| HOLLYWOOD, Fla., March 1
HOLLYWOOD, Fla., March 1 For the first time in
four years, the world's biggest miners are awash in cash, riding
a wave of cost cuts and a recovery in raw material prices from
coal to zinc last year.
But instead of using their newfound bounty to unveil lavish
growth plans, as they did in 2012 just as metals prices started
plummeting, the cash is going to more sober uses this time:
paying dividends and slashing debt.
Spending on growth projects ranks third in priority,
delegates and companies said at a mining industry conference in
Florida this week. That raised the prospect of limited mine
production increases that could support commodity prices
especially for copper and zinc.
"Companies who said they are going to spend more on capital
(projects) or do not have a clear dividend policy, they've all
been penalized (in the stock market)," said Charl Malan, senior
analyst at New York-based fund management firm Van Eck
The world's four biggest diversified miners, including BHP
Billiton Plc and Rio Tinto Plc, last year raked
in more than $20 billion in free cash flow before dividends and
share buybacks, said Clarksons Platou analyst Jeremy Sussman.
That left them with about $30 billion in cash and cash
They were helped by deep cost cuts and a rally in metals
such as steelmaking coal that tripled while zinc surged 60
Those miners were able to reduce gross debt - racked up
during the last big cycle of mergers and acquisitions and new
mine projects - by more than $20 billion in 2016, Sussman said.
Memories of ill-timed acquisitions and a mine build spending
spree just as metal prices peaked in 2011, are still fresh in
the minds of miners and their shareholders.
'DIVIDEND FRONT AND CENTER'
Teck Resources Ltd shares slumped 10 percent on
Feb. 15 even as the company reported better-than-expected
earnings. Shareholders were disappointed by a lack of clarity on
its dividend policy.
Chief Executive Officer Donald Lindsay tried to clear things
up this week at the Florida conference, saying that while debt
reduction is the top priority, targets will be met soon, likely
by the end of June.
"Thereafter the dividend is going to be front and center for
the board," he said in a presentation at the conference.
In recent earnings reports, BHP and Rio both rewarded
shareholders with bigger-than-expected dividend payouts while
Glencore Plc said it was in a good position to pay a
For Chilean copper miner, Antofagasta Plc, excess
cash will first go to sustain existing operations, then to
dividends and lastly to growth, CEO Iván Arriagada told Reuters
on the sidelines of the conference. The miner is focused on
expanding two of its existing operations rather than big, new
projects, he added.
Still, some commodity prices, notably for uranium and
fertilizer, remain stubbornly low, forcing some big producers to
cut production and dividends.
"Today we're not investing even one dime in any kind of new
production," Cameco Corp CEO Tim Gitzel said at the
conference. Uranium spot prices touched 13-year lows late last
year, and further production cuts even at low-cost mines are
possible, he said.
"That's the toboggan ride we've been on," Gitzel said.
(Additional reporting by Rod Nickel in Winnipeg; Editing by
Denny Thomas and Jeffrey Benkoe)