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Mining sector digs boom

Friday 28th May 2010
The beginning of 2009 saw commodity prices continuing to fall globally, tough price negotiations with customers and challenging market conditions.

However, companies responded swiftly and decisively: funding was restructured, mines were closed and production cut as margins declined.

However, in contrast, the year ended with the market capitalisation of the Top 40 returning to the heights of 2007 and a cautious optimism returning, according to PricewaterhouseCoopers's seventh annual review of global trends in the mining industry: Mine, Back To The Boom.

Tim Goldsmith, global mining leader, PricewaterhouseCoopers said: "Although 2009 saw overall revenues decline, a drop in net profit and a decrease in cash flow in the industry, none of the Top 40 companies were subject to bankruptcy or voluntary administration provisions. This was largely due to their ability to remove their debt overhang, strengthening commodity markets over the year and the positive impact of government stimulus packages around the world.

"On the other hand, there were no significant transactions completed during the year – pointing to a potential missed opportunity for those that may have had the available financial resources.

"Despite approximately US $200billion of capital expenditure over the past three years, production remained flat across most commodities. Exploration spend by the Top 40 declined significantly given its discretionary nature. As reserve replacement becomes more challenging, the lack of spend on exploration poses the question – when and where will the next world-class mines be found?

"This will only continue the supply challenge. Add to that the fundamental demand strength over the medium and long-term, driven by continued growth from China and other developing nations, and we firmly believe we are in the next phase of the boom."

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Mike Jones

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