Global mining sector profits doubled

WINDHOEK – A recent report issued by PricewaterhouseCoopers indicated that profits in the global mining sector have more than doubled last year.

The report, ‘Mine – Enter the Dragon’ provided a consolidated view and discussed current trends in the global mining industry. “The world’s 40 largest mining companies reported a 111 per cent increase in aggregate net profits for 2004, up from US$13,2 billion (about N$92,4 billion) in 2003 to US$27,9 billion in 2004.This is the result of increased demand worldwide, particularly from China and a weaker US dollar, pushing up commodity prices,” it said.Globally seen is a surge in exploration driven by extensive activity in China, Mongolia and Russia.The migration of exploration investment to these less developed regions is indicative of the increasing pressure on larger mining companies to expand their reserve portfolios and the growing pool of finance becoming available to junior mining companies.In Canada alone, juniors raised approximately N$14 billion in 2004, more than double the amount raised in 2003.Other financial highlights for the companies analysed included revenue increased by 39 per cent (US$184 billion), net profit margin of 15 per cent compared to 10 per cent in 2003, return on capital employed of 14 per cent compared to seven per cent in 2003, net cash flow from operations increased by 88 per cent to US$41 billion, capital expenditure increased by 24 per cent to US$23 billion and exploration expenditure increased by 31 per cent to US$1,7 billion.Rather than being at the top of the commodity cycle, the industry may be undergoing a structural change in global demand.Early indications are that the outlook for 2005 remains positive and the report suggested the first mining boom of the 21st century appears ready to continue.Many companies are now implementing growth strategies to take advantage of the buoyant market conditions.The 24 per cent increase in capital expenditure, which includes the impact of a weakening US dollar, remains modest.This reflected caution being exercised by mining companies and a shortage of attractive investment opportunities.The results of 2004 analysis indicate that the boom has arrived and looks set to continue.-Nampa”The world’s 40 largest mining companies reported a 111 per cent increase in aggregate net profits for 2004, up from US$13,2 billion (about N$92,4 billion) in 2003 to US$27,9 billion in 2004.This is the result of increased demand worldwide, particularly from China and a weaker US dollar, pushing up commodity prices,” it said.Globally seen is a surge in exploration driven by extensive activity in China, Mongolia and Russia.The migration of exploration investment to these less developed regions is indicative of the increasing pressure on larger mining companies to expand their reserve portfolios and the growing pool of finance becoming available to junior mining companies.In Canada alone, juniors raised approximately N$14 billion in 2004, more than double the amount raised in 2003.Other financial highlights for the companies analysed included revenue increased by 39 per cent (US$184 billion), net profit margin of 15 per cent compared to 10 per cent in 2003, return on capital employed of 14 per cent compared to seven per cent in 2003, net cash flow from operations increased by 88 per cent to US$41 billion, capital expenditure increased by 24 per cent to US$23 billion and exploration expenditure increased by 31 per cent to US$1,7 billion.Rather than being at the top of the commodity cycle, the industry may be undergoing a structural change in global demand.Early indications are that the outlook for 2005 remains positive and the report suggested the first mining boom of the 21st century appears ready to continue.Many companies are now implementing growth strategies to take advantage of the buoyant market conditions.The 24 per cent increase in capital expenditure, which includes the impact of a weakening US dollar, remains modest.This reflected caution being exercised by mining companies and a shortage of attractive investment opportunities.The results of 2004 analysis indicate that the boom has arrived and looks set to continue.-Nampa