Miners’ focus shifts from investor returns to survival – by Silvia Antonioli (Reuters U.S. – July 10, 2015)


LONDON, July 10 (Reuters) – Hit hard by the accelerated downturn in metal prices in recent months, global mining companies preparing to report results are likely to announce another round of austerity measures to cut costs and convince investors to remain committed to the sector.

With investors looking for evidence of continued capital discipline while credit ratings and dividends are pressured by a rout in prices for anything from iron ore to platinum, reductions in capital expenditure, operational costs and jobs could all be on the cards.

It comes as little surprise, therefore, that miners have been among the worst performers on London’s FTSE 100 index of blue-chip companies so far this year. The FTSE 350 mining index has fallen by about 15 percent since the start of the year.

“The picture has shifted to survival. With prices where they are, you wouldn’t expect any of the majors to think about big buybacks,” said Nik Stanojevic at British wealth manager Brewin Dolphin.

High dividend yields and a boom in metal prices boosted mining shares from the turn of the century, but the downturn in prices since 2011 has exposed companies’ failure to allocate capital effectively and to shore up balance sheets, prompting many investors to take flight.

Mining companies may be taking steps to address the problems, but the waters have been muddied further by concerns over global metals demand, with nervousness heightened by recent economic jitters in China.

BHP Billiton and Rio Tinto , the world’s two largest mining companies, both have a progressive dividend policy and have managed to mollify investors with attractive yields of more than 6 percent.

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