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Rio Tinto is a leading international mining group that finds, mines and processes the earth's mineral resources.
The Group's major products include aluminium, copper, diamonds, energy products, gold, industrial minerals (borates, titanium dioxide, salt and talc), and iron ore. Its activities span the world but are strongly...Read more
Major miners will be forced to "sweat for success", says CitigroupJanuary 16 2012, 12:18pm
The next decade will be all about sweating assets for the world’s major miners, according Citigroup, which this morning gave its long-term assessment of the industry.
“The mining sector was given a free kick with surging commodity prices over the past decade, which hid a number of sins,” the broker added.
“Mining companies will now have to sweat it out to deliver shareholder returns.”
In a 45-page note it concluded the best risk-adjusted returns will be delivered by Rio Tinto (LON:RIO), ENRC (LON:ENRC), Glencore (LON:GLEN), Randgold (LON:RRS), Petropavlovsk (LON:POG), Kazakhmys (LON:KAZ) and Nyrstar (EBR:NYR).
It based its analysis on seven criteria including the potential to grow volumes, labour productivity and cost control.
However, the major thrust of the report focuses on a potential paradigm shift back from a decade in which miners have been helped by higher commodity prices to an era where they will have to work much harder to maintain revenues, profits and margins.
The mining sector’s performance over the next five to ten years is likely to mirror the late 1990s and early 2000s, Citi added.
“Going forward we believe commodity prices will generally trade sideways over the next decade, albeit with increased volatility,” it added.
“Commodity markets enter 2012 relatively well balanced, but are torn between the lower demand impact of a potential double-dip in the US, European recession and sharply lower Chinese growth (downside price risk) vis-à-vis weather and political disruptions to supplies (upside price risk).”