Chamber of Mines CEO Roger Baxter
JOHANNESBURG (miningweekly.com) – The global mining industry is experiencing a lower appetite for expansion from lenders and shareholders, as well as a drop-off in capital expenditure, noted Chamber of Mines CEO Roger Baxter on Wednesday, citing PwC’s Mine 2016 report titled ‘Slower, Lower, Weaker . . . But Not Defeated’.
Delivering a Mining Indaba presentation via webcast, Baxter noted that, in general, there was lower demand, a bleak global outlook and lower commodity prices.
“Everyone’s feeling the pinch,” he said.
Baxter stated that China’s economic slowdown had been material for commodity prices and that investment-driven commodity demand growth from China was nearing an end and shifting to more consumer-driven growth.
“The extent of oversupply of property is significantly slowing commodity demand growth,” he said, pointing out that the global commodity supply response had not matched demand slowdown and significant ‘sunk’ capital for growth in projects had slowed the necessary supply reduction response.
“Commodity markets range from neutral to significantly oversupplied. Significant overcapacity exists, depressing prices,” he said.
Baxter added that commodity pricing outlook risks remained on the downside and that the global mining industry was under significant pressure.
He noted that, in 2015/16, the top 40 mining companies experienced commodity prices that continued to fall, as demand slowed and oversupply emerged in some commodities.
Revenues fell by 21% to $539-billion, operational costs fell to $419-billion and impairments doubled to $53-billion.
“Mining companies focused on cost cutting, productivity improvement, capital discipline and adjustment [in that period],” he said.
Baxter further highlighted that South African mining sector costs had risen at a fast pace, while global companies had reduced costs in aggregate.
“South Africa faces the same challenges as global mining markets but, at a global level, companies have managed to cut their costs. The top 40 mining companies were able to cut costs by $80-billion. In South Africa, there is lots of pressure on domestic costs,” he said.
Baxter pointed out that global and local focus areas included consolidation, capital discipline, reducing cost pressures, improving productivity and innovation drives.
“[The local mining industry] needs to focus on improving productivity and containing cost increases, as well as getting the industry back on track,” he stated.