There are few con men left in the mining industry, but when they do fleece investors, they can do it in a spectacular way. For our younger readers, BreX comes to mind. For those of us a little longer in the tooth, Windfall was the classic case of under-reporting and over-promoting.
By far the majority of the mining industryboth juniors and international powerhousesare honest and want to be seen as offering genuine investment opportunities. The high cost and long lead times it takes to put a deposit into production force investors to look harder than ever at all aspects of a project. But the industry and the investment community don’t always agree about how clearly they communicate the risks and opportunities. This disparity leaves mining executives feeling their companies are undervalued.
The differences are pointed out in a new survey, called "Digging Deeper: Managing value and reporting in the mining industry", from PRICEWATERHOUSECOOPERS (PwC). The survey revealed that more than half the mining companies interviewed (seven Canadian and 21 others from around the globe) thought they worked proactively to initiate or maintain contact with the investment community. But only 23% of investors and 9% of analysts believed the mining sector was proactive in its communications. That is a marked difference of opinion.
PwC asked company executives, investors and analysts to rate the importance of 32 value indicators applicable to the mining industry. Of the indicators identified as important to investors and analysts (22 and 17, respectively), only a few fell into the traditional financial reporting category. Mining companies thought even fewer indicators were important. Among the three groups, only nine indicators were universally accepted as important.
There was another marked difference in thinking between producers and stakeholders. Investors and analysts value indicators relating to both the market place in which the companies operate and the companies’ strategy to address those markets. Companies rate the softer indicators such as social and environmental aspects as significantly more important than does the investment community. The authors of the survey expressed surprise at this, given the importance these factors have in securing mining licences.
Be it mining or anything else, the world of business and investing only gets more complicated. In the end the capital pool is only so large. This report is a good starting point for mining executives to learn more about their stakeholders’ needs and how to increase the value of their companies. It can be viewed at www.pwc.com/mining or call Carolyn Morris in Toronto at 416-941-8383 ext 13207.