3. Electronic Theses and Dissertations (ETDs) - All submissions

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    Evaluation of financial performance of South African gold, platinum, coal and iron ore mining companies for the period 2012 – 2016.
    (2018) Makamba, Tapiwa
    South Africa hosts vast mineral resources that it has a great global comparative advantage in terms of mineral resources endowment. The mining industry continues to be a key contributor to the country’s economy. However, since the end of the 2008 global economic crisis, the industry has faced multiple global and local economic and operational challenges that together threaten the survival and sustainability of the industry. This study investigated the effects these challenges had on the financial performance and health of the South African mining industry for the period 2012 to 2016. The research focussed on the performance of platinum, gold, coal and iron ore mining companies listed on the Johannesburg Stock Exchange. To determine the companies’ financial performance, financial ratios were used to measure the profitability, liquidity, solvency, activity and market performance of the companies. Validation of the findings of ratio analysis was done using the Altman Z”-score analysis model that also classified the companies’ financial health over the period. As commodity price is a key driver of mining companies’ value, a Pearson coefficient correlation analysis was done to determine the influence commodity price had on the performance of the mining companies during the period. The study found that the overall financial performance and health of mining companies was declining over the course of the analysis period. Profitability was low for all commodity sectors except iron ore, liquidity was good for the platinum and iron ore sectors but poor for the gold and coal sectors. All commodity sectors had good activity ratios but, had poor solvency and market ratios except the iron ore sector. Only the iron ore mining sector performed well in all the ratio categories. Declining commodity prices for most commodities, increasing operating costs, declining productivity were found to be the main factors that affected the performance of mining companies. In addition, the impact on the mining sector of government and policy uncertainty such as the Mining charter, resulted in wholesale decline in the value of mining stocks as investor confidence waned. The Altman Z”-score analysis showed that most analysed companies were in a safe zone, but a few were in a distress zone during the analysis period. Because mining Page | companies are price takers, it is important that they improve on their efficiencies to remain viable and sustainable against a constrained economic and operational challenges.
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    Analysis of key value drivers for differing value performance of major mining companies for the period 2006 - 2015
    (2017) MacDiarmid, Jack Augustus
    The period from 2006 to 2015 was a turbulent one for mining companies. The end of the 2000s commodity super cycle resulted in all-time high market values for most commodity based companies, followed by a rapid decline in value with the onset of the Global Financial Crisis in 2008 and a similar rapid recovery following this. Whilst much of this change in value was driven by commodity prices, the inconsistent performance between companies suggests that there are other factors affecting mining company value. To determine the key drivers of company value, four diversified and international mining companies which represent close to 50% of the 2006 industry revenue were selected for analysis. These were Anglo American, BHP Billiton, Rio Tinto and CVRD-Vale. Financial and production data was collected to analyse different potential value drivers. Because of its suitability for comparison of company value, the market based valuation approach was selected as the company valuation technique. Enterprise value (EV) was the metric used for company value since this provides a measure of the real market value of a firm as a whole business. Eight potential value drivers, which include production output, commodity price, revenue, EBITDA margin, EBITDA multiple, gearing ratio, net debt to EBITDA ratio and ROCE, were selected for analysis. Each potential value driver was tracked against EV to determine if there was any correlation between the value driver and EV. Also, the Pearson correlation method was used to determine correlation between each potential value driver and EV. Production output and commodity price in isolation were found not to drive company value. However, when combined to calculate revenue, had a very high correlation to EV with an average Pearson coefficient of 0.8. EBITDA multiple was also found to be a key driver of company value, with this metric closely aligned to revenue (Pearson coefficient of 0.6). The two debt metrics, gearing ratio and net debt to EBITDA were found to only have a correlation to EV in times of declining commodity prices and revenue. EBITDA margin and ROCE were found to have no correlation to EV and as such were not considered to be key drivers of company value. Mining companies must ensure that they focus on the correct value drivers to ensure those they influence do impact the company value.
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