The top 40 multinational mining companies have more cash than at virtually any other time in their history, thanks to the boom in commodity prices, which increased their combined market value by nearly two-thirds to $1.46-trillion (R18-trillion) over the past year.
This is according to the latest annual survey by PwC, which also forecasts that these mining companies will in 2021 report the highest revenue and second-highest net profit since the accounting firm began monitoring the trends in the industry 18 years ago.
Mining companies with higher environmental, social and governance (ESG) ratings also outperformed the broader market during the peak of the Covid-19 crisis, delivering an average total shareholder return of 34% over the past three years — 10 percentage points higher than the general market index.
Globally, there has been a strong push for businesses and companies to mitigate the fallout of climate change by reducing reliance on fossil fuels such as coal. In SA, the Presidential Climate Change Coordinating Commission was set up in 2020 to guide the country’s response to the climate change.
SA generates most of its electricity through coal-fired power plants, which are not always reliable after years of lack of, or poor, maintenance.
Earlier in April, Sasol announced two green-hydrogen initiatives to power heavy-duty trucks and for the production of aviation fuel as part of the efforts to mitigate climate change.
Anglo American, the global mining titan with a rich SA heritage of more than 100 years, has also hived off its thermal coal assets, causing the separate listing of Thungela Resources on the JSE this week.
In so doing Anglo joins Rio Tinto and BHP, which divested from coal assets.
“The global mining sector has demonstrated both resilience and agility in adapting its operations during the pandemic. Coupled with this, the drive towards environmental sustainability has created a volatile landscape for mining companies, but is also presenting an opportunity for genuine, transformational change,” said Andries Rossouw, PwC Africa mining leader.
“The past year has demonstrated how putting ESG at the core of a strategy is crucial for delivering growth. Looking forward, it’s clear that investors in this sector will continue to be increasingly drawn to companies that actively embrace ESG policies.”
The survey also reveals that top 40 coal production fell 12% in 2020. Deals fell from five in 2018 to zero in 2019 and 2020, highlighting the sector’s continued shift to net-zero.
While tax transparency is a fundamental way for companies to demonstrate their commitment to ESG issues, only 30% of the top 40 mining companies embraced tax transparency reporting in 2020.
The PwC report also finds a further 39% of mining and metals company CEOs are extremely concerned about tax policy uncertainty, more than double the number last year (18%). This poses a long-term risk to the sector.
Tax transparency, a key ESG metric, gives miners the chance to highlight their financial contributions to their communities and the resulting improvements in education and infrastructure, among other aspects.
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