Look to Africa for Expansion in 2013
BRUSSELS - Thursday, February 21st 2013 [ME NewsWire]
Split on Their Ability to Access Capital or Credit in 2013
- Africa is
the Primary Target for International Expansion across Virtually All
in Technology and Business Processes to Drive Profitability
International mining executives cite global economic disruptions as the leading
risk impacting their organization in 2013, according to new research published
The survey of 130 C-Level and senior financial executives at mining companies
in the United States (U.S.), South Africa, United Kingdom (U.K.), Australia and
Canada sought their insights on international expansion plans and financial
The concern over global economic disruptions has left mining executives with
mixed feelings about their ability to access capital and credit in 2013. While
37 percent feel that 2013 will mirror 2012, 31 percent feel their ability to
access capital and credit will improve, and 32 percent feel it will be worse.
Sentiment was similar across all countries.
After ‘global economic disruption’ (44 percent), ‘environmental and
regulatory issues’ and ‘geopolitical unrest’ top the list of executives’
concerns at 18 percent each. Executives from the U.S., however, list
‘environmental and regulatory issues’ as their top concerns. This is
predictable, as the U.S. government is contemplating new environmental and
regulatory programs, parts of which have not been updated since 1872.
"While most commodity prices continue to be near record levels,
macroeconomic issues around the globe continue to impact the mining community
at large,” says Charles Dewhurst, Global National Resources Leader, Natural
Resources industry group at BDO. "As mining companies ride the ebb and flow
of commodity prices, they should remain aware that other risks, including the
high cost of infrastructure, geopolitical unrest and regulatory issues,
challenge the profitability and long-term sustainability of their operations.”
To grow their organizations, 40 percent of executives plan to expand their
business through further international expansion, followed by domestic
expansion (27 percent) and merger and acquisition activity (23 percent). With
limited resources on their shores, the U.K. has the largest focus on
international expansion, with 71 percent looking overseas. The U.S. deviates
from the collective trend, with 25 percent citing research and development as a
preferred means to grow their organization compared to an average of only 10
percent across all countries.
Foreign expansion on the horizon
Collectively, 76 percent of survey mining executives currently have
international operations, with an additional 5 percent planning to expand
internationally in the next six to twelve months. Those surveyed cite Africa
(32 percent) as their primary target for expansion, followed by North America
(23 percent) and Latin America (17 percent). Interestingly, each country notes
some domestic expansion activity, yet motivations for international development
differ between countries.
For instance, South African companies are exclusively looking to expand
further into Africa in 2013, while Canadian companies (56 percent) anticipate
that North America will be a key component of expansion plans – suggesting that
an expansive geographic footprint is a challenge for mining companies.
One-third (33 percent) of all executives from the U.S. are eyeing Latin America
for future development, almost double the study average of 17 percent.
"A company’s ability to expand internationally will be a competitive
advantage as resources become more challenging to mine around the globe,” says
Dewhurst. "Yet expansion without properly managing the financial risk and
exposure can seriously impact a company’s success. As countries around the
globe consider new tax regulations and royalty requirements, it is critical
they weigh the risk and reward of expanding operations.”
Mining executives are employing a variety of tactics to enter foreign
markets, including joint ventures with local companies (39 percent),
acquisitions in the country of interest (31 percent) and independently
establishing operations (24 percent). While their strategies for entry into a
foreign market differ, there are some commonalities. For example: South Africa
(36 percent), the U.S. (50 percent) and Australia (48 percent) prefer joint
partnerships, while Canada (40 percent) and the U.K. (44 percent) favor
acquiring a company in their target region.
Other key findings from the report include:
- Investments in technology are driving
profitability. Across the board, mining executives are
placing a stronger focus on the development of internal business processes
(65 percent) to drive profitability in 2013. Though new technologies are
the second most popular strategy overall at 30 percent, U.S. executives
are more heavily focused on investments in technology, with 50 percent of
executives anticipating that it will improve their bottom line.
- Private equity cited as primary financing
option in 2013. Of those surveyed, 28 percent note private
equity as a means to aid business growth across all countries. This is a
positive indicator for the private equity market after natural resources
funds experienced a slow year in investments in 2012.
- The U.S. is embracing project financing,with
39 percent of U.S. executives citing this as a key financing option. The
results follow a recent trend of U.S. banks, including Citigroup and Bank
of America, increasing their project financing transactions.
- Demand for resources is the most important
factor driving growth for the industry, according to 42
percent of executives surveyed. Access to capital or credit (37 percent)
and increased commodity prices (13 percent) rounded out the top three
factors for growth.
NOTE TO EDITORS
About the international BDO network
BDO refers to one or more members of BDO International Limited, which form
part of the international BDO network of independent member firms (the ‘BDO
Service provision within the BDO network is coordinated by Brussels
Worldwide Services BVBA, a limited liability company incorporated in Belgium
with its statutory seat in Brussels.
Each of BDO International Limited (the governing entity of the BDO network),
Brussels Worldwide Services BVBA and the member firms is a separate legal
entity and has no liability for another such entity’s acts or omissions.
Nothing in the arrangements or rules of the BDO network shall constitute or
imply an agency relationship or a partnership between BDO International
Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO
BDO is the brand name for the BDO network and for each of the BDO member
The combined fee income of all the BDO Member Firms, including the members
of their exclusive alliances, was $6.02 billion in 2012. The global network
provides advisory services in 138 countries, with almost 55,000 people working
out of 1,204 offices worldwide
This is the initial BDO International Natural Resources Study with emphasis
on the mining industry. The research was conducted among senior management
executives representing a broad mix of companies and geographic areas. Topic
coverage was highly diverse including, but not limited to, key drivers of
growth for the global mining industry, access to capital and credit, strategies
for enhancing profitability, impact of regulations, key targets for geographic
expansion and the identification of important threats facing the global mining
This multi-country executive survey was designed and managed by Market
Measurement, Inc. in close consultation with BDO. Questionnaire content was in
the native language of each country.
The study findings are based upon attitudes, behaviors and perceptions among
132 mining executives with similar levels of representation in the study data
across the U.S., Australia, Canada, South Africa, Russia, and the United
Kingdom. Study participants were identified through major trade and
professional associations, subscribers to industry publications and similar
sources. Additional characteristics of this important research initiative
titles: More than one-third (35 percent) are the chairman, CEO, president
or managing director of the organization, with a similar level of
representation from CFOs/controllers/directors of finance (28 percent).
coverage: More than three-quarters (76 percent) have international
revenue: Almost one-half (45 percent) of the participating companies
report annual worldwide revenues in excess of $50 million.
Bliss Integrated Communication for BDO
Erin E. Burke, (212) 584-5477