Global mining profits increased in 2011 despite fall in share price

Elizabeth Fournier
THE world’s top 40 mining companies saw their combined profits hit a record of $133bn in 2011, but the success failed to transfer to the stock markets as overall market capitalisation fell by 25 per cent.

According to a report into mining industry trends by PwC, net profits climb 21 per cent to $133bn last year, but a 25 per cent increase in costs meant that profit margins could only remain steady.

And a lack of confidence in the sector’s growth prospects, as well as ongoing concerns over external macroeconomic factors, meant that market values declined to $1.2 trillion – a 25 per cent drop on the previous year.

“The demand story remains robust and long-term growth in emerging markets is more significant to the mining industry than short-term jitters in the developed world,” said PwC’s global mining leader Tim Goldsmith.

“Investors have simply not bought into the industry’s growth story or are reacting to other short term global economic concerns. There is a growing disconnect between the two.”

Spending also fell during 2011, with the top firms investing $98bn in capital projects over the year, compared to $120bn in the previous 12 months.

The research also showed the increasing dominance of emerging markets firms in the industry, with 19 of the top 40 – contributing 38 per cent of the total market value – coming from developing economies.