Diversified resources group Exxaro Resources Limited has been named as one of the top 10 mining companies worldwide to have delivered the highest total shareholder returns (TSRs) over the 10 year period spanning 2001 - 2011. The Boston Consulting Group (www.bcg.com) has released a report which stated that excellent capital stewardship, robust organic growth and a strong, credible outlook for value creation helped the global mining industry achieve average TSRs of 18% in the period 2001 - 2011, 15% more than the S&P 500. “Even more remarkable was the decade-long annual average TSR of the industry’s top ten: a stunning 39%,” says the report. “Furthermore, unlike their industry peers, the top ten mining companies continued to earn high TSRs during the second half of the decade, the period encompassing the global financial crisis.”

In the report “Value Creation in Mining 2012”, the result of a study of 34 leading mining companies, the Boston Consulting Group calculates TSR as a product of multiple factors including the combination of revenue growth and change in margins as an indicator of a company’s improvement in fundamental value. It then uses the change in the company’s valuation multiple to determine the impact of investors’ expectations on TSR. Finally, the model also tracks the distribution of free cash flow to investors and debt holders in the form of dividends, share repurchases, or repayments of debt in order to determine the contribution of free-cashflow pay-outs to a company’s TSR.
The Boston Consulting Group noted, “The mining industry clearly benefitted from the continued economic expansion in emerging markets, which led to steadily rising commodity prices. Value creation also was fuelled by production growth, margin expansion, and cash returned to equity holders.”

Revenue increases attributable to rising commodity prices accounted for nearly 14 of the total 18% TSR that the industry averaged. The remaining 4% was the result of a combination of production gains, margin expansion, and contributions from cash flow. The report’s top ten value creators for the period of 2001-2011 are Mexican miner Industrias Peñoles (average TSR of 58,2%); Grupo Mexico (49,5%); the UK’s Randgold Resources (45%); Canada’s First Quantum Minerals (42,7%); China’s Inner Mongolia Yitai Coal (40,2%); US miner Cliffs Natural Resources (40,1%); Exxaro Resources (39,2%); Sociedad Químaca y Minera de Chile (SQM) (36,9%); the UK’s Antofagasta (32,4%); and China’s Yanzhou Coal Mining (30,1%).

“In every dimension - from profit growth to cash flow contributions to multiple expansion - the top ten mining companies outperformed the rest of the sample,” the report stated. “Even more impressive was the fact that commodity exposure had no impact on success; the top ten included a broad range of mineral producers, from gold and copper to coal and industrial-mineral companies.” The study identifies factors behind the dramatic performance of the top ten, namely that they managed capital expenditures and consequent cash flows well. The result was evident in their debt management, limited equity dilution, and dividend policies.