July 10 (Reuters) –
Hit hard by the accelerated downturn in metal prices, most global mining companies preparing to report results are likely to announce another round of austerity measures to cut costs and thereby convince investors to remain committed to the mining sector.
Outside of BHP and Rio Tinto, credit ratings and dividends are being pressured by a rout in prices on any commodity from iron ore to platinum. Directors are pressured by major stock holders to force reductions in capital expenditure, operational costs and jobs. Firing top managers is not out of the question.
Collectively, miners have been among the worst performers on London’s FTSE 100 index of blue-chip companies so far this year. The FTSE 350 mining index has fallen by about 15 percent since the start of the year. That is after a bad year in 2014.
“The picture has shifted to survival”… says Nik Stanojevic at British wealth manager Brewin Dolphin. High dividend yields and a boom in metal prices boosted mining shares from the turn of the century (2001 to 2011 with one interruption…
The downturn in prices since 2011 has exposed companies’ failure to allocate capital effectively and to shore up balance sheets, prompting many investors to take flight. Planners for ports and railways to support the old boom year should take note. New strategies need to emerge “or more heads may role” and investors walk away.