Mining begins to thaw as commodity freeze persists

Published at Jun 21, 2016, in Features

The weird and wonderful world of Mining has been through the proverbial meat grinder in recent years — and lived to tell the tale.

According to Pricewaterhouse Coopers, the world’s leading accountancy and corporate finance firm, the Mining sector is “slower, lower, weaker — but not defeated”. PwC publishes an annual status check report of the Mining sector as a whole, and each year, the report’s title gives a good insight into true sentiment in the sector.

In 2005, PwC’s report was titled, ‘Enter the Dragon’, astutely identifying the entrance of China on the commodity world stage. In 2007, the report was titled ‘Riding the wave’, which turned to ‘As good as it gets?’ in 2008. In 2009, ‘When the going gets tough’, and then in 2011, ‘The game has changed’.

Aggregated together, the world’s top 40 mining companies have been left hurt and bruised by the commodity ‘bust’ that followed the ‘boom’. Of the 40 companies, two filed for bankruptcy over the past 12 months while all 40 saw their shareholder dividends slashed alongside huge reductions in capex and over $200 billion in cumulative write-offs.

The fundamental reasons behind the downbeat assessment are well known amongst Mining investors, and with much of the negativity now firmly priced in, PwC sees a strong chance of the protracted commodities decline, finally beginning to turn.

In a recent overarching report on the core of the world’s mining sector, as represented by the largest 40 Resources companies, PwC found the globe’s 40 biggest miners made a collective loss of $US27 billion (A$37 billion) in 2015. This was the first loss that weighed on the entire industry with the big players suffering most, hit by China’s slowing economy and a 25-40% fall in commodity prices last year.

PwC estimates that the market value of the world’s top 40 miners, fell 37% to equal US$494 billion in nominal terms, thereby erasing all the gains from the Australian mining boom, loosely ascribed to the period between 2009 and 2014.

Australia’s favourite commodity, iron ore, perfectly illustrates the frayed state of affairs in Mining since 2009. A protracted rise in demand for industrial commodities and metals led to rising prices for most commodities. But the boom period lasted barely 5 years before oversupply and waning global demand began to weigh on prices.

PwC sees the commodities cycle as following its normal expected pattern with the big miners switching away from new exploration, and focusing on more efficient production at lower cost. In other words, consolidation and doing better with what they already have.

Mature mining companies are now forced to take-on tougher deposits, found at greater depth or with additional processing required, which effectively means they are working harder just to remain where they are. One of the biggest surprises from the PwC report is the finding that productivity among the top 40 miners rose, despite the sharp falls in commodity prices.

“Commodity prices have broadly fallen by around 25%, but the market caps of the big miners have fallen by over 50%” said PwC Mining Leader Chris Dodd, via a webcast broadcast by PwC. “The Mining industry is in uncharted territory” he added.

Digging down into exactly why such a heavy impact on big miners has occurred, and how this could effect future Mining activity, PwC says that, “Investors are punishing poor allocation of capital and inefficient capital expenditure. As exploration falls, future sustainability of the industry is now coming into question”.

For the time being in 2016, we’ve seen a sharp reversal in commodity prices but with the unwanted caveat of heightened volatility. PwC says it’s still “premature” to call 2015 the bottom.

PwC concluded that Mining is not defeated just yet, “It is within the power of the Top 40 to rebuild their investment propositions and rise off the canvas. But if there is one thing that 2015 has shown, it is that the foundation cannot be as dependent on China”.

To read PwC’s full 52 page report, click here.

Where to invest $1,000 right now

When the experts at Next Investors have a stock pick, it may pay to listen.

The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.

They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.

Click the link below to see what they are currently investing in.


S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why is Australia’s leading small cap publication

Founded seven years ago, is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise. provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more. is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!