3 strategies for sustaining shareholder value creation
To sustain value creation and meet shareholder expectations on return, miners increasingly have to shift from a short-term focus on cash to a long-term strategic plan for capital that delivers returns across the portfolio. These are:
1. Production growth: companies can look to add production levels by expanding existing operations or bringing new mines on line; however, quality of assets has to be extremely good for the volume growth to be effective. Acquisitive growth is another avenue, but it’s important to identify the best projects to invest in, from both a quality and a portfolio-fit point of view.
2. Portfolio optimization: the divergence of commodity markets and increased volatility require mining companies to maintain a balanced portfolio that is able to cushion against unexpected adverse price movements.
3. Balanced capital allocation: as the market shifts to growth, measures for better capital allocation, which consider the need to reward shareholders and productivity growth, will be crucial for future standout performers.