PwC NEWS RELEASE: Top 40 global mining companies’ total assets could exceed $1 trillion in 2011

For a copy of the report click here: Mine 2011: The game has changed

Largest Canadian-based miners increased revenues by 38% in 2010: PwC report

TORONTO, June 7, 2011—The top 40 global mining companies—including nine headquartered in Canada—increased their total assets to US$943 billion in 2010 and are poised to break through the US$1 trillion mark in 2011 driven by record levels of cash, and property and equipment on company balance sheets, according a new PwC report released today.

The financial results of the Top 40 in 2010 are spectacular. Total revenues increased 32% to US$435 billion, breaking the US$400 billion mark for the first time. Net profit rose 156% to US$110 billion and operating cash flows grew by 59%, leaving more than US$100 billion cash-on-hand at year end.

The report also found the Top 40’s total year-end market capitalization increased 26%, driving up the  market capitalization of the smallest company on the list to US$11 billion in 2010 from US$6.5 billion in 2009.

The top Canadian-based mining firms significantly contributed to the overall Top 40 financial totals. Together, the nine Canadian companies increased revenues by 38%. Net profit increased a staggering 1,536% to US$8.9 billion and operating cash flows grew 224%. However, the 2009 base for comparison is low as a result of Barrick Gold settling its gold sales contracts that year.

“We attribute this jump in profits to record high commodity prices coupled with an overall rise in production by 5% in 2010,” says John Gravelle, National Mining Leader, PwC.  “The mining industry is ushering into a new era where demand will continue to be stoked by emerging markets whose needs for resources show no sign of letting up. China’s 7% GDP growth target in its recently released 12th Five Year Plan reinforces the support for continuing high demand for base metals.”

Yet, with a new era comes new challenges for the mining sector. Supply is increasingly constrained as projects become more complex and remote, limiting miners’ ability to keep up with demand.

“We’re seeing miners financially able to build new mines, but skills shortages both within and outside of the sector mean they can’t find the people to physically build their desired projects,” says Gravelle. “And despite high profits, the costs to mine have skyrocketed due to lower grades, higher fuel prices and a low US-dollar, which will likely increase the  overall cost base as well as commodity prices permanently.”

Where is the money going?

To keep up with demand, the Top 40 have announced US$311 billion of capital expenditures for the coming years, with over US$120 billion planned for 2011. This is more than double the total 2010 spend, which also included sustaining capital expenditures.

The deal market will continue to see heightened activity with more mining firms better equipped to finance mergers and acquisitions. In 2010 for instance, there was a 26% increase in cash payments for investments.

“More shareholders are increasingly asking what companies are doing with the excess cash and pressuring them for higher shareholder returns,” says Gravelle. “In the first half of 2011, a number of companies have acted with providing significant share buy-backs.”

Interestingly, exploration spending remains flat and relatively low amongst the Top 40 at just under US$6 billion and only 8% of net investing cash flows.  Instead, they are effectively outsourcing these activities to the junior sector, thus magnifying the importance of the junior sector’s ability to raise capital.

For a copy of the report click here: Mine 2011: The game has changed

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Contact Jessica Draker, PwC
Tel: 613 755 8706
email: jessica.l.draker@ca.pwc.com

OR:

Kiran Chauhan, PwC
Tel: 416 947 8983
email: kiran.chauhan@ca.pwc.com

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