South African Mining takes hit in 2018

PwC recently released their 2018 Mine Report, in which they analyse the top 30 JSE-listed South African Mining Companies. This is the 10th edition of SA Mine, a series of publications that highlights trends in the South African mining industry. In their analysis, they consider the performance of these companies. According to the report, South African mining had a ‘mixed bag’ of performance in 2018.

Interestingly, the global mining industry had a good year. Globally, the financial performance of the mining industry improved considerably from the previous year. It was South African Mining companies that had a tough financial year. Bulk commodity producers with iron ore, coal, manganese and chrome performed well, but the aggregated SA mining industry, which is more exposed to precious metals, did not enjoy the same benefit from price increases. Michal Kotzé, PwC Africa Energy Utilities & Resources Leader, explains further. “Cost-saving initiatives could not offset the impact of input cost inflation. The increased costs and production challenges meant a weakening in operating results. Together with the gold and platinum impairments, it meant that the industry recorded a loss for 2018.”

Reports main results:

  • In 2018 total market capitalisation of the 31 companies analysed in this report recovered to R482 billion (more than 2017s R420 billion, but less than 2016s R560 billion).
  • Gold and platinum group metals (PGMs) continue to dominate the share of market capitalisation of the companies analysed, but experienced declines of 4% and 5% respectively. Iron ore saw an increase of R40 billion from 2017 to 2018; increasing the commodity’s percentage share of capitalisation from 13% to 20%. The rest of the commodities remained stable.
  • Manganese, iron ore and chrome are the only commodities that showed real production growth over the last 15 years.
  • Total revenue generated by the companies analysed for the financial year-end 30 June 2018, increased by 8% (R28 billion) from the prior year.
  • Despite various cost saving initiatives, above inflation cost increases continues to put the industry under pressure with a decline in EBITDA.

[Source: PwC SA Mine report]

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