The Mining Walk of Shame
Miners have a terrible record of investing shareholders' money. Rio Tinto's US$25bn writedown on Alcan stands out as the worst recent example, but it's far from the only one. A mammoth US$140bn in writedowns have been taken by the mining industry since 2011, according to a report by PwC. Yesterday The Australian reported another round of impairments is likely in August. Value isn't lost during the bust, it is destroyed during the boom, when capital expenditures and acquisitions are made. Yet it's not all management's fault. Remember Leigh Clifford's conservative reign at Rio Tinto? Sacked for not being aggressive enough, just months before the Alcan acquisition. So shareholders are part of the problem, too, and seem to have learned little from experience. They throw cash at management and beg for growth right at the height of the boom. Perhaps investors have their own walk of shame to make?
Steve began Forager Funds in 2009, and now manages approximately $470m across two funds. Offering a listed Australian Shares Fund (FOR) and an unlisted International Shares Fund, Steve focuses on long-term investing in undervalued companies.