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PwC expects global top 40 miners' net profit to dive 15%

COVID-19 has dented the profits of the world's top 40 miners in fiscal 2020, according to PwC’s Mine 2020 report.
PwC expects global top 40 miners' net profit to dive 15% PwC expects global top 40 miners' net profit to dive 15% PwC expects global top 40 miners' net profit to dive 15% PwC expects global top 40 miners' net profit to dive 15% PwC expects global top 40 miners' net profit to dive 15%

The global top 40 miners are expected to earn 15% less this year, thanks in large part to the coronavirus pandemic

Net profit for the top-40 by market capitalisation is expected to fall 15% this year to US$51 billion, given an expected 6% year-on-year drop in revenues to $649 billion and a resultant 6% drop in EBITDA to $157 billion.

In contrast, for the period ended December 31, 2019, revenues for the group rose 4% to $692 billion, with EBITDA during the period flat at $168 billion. Dividends paid rose 25% last year and the total market capitalisation was up 19% to $898 billion.

Similar to last year, six Canadian companies made the top 40 list, reporting a net profit margin of 19%, versus 9% for the global top 40. With a relatively healthy gearing ratio of 21% compared with 31% for the global top 40, the Canadian companies demonstrated their financial resilience, said report author and PwC Canada's mining leader, Kevin Chan.

"The strong performance of Canada's largest mining companies in 2019 speaks to their continued progress in recent years. While 2020 will be challenging, miners' resilience during COVID-19 should help them manage through the coming months and position them to make investments needed for long-term success," he said.

For Canadian miners, mergers and acquisitions continue to offer opportunities to attract capital and help companies emerge stronger from the COVID-19 pandemic. Of five major deals above $1 billion noted in PwC's report, four involved Canadian companies, the largest being Newmont Corp's $13.1 billion acquisition of Goldcorp and Kirkland Lake Gold's $3.8 billion Detour Gold buy.

Even as bigger deal activity has slowed, the largest transaction so far in 2020 also involved two Canadian-listed companies; SSR Mining's proposed $2.4 billion merger with Alacer Gold, which will join two companies with mines in four jurisdictions to create a diversified portfolio.

Canadian miners had also been proactive in doing more to deal with cybersecurity threats and making environmental, social and governance (ESG) factors a top priority, according to the report. "There is a reputational advantage with key stakeholders, including investors, for whom ESG performance is becoming a leading guidepost for investment decisions," said Chan.