The world’s largest mining companies are facing significant changes and must adapt their strategies for long-term growth, according to PwC’s 20th annual Mine report.
PwC’s 20th annual Mine report, aptly titled “The Era of Reinvention,” underscores the increasing demand for critical minerals, a trend driven by the global transition to clean energy. It suggests that to remain economically viable and seize the opportunities this high-demand era presents, miners must reinvent their operations.
The report also sheds light on the growing role of governments and new industry players –such as automobile companies– in securing critical mineral supply amidst geopolitical uncertainty. It reveals that critical minerals, which are essential for clean energy transition technologies like batteries, electric vehicles and solar and wind generation, dominated deal activity in 2022.
These critical-mineral deals accounted for 66 per cent of total Top 40 M&A, reflecting the increasing demand for these minerals.
“Mining is playing a fundamental role in underpinning the global transition to clean energy, but the path ahead is rocky,” PwC partner Lauren Bermack said.
The report also highlights the industry’s need to address climate-related risks and the importance of decarbonization in the industry’s future business decisions.
According to PwC’s 2022 survey of more than 4,000 CEOs globally, over one-third of mining CEOs see their company as highly or extremely exposed to climate-related risks within the next five years.
The report concludes with a call to action for the mining industry to continue setting and communicating targets for reducing emissions, implementing renewable-energy technology at sites, and evaluating emissions-reduction partnerships with customers.
“The high-demand era of critical minerals is now. It’s full of opportunity, but for those miners who do not reimagine and reinvent their operations by finding the right value-chain partners, they will likely miss out on the opportunity,” PwC partner Monica Banting said.
Despite the industry’s strong financial performance in 2022, there were challenges. Rising costs and economic uncertainty squeezed Earnings before interest, taxes and depreciation margins from 32 per cent to 29 per cent.
While the 2022 revenue of the top 40 mining companies remained stable at US$711 billion, coal became the largest contributor to total revenues (28 per cent) for the first time since 2010.
The report found that 41 per cent of the mining CEOs polled in PwC’s 26th Annual Global CEO Survey acknowledged that their companies would not be economically viable in ten years if they continue on their current path.
However, the market capitalization of the Top 40 miners tripled from US$400 billion in 2003 to US$1.2 trillion in 2022, indicating potential for growth.
The top miners in the world include Barrick Gold Corporation (NYSE:GOLD) (TSX:ABX), Rio Tinto Group (LSE: RIO) (ASX: RIO), Glencore PLC (LSE: GLEN), BHP Group Limited (ASX: BHP) and Vale S.A. (NYSE: VALE).
