While the revenues of the top 40 mining companies grew by 32% in 2007, costs increased by 38% with the result of reduced margins, says a report release today by PricewaterhouseCoopers (PwC).

The fifth annual report provides a comprehensive analysis of the financial performance and position of the global mining industry and also discusses current trends in the global mining industry.

During 2007, the global mining industry did not see the effects of economic slowdown that hit other regions or sectors of the economy. With explosive growth continuing, especially in emerging economies, mining companies were struggling to keep up with demand.

The survey shows that market capitalization of the industry grew by 54% with the most striking change in composition coming from the relative reduction in the market capitalizations of the traditional mining powers (Canada, United States, Australia, and South Africa) and the growth and emergence into the Top 40 of the emerging markets’ companies in the BRIC (Brazil, Russia, India, China) and South American regions. In 2003, the market capitalizations for these emerging markets’ companies made up 14% of the total Top 40 market capitalization; in 2007 this relative weight grew to 36%.

Although Canadian and Australian based companies’ market capitalization strength in the Top 40 has diminished, both nations are currently well positioned for growth and resurgence with their strengths in the junior and mid-tier mining sectors. Toronto’s venture exchange listed Top 100 junior mining companies have experienced a 135% growth in market capitalization since 2005, with Australia’s Top 50 mid-tier mining companies (under $5 billion) showing 122% growth.

For the first year since 2002, cash flows from operations were insufficient to cover the increased levels of investment activities; significant external financing has been obtained to fund the various growth ambitions. Furthermore, total shareholder returns for the top 40 averaged 119% in 2007, compared to 55% in 2006.

“The good times continue for the global mining industry,” says Paul Murphy, PwC Canada mining practice leader. “Record commodity prices and continued growth in emerging economies have let the top mining companies avoid the slow downs that we have seen hitting other sectors. While most indicators are still showing strong performance and continued growth, we have seen a decrease in margins due to cost increases. And with continuing issues with skills shortages, it is ever harder to bring new supply to the market. For some industry participants, this may be as good as it gets, however, for those companies operating low cost long life mines the future looks very bright.”