PwC: Mining investors demand cost cuts

Comment on this story
GoldMining Reuters.

Johannesburg - Investors are demanding the world’s biggest mining companies produce sustainable cost reductions and not just defer spending after the industry’s profit fell to the lowest in a decade, PricewaterhouseCoopers said.

The 40 largest miners “have acted on short-term cost reduction strategies but stakeholders are watching to ensure that results were not simply achieved from deferring spending,” the firm said in a report.

“Mining companies have historically found sustained productivity improvement to be difficult.”

Mining companies including BHP Billiton, the world’s biggest, Anglo American and Rio Tinto are looking to cut costs by reducing jobs, exploration and capital expenditure after a decade-long commodities boom waned, crimping revenue.

The world’s 40 biggest miners made $20 billion of profit in 2013, the lowest since at least 2004, after booking writedowns of $57 billion, PwC said in a report titled “Mine 2014: Realigning Expectations” published today.

The fervor to reduce expenditure may drive merger and acquisition activity, with companies seeking to share capital expenditure and infrastructure, PwC said.

“We can expect to see some moves towards consolidation, friendly or otherwise, if only to seek out synergies to reduce costs in this low-price environment, consistent with the new mantra of lower costs and higher productivity,” it said.

Gold producers were the worst affected by writedowns, impairing $27 billion of assets, after the price of bullion fell 28 percent in 2013, the largest annual drop since 1981.

Barrick Gold, the world’s biggest producer, last month failed to buy its largest competitor, Newmont Mining, a merger that was partly driven by cost savings. - Bloomberg News



sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.