The global mining sector has emerged well from the worst of the COVID-19 pandemic economic crisis, with the top 40 companies coming out of the storms of 2020 in excellent financial shape, consulting firm PwC said in a report.
In fact, 2020 was a banner year for the mining sector. Compared to 2019, net profit was up 15%, cash on hand rose 40%, and market capitalisation increased by nearly two-thirds. And things are expected to get even better for the world’s biggest mining companies, the Mine 2021 report said.
“Our 2021 forecast indicates that the Top 40 will report record-high revenue and EBITDA levels (in this report’s 18-year history) and the second-highest net profit,” PwC analysts said in the report.
PwC said it expects mining companies with their near-record levels of free cash flow to make a big, bold pivot towards the future, focusing on an era-defining transition to a low-carbon, sustainable economy.
“Eight of the ten largest economies have set ambitious net-zero targets. Many global companies, including several of the Top 40 miners, have made similar commitments. Making environmental, social and governance (ESG) issues the core of organisational strategy gives big miners a compelling path to build trust, grow and produce sustained outcomes,” the report pointed out.
Companies that rate higher on ESG outperformed the broader market during the peak of the pandemic—and in the longer term, too, the report said, adding that investors were increasingly drawn to companies that actively embraced ESG policies.
According to the International Energy Agency, the energy sector’s need for critical minerals that are essential for clean energy technologies could increase by as much as six times by 2040. Along with environmental expectations, ESG is also a framework for mining companies to be a more active and salutary participant in local and regional communities.
“The Top 40 make a significant contribution to society through taxes and rents. But they have some distance to go in being transparent about these payments. Mining companies should be proud to report the taxes they pay and the social benefits these outlays deliver—such as funding hospitals, infrastructure improvements and schools—and they should join with local governments in helping to create tax policies,” the report said.
Although the Top 40 responded to the pandemic with agility and purpose, they cannot afford to let their guard down, the report said, adding that a second, third and fourth waves of the virus, driven by new variants, continue to emerge, and many of the measures taken to control its spread are still in force.
The challenges of COVID—and the new normal manifested by uncertainty about infection rates in different parts of the world—and environmental sustainability have created a volatile landscape that presents an opportunity for genuine, transformational change in the mining industry, the report said.