Boards and investors have let the mining sector dig itself into a hole. (2015)
“Two factors have driven dismal investors’ outcomes: first, the hubris of many mergers at the peak of the boom; second, the excessive nature of investment to increase output as financial discipline went out of the window.
Ian McVeigh, Jupiter Asset Management head of governance
The Telegraph, 27 Aug 2015
“What a sorry state of affairs for long-term investors in the mining sector, the ones who put their money into household names like Rio Tinto or Anglo American during the great commodity boom from 2003 to 2015. Over this period, the FTSE All Share Mining Index actually managed to underperform the broader market by a massive 39pc in spite of a powerful tailwind for much of the period.
“Two factors have been behind this dismal outcome for investors: first, the hubris that marked many of the mergers made at the peak of the boom; second, the excessive nature of much of the capital investment that went to increase output as financial discipline went out of the window.
“It also raises questions about the quality of the corporate governance operating at these mining firms.
“…What we have seen in banking and now mining is that in periods when particular industries are growing strongly, non-executive board members seem at best to do nothing and at worst to act as cheerleaders for ambitious managements.”
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Back to the topOh dear!! South Africa’s economy was built on mining. The foundations run very deep. It seems hubris was always there from the very start. Cecil John Rhodes, JB Robinson and most (although not all – Alfred Beit seemed to be the exception) of the other Randlords showed the symptoms. Rhodes is a textbook case. Alas it seems that the foundations have been built on sand. The gold mining industry now faces a class action law suit that will run into untold billions of dollars for compensation claims by former workers now sick and dying from respiratory diseases like TB and Silicosis acquired while working underground. The investors are not the ones who really suffer the hubris. How will the industry now fund the compensation claims?