INDUSTRY OUTLOOK

16 May 2017

 

Industry Outlook by Sam Martin

The Australian Mining industry looks set to enjoy a much needed reprieve as 2017 shapes to be the year the industry can catch its breath. Analysts such as PwC and Ernst and Young have indicated a shift in the industry to one of planning which seems to be a sentiment expressed by mining companies in quarter one of 2017.

Cost optimisation and increased productivity will remain core to the mining industry. The strategies adopted over the past 2 years will place mining companies in a strong position to capitalise on improved operating margins and if market conditions continue to strengthen the focus will shift to growth developments which will come in the form of asset expansion as well as asset acquisition.

In recent times expansion projects and tenement developments have been put on hold but as many sites enter into the final stages of their life, these developments are once again commencing to ensure asset continuity.
Asset acquisitions have been most recently driven by the portfolio realignment of some of the major players. This change in strategy has seen a number of profitable sites up for sale over the last 18 months providing great acquisition targets for the small to medium sized operators.  These predominately equity based transactions will continue in 2017 and will consolidate the position of the mid-tier players helping them become major players in their respective commodities at the peak of the next cycle.

While the industry is by no means at the beginning of its next boom the overriding sentiment of the sector is one of optimisim. While it is safe to say that the focus will still be on strengthening the balance sheet, improving commodity prices has freed up funds to replace much needed equipment which will ultimately filter down to the suppliers. As the focus shifts to the future miners will ensure they have the best assets in their portfolio to achieve sustainable growth and maximise the financial return to their shareholders.  

Information in this article was obtained from:
Ernst & Young Mergers, acquisitions and capital raising in mining and metals – 2016 trends, 2017 outlook. To review the full report please click here
PwC’s future in sight series. To review the full report please click here

Written by: Sam Martin

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