Industry Trend Analysis - Global Miners: After A Stellar Year, Future Strength To Depend On Restraint - APR 2018

BMI View: In 2017, miners posted strong financial results across the board, driven by higher metal prices. As the industry returns to a period of growth, continued profitability will depend on companies' commitment to keeping costs down, targeting value over volume and sticking to core commodities. Cost inflation related to higher commodity prices will become a central challenge for miners, as EM currencies continue to strengthen, oil prices rise and governments look to increase revenues from a recovering industry.

Building on their recovery in 2016, top mining companies reported stellar 2017 fiscal year results, including Glencore's record USD14.8bn EBITDA, Rio Tinto's largest-ever dividend of USD5.2bn, and Anglo American's highest dividend in a decade of USD1.0bn. The significant jump in metal prices drove the strong performance, while miners also cited cost savings and efficiency gains as key reasons behind the earnings improvement. Years of divesting from non-core assets and implementing stringent spending programmes has allowed firms to significantly reduce debt-loads: Anglo American's drastic restructuring plan announced in 2015 lowered the firm's total debt-to-EBITDA ratio from a staggering 22.8x in 2012 to 1.5x by 2017. While Anglo moved away from the initial plan to whittle down its portfolio to exclusively copper, diamonds and platinum, the firm still shed 32 assets (from 68 in 2013) over the past four years and continues to offload high-cost mines. In Q118, Anglo completed the sale of the Drayton coal mine in Australia and several thermal coal operations in South Africa.

Return To Core Commodities

Earnings High
Select Miners - EBITDA (USDmn)
Note: BHP fiscal year ends June 2018, 2017 data is Bloomberg estimate. Source: Bloomberg

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