Emerging market miners outperform those in developed countries in 2013: PwC report

4 June 2014 (Last Updated June 4th, 2014 18:30)

Miners from emerging markets outperformed those from developed countries by earning $24bn profits in 2013, according to the latest annual mine report by PricewaterhouseCoopers (PwC).

PWC

Miners from emerging markets outperformed those from developed countries by earning $24bn profits in 2013, according to the latest annual mine report by PricewaterhouseCoopers (PwC).

Mining companies from the developed parts of the world showed a net loss of $4bn, said the report, which analysed the 40 largest miners.

The global mining industry has reported a 72% drop in net profits to $20bn in the last year, with gold, coal and diversified miners being the worst affected. The combined market capitalisation value of the 40 companies fell by 23% to $958bn.

The mine report termed 2013 as "one of the most difficult operating environments for years", due to a fall in commodity prices triggered by gold's greatest annual decline in 30 years, the fall of mining stocks by 23% and record impairments of $57bn.

Mining companies incurred impairment charges of $57bn during 2013, an increase from $40bn in 2012, while dividend payouts rose to $41bn from $15bn during previous five years, as mining companies look to retain investors.

"The industry is witnessing fundamental shifts in strategy, such as increasing focus on extracting value from higher-quality assets."

Miners in developed countries were especially affected as the governments in the emerging economies are seeking an increasing share of royalties and taxes.

PwC global mining leader John Gravelle said the industry is adjusting to tough times in the short-term with strategies in place to regain confidence.

"Despite diminished profitability and shrinking cash, underlying performance in the industry as represented by adjusted EBITDA, withstood the tough conditions, only down 8% in 2013," Gravelle said.

"Dividend yields also continued to increase, with gross dividends paid up 5% and dividend yields slightly up to 4%."

Gravelle also said that the industry is witnessing fundamental shifts in strategy, such as increasing focus on extracting value from higher-quality assets, realising greater efficiencies and spreading capital and risk, and a commitment to address diminishing productivity levels.

The report forecasts that the capital expenditure in the sector will be around $116bn, which is 11% lower than 2013 as capital velocity slows.


Image: The global mining industry has reported a 72% drop in net profits, says the PwC report. Photo: courtesy of PwC.

Energy