succumb to short-term greed," Rossouw said on the sidelines of the 2018 Junior Indaba. "We have seen this in a number of regulations and taxes where governments are seeing there’s value in the mining industry and they want to get their hands on it now.
"They’re not willing to wait for the longer term to realise full benefits. They want short-term gains, and that’s a real concern for us in the near term."