Browsing: commodities

The global mining industry for the last 6 years enjoyed rising commodity prices. Record cash flows have provided mining houses…

The company in 2021 generated profits or EBITDA in the region of US$ 20.6 billion from its specified businesses according to its website. For perspective, this EBITDA figure is about the size of the GDP of Zimbabwe. Shareholders of the company received US$ 6.2 billion in 2021. The strong financial showing according to the company was due to increased production which was up 5% year on year, stronger prices for its products and consequently much higher margins.

Cutifani stressed that the solid numbers produced by his company were not just good for shareholders but were good for all stakeholders and the communities where Anglo operates. The company paid US$ 7.1 billion in taxes in 2021. This number was 89% higher than the figure paid in 2020.

The EBITDA margin achieved in 2021 was 56% which was significantly higher than the 35% achieved the previous year. The high margins had a favourable impact on profitability resulting in earnings per share (EPS) of US$ 7.22. The higher margins achieved in this year were also responsible for the increased return on capital employed (ROCE) of 43% in 2021 against a standard of 15%.

Notwithstanding the high metric for ROCE, the company projects that this metric will grow even more still to anywhere between 45% and 50% from 2023 going forward. This is expected to come on the back of improved costs and prices.

The company made significant headway in terms of deleveraging its balance sheet in 2021. It ended 2020 with US$ 5.5 billion and ended 2021 with US$ 3.8 billion.

The company is part of the JSE listed industrial mining and metals sector which is collectively worth ZAR 5.46 trillion or (US$ 360.11 billion). It is the fifth-largest company in that sector. The company produces iron ore from two mines namely Sishen and Kolomela in South Africa.

Kumba Iron Ore’s finances during 2021 were premised on 3 things namely what the company described as “disciplined capital allocation” which involved the cash payouts to shareholders on the back of the improved return on capital ratios. The second aspect that drove the company’s financials was what it called “value-focused growth”. The company enjoyed a higher-than-average price for its ores.

It reportedly earned an average forward on board (FOB) export price of at least US$ 161 per ton which was 18% higher than the benchmark during 2021.

Strong demand for its commodities was the result of supply chain disruptions being experienced the world over. Nagle who succeeded long time chief executive Ivan Glasenberg stated that coal was the star of the show for the company. The high demand for coal was the result of little to no activity being done by mining companies worldwide in terms of building coal mines.

These days coal is not only a dirty commodity but “coal mining” is a dirty word so to speak. It borders on profane in a world that is now strongly driven by ESG to even mention the development of a coal mine. That being the case many players in the coal mining space are finding it increasingly difficult to secure funding for coal mine development projects. 

This has played well into the hands of Glencore which has happily supplied the so-called dirty commodity to eager customers. Shareholders should be glad that the company has done this. In the event they are not happy that the company is selling this polluting fossil fuel they are well-advised to remember the US$ 4 billion payouts.

When exports receipts increase it means from the definition given that the country that pursues this strategy will find itself in the desired position where it earns more than it spends.

This in the long run will lead to the country becoming less reliant on balance of payments support from multilateral lenders and repaying its debt obligations.

For a country like Zimbabwe, it is imperative that the southern African country pursues this strategy as the increased foreign exchange receipts will provide desperately needed foreign currency and monetary stability.