HILTON TARRANT: The 10th edition of PwC’s Annual Global Mining Survey, entitled “Mine: A Confidence Crisis” came out today. It paints a bleak picture of a sector facing flat revenues, declining profits and share prices at their lowest levels in years and sometimes decades.
Hein Boegman is PwC’s mining leader for Africa. The survey uses financial information for the 2012 financial year. Hein, some of that stretched back into 2011 and, looking at the top 40 mining companies in the world, obviously that includes Anglo American and BHP Billiton. Of local interest, AngloGold Ashanti, Gold Fields and Impala Platinum are included in that sample of 40 companies.
This report paints almost a complete loss of confidence in nearly every aspect of the mining sector.
HEIN BOEGMAN: Thank you first of all for the opportunity, Hilton. If we look back to 2005, when we spoke about the entering of the Dragon, the China interest into the mining industry, then the good times rolling up to 2008, when it got ugly and when “The going gets tough” was our title then, back to the boom and the rebound in the last two or three years, with this growing disconnect. And this year we call it a “confidence crisis” in that the market seems to be valuing companies at a particular level, whereas the industry seems to think that some of the good things that they are doing go unrewarded. And I think that is perhaps where this disconnect comes from.
HILTON TARRANT: Hein, what about gold miners in these top 40 across the world? Obviously one or two South African-based gold companies are in that list. Gold companies are having a torrid time, not only on the cost front but also on the share price front. Massive, massive losses of value.
HEIN BOEGMAN: Yes, if you look at these by number as we surveyed 40 – 28% of that sample will be mining companies. But they only represent 14% of the value. And if you take that back 10 years, it was a completely different picture. The inverse of that is, if you take the diversifieds that have iron-ore assets, and you look at how small they are by sample, it’s only about 8 or 9%, but they bring close to 30% of the value from a market capitalisation percentage.
The story with gold – there certainly seems to be a disconnect between the increase in market capitalisation on the back of the increase in the gold price. Historically those things have been pretty closely linked. But it does look, at the moment, with the continued market slide with a relatively stable dollar gold price, like that link has been broken, and the market is looking more at the ability to give reasonable returns on capital invested. And I think that is perhaps where a part of the hiding come from.
HILTON TARRANT: That’s was Hein Boegman, We’ll try to bring you his thoughts on labour, specifically in the South African environment as it relates to the global mining sector, in tomorrow night’s programme.
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