Zambia suffered major mining investment pullback in 2016 – report

Sat, 24 Jun 2017 12:20:30 +0000

By BUUMBA CHIMBULU

ZAMBIA is among African countries which were unable to make it on the World’s Top 40 miners’ list whose mining industry survived the global shocks, hence attracting sustained balance sheets and a return to profitability in 2016.

According to PricewaterhouseCoopers (PwC’s) Mine 2017 report released recently, Zambia is among some African countries which suffered one of the largest pullbacks in mining investment of any region.

The report analyses financial performance and global trends, also outlines the new opportunities and hazards on the horizon – and the impact of inflexible activity.

It analysed 40 of the largest listed mining companies by market capitalisation and information was obtained in the periods 1 April 2015 to 31 December 2016.

In the report, South Africa, Congo DR, part of East and West Africa contributed an average of 4 percent to global mining in 2016, unlike countries such as Zimbabwe, Botswana and Zambia, among others, which did not make any contribution.

“The entire continent absorbed only 13 percent of global spending in 2016. Improving economic conditions suggest that large mining companies will begin to reverse the spending decline this year,” reads the report.

According to the report, 40 percent of the Top 40 miners are members of the Extractive Industries Transparency Initiative (EITI) which Zambia is also an affiliate. PwC reports that a number of Top 40 miners had announced or implemented digital innovations that are already enhancing performance.

It also indicated that the market capitalisation of the Top 40 increased in 2016 by 45 percent to US$714 billion, approaching the 2014 level, mainly due to rising commodity prices.

The report recognised a return to profitability in 2016, with an aggregate Top-40 net profit of US$20 billion; after an aggregate loss of US$28 billion in 2015.

“The improved fortunes of the industry were then directed to strengthening balance sheets. Debt repayments totalled $93 billion, up from $73 billion a year earlier, with most of the debt issued to refinance, rather than fund, acquisitions or mine development,” reads the report.

And Michael Kotzé, energy, utilities and mining industry leader for PwC Africa, said the narrative of the Top 40 in 2016 indicated that there was no significant action during the year.

“The narrative of the Top 40 in 2016 tends to read like a mine site safety mantra: Stop. Think. Act. The industry has moved out of danger but 2016 was not a year of significant action, and we now wait to see who will be bold and step out beyond the fluctuating market confidence,” he said.

He however said there was an improved gearing ratio of 41 percent, down from the 2015 record of 49 per cent.