SA Mine 8th edition

Higlighting trends in SA mining industry

With the general outlook for the industry remaining subdued at best, 2016 marked another challenging year for miners


The 2016 financial year was impacted by significant US-dollar commodity price decreases, which were offset by a substantially weaker rand from October 2015.

Despite flat revenues, increased costs continued to erode margins and with record impairments, resulted in the first aggregated loss since inception of this publication.

Companies had no choice but to cut back on new developments, refocus on profitable production rather than maximum production and reduce costs.

Market capitalisation by commodity

Market capitalisation by commodity | Source: I-Net Bridge, PwC analysis

Key findings

Market capitalisation of 31 companies

South Africa's mining landscape

With the general outlook for the industry remaining subdued at best, 2016 marked another challenging year for miners. Performance was impacted by a slower than expected rate of economic growth, a prolonged and continuing downswing in commodity prices, an increase in short-term volatility, increased pressure on operating models and regulatory uncertainty.

Adding to the challenge is the increased difficulty in raising capital due to a loss of confidence by investors and capital markets being seen as a last resort. South Africa’s possible credit ratings downgrade has also created some uncertainty within the market.

Operating costs continue to increase

Risks facing the mining industry

Given the current economic downturn and slump in commodity prices, coupled with negative investor sentiment, the mining industry is faced with many related challenges and risks that need to be effectively addressed to ensure survival of the companies and the industry.

In the current period we have noted companies increasingly focus in more significant detail on their risks, mainly due to the impact of the changing environment forcing management to make tough operational and financial decisions to ensure sustainability.

The highest-ranking risks included labour relations; sustainable business plans or budgets; the volatility of metal prices and exchange rates; infrastructure access and capacity; the regulatory, political and legal environments; high operating costs; and skills availability.

Total value created by entities analysed

Improving value to stakeholders

  • Total value created by the entities analysed increased by 5%, from R158 billion to R167 billion. The increase is largely attributed to better performance by the gold companies.
  • Funds reinvested in the form of capital additions and acquisitions was 32% of total value created (2015: 36%), which is lower than in previous years.
  • Companies continue to feel the burden of high labour costs, adding pressure on margins. This, despite a reduction in the number of employees. The value received by employees represented 38% of total value created (2015:37%).
Labour cost driven by platinum companies

Financial perfomance

  • Revenue increased by a mere 2% (R6 billion) from the prior year.
  • Operating expenses increased by R12 billion, which is a 4% increase from the prior year.
  • Labour cost increased by 5.2%. The increase was mainly driven by the platinum companies.
  • This is the first year since the start of this publication in 2009 that an aggregated net loss was recorded.

Contact us

Michal Kotze
Africa Mining Industry Leader
Tel: +27 (0)11 797 4603

Andries Rossouw
Tel: +27 (0)11 797 4060

Mining enquiries
Mining Centre of Excellence
Tel: +27 (0)11 797 5332

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