The latest news from PricewaterhouseCoopers (PwC) is very gloomy. The survey, titled Mine: When the going gets tough, is full of bad news.
Unfortunately, PwC reports a market capitalization of the world’s top 40 mining companies has dropped by 65%. The cutoff for inclusion in the top 40 was a capitalization of $2.3 billion in 2008 rather than $9.0 billion as was the case in 2007. The firm blames the fall of commodity prices and the impact of the global economic crisis on investor confidence for the decline.
Gold companies were least affected. Their market capitalization decreased by only 20%, thanks to the perception that gold is a safe haven during economic turmoil. There are now 14 gold companies in PwC’s top 40, and together they comprise 26% of the total market capitalization.
Investor returns were lower last year, too. In 2008, only three of the top 40 companies reported positive total shareholder returns. The four companies reporting the greatest decline dropped 75% or more. The picture is even gloomier when compared to the 2007 numbers. Fourteen of the previous year’s top 40 had returns of more than 100% and four reported a whopping 400%.
Far be it from me to disagree with PwC, its many analysts and the money it spends to put together the latest Mine report. But why so much bad news? The firm has contrasted the 2008 findings to those of 2002, the first year it undertook the survey. By that measure, mining looks to have made terrific gains. It’s hard not to be a world-beater during times of ever-higher commodity prices. Let’s hope the latest downturn is a blip (perhaps even a huge correction) in the fortunes of the global industry, and that their fortunes will again rise soon.
PwC has posted the report at www.PwC.com/mining. I urge CMJ readers to study it and draw their own conclusions. The report also includes a summary of views expressed by leading CEOs, the seven-year trends, information on compensation, investing, fraud, and more.