Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Mining companies’ rising asset retirement obligations (AROs) could exceed the industry’s debt obligations by 2033, according to a new report by Moody’s Ratings.
Environmental reclamation and site restoration costs for 24 major mining companies reached $72 billion in 2023, up from $40 billion in 2013.
According to Moody’s, this figure represents about 42% of the mining industry’s outstanding long-term debt at the fiscal year-end of 2023.
The 24 companies studied spent between $1.4 billion and $1.8 billion annually on AROs during the 2013-2018 period. However, since 2018, their ARO payments have more than doubled to approximately $3.7 billion in FY2023 — a five-year compound annual growth rate (CAGR) of 18.2%.
This increase comes as governments have tightened regulations on mining in recent years to promote more sustainable practices.
As of the end of 2023, Rio Tinto had the largest ARO provision, followed by BHP, Newmont, Glencore and Vale.
To put this into perspective, Rio Tinto’s 2023 AROs represent 32% of its revenue. For BHP and Vale, the figure stands at 18%.
