Mining companies have adopted a more conservative approach to adjust to more volatile commodity prices following the 2015-16 market downturn, focusing on cutting costs, improving productivity and boosting liquidity, according to a new report from rating agency Moody's Investor Service.
Earnings at the sector's 130 rated issuers have improved since the mid-decade downturn, and earnings before interest, tax, depreciation and amortization for the 12 months to September 2020 were $230bn, the third highest in the world after oil and gas and pharmaceuticals.
Total mining debt stands at $670 billion.
The debt-to-earnings ratio has fallen sharply since 2015, from 3.8 to 2.7.
The overall better performance of the major mining companies is the result of a rigorous strategy to reduce operational risk through the formation of joint ventures on large projects following the economic downturn, with regard to dividends, liability management and projects requiring significant capital expenditure.
Moody's said decarbonisation was good for the industry, but mining intensity was unlikely to decrease and there was no obvious substitute for mining, either for inputs or final products.
The new market will also tighten supply in the short term.
Some of the issues affecting the industry over the next decade include the increasing demand by countries for a greater share of the economic benefits of their natural resources through taxes, royalties and mine ownership.
Increasingly, countries are also legislating to force mining companies to build smelters and refineries at home, most notably Indonesia, which has a ban on raw ore exports.
