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It was mining’s annus horribilis.
In 2013, the largest 40 global mining companies booked record impairments of $57-billion (U.S.), driving down aggregate net profits a whopping 72 per cent to $20-billion, a descent not seen in a decade, according to PricewaterhouseCoopers LLP’s annual “Mine”report.
The Top 40’s market capitalization fell by $280-billion, or 23 per cent, to $958-billion at the end of last year.
Only four of the Top 40 companies managed an increase in market cap: Freeport-McMoRan Copper & Gold Inc. (copper), Fortescue Metals Group Ltd. (iron ore), First Quantum Minerals Ltd. (copper, gold) and Polyus Gold International Ltd.
Gold producers were the hardest hit. Gold prices experienced their biggest annual decline – 27 per cent – in more than 30 years, says the report, released Thursday. And gold companies accounted for the lion’s share of impairments: $27-billion.
HSBC’s global mining index fell 23 per cent, a decline due to the negative commodity price outlook but “also in part due to the continued lack of confidence from investors based on historical performance,” the report said.
In stark contrast, the Dow Jones and FTSE-100 were up by 27 per cent and 15 per cent, respectively, in 2013.
The good news is that, despite volatility, “the industry is still supported by overall long-term demand fundamentals, specifically from emerging markets, particularly China.”
And shareholders continued to be rewarded with attractive dividend streams.
“Based on the December 2013 market capitalisation [sic] and 2013 dividends paid, the Top 40’s dividend yield is now over 4 per cent providing a relatively attractive investment proposition as compared to record low interest rates, with the potential for upside from improvements in commodity prices and productivity in the future.”
Total dividends of $41-billion last year were double the total net profit of $20-billion.
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