JOHANNESBURG (miningweekly.com) – With the mining downturn having bottomed out in 2015 and improved performances already achieved in 2016, BMI Research believes the major diversified miners can expect to perform better over the coming years.

Based on the performance of large diversified mining companies, including Anglo American, Glencore, Vale and Rio Tinto, which have posted positive net incomes for the first time in years, BMI Research adjusted its outlook for major diversified miners to positive.

“Not only did they make profits, they were also successful at debt reduction,” the firm noted, pointing out that Glencore made a profit of $1.6-billion in the last financial year, while reducing debt from $25.9-billion at the end the 2015 financial year to $15.5-billion in 2016.

Similarly, Rio Tinto, Vale and Anglo American posted profits of $4.6-billion, $3.9-billion and $1.6-billion, respectively, following years of losses.

Rio and Anglo American also managed to reduce their net debt to below $10-billion each. Vale was, however, less successful and only managed a marginal reduction in debt.

“Miners will remain committed to debt reduction in the year ahead and beyond, along with which their performance will continue on the uptrend. Reduced cost of debt servicing as interest payments decrease with debts paid off will contribute to better balance sheets. Most major miners have decided to restart dividends from 2017 onwards,” BMI pointed out.

However, BMI further pointed out that commodity prices would not be the main driver of growth in coming years. “Instead, cost reduction and efficiency improvements will be the sources of strong balance sheets, improved cash flows and overall better performance.”

Meanwhile, despite improvements in operating cash flows across the board, capital expenditures will remain stringent over the next three years in terms of absolute value, as miners will continue to pursue a strategy of great capital discipline.

“This will ensure miners have greater free cash flow going forward to weather market volatility than in past years. Miners will continue investing in technology – all the more so that technology will help them improve efficiency further – and expand growth assets, but there will be minimal investment in greenfield projects,” BMI stated.