The report said 40 biggest mining companies declared a dividend of $43 billion in 2018.
It said forecast indicated weaker prices for coal and copper, while Iron ore and others showed less than average prices.
The report said: ‘’ Investors are not impressed by the records of the 40 biggest mining firms in the world, due to the poor showing of the sector in 2018. Though the total market capitalisation of the mining sector rose sharply in the first quarter of 2018, the sector recorded eight per cent in 2019. In spite of the strong operating performance of the world’s top miners, there is still more room for improvement for mining countries’’
The report added: ‘’ Investors and other stakeholders have concerns about the mining industry’s ability to respond to the risk and uncertainties of a changing world. The concerns are in the areas of emission of resources and investments in mining technology, among others. However, the mining sector has opportunities to adapt to the growing and changing expectations of stakeholders.
In 2018 the top 40 paid down $15.5 billion in net borrowings, resulting in the gearing position dropping below the 10-year average.
All liquidity and solvency ratios improved during the year, leaving the world’s largest miners with strong balance sheets and cash flows.
In line with expectations, capital expenditures started to rise again, albeit from historically low levels. The 13 per cent increase over the previous year to $57 billion, suggests that miners are proceeding cautiously; approximately half of the capital expenditure in 2018 was for ongoing projects.
Capital expenditure on coal was consistent, year-on-year, and we expect miners will maintain current production levels while the coal price remains high.
An 11per cent lift in operating cash flows has allowed the top 40 to increase shareholder distributions in 2018 to a record $43 billion. Dividend yield for the year was 5.5 per cent.
There was a notable jump in share buybacks to $15 billion, up from $4 billion in 2017. Rio Tinto and BHP accounted for 70 per cent of the total activity, returning proceeds of non-core disposals to shareholders.
Andries Rossouw, added “Mining along with oil & gas, distributes a greater share of its value to governments than almost any other sector.
“A number of countries have also implemented carbon taxes and/or emissions trading schemes.”
Of 25 countries in which the top 40 operate, 13 countries have already implemented these taxes/schemes and nine countries are actively considering implementation.
After several years of sluggish activity, M&A picked up significantly in 2018. The value of announced transactions rose 137 per cent to $30 billion, driven by a flurry of activities in the gold sector, the on-going push by miners to optimise their portfolios, and momentum to acquire energy metals projects.
Rossouw comments further: “This renewed appetite for large transactions looks as though it will continue throughout 2019, with the deal value announced 30 April 30, 2019 already surpassing the value of all the announced deals in 2017.
The gold sector is experiencing a renewed round of consolidation, driven by a shrinking pipeline of projects, fewer new high-grade discoveries and a lack of funding for junior developments.
Gold deals increased from eight per cent of total top 40 deal value in 2017 to 25 per cent in 2018, and this year are tracking at close to 95percent of deals as at the end of April.
“Gold mining companies need to be rigorous and disciplined with prospective deals. With substantially all the value generated by mergers and acquisitions between 2005 and 2012 now lost, investors are still reeling from past transactions where purchasers overpaid for assets,” Kotzé comments.
Source: The Nation