Highlighting trends in the South African mining industry November 2014
SA Mine 6th edition
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The South African mining industry
Integrating risk into business strategy
Improving value to stakeholders
Companies included in the analysis
1. Executive summary
SA Mine: 6th edition – Highlighting trends in the South African mining industry
Highlights Current year R ’billions Revenue from ordinary activities
Distribution to shareholders
Net operating cash flows
This is the sixth in our series of annual publications highlighting trends in the South African mining industry. The significant decrease in the industry’s profitability fuelled contraction in market capitalisation of South African mining stocks. This decrease is in line with global mining counterparts who are also struggling with higher costs and lower prices.
The 2014 financial year was again marred by labour unrest In addition, local cost pressures and international demand weakness resulted in shrinking margins and wide ranging impairment provisions.
Prior year R ’billions
A weakening rand over the period somewhat shielded the South African mining industry from the decline, with rand prices remaining relatively flat. Unfortunately, flat prices will not support the industry’s significantly increased cost base. Generally, balance sheets remained strong, with stable liquidity. However, increased gearing was needed for companies to fund sustaining capital expenditure and in some cases operating losses. The R49 billion impairment provisions raised highlights the difficulty in making long-term decisions in volatile markets.
The mining industry still adds significant value to the South African economy with regards to GDP contribution, employment, tax and export revenues. Leadership will be required from all stakeholders to ensure long-term optimisation of the industry as opposed to the threat of instant gratification claims by stakeholders. Mining companies now need to integrate risk and performance management and they need to evolve risk management to be more predictive in order to anticipate and plan for potential negative events. Mining charter requirements