Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Mining Investors Demand Sustainable Cost Reductions, PwC Says

Don't Miss Out —
Follow us on:

June 5 (Bloomberg) -- Investors are demanding the world’s biggest mining companies produce sustainable cost reductions and not just defer spending after the industry’s profit fell to the lowest in a decade, PricewaterhouseCoopers LLP said.

The 40 largest miners “have acted on short-term cost reduction strategies but stakeholders are watching to ensure that results were not simply achieved from deferring spending,” the firm said in a report. “Mining companies have historically found sustained productivity improvement to be difficult.”

Mining companies including BHP Billiton Ltd., the world’s biggest, Anglo American Plc and Rio Tinto Group are looking to cut costs by reducing jobs, exploration and capital expenditure after a decade-long commodities boom waned, crimping revenue. The world’s 40 biggest miners made $20 billion of profit in 2013, the lowest since at least 2004, after booking writedowns of $57 billion, PwC said in a report titled “Mine 2014: Realigning Expectations” published today.

The fervor to reduce expenditure may drive merger and acquisition activity, with companies seeking to share capital expenditure and infrastructure, PwC said.

“We can expect to see some moves towards consolidation, friendly or otherwise, if only to seek out synergies to reduce costs in this low-price environment, consistent with the new mantra of lower costs and higher productivity,” it said.

Gold producers were the worst affected by writedowns, impairing $27 billion of assets, after the price of bullion fell 28 percent in 2013, the largest annual drop since 1981. Barrick Gold Corp., the world’s biggest producer, last month failed to buy its largest competitor, Newmont Mining Corp., a merger that was partly driven by cost savings.

To contact the reporter on this story: Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net Ana Monteiro, Tony Barrett

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.