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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