Source: PricewaterhouseCooper, 2013

Return on capital employed by the top 40 companies fell to 8% in 2012, its lowest level since 2003.

Tit led Mine—A Confidence Crisis, the 52-page report examines a wide range of financial and operating metrics for the top 40 companies. The report notes that, despite a turbulent year, the overall yearend 2012 market capitalization for the top 40 of just more than $1.2 trillion was roughly the same as at year-end 2011.

From a market capitalization perspective, 2012 was a good year for diversified mining companies. Within the top 40, the top five gains during the year were made by BHP Billiton, Rio Tinto, Xstrata, Grupo Mexico and Inner Mongolia Baotou Steel Rare Earth Hi Tech—three diversified, one copper and one rare earths producer. These five companies reported a combined gain in market capitalization of $61 billion.

Gold producers, on the other hand, had an especially bad year. Of the five companies whose market capitalization shrank the most in 2012, four were gold producers—Barrick Gold, Anglo Gold Ashanti, Goldcorp and Newmont. In total, the top 40’s gold miners lost $29 billion, or 15%, of their market capitalization in 2012.

If 2012 was good for some companies and bad for others, the first four months of 2013 were rough across the board, the PwC report states. During these four months, market capitalizations fell for 37 of the top 40 companies, for a total loss of more than $200 billion, or 17%, from year-end 2012. Only Minera Frisco, Mosaic, and Inner Mongolia Yitai Coal had increases in market capitalization during this period.

For the top 40’s gold miners, the loss in market capitalization during the first four months of 2013 totaled $58 billion and was especially sharp during a significant sell-off in April following the largest one-day drop of gold prices ever.

These early 2013 setbacks in the market capitalizations of mining-company stocks occurred while the broader equity markets were rallying and the Dow Jones industrial average was hitting an all-time high. It was apparent, the PwC report states, that the markets had lost confidence in mining.

The top 40 mining companies have recognized this loss of confidence among investors and are taking a variety of actions to win back investors. Some companies have replaced their CEOs, including five of the top 10 companies. Some have increased their dividends. Some have deferred or scaled back capital spending on projects to increase production, and some have increased their project hurdle rates. Many companies have undertaken studies to unlock latent capacity at existing operations, and many major players have announced plans to divest what they consider to be non-core assets.

Looking for a light in a tunnel of darkness, the PwC report notes that long-term global demand fundamentals for mined products remain intact. China is continuing to grow and will remain the mining industry’s most important customer. Emerging and developing markets will continue to be the world’s growth engine.

For the near term, investor confidence remains a key issue. PwC’s global mining leader, Tim Goldsmith, concludes his executive summary of Mine—A confidence crisis by stating, “Regaining investor confidence depends on how the industry responds to its rising costs, increasingly volatile commodity prices, and other challenges such as resource nationalism. Now is the time to show that the industry can deliver in good times and bad. While currently there may be a confidence crisis, we have faith that the long-term fundamentals will ensure mining is a great industry to be in for many years to come.”

(The full PwC report is available as a free download at: www.pwc.com/en_GX/ gx/mining/publications/assets/pwc-mine-aconfidence-crisis.pdf.)