The once mighty AngloGold Ashanti has been bumped off the list of SA’s Top 10 mining companies, replaced by Royal Bafokeng Platinum, according to the PwC SA Mine 2021 report released on Tuesday.
“The gold sector experienced the largest negative share price movements as a result of the declining gold stocks and lack of investor confidence in the precious metal,” says the report.
“In addition, gold was also ranked as the least preferred commodity in June 2021 and this is reinforced by the drop in position by AngloGold Ashanti and Gold Fields.”
Market cap of Top 10 mining companies
Strong iron ore price movements saw Kumba Iron Ore move up to second place, on the back of its record financial performance.
In terms of ranking, Impala Platinum was the biggest climber, moving from sixth place to replace AngloGold Ashanti in the top three, after its market capitalisation more than doubled between June 2020 and June 2021.
In addition to Impala Platinum, Sibanye-Stillwater moved from fifth place to fourth place. Both these improvements in ranking are attributable to the favourable platinum group metal (PGM) prices.
Higher prices for PGMs and iron ore were the main drivers behind the 63% jump in mining revenue for the year to June 2021, according to the report.
Sector shows resilience
Mining was among the most resilient sectors in the SA economy, benefitting from a 71% average increase in PGM prices and a 48% increase in iron ore prices. These higher prices helped offset the drop in production that occurred at the start of the hard lockdown in March 2020.
There was a 13% increase in mining production over the previous year, with diamonds, manganese ore and chromium leading the way. Diamond production was up 30% year on year, while coal was down 6%.
Iron ore prices increased by more than 200% from the prior year and this was largely driven by China’s rapid economic recovery and subsequent reopening of other global steel markets.
Another sign of the health of the sector is the level of dividends paid to shareholders.
A total distribution of R76 billion was made for the year to June 2021, up from R43 billion the prior year. Impala Platinum paid a dividend of R11 billion (2020: R0.9 billion) for the year to June 2021, while Kumba gave R25 billion (2020: R19 billion) to shareholders.
Though gold mining companies struggle to make it onto the list of the Top 10 companies ranked by market cap, Harmony increased revenue by 42%, due largely to a 26% improvement in production and a higher average rand gold price.
“The excellent financial performance resulted in mining companies being in a very strong financial position,” says Andries Rossouw, PwC’s Africa energy, utilities and resources leader.
“Debt has largely been repaid and returns to shareholders reached record rand levels for many companies. The fiscus benefitted from increased direct and indirect taxes and mining royalties to the extent that it could support ongoing socioeconomic support during the pandemic.
“The remaining free cash flow and available cash resources leave mining companies with interesting capital allocation decisions,” adds Rossouw.
“Strategies will include expansions and new development, acquisitions, strengthening of local infrastructure and host communities, market development, and investments up and down the value chain. Execution on these strategies will require disciplined long-term sustainable mindsets.”