How to avoid the worst financial outcomes in the mining industry
department or school: Applied Science, Faculty of
department or school: Mining Engineering, Keevil Institute of
data provider: DSpace
degree campus: UBCV
creator: Gillis, Andrew
issued: 2021-06-09T19:27:23Z
issued: 2021
related degree: Doctor of Philosophy - PhD
degree grantor: University of British Columbia
description: The mining industry has a long history of generating low shareholder returns. Over the past two decades, the average Canadian mining company has returned -8%, while the TSX composite index returned +7%. Prior studies have failed to reach generalizable conclusions about the factors that drive mining firm performance over the long run. This research project investigated over 100 Canadian mining companies' performance from 2003 to 2016 and identified the most significant long-run performance factors. The analysis of these Canadian mining firms found that commodity prices explained the majority of firm performance on an annual basis, but mineral asset impairments had a much more considerable influence on performance over the long run. Over the study period, 90% of Canadian mining companies declared a mineral asset impairment. On average, companies wrote off 40% of a mine’s value when they reported an impairment. After collecting data on almost 300 operating mines, this research project found that declines in metal prices, lower than expected ore grade, and poorer than expected ground conditions contributed significantly to mineral asset impairments, along with several other factors. This research project also found that mineral asset impairments were more likely to occur when mines were located in developing countries, when a mine was located in a geographic region unfamiliar to the operating company, and when a mine employed a mining method or a mineral recovery method that was unfamiliar to the operating company. Finally, this study discussed mineral asset impairments through the frame of project forecasting errors to identify possible root causes of impairments and suggest methods for reducing impairments. It identified technical errors, optimism bias, and principal-agent conflicts as potential root causes. The investigation of over 250 unique impairment events found that approximately 30% were caused by technical error and 70% by optimism bias or principal-agent con…
aggregated CHO: https://circle.library.ubc.ca/rest/handle/2429/78574
note: How to Avoid the Worst Financial Outcomes in the Mining Industry by ANDREW GILLIS BASc, The University of British Columbia, 2007 MBA, Simon Fraser University, 2015 A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in The Faculty of Graduate and Postdoctoral Studies (Mining Engineering) THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) June 2021 © Andrew Gillis, 2021 ii The following individuals certify that they have read, and recommend to the Faculty of Graduate and Postdoctoral Studies for acceptance, the dissertation entitled: HOW TO AVOID THE WORST FINANCIAL OUTCOMES IN THE MINING INDUSTRY Submitted by Andrew Gillis in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Mining Engineering Examining Committee: John Steen, Mining Engineering, UBC Supervisor W Scott Dunbar, Mining Engineering, UBC Supervisory Committee Member Andrew von Nordenflycht, Beedie School of Business, SFU Supervisory Committee Member Shaun Barker, Earth, Ocean and Atmospheric Sciences, UBC University Examiner Werner Antweiler, Sauder School of Business, UBC University Examiner iii Abstract The mining industry has a long history of generating low shareholder returns. Over the past two decades, the average Canadian mining company has returned -8%, while the TSX composite index returned +7%. Prior studies have failed to reach generalizable conclusions about the factors that drive mining firm performance over the long run. This research project investigated over 100 Canadian mining companies' performance from 2003 to 2016 and identified the most significant long-run performance factors. The analysis of these Canadian mining firms found that commodity prices explained the majority of firm performance on an annual basis, but mineral asset impairments had a much more considerable influence on performance over the long run. Over the study period, 90% of Canadian mining companies declared a mineral asset impairment.…
has type: Thesis/Dissertation
date issued: 2021-11
is shown at: 10.14288/1.0398315
language: eng
degree discipline: Mining Engineering
provider: Vancouver : University of British Columbia Library
publisher: University of British Columbia
rights: Attribution-NonCommercial-NoDerivatives 4.0 International
rights URI: http://creativecommons.org/licenses/by-nc-nd/4.0/
scholar level: Graduate
contributor: Steen, John Thomas, 1971-
type: Text
identifier URI: http://hdl.handle.net/2429/78574