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AFTER years of bleeding cash and grappling with the com-modity price squeeze, the mar-ket capitalisation of the world’s top 40 mining companies grew by almost half last year.

PwC’s Mine 2017 report, which was released on the sidelines of the Joburg Indaba yesterday, found that the mar-ket capitalisation of the com-panies strengthened by 45 per-cent last year to $714 billion (R9.1 trillion) – approaching the level reached in 2014 – mainly because of rising commodity prices.

The two-day indaba is being attended by 300 explorers, developers and investors in Africa’s junior mining industry.

Commodities had a bumper 2016, with solid performances in the prices of gold, copper and nickel.

The PwC report said the real story of 2016 was the strength of the prices of coal and iron ore, which were battered in the previous year. Investors were taken on a wild ride that con-tinued into the first quarter of this year.

The report said iron-ore prices doubled to the end of the year, reaching a high of $89 a ton in mid-February, only to suf-

fer a sharp reversal thereafter.It also noted the dramatic

peak in the price of coal last year, with the price of thermal coal doubling to reach $100 a ton in November, before begin-ning to retreat in December.

The top 40 companies reported a net profit of $20bn last year, compared with an aggregate loss of $28bn in 2015.

“Miners managed to turn the historical aggregate net loss in 2015 into a profit, driven by lower impairment charges, and a decrease in interest expenses after key players cleaned up their balance sheets,” the report said.

ValuationsThe report, which is based on studies of financial informa-tion and covers the period April 1, 2015, to December 31, 2016, found that the valuations of the top 40 miners had climbed, particularly in the case of the traditional miners.

“The mining industry remains a long way off the peaks of previous cycles, but it has regrouped and has begun to rise again,” it said.

However, the report said the industry was not out of the woods yet, because capital expenditure (capex) has fallen to new lows.

It said capex fell by a fur-ther 41 percent, to a record low of $50bn, and there was an absence in the announcement or commencement of signifi-cant greenfields projects.

It also found that, for the fourth consecutive year, the

industry reduced spending on exploration.

“Only $7.2bn was invested in 2016, barely one-third of the record $21.5bn allocated in 2012, with the funds cautiously tar-geted at less risky, later-stage assets, typically located in pol-

itically stable countries,” the report said.

The PwC report said Anglo-Gold Ashanti was the only “real” South African company to make the top 40 list in 2016, at number 40, while South32, which demerged from BHP

Billiton, was a new arrival, at number 22.

Another company on the list was Anglo American, whose subsidiaries include Anglo American Platinum and Kumba Iron Ore, which was ranked eighth.

Thursday, June 08 2017 BUSINESS REPORT

Mattress Firm entered into a strategic

partnership with the largest bedding manufacturer in the

United States, Serta Simmons Bedding, and successfully

rebranded approximately 1 400 stores

“In our second year since listing on the Frankfurt Stock Exchange, we are focused

on the implementation and bedding down of recent strategic acquisitions, while the

underlying performance of the business remained solid.” Markus Jooste, CEO of Steinhoff

www.steinhoffinternational.com

Further information is available at

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2017*

Expanded the product and market segments through

the successful implementation of Poundland

in the United Kingdom, Tekkie Town

in South Africa and Fantastic in Australia

* Unaudited Buco: All Pennypinchers stores to be rebranded to Buco.

Poco: Second store opening in Cape Town, South Africa.

For the six months ended 31 March 2017, the Steinhoff

group delivered a solid set of results supported by a

resilient discount market, as well as strong leadership

and execution from our decentralised management

teams. Upon analysis of the integrated organic

operations (excluding acquisitions), revenue increased

by 7% and adjusted organic margin3 improved with

a pleasing 20 bps from 11.3% to 11.5%. This solid

revenue and margin performance underscores the

resilient model of the group, underpinned by a growing

discount market segment and product and geographic

diversifi cation.

Pep: 52 new stores opened in South Africa.

50 brands

12 000 stores

30+ countries

130 000+ employees

Steinhoff adds value to its customers’ lifestyles by providing EVERYDAY PRODUCTS at AFFORDABLE PRICES and serving customers at their CONVENIENCE

PEP CELL

PEP HOME

PEP HOME

REFINERY

BRADLOWS

SLEEPMASTERS

PEP

UNITRANS AUTOMOTIVE AND HERTZ

POCO

TEKKIE TOWN

INCREDIBLE CONNECTION

ROCHESTER

JOHN CRAIG

ACKERMANS

SHOE CITY

BUCO

REVENUE

Household goods 62%

General merchandise 31%

Automotive 7%

H1FY17 SEGMENTAL CONTEXT

REVENUE

Europe 53%

Africa 26%

USA 15%

Australasia 6%

H1FY17 GEOGRAPHIC CONTEXT

CONTINUING OPERATIONS (EURO MILLION) H1FY17 H1FY16 Growth

Revenue (€m) 10 165 6 889 48%

����������� �������1 903 797 13%

Diluted sustainable earnings per share (c)2 15.5 16.0 (3%)

Adjusted diluted sustainable earnings per share2, 3 16.6 16.0 4%

������������������������4 101% 70% 44%

Net asset value per share (c) 371 324 15%

1 Before capital items.2 Diluted sustainable earnings per share is calculated using diluted earnings per share as determined by IAS 33 Earnings

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number is required to be reported by the Johannesburg Stock Exchange, where the group has its secondary listing, and

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THE TWO-day Junior Mining Indaba which began in Johan-nesburg yesterday highlighted how South Africa’s deterior-ating regulatory regime and negative investment sentiment was stifling growth for smaller houses.

