Commodity prices weigh heavily on top 40 mining giants June 4, 2015 – by Natasha Odendaal (MiningWeekly.com – June 4, 2015)

http://www.miningweekly.com/page/americas-home

JOHANNESBURG (miningweekly.com) – The tough fight faced by the global mining industry in 2014 would escalate into a brawl this year as mining companies worldwide struggled to emerge from depressed markets, PwC’s Africa Mining Centre of Excellence head Michal Kotze said on Thursday.

Widespread government intervention, significant conflicts surrounding strategy debates and other internal industry conflicts, “huge” competition, weakening commodity prices with increasing short-term volatility and rising shareholder activism had left industry on the ropes.

A reduction in capital spend, somewhat higher production and “unexpected help” from currency devaluations and lower input costs had assisted the mining industry to “manage expectations” during 2014 despite continued headwinds from weak commodity prices, the latest PwC ‘Mine’ report showed.

By April 2015, iron-ore prices had dropped to below 50% of the value recorded in January 2014, while coal and copper prices dropped to below 75% and 80% of their respective price structures during the same period.

Only gold and nickel saw prices remain near those of January 2014. This had driven revenues down 6% and sent overall market values plummeting $156-billion or 16%.

Globally, mining companies’ net profit decreased 9%, while free cash flow turned positive to $24-billion, mostly owing to cost-saving initiatives.

PwC’s yearly analysis of the 40 largest global miners, in which a South African company did not feature for the first time, showed operating costs decreasing 5% on the back of exchange rate fluctuations and the 40% reduction in the oil price.

“With few exceptions, market supply and demand trends result in miners operating on the assumption that lower commodity prices will continue and the focus will, therefore, remain on containing operating costs and maintaining capital discipline,” Kotze pointed out.

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