Mid-tier miners rise up despite mixed market conditions

Lithium market conditions have been challenging.

Australia’s mid-tier mining sector has experienced a mixed year for commodity prices, but has still reached its highest total market cap since the boom times of 2011.

According to PWC’s 14th Aussie Mine Report, the MT50’s market cap increased by 9 per cent to $64 billion, with the industry enjoying pricing not seen since the “boom” times.

The report analyses the 50 ASX-listed ‘mid-tier’ mining companies (MT50) with market values under $5 billion.

With a 17 per cent increase in exploration expenditure, $7.3 billion of debt being repaid and revenue continuing to rise with growth of 28 per cent from 2018, the industry’s growth reflects healthy potential for the future.

“We’re now into our third consecutive year of strong results for the mid-tier miners,” PwC Australia mining leader Chris Dodd said.

“Market cap, revenue and net profit before tax is up, production is up, exploration is finally returning, debt repayments and dividend payments have tripled in three years, companies are holding a very healthy vault of cash, importantly, employment is up and there’s been a significant increase in taxes paid,” Dodd said.

Although not all parts of the industry have been so lucky, with lithium and coal having faced some challenges this year, almost half of the MT50 has decreased in market capitalisation.

Despite Yancoal and Whitehaven Coal both feeling the pain of reduced pricing for their primary commodities, it was base metals miner MMG that felt the impact of challenging conditions the most.

The gross margin percentage has also dropped across the board, with operating costs outweighing revenues from production increases.

“While there’s a quiet boom for gold and iron ore miners in particular, this is not the case for almost half of the MT50 who saw their market cap decrease over the year,” Dodd said.

“Lithium miners on the list, for example, have been dealing with prices that have come right down as product has been brought to market by a growing host of new producers globally without sufficient growth in demand.

“We expect momentum to return though, given the ongoing strategic importance of this battery mineral to meet demand for advance technologies.”

With social licence and acceptance from consumers effecting the role of coal, Dodd believes the sector needs to articulate to the general population that coal mining is critical in transitioning to a renewable future.

“ESG reporting by all companies, not just miners, is accelerating the debate on whether we are collectively doing enough,” Dodd said.

“Miners are responding and play a crucial role in a lower carbon future.”

Although challenges for coal and lithium has had knocked the industries’ confidence, environmental discussions and ESG reporting to improve the industry will forge a better future for all beneficiaries of the mining industry, consumers and communities alike.

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