Mining bosses – 2015 was bad enough, but the worst is yet to come

By Thomas Biesheuvel, Jesse Riseborough and Agnieszka de Sousa

(Bloomberg) — After a crushing 2015, it might be another tough year for the mining industry.

The chief executive officers of Anglo American Plc and Vedanta Resources Plc are among mining bosses gathered for an industry conference in Cape Town who are cautioning that the worst may still be ahead and that companies must adapt to survive.

The sun sets behind a shaft outside the mining town of Carletonville, west of Johannesburg, July 7 2015. South African gold producers said on Tuesday that union wage demands were "unaffordable" and could add 16.5 billion rand ($1.3 billion) to the sector's wage bill.The producers, which include AngloGold Ashanti, Sibanye Gold and Harmony Gold, said in a statement that the industry's total wage bill in 2014 was 23.5 billion rand. REUTERS/Siphiwe Sibeko
The sun sets behind a shaft outside the mining town of Carletonville, west of Johannesburg, July 7 2015. REUTERS/Siphiwe Sibeko

“Things may still get worse before they get better,” Anglo CEO Mark Cutifani said in a speech on Monday. “We can’t rely on a reversal of this price slump any time soon. For many of us in the industry, 2016 is already shaping up to be the most challenging yet.”

The mining industry was plunged into chaos last year as industrial-metal prices plunged 27 percent, the worst performance since 2008, as the market contended with excess supplies amid cooling demand from China, the world’s biggest consumer. Grappling with slumping profits, producers have been forced to scrap dividends, raise cash and cut debt to stay afloat.

Read also: Bad mining investments coming home to roost: 2015 write-offs surge to $42bn

Debt Focus

Vedanta CEO Tom Albanese said he was hesitant to call the bottom and that the company was focused on meeting its debt requirements.

“Our peers in the sector are doing exactly the same thing,” Albanese said in an interview with Bloomberg Television on Monday. “The businesses are just hunkering down and getting that done. And those businesses that are best at it will be best- recovering.”

South32 Ltd. is also concerned about excess supply, CEO Graham Kerr said.

“Excess supply is awash in most commodities and as painful as it is, economically and rationally it needs to leave the market to create a long-term sustainable future,” Kerr told the conference. “I expect this challenging environment to persist for some time and market conditions are likely to remain volatile.”

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