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Beyond resilience: stress testing capital allocation
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*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
The diversified miners are in a robust financial position having embedded conservative capital allocation strategies after the 2015 commodity price crash. They’ve introduced rigorous project approval processes and scrapped progressive dividends. Companies have expanded investment at a measured rate, but dividend payouts have been volatile. Has the balance moved too far from providing predictable investor returns? We stress-tested balance sheets for a bear market downturn. Most diversifieds are well-positioned to withstand a severe drop in commodity prices. In a 2015-style crash with prices falling 30% across the board, net gearing would remain below 40% for all but Glencore. Each company is unique, but all have options to attract broader shareholder attention: raise distributions, boost sustainability credentials and deliver growth organically or through M&A.
Table of contents
- Executive summary
- The 2014/2015 commodity price crash led to a shift in strategy
- What would happen if commodity prices fell now?
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The diversified miners have headroom to increase spending
- Forecast yields are unsustainable, higher payout ratios would bolster the outlook
- Greenfield project pipelines offer options, for some
- Decarbonisation investment as a low-risk capital allocation option
- Opportunities abound for the diversified miners
Tables and charts
This report includes the following images and tables:
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Latest balance sheet metrics of the diversified minersCombined net debt (US$ billion) and net gearing of the diversified minersCombined adjusted EBITDA (US$ billion) and net leverage of the diversified miners
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Latest shareholder distribution policies and debt-related targets of the diversified minersCombined shareholder distributions and capex (US$ billion) of the diversified minersReinvestment rates and shareholder payout ratios of the diversified minersComparison of net debt with company target ranges and credit rating thresholds (US$ billion)Combined net gearing of the diversified miners in each price scenarioPeak net gearing of each miner in the price scenariosPercentage headroom to increase spend before hitting balance sheet thresholdsTotal projected spend on capex and shareholder distributions (US$ billion) between 2024 and 2030Dividend yield and operating cash flow payout ratio forecast and history
- 5 more item(s)...
What's included
This report contains:
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