Insight
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:
- Latest balance sheet metrics of the diversified miners
- Combined net debt (US$ billion) and net gearing of the diversified miners
- Combined adjusted EBITDA (US$ billion) and net leverage of the diversified miners
- Latest shareholder distribution policies and debt-related targets of the diversified miners
- Combined shareholder distributions and capex (US$ billion) of the diversified miners
- Reinvestment rates and shareholder payout ratios of the diversified miners
- Comparison of net debt with company target ranges and credit rating thresholds (US$ billion)
- Combined net gearing of the diversified miners in each price scenario
- Peak net gearing of each miner in the price scenarios
- Percentage headroom to increase spend before hitting balance sheet thresholds
- Total projected spend on capex and shareholder distributions (US$ billion) between 2024 and 2030
- Dividend yield and operating cash flow payout ratio forecast and history
- 5 more item(s)...
What's included
This report contains:
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