Profit margin of 40 top global mining companies fall - PwC

PricewaterhouseCoopers reveals that the profit margin from mining world's top 40 companies are under the historical peak in 2006 and 2007 as a result of the high cost burdened profits.

Profit margins for the world's top 40 mining companies are below the historical peaks of 2006 and 2007 as higher costs outweigh record commodity prices, PricewaterhouseCoopers said on Tuesday.

Revenues for the world's 40 largest miners by market value rose 32 percent to a record $435 billion in 2010 on higher commodity prices and a 5 percent climb in production.

However, cost pressures meant the return on equity was only 22 percent last year, compared with the highs of 31 percent and 28 percent in 2006 and 2007 respectively.

"With no sign of inflationary pressures easing, maintaining cost discipline in a volatile global and financial environment remains extremely important for the industry," PwC's global mining leader Tim Goldsmith said.

Top 40 mining companies have announced more than $300 billion of capital expenditure programmes, of which over $120 billion is planned for 2011, PwC said.

"The real challenge now is addressing ever rising costs with huge forecast capital expenditure programmes compounding already tight labour and materials supply - and increasing complexities in operations, as sourcing new supply continues to move into more remote and challenging locations."

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