Advisory firm PricewaterhouseCoopers (PwC) have urged miners to adopt strategies to mitigate against further economic and social risks post the Covid-19 crisis.
PwC’s forecast for 2020 suggests the global top 40 miners would take a modest hit to earnings before interest, taxes, depreciation, amortisation and impairment of approximately 6%, following a strong financial performance in 2019, which saw revenue increase by 4% to $692-billion and market capitalisation increasing by 19% to $898-billion.
“In some respects, the mining sector is well-situated in the wake of Covid-19. Mining companies have strong finances and are mostly still operational, albeit with some level of increased precautionary and preventive control,” said PwC global leader for mining and metals, Jock O’Callaghan.
“But the longer-term impacts remain uncertain, and ongoing disruption is likely. Top 40 miners should take advantage of their current position of financial stability to revisit their strategies. Doing so will ensure their businesses can enhance their resilience over the long term and meet the demands of the global economy – meeting their aspiration to resource the future.”
PwC’s latest ‘Global Miner’ report, now in its 17th edition, cautions that mining companies would need to adapt to long-term impacts caused by Covid-19.
O’Callaghan said that miners may need to think about de-risking critical supply chains and invest more in local communities, and that a shift towards localisation in supply chains and for smaller deals in local markets, as well as different forms of community engagement, could turn out to be enduring consequences of the pandemic.
Meanwhile, the report found that capital expenditure was up 11% to $61-billion in the 2019 financial year, and PwC expected capital expenditure would slow in 2020, freeing up cash flows, and giving miners the capacity to pay dividends should they choose to do so.
PwC does not expect many mega-deals to take place in 2020 owing to increased economic uncertainty and practical constraints of site visits and inspections. However, the current conditions provide opportunities for the Top 40 to capitalise on smaller acquisitions in their local markets.