Mining industry steadies ship
PwC’s annual report on the mining industry finds 2016 was a strategically modest year for the top 40 mining companies. Simon Frost reports.
Stop, think, act – that’s the soundbite mantra of global consultancy firm PwC’s Mine 2017 report, which was released in June. 2016 saw most of the big players in the mining industry rein in new exploration activity, with capital expenditure falling by 41% to a low of US$50bln, the exception to this trend being the Chinese market, where the most significant asset buyers in the top 40 were found, investing heavily in the bottom end of the materials cycle.
Jason Burkitt, PwC UK’s mining leader said, ‘While 2016 wasn’t a year of decisive action, it did give the industry much needed breathing space. During this “stop and think” phase, not only did the top 40 move back into profitability, with reinforced balance sheets, there was also a welcome absence of distress, all of which helped boost market confidence.’
Cause to think stemmed from both opportunities and hazards in the near future. The trend towards clean and renewable sources of energy – and, in particular, the development of electric vehicles – will continue to increase the demand for lithium and cobalt, for example. The lithium market is becoming crowded, however, as companies flood in to secure assets and get projects on stream. Meanwhile, more than 61% of cobalt is currently sourced in the Democratic Republic of the Congo (DRC), almost exclusively as a by-product of copper and nickel mining, which has not seen any significant expansion, nor are any new mines planned in the near-to-medium term, limiting growth in supply.
In April 2017, Apple set out its aim to stop sourcing materials from mining entirely, which, albeit on an as-yet undefined timescale, signifies a general direction in manufacturing towards higher rates of recycling, which the mining industry will need to adapt to.
Recent roadblocks to large projects, such as social protests and related difficulties in accessing funding, also make clear the mining industry’s need to improve transparency by engaging more thoroughly, clearly and regularly with reporting initiatives. PwC found that only around half of mining companies are producing sufficiently timely and quantitative data on sustainability to reporting initiatives, with emerging miners found to report less than traditional companies on all factors examined in the report – safety, water use, emissions, value added and diversity – to varying degrees.
We’ve broken down some of the key findings of PwC’s Mine 2017 report – you can read it in full at pwc.to/2rmKrZO