PricewaterhouseCoopers has said that Nigeria, Ghana and other countries globally are recording abysmal performance in mining and allied sectors of their economies.
In its report dated 2019, the consulting firm chided Nigeria and other countries for their poor performance in the mining sector in recent times.
A Nigerian newspaper, the Nation quoted the report as saying that 40 biggest mining companies declared a dividend of 43 billion dollars in 2018 and that the forecast indicated weaker prices for coal and copper, while Iron ore and others showed less than average prices.
‘’Investors are not impressed by the records of the 40 biggest mining firms in the world, due to the poor showing of the sector in 2018. Though the total market capitalisation of the mining sector rose sharply in the first quarter of 2018, the sector recorded eight percent in 2019. In spite of the strong operating performance of the world’s top miners, there is still more room for improvement for mining countries.
‘’Investors and other stakeholders have concerns about the mining industry’s ability to respond to the risk and uncertainties of a changing world. The concerns are in the areas of emission of resources and investments in mining technology, among others. However, the mining sector has opportunities to adapt to the growing and changing expectations of stakeholders,” the report said.
It added that in 2018, the top 40 paid down 15.5 billion dollars in net borrowings, resulting in the gearing position dropping below the ten-year average.
The report noted that all liquidity and solvency ratios improved during the year, leaving the world’s largest miners with strong balance sheets and cash flows.
It explained that in line with expectations, capital expenditures started to rise again, albeit from historically low levels and that the 13 percent increase over the previous year to 57 billion dollars, suggests that miners are proceeding cautiously; approximately half of the capital expenditure in 2018 was for ongoing projects.
“Capital expenditure on coal was consistent, year-on-year, and we expect miners will maintain current production levels while the coal price remains high.
“The 11 percent lift in operating cash flows has allowed the top 40 to increase shareholder distributions in 2018 to a record 43 billion dollars. Dividend yield for the year was 5.5 percent,” it said.
According to the report, there was a notable jump in share buybacks to 15 billion dollars, up from four billion dollars in 2017. Rio Tinto and BHP accounted for 70 percent of the total activity, returning proceeds of non-core disposals to shareholders.
The report noted that in 2018, the share of value distributed to governments in the form of direct taxes and royalties increased from 19 percent to 21 percent and that employees received 22 percent of the total value distribution from the top 40.
“Mining along with oil & gas, distributes a greater share of its value to governments than almost any other sector.
“A number of countries have also implemented carbon taxes and/or emissions trading schemes,” Andries Rossouw added
Of the 25 countries in which the top 40 operate, 13 countries have already implemented these taxes/schemes and nine countries are actively considering implementation.
“This renewed appetite for large transactions looks as though it will continue throughout 2019, with the deal value announced 30 April 2019 already surpassing the value of all the announced deals in 2017,’’ Rossouw said.
It noted that the gold sector is experiencing a renewed round of consolidation, driven by a shrinking pipeline of projects, fewer new high-grade discoveries and a lack of funding for junior developments.
Gold deals increased from eight percent of total top 40 deal value in 2017 to 25 percent in 2018, and this year are tracking at close to 95 percent of deals as at the end of April 2019.
“Gold mining companies need to be rigorous and disciplined with prospective deals. With substantially all the value generated by mergers and acquisitions between 2005 and 2012 now lost, investors are still reeling from past transactions where purchasers overpaid for assets,” the report said.
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