Top 10 mining trends for 2014 – 5. Record impairments

Over the coming weeks Australian Mining will be showing you what to expect in the year ahead, in a 10 part series which will analyse the top ten trends for 2014.

Prolonged market volatility is forcing miners to change the way they operate, making tough strategic changes in a bid to remain viable.

Releasing its sixth annual Tracking the Trends report, Deloitte global mining leader Phil Hopwood explains that mining companies are facing a climate marred by volatile commodity prices and shifting demand fundamentals.

“To rectify cost overruns, improve capital efficiency and rebuild investor relationships, companies need to sharpen their focus on productivity, sustainable cost management and enhanced shareholder value,” Hopwood said.

1. Mining productivity hits new lows

2. Market imbalances will wreak commodity price havoc

3. Innovate or bust

4. Funding cracks widen

5. Record impairments 

As miners and OEMs forge ahead with rationalisation programs, edging further and further away from the ‘production at any cost mentality which has plagued the sector in recent years asset impairments will continue to mark companies’ bottom lines.

In the last 12 months Australia’s top 50 mid tier miners have plunged into the red, posting losses of more than $1 billion dollars, while there was no love lost with investors, wiping more than $17 billion off market values, a recent PwC report found.

Despite many operations being put on care and maintenance, major projects being postponed or cancelled, and assets being sold off, mining companies haven’t completely shut their wallets.

Rather majors are being increasingly selective with their investments all the while focussing on investor returns.

In November BHP opened its coffers, spending $301 million to replace two shiploaders at its Nelson Point port operations in Port Hedland, Western Australia.

The company said investing in the shiploaders will increase the reliability of its inner harbour port facilities.

The existing shiploaders are more than 40 years old and currently load iron ore at a rate of approximately 10,000 tonnes per hour.

“This investment will also create additional port capacity that can be utilised as a series of debottlenecking initiatives increase the capacity of our Western Australia Iron Ore supply chain towards 270 million tonnes per annum (100% basis), at a low capital cost,” BHP said.

Rio also followed suit approving a $400 million expansion plan to boost iron ore production capacity to 360 million tonnes per annum by 2017.

Rio chief executive Sam Walsh at the time said the new expansion plans are $3 billion lower than previous estimates and are in line with the company’s commitment to allocate capital to opportunities that will generate the best returns to shareholders.

 

Tomorrow: Trend six– Mining community demands ramp up 

 

To read the full report, click here.

To read last year’s top 10 mining trends, click here.

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