The world's mining industry profits took a 95% jump in 2003, according to a report released on June 14 by PRICEWATERHOUSECOOPERS (PwC). Better yet, Canada, currently second to Latin America, is poised to become the leader in exploration spending. Global market capitalization is on the rise as well, more than doubling in the last 18 months to US$390 billion in March 2004.
PwC collected numbers from 30 of the world's largest mining companies to compile its report, "Mine* Review of Global Trends in the Mining Industry".
Included in the survey were Canadian companies BARRICK GOLD, CAMECO, FALCONBRIDGE, INCO, KINROSS GOLD, PLACER DOME and TECK COMINCO. Besides the financial aspects of the industry, the report covers health and safety, reserves, hedging, exploration, environmental provisions, sustainability and political risk.
The report credits the two-year rise in the gold price and strong base metals prices for improved industry performance. Revenue was up 18% to US$110 billion, compared with US$93 billion in 2002. Net profit margins rose to 10.4% from 6.3%. Return on capital was also up, to 7.6% in 2003 compared with 4.7% in 2002.
"We seem to be at the start of the first mining boom of the 21st century, after market capitalization has almost doubled over the past 18 months," says Paul Murphy, partner and PwC's Canadian mining practice leader. "Canadian companies have contributed to this trend and rank third in terms of total market capitalization globally. This trend has been bolstered in Canada in the area of exploration, particularly in British Columbia, where federal and provincial government improvement of their flow-through shares arrangements and activity in the diamonds sector have positioned the country well for future growth."
Murphy cautioned that the mining industry remains a cyclical one: "While there is no doubt the recent improvement in profitability is very encouraging for both Canada and the global industry, the challenge remains for mining companies to deliver acceptable returns even in the downturn. It remains to be seen whether the mining industry will respond to higher metal prices with excessive increases in production or whether it has learnt from its past mistakes. We have already seen a 21% increase in capital expenditure during 2003, to almost US$14 billion."
Log onto www.pwc.com/ca/mining for the link to download the entire report in .pdf format or to request a hardcopy. There is no charge for this service. More information is also available from Nicholas Greenfield at 416-869-2383.