The annual event is seen as an opportunity for junior miners to find solutions to problems ranging from lack of funds, regulatory uncer-tainty to attracting investment, despite the subdued global eco-nomic growth outlook.

However, the absence of gov-ernment officials on the pro-gramme was the latest indica-tion of the trust deficit between industry and the government.

Delegates heard how even with the imminent gazetting of the mining charter, the indus-try would not likelyrestore its fortunes.

Paul Miller, Mining Finance, Corporate and Investment Banking, Nedbank Capital, said it was going to take more than gazetting the mining charter to bring stability to South Africa’s ailing mining industry. He told the more than 300 explorers, developers and investors at the indaba that the regulation had been hamstrung by activist government officials who had political motives when apply-ing the law.

“The mining charter gives too much discretion in the hands of officials in the Depart-ment of Mineral Resources

(DMR) in the regional offices,” said Miller.

“The problem with the char-ter is that officials in regional offices interpret the rules differently and you cannot get rid of that,” Miller said, adding that South Africa had been overtaken by countries like Tanzania, and Botswana as favourite investment destin-ations.

“South Africa is perceived as a no go area for projects because investors think their mining projects will be stolen because of the regulatory environment,” Miller said.

Jacinto Rocha, a director at the Mineral Investment Advis-ory Services and former dir-ector-general of the DMR said that the regulatory system was inefficient.

Hulme Scholes, a director at Malan Scholes, said that the regulatory environment was a mess.

“We are sitting with a mess. We have regulation that cre-ates confusion. We have weak leadership which is not able to make decisions,” he said, refer-ring to the delay in the release of the charter.

The Chamber of Mines, which represents 90 percent of mining houses, has previ-ously complained that the new version of the charter which is expected to be made into law next week has unrealistic tar-gets. It also said previously it would go to courts if the min-ing charter was not in line with expectations.

Mining regulatory environment ‘a mess’

INCOME distribution rather than average income is key to under-standing market opportunity and consumer dynamics in emerging markets, allowing for targeted port-folio strategies.

This is according to a report released by Economist Intelligence Unit Canback, which looked into how sub-national differences and the composition of income brackets across geographies played a key role

in identifying market opportunity.Canback managing director Staf-

fan Canback said that distribution data could be interpreted to inform risk management and mitigating strategies as well as understanding new customer segments for product reach expansion.

“The income distribution data allows companies to accurately

assess potential opportunities and prioritise market expansion.

“While tapping into these oppor-tunities can be challenging, compan-ies can look to income distribution data for a deeper understanding of emerging-market dynamics,” Can-back said.

According to the latest Standard Bank Consumer Trends report,

income per person in South Africa grew moderately at 0.4 percent in real terms between 2011 and 2016.

The report found that total personal income was estimated at R3 trillion in 2016, up from R2.8trln in the previous year, a nominal growth of 6.5 percent year-on-year.

However, accounting for popu-lation size, an average adult South

African was poorer in 2016 than in 2015.

The 2016 adult population was estimated at about 39.7 million, from 36.3 million in 2011.

Canback said that income distri-bution data could be incorporated into predictive models for a more detailed understanding of market dynamics and it was better to break

down the data by city-to-city and province-to-province to highlight opportunities that existed than just fixating on average income.

“However, these market sizing models can be augmented to include factors outside income. Additional variables come in two layers: the first includes other macro data cov-ering industry and trade dynamics

such as category data, marketing spend or distribution coverage and the second covers micro data such as insights generated from consumer surveys, for example, usage and atti-tude surveys”, Canback said.

South Africa is regarded as hav-ing one of the worst wealth distribu-tion rates in the world, with its share of wealth held by the top 1 percent earners having increased to 20 per-cent by 2015, with 10 percent of the population holding 65 percent of the country’s total wealth.

Income spend determines consumer dynamics, report says Kabelo Khumalo

The sun sets behind a shaft outside the mining town of Carletonville. The world’s top 40 mining companies reported a net profit of $20 billion last year, compared with an aggregate loss of $28bn in 2015, PwC’s Mine report says. PHOTO: REUTERS

Mining industry ‘on the rise again’Turn-around mainly due to higher commodity pricesDineo Faku

Dineo Faku