PERTH (miningweekly.com) – Australia’s midtier miners have outperformed the market during the Covid-19 pandemic, maintaining consistent revenues and profits, advisory firm PwC has found.
In its 'Aussie Mine 2020' report, PwC notes that Australia’s 50 ASX-listed midtier mining companies, with market values of less than A$5-billion, reported revenue increases of 6% to A$29.4-million and market cap up to A$61-billion.
The 50 midtier miners outperformed the combined ASX200, and were equivalent to the ASX5 for the first time.
In its fifteenth edition, the report shows the midtier miners' net assets have also reached a record high of A$43.17-billion and cash is up 16%, but this has coincided with a 177% increase in short-term debt, indicating a focus on working capital that is required over the next 12 to 24 months.
PwC Australia national mining leader Debbie Smith said the 'Aussie Mine 2020' report indicated that the midtier miners have shown resilience throughout the pandemic and highlighted the key role that miners play in supporting communities and the broader economy.
“The 50 midtier miners have collectively paid A$1.5-billion in mineral royalties and more than $3.5-billion in dividends to shareholders in the past year. Our estimates show the group also employs more than 50 000 people globally; even more if you count the jobs created for contractors and communities. The mining industry as a whole employs approximately 250 000 people in Australia, accounting for 2% of the Australian workforce, and the projected employment growth for five years to May 2024 is 6.2%.
“The miners spent A$5.9-billion on capital expenditure during the year and with momentum continuing on projects, this continued investment will continue to be a very important contributor to jobs growth. With contributions like this and strong finances, we believe the 50 midtier miners are well positioned to resource our nation’s economic recovery.”
PwC Australia 2020 Aussie Mine project leader Justin Eve said the midtier miners had never performed so well.
“The value of net assets is the highest it has ever been. This means there are stronger balance sheets in the 50 midtier miners to leverage into the future. We now have a really solid base in the mid tier, on which to continue to build into the future.”
“Exploration is up 21%, and we’ve seen that also through a record number of eight explorers making the mid tier 50, which is the highest ever. This demonstrates the willingness to invest in future mines and therefore employing a lot of people through the value chain. This is a great sign that investors have confidence in the industry’s future potential.”
PwC’s analysis shows the pandemic has resulted in mixed performance across the group, with producers of gold and iron-ore benefiting from a significant increase in commodity prices and high demand, while coal and copper producers reported a decline in revenue owing to weaker commodity prices and higher cost in managing operations.
The surge in gold prices over the previous 12 months has shaped the movement in the 50 midtier miners, with gold miners accounting for more than 50% of new entrants in 2020.
Gold miners now represent the largest group, making up 44% of the 50 midtier miners, with three new entrants to the top ten midtier miners. One gold company broke through the A$5-billion barrier and graduated from the list, following two gold company graduates in 2019.
“It’s been a golden year for the 50 midtier miners but that’s not surprising given record gold prices and the fact that investors often turn to gold in times of high uncertainty. Gold’s stellar performance in the past year makes it an outlier in the 2020 50 midtier miners and across the entire economy, sitting well ahead of the collective performance of the ASX200,” Eve said.
Furthermore, eight explorers also counted among the ranks of the 50 midtier miners, all new entrants from the last report, with exploration expenditure amongst this group also growing by 21%.
The report has found that while most midtier miners were moving in the right direction on environmental, social and corporate governance (ESG) disclosure, reporting remains relatively immature against the new World Economic Forum framework.
The performance of the 50 midtier miners was poorest on disclosures related to the prosperity measure on ensuring all human beings can enjoy prosperous and fulfilling lives and that economic, social and technological progress occurs in harmony with nature.
The report found that only 39% of the group reported against this pillar of the framework. Disclosures against the planet measure on protecting the planet from degradation were also low at 45%.
“The stakeholder group for the 50 midtier miners is expanding and expectations of transparent, robust and meaningful ESG disclosure are rising. The reporting frameworks have been evolving in line with this changing reference point in how companies are being assessed. For midtier miners' continued success, they must move past the stage of general or variable commitments and address community concerns on ESG practices,” Smith said.
“A strong focus on ESG will improve ‘brand mining’ and translate to long-term value creation for investors, regulators, consumers, employees and the communities that midtier miners operate in by strengthening the sector’s social licence and ability to attract higher-quality capital.”
Smith noted that other current and emerging issues must be in focus including productivity and innovation, a heightened interest from the community in government funding and tax transparency and increased cyberattacks, particularly at critical operational technology, with 78% of industrial control systems managers believing there will be a cyberattack within 12 months.
“Miners should take the opportunity, given their relative resilience, to address these issues,” she added.