A report released by PricewaterhouseCoopers (PwC) has claimed that mining companies in South Africa are witnessing steep decline in financial performance due to a slump in commodity prices and high cost pressures.
In order to meet demanding global and local mining environment, the companies are struggling to boost productivity.
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The findings from PwC’s seventh edition of ‘SA Mine’ found that the industry continues to be spoiled by labour unrest.
Four gold mining companies are said to be locked in a three-month wage stalemate with unions and the pressures of a coal strike mounting recently.
PwC African mining industry leader Michal Kotze said: "The message to miners is clear: ‘Continue to focus on costs, refocus on your core business and carefully evaluate growth opportunities’. It certainly will make for some interesting planning and forecasting discussions in the coming year."
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During this year, market capitalisation for the top 35 companies declined to R414bn ($1bn) as of 30 June 2015.
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By GlobalDataMarket capitalisation as at 30 September 2015 stood at R304bn ($23.1bn), resulting in an aggregate fall of R371bn.
During this period, iron ore and coal prices were severely impacted.
Despite a continued reduction in prices, coal is said to remain the highest earning commodity in the country and posted a solid performance over the last ten years.
In the last two years, the long-term decline in gold production temporarily halted and the fall indicates the ever-increasing depths of existing mines and technical difficulties faced by start-up operations.
Production of platinum group metals (PGMs) has been impacted by industrial action since 2012, as well as mine enclosures in the low-price environment.
PwC assurance partner Andries Rossouw said: "Financial performance for the South African mining industry in 2015 was extremely challenging and downcast."
In 2014, revenue only increased by a mere 4%, operating expenses increased by 14% and the share of labour costs decreased marginally from 47% to 45% in 2015.
In 2015, net profit reduced by 75% and the EBITDA margin is 22%.
Kotze concluded: "Creating an environment with adequate infrastructure, less policy and regulatory uncertainty, and a skilled yet flexible workforce should go a long way towards attracting investment and benefitting all stakeholders."
