PERTH (miningweekly.com) - The market capitalisation of Western Australian (WA) listed companies, which comprise the Deloitte WA Index increased over just 1% during the last 12 months, reflecting the uncertainty in commodity prices and the global economy over the last year, advisory firm Deloitte reported on Monday.

In a special edition of its WA Index, which coincided with the opening of the Mining Indaba in Cape Town, Deloitte noted that the combined market capitalisation of A$148.6-billion for the WA listed companies showed a decrease of 16.9% over the past five years.

In terms of market capitalisation, mining companies with significant operations in Africa comprise just 5.4% of the Deloitte WA Index Top 100 as at the end of December 2012, less than half of the 11.4% representation as at the same time in 2007.

Deloitte’s lead audit partner and mining leader for WA, Tim Richards said that while this may seem to indicate operational failure, poor equity performance or withdrawals from the region, the reality was the reverse.

“The success of Australian companies in Africa has seen a large number of midtier miners targeted by global resource companies as a means of accessing valuable assets and management expertise in Africa. The growth over the five-year period of WA mining companies in Africa has actually been extraordinary,” Richards said.

The top two movers and shakers for the 12 months ended December 2012, were Papillon Resources and Resolute Mining Limited, with increases in market capitalisation of 274.1% and 31.8% respectively.

“With financial market performance over the last year being fairly volatile, the ability of Papillon and Resolute to overcome these factors and grow market capitalisation over the last year is an achievement to be celebrated and is unique amongst the companies forming the African Mining Indaba Deloitte WA Index,” Richards said.

Precious metal prices continued to impress, Deloitte added, with the current price of gold bullion up 5.6% from 12 months ago and up 98.8% from five years ago.

Consequently, Deloitte noted that it was not surprising to see that companies operating in this sector dominated the top percentage movers.

Gold prices are expected to stay high this year owing to ongoing constraints in global mine supply, with the average price for 2013 forecast to be above $1 850/oz - a new record on a full-year basis. 

Despite the slowdown in global manufacturing activity and other economic headwinds, industrial metal prices remained relatively high throughout 2012, with supply constrained metals such as copper maintaining a pricing premium.

Tin had seen the greatest recovery year-on-year, with prices rising 22.1% in the year ended December 2012, and up 43.6% on spot prices of December 2007.

LME lead prices were up 15.2% over the year and even iron-ore had seen prices increase by 35.3% since the third quarter of 2012. However, Deloitte noted that there was still plenty of room for improvement, as iron-ore, zinc and aluminium spot prices continued to perform below levels observed five years ago.

Deloitte’s Australia-Africa services group leader Jacques van Rhyn said that despite the volatile and challenging conditions over the past 12 months, in the 2012 financial year, the ASX reported nine new listings with principal projects in Africa, raising a total of A$135-million.

This was in addition to a further A$1.3-billion raised through follow-on raisings by more than 50 companies for over 60 projects.

“We are also aware of a number of greenfields exploration projects in private ownership that commenced during 2012, and which may seek future listings and capital raising - clearly indicating a continued appetite for projects in Africa,” Van Rhyn said.

“Although the African Mining Indaba WA Index highlights the growth of Australian listed mining companies with significant operations in Africa, we must not forget the number of companies who have delisted or those whose market capitalisation has been affected by merger and acquisition activity. There is still ongoing activity around new private projects.”

Van Rhyn added that the opening of new mines in Africa was subject to a number of risks and uncertainties, and added that capital-intensive infrastructure development, long lead times to secure equipment, resource nationalism, bribery and corruption, deeper mines, access-to-finance issues and stricter social and environmental regulation in many countries all added to the complexity of supply.

“However, as operating and capital costs remain a big issue in Australia (the cost to mine and ship iron-ore is estimated to be 30% higher in Australia than the global average), Australian mining companies continue to turn their focus to Africa,” he added.