14 January 2013
South Africa-based diversified resources group Exxaro Resources has been named one of the top 10 mining companies worldwide to have delivered the highest total shareholder returns over the 10-year period spanning 2001 to 2011.
According to a recent report by the Boston Consulting Group, JSE-listed Exxaro Resources delivered an average return to shareholders of 39.2 percent between 2001 and 2011, placing in seventh out of 34 leading mining companies surveyed.
This compared with and average total shareholder returns (TSRs) of 18% for the the global mining industry as a whole between 2001 and 2011.
Mexican miner Industrias Penoles was the top value creator over the decade with an average TSR of 58.2%, followed by Grupo Mexico with 49.5% and the UK’s Randgold Resources with 45%.
The rest of the top 10 comprisde Canada’s First Quantum Minerals (TSR of 42.7%), China’s Inner Mongolia Yitai Coal (40.2%), US miner Cliffs Natural Resources (40.1%), Exxaro Resources (39.2%), Sociedad Quimaca y Minera de Chile (36.9%), the UK’s Antofagasta (32.4%), and China’s Yanzhou Coal Mining (30.1%).
In its report, the Boston Consulting Group calculates TSR as a product of multiple factors, including the combination of revenue growth and change in margins as an indicator of a company’s improvement in fundamental value.
It then uses the change in the company’s valuation multiple to determine the impact of investors’ expectations on TSR. Finally, the model tracks the distribution of free cash flow to investors and debt holders in the form of dividends, share repurchases, or repayments of debt in order to determine the contribution of free-cashflow payouts to a company’ TSR.
“The mining industry clearly benefitted from the continued economic expansion in emerging markets, which led to steadily rising commodity prices,” the report notes. “Value creation also was fuelled by production growth, margin expansion, and cash returned to equity holders.”
Revenue increases attributable to rising commodity prices accounted for nearly 14 of the total 18% TSR that the industry averaged. The remaining 4% was the result of a combination of production gains, margin expansion, and contributions from cash flow.
“In every dimension – from profit growth to cash flow contributions to multiple expansion – the top 10 mining companies outperformed the rest of the sample,’ the report states. “Even more impressive was the fact that commodity exposure had no impact on success; the top 10 included a broad range of mineral producers, from gold and copper to coal and industrial-mineral companies.
“Furthermore, unlike their industry peers, the top 10 mining companies continued to earn high TSRs during the second half of the decade, the period encompassing the global financial crisis.”