Deloitte WA Index reveals extraordinary growth for WA mining companies in AfricaDOWNLOAD
4 February 2013: Deloitte today released a special edition of the Deloitte WA Index at the opening of the Investing in African Mining Indaba conference in Cape Town, South Africa, highlighting the performance of WA listed mining companies with significant operations in Africa over the past 12 months and five years.
Increased uncertainty surrounding commodity prices and the state of the global economy over the last year have had a significant impact on not only those operating in Africa, but all WA listed companies. The market capitalisation of WA listed companies which comprise the Deloitte WA Index as at 31 December 2012 was AU$148.6bn - an increase of just 1.0% over the past 12 months and a decrease of 16.9% over the past five years.
In terms of market capitalisation, mining companies with significant operations in Africa comprise just 5.4% of the Deloitte WA Index Top 100 as at 31 December 2012, less than half of the 11.4% representation as at 31 December 2007.
Deloitte’s Lead Audit Partner and Mining Leader – Western Australia, Tim Richards said while this may seem to indicate operational failure, poor equity performance or withdrawals from the region, the reality is the reverse.
“The success of Australian companies in Africa has seen a large number of mid-tier miners targeted by global resource companies as a means of accessing valuable assets and management expertise in Africa. The growth over the five year period of WA mining companies in Africa has actually been extraordinary,” Mr Richards said.
The top two movers and shakers for the 12 months ended 31 December 2012 were Papillon Resources Limited (Papillon) and Resolute Mining Limited (Resolute), with increases in market capitalisation of 274.1% and 31.8% respectively.
“With financial market performance over the last year being fairly volatile, the ability of Papillon and Resolute to overcome these factors and grow market capitalisation over the last year is an achievement to be celebrated and is unique amongst the companies forming the African Mining Indaba Deloitte WA Index,” Mr Richards said.
Precious metal prices continue to impress, with the current price of gold bullion (US$1,662/oz) up 5.6% from 12 months ago and up 98.8% from five years ago. Consequently, it is not surprising to see that companies operating in this sector dominated the top percentage movers. Gold prices are expected to stay high this year due to ongoing constraints in global mine supply, with the average price for 2013 forecast to be above US$1,850/oz - a new record on a full-year basis.
Despite the slowdown in global manufacturing activity and other economic headwinds, industrial metal prices remained relatively high throughout 2012, with supply-constrained metals such as copper maintaining a pricing premium. Tin has seen the greatest recovery year-on-year, with prices rising 22.1% in the year ended 31 December 2012, and up 43.6% on spot prices of 31 December 2007.
LME lead prices were up 15.2% over the year and even iron ore has seen prices increase by 35.3% since Q3 2012. However there is still plenty of room for improvement, as iron ore, zinc and aluminium spot prices continue to perform below levels observed five years ago.
Deloitte’s Australia-Africa Services Group Leader Jacques van Rhyn said despite the volatile and challenging conditions over the past 12 months, in the 2012 financial year, the Australian Securities Exchange reported nine new listings with principal projects in Africa, raising a total of AU$135m. This is in addition to a further AU$1.3bn raised through follow-on raisings by more than 50 companies for over 60 projects.
“We are also aware of a number of greenfields exploration projects in private ownership that commenced during 2012 and which may seek future listings and capital raising - clearly indicating a continued appetite for projects in Africa,” Mr van Rhyn said.
“Although the African Mining Indaba Index highlights the growth of Australian listed mining companies with significant operations in Africa, we must not forget the number of companies who have delisted or those whose market capitalisation has been affected by M&A activity. There is still ongoing activity around new private projects.”
“Opening of new mines in Africa are prone to a number of risks and uncertainties. Capital intensive infrastructure development, long lead times to secure equipment, resource nationalism, bribery and corruption, deeper mines, access to finance issues and stricter social and environmental regulation in many countries all add to the complexity of supply. However, as operating and capital costs remain a big issue in Australia (the cost to mine and ship iron ore is estimated to be 30% higher in Australia than the global average), Australian mining companies continue to turn their focus to Africa.”
Copies of the full Deloitte WA Index report are available at the Deloitte team stand 709 and in the Australian Lounge at the Mining Indaba conference in Cape Town, this week.
Further information can be found at www.deloitte.com/za/miningindaba
Table: WA’s top 100 listed companies - See the table in the downloadable version of the media release
NB: See our media releases and research at www.deloitte.com.au
Follow us – @DeloitteNewsAU