Pile-of-Cash Dilemma for Mining Industry Once Crippled by Slump – by Thomas Biesheuvel and Thomas Wilson (Bloomberg News – February 5, 2018)


Three years after a commodity slump left their finances in shambles, mining companies are swimming in so much cash that investors aren’t sure where the industry will spend it all.

With metals from zinc to palladium trading at multi-year highs, four of the world’s top producers generated combined free cash flow last year of about $87 million a day. Some of the unprecedented windfall is earmarked for dividends, which companies including BHP Billiton Ltd. and Glencore Plc cut or eliminated during the slump.

Where the rest of the money goes — into new mine projects, acquisitions or a bank account — remains one of the big unanswered questions for executives, investors and bankers attending Africa’s biggest mining conference, which begins Monday in Cape Town. Companies may be reluctant to spend too much, given the disastrous results of rapid expansions a few years ago.

“You can’t give it all back,” said Ben Davis, an analyst at Liberum Capital Markets in London. “There will be some M&A towards the back end of the year. No one wants any new mines, but you have to use this money for something, and it’s not all going as dividends.”

BHP, Glencore, Rio Tinto Group and Anglo American Plc generated $31.9 billion of free cash flow during their 2017 fiscal years, which exceeds their haul during the last commodity boom in 2011, according to analysts estimates compiled by Bloomberg.

For the rest of this article: https://www.bloomberg.com/news/articles/2018-02-05/pile-of-cash-dilemma-for-mining-industry-once-crippled-by-slump